    [Senate Hearing 105-858]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 105-858

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 1999

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

                                    HEARINGS

                                    before a

                              SUBCOMMITTEE OF THE

                COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE

                           ONE HUNDRED FIFTH CONGRESS

                                 SECOND SESSION

                                       on

                               H.R. 4101/S. 2159

     AN ACT MAKING APPROPRIATIONS FOR AGRICULTURE, RURAL DEVELOPMENT, FOOD
     AND DRUG ADMINISTRATION, AND RELATED AGENCIES PROGRAMS FOR THE FISCAL
             YEAR ENDING SEPTEMBER 30, 1999, AND FOR OTHER PURPOSES

                                   __________

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

                                   __________

             Printed for the use of the Committee on Appropriations

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

                                     ______

                         U.S. GOVERNMENT PRINTING OFFICE
    46-086 cc                    WASHINGTON : 1999

    _______________________________________________________________________
                For sale by the U.S. Government Printing Office
    Superintendent of Documents, Congressional Sales Office, Washington, DC
                                     20402
                               ISBN 0-16-058116-8

                          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 10, 1998

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

                           Tuesday, February 24, 1998

    Department of Agriculture:
        National Agricultural Statistics Service.....................   129
        Agricultural Research Service................................   129
        Economic Research Service....................................   129
        Cooperative State Research, Education, and Extension Service.   129

                          Thursday, February 26, 1998

    Department of Agriculture: Natural Resources Conservation Service   467

                             Tuesday, March 3, 1998

    Department of Agriculture:
        Rural Utilities Service......................................   557
        Rural Housing Service........................................   557
        Rural Business-Cooperative Service...........................   557
        Alternative Agricultural Research and Commercialization
          Corporation................................................   557

                            Tuesday, March 10, 1998

    Department of Agriculture:
        Food and Nutrition Service...................................   647
        Center for Nutrition Policy and Promotion....................   647

                            Tuesday, March 17, 1998

    Department of Agriculture:
        Food Safety and Inspection Service...........................   745
        Animal and Plant Health Inspection Service...................   745
        Agricultural Marketing Service...............................   745
        Grain Inspection, Packers and Stockyards Administration......   745

                            Tuesday, March 24, 1998

    Department of Agriculture:
        Farm Service Agency..........................................   865
        General Sales Manager........................................   865
        Foreign Agricultural Service.................................   865
        Risk Management Agency.......................................   865

                            Tuesday, March 31, 1998

    Commodity Futures Trading Commission.............................   983
    Department of Health and Human Services: Food and Drug
      Administration.................................................  1021

        Material Submitted by Agencies Not Appearing for Formal Hearings

    Department of Agriculture:
        Departmental Administration..................................  1137
        Farm Credit Administration...................................  1142
        National Appeals Division....................................  1146
        Office of the Chief Economist................................  1148
        Office of the Chief Financial Officer........................  1157
        Office of the Chief Information Officer......................  1162
        Office of Communications.....................................  1170
        Office of the General Counsel................................  1172
        Office of Inspector General..................................  1179

                           Nondepartmental Witnesses

    Ad Hoc Coalition.................................................  1205
    American Association of Retired Persons..........................  1207
    American Farm Bureau Federation..................................  1209
    American Farmland Trust..........................................  1212
    American Federation of State, County, and Municipal Employees....  1214
    American Fisheries Society.......................................  1220
    American Honey Producers Association.............................  1222
    American Indian Higher Education Consortium......................  1223
    American Nursery and Landscape Association.......................  1226
    American Seed Trade Association Corn and Sorghum Basic Research
      Committee......................................................  1232
    American Sheep Industry Association..............................  1236
    American Society for Nutritional Sciences........................  1239
    American Sugar Alliance/Sugar Cane Growers Cooperative of Florida  1242
    Bernard H. Berne, M.D., Ph.D.....................................  1247
    California Industry and Government Coalition on PM-10/PM-2.5.....  1249
    Centocor.........................................................  1252
    Children's Nutrition Research Center, Baylor College of Medicine.  1256
    Coalition of Experimental Program to Stimulate Competitive
      Research (EPSCoR) States.......................................  1259
    Coalition on Funding Agricultural Research Missions..............  1260
    Coalition to Promote United States Agricultural Exports..........  1261
    Colorado River Basin Salinity Control Forum......................  1262
    Colorado River Board of California...............................  1264
    Columbia University..............................................  1265
    Consortium for International Earth Science Information Network...  1268
    Cosmetic, Toiletry, and Fragrance Association....................  1270
    Council for Agricultural Research, Extension, and Teaching.......  1273
    Doris Day Animal League..........................................  1275
    Everglades Restoration Oversight Group...........................  1276
    Farm*A*Syst/Home*A*Syst..........................................  1277
    Federation of American Societies for Experimental Biology........  1281
    Florida, city of Gainesville.....................................  1283
    Florida Nurserymen and Growers Association.......................  1283
    Florida State University.........................................  1286
    Friends of Agricultural Research, Beltsville, Inc................  1286
    Friends of the Earth.............................................  1289
    Friends of the National Arboretum................................  1290
    Georgetown University............................................  1292
    Grocery Manufacturers of America.................................  1293
    Health Industry Manufacturers Association........................  1294
    Humane Society of the United States..............................  1298
    International Association of Fish and Wildlife Agencies..........  1301
    International Seafood............................................  1306
    Intertribal Agriculture Council..................................  1306
    Joslin Diabetes Center...........................................  1309
    Kwan, Quon Y.....................................................  1311
    Land Trust Alliance..............................................  1312
    Massachusetts Foundation for Excellence in Marine & Polymer
      Sciences.......................................................  1314
    Metropolitan Water District of Southern California...............  1315
    National Association of Conservation Districts...................  1317
    National Association of Farmers' Market Nutrition Programs.......  1321
    National Association of Professional Forestry Schools and
      Colleges.......................................................  1322
    National Association of State Foresters..........................  1325
    National Association of University Fisheries and Wildlife
      Programs.......................................................  1326
    National Association of State Universities and Land-Grant
      Colleges:
        Association of American Veterinary Medical Colleges and Board
          on Veterinary Medicine.....................................  1328
        Dr. James H. Mortensen, Academic Programs Committee on
          Organization and Policy....................................  1331
        Dr. James J. Zuiches, Agriculture............................  1332
        Dr. Thomas L. Payne, Experiment Station Committee on
          Organization and Policy....................................  1335
        Dr. Richard D. Wootton, Extension Committee on Organization
          and Policy.................................................  1337
        Dr. Richard L. Guthrie, International Committee on
          Organization and Policy....................................  1340
        Dr. McArthur Floyd, 1890 Research Directors..................  1341
    National Center for Appropriate Technology.......................  1342
    National Center for Resource Innovations.........................  1343
    National Commodity Supplemental Food Program Association.........  1346
    National Congress of American Indians............................  1347
    National Cooperative Business Association........................  1348
    National Corn Growers Association................................  1349
    National Cotton Council of America...............................  1350
    National Dry Bean Council........................................  1354
    National Easter Seal Society.....................................  1360
    National Pharmaceutical Alliance.................................  1362
    National Potato Council..........................................  1365
    National Rural Telecom Association...............................  1368
    National Telephone Cooperative Association.......................  1372
    National Turfgrass Evaluation Program............................  1375
    National Utility Contractors Association.........................  1376
    National Watershed Coalition.....................................  1377
    Oklahoma State University, Oklahoma Agricultural Experiment
      Station, Oklahoma Cooperative Extension Service................  1379
    Organization for the Promotion and Advancement of Small
      Telecommunications Companies...................................  1383
    Pharmaceutical Research and Manufacturers of America.............  1385
    Predator Project.................................................  1387
    Red River Valley Association.....................................  1388
    Regional Aquaculture Centers:
        Lester Myers, Southern Regional Aquaculture Center...........  1391
        Dr. Richard Spencer, Tropical and Subtropical Regional
          Aquaculture Center.........................................  1392
        Dr. David A. Smith, North Central Regional Aquaculture Center  1393
        Joseph McGonigle, Northeastern Regional Aquaculture Center...  1393
        Ken Cline, Western Regional Aquaculture Center...............  1394
    Society of American Foresters....................................  1395
    Society for Animal Protective Legislation........................  1397
    SPIN-2...........................................................  1399
    Sunkist Growers..................................................  1400
    USA Rice Federation..............................................  1402
    United States Agricultural Export Development Council............  1403
    United States Apple Association..................................  1407
    United States Marine Shrimp Farming Program......................  1410
    United States Telephone Association..............................  1411
    University of Miami..............................................  1413
    University of Southern Mississippi, Mississippi Polymer Institute  1414
    Western Rural Telephone Association..............................  1416
    Wildlife Management Institute....................................  1419
    Wyoming Governor, Jim Geringer...................................  1421

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 1999

                                  ----------

                           TUESDAY, FEBRUARY 10, 1998

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 10:07 a.m., in room SD-138, Dirksen
    Senate Office Building, Hon. Thad Cochran (chairman) presiding.
        Present: Senators Cochran, Gorton, Burns, Bumpers, Kohl,
    and Leahy.

                           DEPARTMENT OF AGRICULTURE

                            Office of the Secretary

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

                                Opening Remarks

        Senator Cochran. The meeting of our subcommittee on
    agricultural appropriations will please come to order.
        Today we are beginning our hearings to review the budget
    request submitted by the President for the fiscal year
    beginning October 1, 1998--the fiscal year 1999 budget--for
    agriculture, rural development, and related agencies.
        We are very pleased to have as our leadoff witness at this
    hearing the Secretary of Agriculture, Dan Glickman. We
    appreciate very much your being here, Mr. Secretary, and we
    understand that you have accompanying you today Richard
    Rominger, Deputy Secretary of the Department of Agriculture;
    Keith Collins, the Department's Chief Economist; and Stephen
    Dewhurst, the Budget Officer for the Department.
        This subcommittee has jurisdiction for all programs and
    activities of the Department of Agriculture, with the exception
    of the Forest Service which is funded by the Interior
    appropriations bill.
        For this next fiscal year, the President has requested
    appropriations of $56 billion for Department of Agriculture
    programs and activities under the jurisdiction of the
    subcommittee, which is a net increase of $8 billion from the
    current fiscal year enacted level. Three-fourths of that
    request is for mandatory appropriations required by law to be
    appropriated.
        The President's total discretionary appropriations request
    is $12.6 billion.
        This presents us with a proposed decrease of approximately
    $330 million from the enacted level for this current fiscal
    year. That's assuming that the President's legislative
    proposals and offsetting savings are enacted into law.
        The Department's request relies very heavily on the
    adoption of new user fee legislation to generate $624 million
    in collections for this next fiscal year. One of these
    proposals is to cover the costs of meat, poultry, and egg
    products inspections. This and other user fee proposals of this
    administration have been rejected by previous Congresses, and I
    suspect they will be rejected by this Congress.
        Further, a $205 million savings in appropriations for the
    crop insurance program results from the President's proposal to
    shift sales commissions for agents from discretionary to
    mandatory spending. That's not certain to be approved by
    Congress either.
        Many other increases proposed for food safety, integrated
    pest management, and a host of other priorities are funded in
    the President's budget by redirecting funds from existing
    programs and activities.
        I think it is fair to say that this subcommittee will not
    have the luxury of being able to count on the availability of
    user fee resources from legislation which has not been approved
    by Congress, and I also expect that Congress will disapprove
    many of the proposed shifts in funds from existing priorities
    of the Congress.
        So, we have our work cut out for us, Mr. Secretary, to get
    these numbers to come out at the end of the line so that we
    fund our programs for research, for agriculture production, and
    for the food programs that are required to be funded by this
    subcommittee each year. So, we will work with you to try to
    identify the priorities and the needs for the Department's
    funding for this next fiscal year.
        We appreciate very much your providing us with your
    statement in advance. It will be made a part of the record in
    full, and we would invite you to proceed to summarize your
    statement or make any other comments that you think are
    appropriate.
        At this point, however, I am going to yield to the
    distinguished Senator from Arkansas, the ranking Democrat on
    the committee, Senator Bumpers.

                          STATEMENT OF SENATOR BUMPERS

        Senator Bumpers. Mr. Chairman, thank you very much. I will
    ask unanimous consent that my formal statement be inserted in
    the record and simply say that this is a sort of bittersweet
    occasion for me because this is the opening round of the
    hearings of my last year in the Congress and my last year on
    this subcommittee.
        Having said that, Mr. Chairman, let me thank you personally
    for the cooperation and the kindnesses you have shown me. We
    have agreed on most things, but even when we have not agreed,
    they have been most amicable disagreements. I could not have
    asked for a better chairman to work with on this committee, and
    I want to publicly thank you for that and just summarize.
        My statement would be basically the same things you said,
    but I would just like to emphasize again that when you consider
    the fact that the budget authority for 1999 is $332 million
    less than 1998 and then you add $600 million in user fees to
    that, we have a pretty tough year in front of us obviously
    because I agree with you, Mr. Chairman. User fees have been
    brought up here--I think this is maybe the sixth consecutive
    year that the Department has asked for user fees, and it will
    probably be the sixth consecutive year they will not be
    granted.
        But I just want to point up the magnitude of our problem if
    user fees are not granted by this subcommittee or by the
    authorizing committee, for that matter, which technically we
    ought to have before we enter into such a thing as that.
        But in any event, Mr. Secretary, I want to thank you for
    your services. You have always been very responsive to the
    members of this committee and we want to publicly thank you for
    that.
        Thank you, Mr. Chairman.

                               Prepared Statement

        Senator Cochran. Thank you very much, Senator. I especially
    appreciate your kind remarks. I do not know of any person I
    have worked with in Congress that I have enjoyed the
    relationship with than this distinguished Senator from
    Arkansas. We have swapped this job back and forth over the last
    decade a number of times. It has always been a pleasure to work
    with him closely on the subjects under the jurisdiction of this
    committee. We will insert your statement in the record.
        [The statement follows:]
                     Prepared Statement of Senator Bumpers
        I am proud to join Senator Cochran and my other colleagues on the
    subcommittee in welcoming Secretary Glickman, Secretary Rominger, Mr.
    Collins, and Mr. Dewhurst. Secretary Glickman was in my state a few
    short days ago and it is a real pleasure to have him and others from
    the Department of Agriculture with us here today.
        This is a bittersweet occasion for me because it marks the first
    hearing for the last annual appropriations bill of which I will have
    the pleasure to serve as a member of this subcommittee. Over the years,
    I have not always agreed with my colleague and friend, Senator Cochran,
    on every single issue before us, but I am happy to say that those times
    of disagreement have been very few and without doubt, the two of us
    have agreed on far more topics than we have disagreed. I want to
    publicly thank him for his courtesy, his thoughtfulness, and the
    partnership we have shared these past several years in crafting the
    funding bills for the Department of Agriculture, the Food and Drug
    Administration, and the other agencies under the jurisdiction of this
    subcommittee.
        The fiscal year 1999 budget now before us appears to offer many new
    initiatives and a few themes we have seen before. Last year, as we
    considered the fiscal year 1998 bill on the Senate floor, I made clear
    my view that investment in agricultural research must be one of our
    highest priorities. I was disappointed to note the overall decline
    below the fiscal year 1998 level in new budget authority requested for
    programs in the Research, Education, and Economics mission area. I
    realize that some of this reduction is simply a result of moving
    specific programs to other mission areas or, as in the case of the
    Census of Agriculture, a function of cyclical budgeting.
        However, I have serious concerns about reductions in formula funds
    to our nation's system of land grant universities and extension
    network. The federal-state partnerships in agricultural research have
    been the backbone for developing our nation's productive capability
    which has made us the envy of the world. Similarly, the budget's
    elimination of congressionally directed research through the
    Agricultural Research Service presents a challenge to us and to the
    research communities in our states who had looked forward to a reliable
    partnership with the federal research arm of USDA. Still, I am
    confident the commitment of the President and of Secretary Glickman
    toward agricultural research is strong and I look forward to working
    together to craft legislation for the coming year that will help
    prepare our nation and our nation's farmers for the coming century.
        I also worry about the farmers themselves. I know that may sound a
    little disingenuous when you consider that net farm income, though
    slightly down in 1997, was at a record high of $60 billion in 1996. It
    is an unfortunate lesson of history, but prosperity on the farm is
    usually fleeting. Cycles of high yields and high prices come, and those
    same cycles, in time, go. In 1996, when the tide was high, Congress
    with the stroke of a pen kicked away a tradition of cooperative support
    and assistance that the farmer had known for more than a generation. It
    may have been an imperfect partnership, but the American farmer knew
    USDA would be there when it was needed.
        USDA is still there and the challenge now is for the Department of
    Agriculture to continue to be a Department for Agriculture in a very
    changing economic and political environment. The 1996 Farm Bill did not
    destroy the farm safety net, but it was badly mangled. Before declining
    budgets and different directions in farm programs and farm policies
    completely dismantle USDA's presence in rural America, we need to take
    a few steps back and reflect on where we have been, where we need to
    go, and how best to get there. I note that the budget for fiscal year
    1999 contains several features designed to improve the farm safety net
    and I look forward to hearing from the Secretary on this subject.
        The 1996 Farm Bill also included the creation of a Commission for
    Agriculture in the 21st Century. Being a new commission and a new
    appropriations account in a time when it has been difficult just to
    maintain the necessary ongoing programs, the Congress provided no
    direct funds for this activity in the fiscal year 1998 bill. I hope we
    will look more closely at the work and the potential of the Commission
    this year. I fear we may otherwise one day regret having turned our
    backs on the American farmer because times were good only to find that
    without him, times may become very, very bad for the rest of us.
        Food Safety continues to demand our strict attention. Food recalls
    accounted for some of last year's largest news stories. Whether it is
    contaminated beef or tainted strawberries, the American people are more
    demanding than ever about the wholesomeness of the food they eat. Part
    of this goes back to my earlier comments about research. It is vital
    that we learn all we can about how to identify, detect, and prevent the
    occurrence of food borne illness. It is equally vital that we proceed
    with the very best science in order to avoid sensationalized scares
    regarding food safety that can, in an instant, destroy businesses that
    took generations to establish.
        This subcommittee provided funds in fiscal year 1998 to implement
    the President's Food Safety Initiative, a collaboration of USDA, FDA,
    and CDC. The fiscal year 1999 submission carries this initiative
    forward. Food safety is an area where everyone should be in agreement.
    Food producers, processors, and consumers all have a vital interest in
    knowing that products are reliable and safe. Consumers demand such
    standards just as producers and processors hope consumers will demand
    their products. As more and more foods are imported from around the
    world, as emerging diseases and pests capture the headlines, it is more
    important than ever that we hold food safety to the highest attainable
    standard possible.
        Again this year, the budget request is dotted with proposed user
    fees. Some are new creations, some are old acquaintances. The budget
    proposes to collect $573 million in new FSIS user fees. This sizable
    amount, we are told, would equal only pennies per pound in additional
    costs to the consumer. After all I have just stated about food safety,
    one would assume that the American consumer would think nothing of
    spending a few pennies more to know that the meat or poultry products
    in the shopping cart are safe. Unfortunately, I am not convinced higher
    consumer prices is the proper analogy to the user fee proposal.
        If authorized and collected, the cost of FSIS user fees would
    seldom, if ever, be absorbed by the meat and poultry processing
    companies. Anecdotally, we are told that those few additional pennies
    per pound would come, not out of our tax burden, but out of our
    pocketbooks at the grocery store. However, it is most unlikely that the
    companies would pass this cost on to the consumers in grocery stores
    where competition is the most fierce. Instead, the companies are more
    likely to pass on these costs to the one sector of the economy that is
    unable to pass them on to anyone else, the producer. It seems odd that
    while we worry about the small farmer, while we shake our heads at
    livestock prices, while we worry about the economy of foreign nations
    that might disrupt our livestock exports, we would in the next breath
    propose adding another $573 million annual cost (nearly $2.8 billion
    through the year 2003) to these very producers.
        The Department of Agriculture touches on many more subjects than
    those I have just discussed. Providing adequate nutrition for our
    people, protecting our environment, promoting rural development, and
    remaining on the cutting edge of world trade are but a few of the other
    vitally important functions of USDA. As we proceed through this year's
    hearing schedule, I look forward to hearing from all agencies of USDA
    on their plans for the coming year.
        The budget presented to us by President Clinton is a balanced
    budget. It took a lot of pain and suffering by all of us to reach this
    historic point. We will have a lot of pain yet to endure to make a
    balanced budget more than simply a point in time. As we hear from
    Secretary Glickman, and the other USDA officials that will follow him,
    we need to keep in mind that austerity will continue as our guide. We
    will also recognize our duty to the constituencies we serve today and
    in the years to come. The passage of the fiscal year 1999
    appropriations bill will be a point in time, but one which we must
    assure will lead us in the right direction to a coming millennium.

                           STATEMENT OF SENATOR BURNS

        Senator Cochran. Are there other Senators who would like to
    make an opening statement? If so, I will be happy to recognize
    you for that purpose. Senator Burns, you were here early.
        Senator Burns. Well, Mr. Chairman, let me just place my
    statement in the record.
        The Secretary already understands that I have got--I do not
    know why we ought to be appropriating any money for the
    Department, to be honest with you. That is where I am at right
    now.
        Senator Bumpers. Would you repeat that?
        Senator Burns. Yes; I do not know why we are appropriating
    any money because I do not see an advocate down there for the
    producer and I would sure like to.
        I want to say that I am very disappointed in the roadless
    areas so far as the Forest Service is concerned with EEP having
    the money and not spending it, not competing. Those areas that
    I think would best be left to really just a private sit-down, I
    would like to sit down with the Secretary one of these days and
    go over each one of these things because what is going on in my
    State of Montana has far-reaching ramifications. It is serious.
    It is serious beyond belief. I know there is a way to work
    through this and I do not think probably in the public domain
    is the place to do that.
        I have a hard time telling my farmers if you think
    everything is good on the farm. I have a hard time saying that
    we cannot get as much for a 60-pound bushel of wheat as they
    are getting for a pound of wheat in the grocery store. Now,
    something is awry and I am not smart enough to figure it out. I
    wish I was. I wish there was a single bullet, but there is not.

                               Prepared Statement

        So, Mr. Chairman, I would just submit my statement for the
    record and one of these days I would like to sit down with the
    Secretary because we have some very, very serious things to go
    over, if we possibly can.
        I thank the Secretary for coming today and I thank the
    chairman for holding the hearing.
        [The statement follows:]
                      Prepared Statement of Senator Burns
        Thank you, Mr. Chairman. I would like to start by stating how well
    run I find this subcommittee to be, I believe the Chairman and the
    Ranking member do a very good job of getting this process underway in
    this subcommittee. I would also like to commend the staff of this
    subcommittee for the professional manner in which they perform their
    jobs. Last year their work was a good example of how this process works
    and I do appreciate their fine work.
        Now with that done, I am pleased to see the Secretary of
    Agriculture before us today. In my mind this is a very timely hearing
    considering much of the work that the Secretary and his department have
    been involved with in recent weeks. Between the difficult times that
    our farmers are facing in the field and the recent announcement on
    roadless areas in our National Forests. These issues have all had a
    definite impact on my state of Montana, and I honestly don't think a
    lot of consideration is being given to rural America by the Department
    at this time.
        To start out with Mr. Secretary, we must all admit that the current
    farm program is in existence and is moving forward. The producers are
    getting their transition payments and all is well on the farms. That is
    the feeling I am getting from my constituents when they talk to the
    people in your department. But all is not well. When I go to the store
    to purchase breakfast cereal, and have to pay $3.75 a pound for
    Wheaties, and yet my farmers in Montana can't get that for a bushel
    which weighs sixty pounds, well something is far from right on the
    ground.
        It is my belief, and it is shared by many on the ground that this
    is due to inadequate trade policies and work both by the office of the
    United States Trade Representative and the Department of Agriculture.
    In recent weeks I have had numerous inquiries into my position on the
    trade credits that this country is providing to countries in Asia. They
    are wondering about their future in these markets.
        It is my position that I will accept the first payment made by this
    government to Asian countries, but Mr. Secretary we had better see some
    realistic development in the trade of American agriculture products
    from this effort. Without that I see a rough and rocky future for any
    approval of additional efforts for bailing out these countries. When
    our trade representatives are working with these people it is their
    responsibility to make sure that American farmers and ranchers are
    being taken care of on the world market.
        As far as I am concerned this is not the case today. Most if not
    all American farmers are proud of and will back their country to the
    bitter end on matters of national defense and security. But, when doing
    so they would like to think that their government is giving them a fair
    break on dealing on the world trade stage. This is not the case today.
    As we place trade sanctions on many countries in the world, thus losing
    any and all opportunities for trade of food products with these
    countries, our friends and trade partners move into those markets and
    have a hay day.
        It is known that some of our trade partners are going into the
    countries we have trade sanctions with and selling above market price.
    They then take the extra earnings they have achieved and sell below
    market price in those markets in which we compete with them. Yet, for
    the past two years the Department which you have been in charge of has
    yet to spend one dollar of Export Enhancement Program, (EEP), funds to
    counteract this trade difference. As a matter of fact you gladly turned
    back about $60 million last year for disaster assistance.
        This year you propose capping EEP at a sum of $320 million, when
    Congress has provided you authority for up to $550 million for this
    program. I would personally like to see some of that money used, but in
    consideration of what you have done in the past couple of years, I
    honestly don't understand why you are even putting that amount in the
    account this year. I would be pleased today to hear you state that you
    really plan on using it, but I doubt you will say much more than if
    market conditions warrant the use of EEP funds your office will make
    those funds available.
        In contrast to the EEP funds the Department of Agriculture has gone
    out and done a lot of good work with the Foreign Market Development
    funds. This seems to be the one account in the Department and in the
    Foreign Agriculture Service where the dollars are getting used. Then
    again we face another obstacle set forth by the Department, the lack of
    realistic funding for this program. If it is the one program that seems
    to be working and bringing dollars back to the American producer, why
    does the Department continue to under fund this vital program. It
    appears all the Department does is carry over funds for the Cooperator
    program.
        This weekend I will be returning to Montana, as will many of my
    colleagues be returning to their states, for the President's week
    break. This Friday and Saturday in Shelby, Montana they will be hosting
    the annual Farm and Ranch Days in which I will be in attendance,
    answering questions and speaking to a number of farmers from Montana
    and surrounding Provinces and states about our Agriculture policy. I
    would like to invite you, and will assist your office to set up a time,
    for you to speak to my farmers about their future via the phone. Then
    you can explain to them why the rest of the world seems to be under
    selling our grain on the world market.
        By the way, are you aware of the significance of this meeting being
    held in Shelby, it was the town that almost declared war on Canada
    several years ago due to the amount of wheat that was coming across the
    border in that area. They did it then, and don't be surprised if they
    do it again in the near future Mr. Secretary.
        I can guarantee you, your staff and the Department that until I
    feel that the concerns of the American and Montana farmers are
    adequately addressed on the world market that you will continue to hear
    from me on this topic. I have not supported NAFTA or GATT and for the
    reasons listed above. This Department and this Administration continue
    to cut trade deals all across the world, but my farmers are not basking
    in the splendor that they were assured would come their way. Because
    the world looks upon us as easy traders, one of the first issues that
    drops off the table is agriculture.
        Why is it that everybody is concerned about the food supply the
    American Farmer and Rancher provide. It is because without a doubt they
    produce the finest, most reliable and SAFEST food in the world. The
    rest of the world knows this, and in reality are afraid of our
    producers. Mr. Secretary, I am willing to put any producer in Montana
    up against, on a competitive market, any producer in any country in the
    world. Time and time again they will produce a SAFER, more reliable and
    less expensive product. But time and time again they, the producers,
    are faced with the fact that they must compete not against another
    farmer, but against a foreign government without much help from their
    own.
        It is apparent that the current Administration wants you and your
    office to go down in history for providing a safer food supply for the
    people of this country. Well, Mr. Secretary, if this Department does
    not go out and assist our farmers with marketing on the world market,
    you won't have to worry too much about the food supply here in the
    United States. I wonder how safe you all will consider the food supply
    that we will be required to import from foreign countries in order to
    meet our daily needs.
        Mr. Secretary, it is simple, Congress has provided you with the
    tools do go out and compete on the world market. Please use them and
    help our farmers make a decent living and have a chance. If not, the
    idea of the Big Open will occur again, and states like Montana will
    become the playgrounds that those with the big dollars would like to
    see anyway.
        Well that is my sermon on agricultural trade for today. Here ends
    the lesson. Unfortunately now I must go onto the issue which I am sure
    you knew I would bring up today, Roadless Areas and the moratorium on
    any and all construction of roads in these areas.
        I cannot believe the nature in which you and the Chief of the
    National Forest Service allowed this to occur. A couple of weeks prior
    to the announcement by the Forest Service, myself and several members
    of this committee and the Energy and Natural Resources Committee,
    joined in sending you a letter outlining our concerns and suggesting
    that we were as concerned as you about the roadless areas. We stated
    that we would be willing to work with you and the Administration in
    developing a policy to address these issues in our states where your
    announcement had the greatest impact. But obviously those people who
    have elected us have no understanding of the finer issues, since their
    voices and their concerns went selectively unanswered by your office.
        This concerns me greatly, since we like the President are elected
    officials, and although both Congress and the Administration like to
    act like we have all the answers. By working together we may be able to
    at least address them in a fashion that will answer the concerns of all
    the people, not just special interest groups that fancy having one ear
    or the other.
        Mr. Secretary, your decision to implement this moratorium and to
    notice proposed rule making has done more in the past few weeks to
    reignite the fire that was once called the ``war on the west''. No
    other Administration has done more to make people who live and work on
    the public, and for that matter private lands, in the west feel as
    though nobody cares about them like this Administration has. These are
    real people, Mr. Secretary, with real jobs and real dreams about the
    future, both for themselves and their children. Yet they are brokered
    as insignificant pawns in a motion to please the extreme elements
    within this Administration.
        I have to honestly tell you how very disappointed I am in you and
    your office for this action. There were numerous ways in which to
    address the current situation, and you let them all slide in order to
    preserve some righteous thinking person in the White House. Just
    remember sir that which can be done by executive order can be undone by
    executive order, and god forbid the consequences at times can be worse
    than what we started out with in the first place.
        Now I have preached a sermon, and given a lecture. I had hoped and
    always thought that this might be the one committee where I did not
    feel the need to do this, but current events have led me to this point
    today.
        On to a point of interest in regards to a situation in Montana. You
    understand that I worked with the Chairman and Ranking Member of this
    Committee last year to provide funding for a quarantine facility in
    Montana for the bison that leave Yellowstone National Park. I also
    understood that with the timing of the Agriculture Appropriations, and
    the upcoming winter, that it would not be possible for the Department
    to do much work in relation to that facility. However I had assumed
    that in the past four months that there might be some dialogue with the
    state of Montana and the Department on the future of this facility.
        Mr. Chairman, I admit to being rather long winded today, somewhat
    unlike me, but I had a great deal to get off my chest here today. I
    again appreciate the leadership that you and Mr. Bumpers provide to
    this committee and I am also aware of some of the differences that the
    Ranking member and I have on these issues. But it was important to me
    to get this out in the open and let the Secretary understand why I have
    such a lack of confidence in the Department of Agriculture at this
    time. Again thank you for this opportunity, and I look forward to
    listening to the Secretary explain the USDA budget for the coming year.
    I will have some questions later.
        Thank you, Mr. Chairman.

                           STATEMENT OF SENATOR LEAHY

        Senator Cochran. Senator Leahy.
        Senator Leahy. Thank you, Mr. Chairman.
        I too am one who has enjoyed working with you. We have
    served for so many years. I think we both had dark hair when we
    started. Well, you still have hair. [Laughter.]
        I also was privileged to come to the Senate with Senator
    Bumpers who has been, like you, one of the best friends I have
    had here. I would like to praise Senator Bumpers because of
    what he has done, both as chairman and as ranking member of
    this subcommittee. I know that in that capacity he has had, as
    you have, Senators from both sides of the aisle constantly
    coming, asking for help on far more things than it is possible
    to do. Like you, he has helped when it was possible to do it,
    and when he was unable to, like you, he has still left the
    Senators feeling that they had a fair hearing. No more could be
    asked of any chairman or ranking member.
        Right now we are close to funding full participation for
    the WIC Program. Mr. Secretary, I would say that is a pretty
    significant accomplishment when you consider that not very long
    ago one-half of the pregnant women, infants, and children went
    unserved.
        Another important nutrition investment is the WIC farmers
    market program which helps create farmers markets and assists
    families on WIC at the same time. This committee has greatly
    helped that program with continued funding, and it has turned
    out to be a win-win situation; both a win for the producers and
    a win for the consumers.
        Secretary Glickman, I want to especially thank you and your
    staff. I am glad that there is a USDA because you have been up
    in the past several weeks to help Vermonters in the aftermath
    of one of the worst ice storms in this century. I toured that
    area, along with Senator Jeffords. I know how badly it was hit,
    and I saw the USDA, the Vermont National Guard, and the private
    sector come together to help us there.
        The ice storm paralyzed communities from northern New York
    to the tip of Maine. Trees collapsed from the weight of several
    inches of ice that coated their branches. Power lines were
    literally just ripped right out of the houses. We had miles of
    utility poles that were just flattened. They were standing one
    hour, and the next hour they were all down. Hundreds of
    thousands of people were left without power for days and even
    weeks, while temperatures dropped down well below zero. The
    temperatures warmed up and we got hit with ice melting and
    rivers flooding, overpowering their banks.
        I was born in Vermont. I have lived there 57 years. This
    storm is the worst I have ever seen. In the Burlington area, 50
    percent of the trees were toppled or severely damaged, and
    across the region 70 percent of the trees were damaged. You
    have visited that area before, Mr. Secretary. You know the
    beauty and the utility of those trees, and you can imagine what
    it was like with them down.
        Along with farming, forest and forest products make up the
    majority of the economy of the region hit by the ice storm.
    These rural communities, and the men and women who work there,
    are going to be feeling the economic effect of this storm for
    years to come. In some cases, sugarmakers and woodlot owners
    and apple orchards are going to have to wait several years
    before regrowth allows them to go back into what has been their
    livelihood not only for them but their families for
    generations. We see over $8 million in crop damages and $3
    million in trail damages in our national forests and untold
    millions beyond that.
        The hardest hit, though, were the dairy farmers in many
    ways. They are already struggling to make ends meet. Farmers
    were left without power needed to milk their cows. Cows have to
    be milked twice every day whether you have power or not, and
    sometimes cows went for days without being milked. Farms lost
    cows. Milk handlers were unable to get through on the roads to
    make their pickups. Farmers had to dump thousands of pounds of
    milk, and losing one milk check for a lot of these farmers can
    make the difference of whether they stay viable or not.
        Local and State assistance is going to help them, but
    Federal relief is needed. I hope the Department can help us all
    the way through. There are a number of programs that you have
    in your Department, Mr. Secretary, and we are going to need
    your help and we will continue to work with you.
        But there is another storm on the horizon and that is
    manmade. The storm that I am concerned about in the future is
    the one that the Department of Agriculture is proposing in the
    milk marketing order system. If it is made final, it is going
    to put thousands of small dairy farmers out of business in very
    short order.
        The Commissioner of Agriculture of Vermont has advised me
    that Vermont could lose one-half its farms under the USDA
    proposal. Economic analyses by Agrimark Cooperative shows the
    Northeast will lose $117 million in annual income. Almost all
    regions of the country will be dramatically hurt.
        So, you can imagine then, Mr. Secretary, you are going to
    hear a lot about this. You just had a proposal and a report
    which says we should increase efforts to keep smaller farms in
    farming. Yet, your proposal for milk pricing will force a lot
    of these same small farms out of business. We will address this
    in authorizing committee, but I just wanted you to know it is
    an area of concern.
        Mr. Chairman, I thank you for your courtesy in allowing me
    to go on longer than usual.
        Senator Cochran. Thank you, Senator.
        Senator Gorton.

                          STATEMENT OF SENATOR GORTON

        Senator Gorton. Mr. Chairman, I would like to start out
    also by saying how much we will miss Senator Bumpers when he
    leaves. I was reflecting on the fact that there is almost no
    one I have come across in my career with whom I can disagree
    more frequently or more cheerfully with more eloquence on his
    part and with less rancor from a personal point of view or, for
    that matter, someone who is so great a friend and an ally when
    we find ourselves in agreement. He has done a great deal on
    this subcommittee and the Senate as a whole.
        I guess I wish I could be so kind to the Secretary and his
    budget, but Mr. Chairman, when you start by saying that in
    spite of the image that the American people have of the
    Department of Agriculture, overwhelmingly its money goes into
    entitlements that have to do with transferring money and assets
    from one group in our population to another and how little of
    it goes into agriculture itself, as both we and the American
    people think of agriculture, that is to say, our producers of
    food and fiber.
        To see a budget that continues to move so radically in the
    direction of again cutting off farmers and being hostile to
    them and their interests in the way that this does is an
    intense regret. To see a complete cutoff, for all practical
    purposes, of cooperative research programs of work between the
    Department of Agriculture and our universities in order to fund
    basically more welfare programs.
        The President's ideology that he is unwilling to submit to
    the Congress for its normal ratification just means in my view
    that we have a Department of Agriculture that has forgotten
    about agriculture, and I am convinced that you, Mr. Chairman,
    as has been the case in the past, are going to come up with a
    rather different budget in these research areas than the one
    that has been submitted to us here.
        I also join Senator Burns in a statement, that is not
    directly relevant to this hearing because it is part of the
    Department of Agriculture that belongs in the jurisdiction of
    my subcommittee, over their forest initiatives, again hostile
    to traditional uses without having solicited the views of the
    people in communities who are greatly affected by those
    decisions, making decisions that really ought to be decisions
    made by the elected representatives of the people through their
    Congress rather than in individual Departments.
        So, I have to say that an appropriation bill that I hoped
    we would have a wide degree of agreement on is one that is
    simply going to create controversy and has deeply disturbed
    people in agriculture in my State and I suspect across the
    country.
        Senator Cochran. Thank you, Senator.
        Senator Kohl.

                           STATEMENT OF SENATOR KOHL

        Senator Kohl. Mr. Secretary, we appreciate your willingness
    to testify before this subcommittee today on the issues raised
    in USDA's fiscal year 1998 budget. We recognize the magnitude
    of the task before you. Managing the USDA with this
    administration's commitment to a balanced budget is no small
    task.
        We do ask that as you review programs, you avoid picking
    winners and losers and focus on treating all programs and
    people fairly and equitably. Past decisions in one program, the
    milk pricing laws, have created winners and losers with family
    farms having the most at stake. What needs to happen to Federal
    milk marketing orders is equity and simplicity to eliminate the
    regional differences. Without reform, Wisconsin will lose
    almost one-half of our family dairy farmers over the next
    decade.
        In addition, Mr. Secretary, the family farmers must be
    assured that other countries are not being given an unfair
    advantage or unfair access to our markets and we must expand
    our agricultural exports. To achieve these goals, USDA must
    actively monitor international agriculture trading agreements.
    While properly constructed trading agreements alone will not
    save the family farm, poorly monitored ones will harm their
    existence. Without detailed analysis and careful attention to
    the issues, I feel that family farms may in fact disappear
    forever. Mr. Secretary, USDA's actions on these issues will
    determine the future of the family dairy industry.
        Thank you, Mr. Chairman.
        Senator Cochran. Thank you, Senator.
        Mr. Secretary, with that warm welcome. [Laughter.]
        Thank you. We appreciate your being here.
        Secretary Glickman. I am reminded of Senator Bumpers' joke
    which I have stolen from him and told about 4,000 times. I
    won't repeat it today.
        But thank you very much, Senator Cochran.
        Senator Cochran. It may be one of the few jokes of his you
    can retell. [Laughter.]
        Senator Gorton. I did not know there was one.
        Secretary Glickman. If he has more, I would be glad if he
    called me this afternoon.
        Senator Cochran. We better get back on the subject here.
    You may proceed.

                        Statement of Secretary Glickman

        Secretary Glickman. Thank you. I want to thank you for your
    courtesy and hospitality.
        I also would like to pay tribute to Senator Bumpers. I was
    in Lonoke, AR, Senator Bumpers, where we announced a water
    program that you had actually gotten started. The affection
    that people have for Senator Bumpers is higher than I have seen
    for about anybody in public life. So, I know that his
    contribution to his State is enormous.
        In any event, I want to make a couple of comments.

                           Decreases in USDA Outlays

        One is if you look at the chart here, outlays in the
    Department of Agriculture for the last 6 years have clearly
    been coming down. There are a lot of reasons for that, but the
    prime reason is the reduction in entitlement spending: food
    stamps and farm programs. Food stamp reductions have largely
    taken place because of economic improvement and the resulting
    reduction in the numbers of people on the rolls and their
    length of time on the rolls, particularly for the last 3 years.
    Farm program spending also has come down largely because of
    congressional action related to AMTA payments.
        So, the fact of the matter is that in the 1999 budget we
    have requested increases in EQIP, increases in conservation,
    and to fully fund crop insurance, but we have not asked for
    more money to fund the basic commodity programs because we are
    operating under the 7-year AMTA Freedom to Farm Act which has a
    ratcheting down of farm program expenditures every single year.
        So, I do not want the impression to be left that there is a
    reduction on the farm side and an increase on the welfare side.
    Congress has made some decisions on the farm side to lock in
    reductions over the next 7 years, and I think by and large most
    farmers--not all, but most--think that that decision was an
    appropriate decision. And, we are implementing that the best
    way that we possibly can. The flexibility provisions of that
    farm bill have proven to be very positive.
        Not every part of agriculture is doing well. Most farmers
    are doing better because interest rates are down. They are low
    because we have made progress on the budget. We also have made
    progress on inflation. I think that is a tribute to both the
    administration and Congress, but the fact is those lower
    interest rates have stabilized a lot of the slide on farm
    income that we saw in the 1980's.

                            Severe Weather Problems

        But clearly, the Northern Plains regionally have the most
    serious problem in agriculture today. The Dakotas, Montana, the
    northern tier of States with the very severe weather problems,
    coupled with prices particularly in grains that have not been
    of an augmented level have caused serious problems there, and I
    understand that.

                               Dairy Price Issue

        In addition to that, dairy has not done as well as other
    segments of the American farm economy. Dairy prices today are
    better, but I cannot predict to you where they are going in the
    future. I think the basic formula price for last month was
    $13.30, which indicates some strengthening, but dairy producers
    have suffered a great deal and I think that that is a problem
    for us and we need to work on it. We have proposed milk
    marketing order reform, which is highly controversial, but at
    least we will get a national debate.

                           Weakened Livestock Prices

        A third issue is livestock. Livestock prices, while they
    have been strong the last few years, have weakened recently.
    Part of that has to do with the Asia financial crisis. Part of
    it has to do with other factors.

                          Conservation Reserve Program

        But without trying to be overly defensive, I think it is
    important to recognize that whether we are working on a
    conservation reserve program for example in Washington State to
    make sure that Senator Gorton's farmers are treated fairly
    under that CRP program or we are dealing with exports or other
    kinds of initiatives, the heart of the Department of
    Agriculture is in our efforts to preserve stable income and the
    health of production agriculture. We do a lot of other things
    as well, such as seeing to the sustainability of land and
    making sure that hungry people are fed.
        But I take very seriously, coming from Kansas, my role in
    preserving the strength of production agriculture. A lot of
    decisions were made in the 1996 farm bill which changed farm
    policy, and perhaps we need to talk about some legislative
    issues. I want to make it clear that the heart of what we do is
    to preserve a strong farm economy out there in all sectors, all
    regions, and all commodities.

                          President's Balanced Budget

        Let me just make a comment that we had to make difficult
    decisions in light of the Balanced Budget Act of 1997 and the
    President's commitment to a balanced budget, the first one in
    30 years submitted. We had to make difficult decisions on
    resources in terms of where we provide them and how they are
    redirected. We did propose some new user fees. We absorbed
    certain costs and looked at our own business practices. Those
    efforts, combined with program reductions and reforms taken in
    prior years, have made a significant contribution to the
    President's balanced budget.
        USDA's outlays, as you can see on this chart, are down by
    about 14 percent over the last 6 years, from $63 billion to a
    projected $54 billion.
        Over this same period, employment, on the other chart, is
    down about 20,000 through reorganization and streamlining
    efforts. Today USDA is the smallest it has been since the mid-
    1960's. We are doing our part to reduce the deficit.
        But notwithstanding those facts, there are serious
    challenges facing farmers, rural Americans, and the Nation and
    we cannot abdicate our role in that area.

                                  Civil Rights

        I also want to emphasize to you the importance that the
    President and I place on improving USDA's civil rights
    performance. The necessary funding for civil rights-related
    activities contained in this budget, the largest increase in
    two decades in that area reflects that commitment. We are
    asking for funds to carry out recommendations of our Civil
    Rights Action Team and the National Commission on Small Farms
    that support our civil rights agenda. In total, we are
    requesting $250 million to invest in credit, outreach, and
    conservation programs relating to civil rights, plus funding to
    resolve discrimination cases that are currently pending.
        Briefly, I want to go over the four major parts of the
    budget. The first one has to do with economic and trade
    opportunities.

                             Crop Insurance Program

        The long-term viability of our farmers is now more
    dependent than ever on their ability to manage risks inherent
    in the market. This is what I call the post freedom to farm
    market, where the Government is not actively engaged in
    managing the supply and price of products. We believe that
    maintenance of a strong set of risk management tools is
    essential in this new situation, and that is why our budget
    provides for full funding of the crop insurance program. We
    will propose legislation to shift funding of certain crop
    insurance delivery expenses to mandatory funding to ensure
    maintenance of this vital program. There is no real safety net
    out there for most farmers except selling our products overseas
    and having an effective crop insurance program.
        I admit to you that the crop insurance program is not
    perfect in all respects, but having it based on mandatory
    funding I think will give farmers some security that it will be
    there for a long time.

                       National Commission on Small Farms

        Farmers and ranchers need credit to succeed. Our National
    Commission on Small Farms and our civil rights report
    emphasized that, driving home the point that improved access to
    credit creates opportunity for family farmers, in particular
    beginning and socially disadvantaged farmers.
        For that reason, the 1999 budget provides more funding for
    farm loans. We have proposed doubling direct farm ownership
    loans to $85 million and increasing guaranteed loans. Under our
    budget, almost 3,500 beginning and small family farmers will be
    able to acquire or save their farms. The budget keeps direct
    and guaranteed farm operating loans at $2.4 billion to serve
    some 28,000 limited resource farmers.

                          Government Debt Forgiveness

        But I must tell you there is one other issue I urge you to
    deal with and that is that the 1996 farm bill contains an
    onerous provision which is a categorical ban on loans to
    farmers who have had Government debt forgiveness since the mid-
    1980's. Now, mind you, banks do not even do this. What the law
    says is that if you have had any kind of a write-down in the
    past, 10 years ago, you can no longer get a Government loan, a
    direct operating loan, a guaranteed loan, or the related farm
    loans that we have. So, that means, notwithstanding the
    redemption that we tend to believe that people should have,
    that once you have that impediment, you are forever barred from
    Government assistance. No bank has that kind of onerous
    requirement.
        I admit to you that there were people back in the 1980's
    that took advantage of Government loans and abused the process,
    but since 1989 we have had between 75,000 and 80,000 people who
    have had write-downs and most of those people are doing OK now
    but they are forever barred from getting loans.
        This is a very serious problem and one that has a
    monumental effect. It was raised by our Civil Rights Action
    Team, but it is a problem that affects every single State in
    this country. I am sure, Senator Kohl, you have had people who
    have had Government write-downs in the last 10 years. They are
    no longer eligible for Government farm credit assistance. We
    are denying a lot of small farmers access to credit.
        We will ask Congress to replace this prohibitive standard
    with one that we think is based on common sense that will
    protect both taxpayers and hardworking, creditworthy farmers
    and ranchers. This is also one that we need to work on quickly
    because if we do not, we will lose more farmers because they
    will not be able to get credit assistance, guaranteed or direct
    credit.

                              Agricultural Exports

        Exports have never been more important to the health of the
    American agriculture. This is the other part of the safety net.
    We have to aggressively use our efforts to open new markets,
    maximize export opportunities, fight new obstacles to trade,
    particularly sanitary and phytosanitary restrictions being put
    on our products by other countries. We have been wrestling with
    the Asia financial situation. We have been extending export
    guarantees to key markets, keeping them open to our farmers and
    ranchers.
        On that point but unrelated directly to our budget, I want
    to emphasize the critical importance to American agriculture of
    congressional support for IMF funding. The stability of these
    Asian countries to buy our products is in large degree due to
    stability of their currencies and their economic conditions,
    and it is unlikely that we will have much of a market there
    without that kind of stability.
        For 1999 we have proposed spending nearly $6.5 billion for
    trade related activities, including a projected $4.6 billion
    for export credit guarantees to protect sales to Asia. Just
    this last week I announced that the Koreans were coming in for
    an additional $100 million of credit for hides and skins,
    Senator Burns, which had the cattlemen very, very interested.
        Senator Burns. It will not be my hide.
        Secretary Glickman. No.
        Senator Burns. That is the only one I am interested in
    right now.
        Secretary Glickman. OK. Well, I will not comment.
        But anyway, the fact is that the export credits are a key
    way to deal with this issue.
        The budget also proposes a flexible multiyear authorization
    for the export enhancement program.

                               Rural Development

        We also believe that the programs dealing with housing,
    running water, electricity, and telecommunications are
    critical. They mean job opportunities. Overall the 1999 rural
    development budget will support about $9.8 billion in loans,
    loan guarantees, grants, and technical assistance, which is
    $300 million more than 1998 and $1.8 billion more than in 1997,
    largely due to reduced and stable interest rates. The budget
    supports the administration's Water 2000 initiative, homeowner
    initiative, and maintains rural rental assistance to low-income
    families. I will not read all of the statement here, but the
    area of rural development is a very high priority to the
    administration.

                             Agricultural Research

        Research is critical to the future economic growth of
    agriculture. Driven by publicly funded research, agricultural
    productivity has grown at an annual rate of 1.8 percent over
    the last 45 years. There have been all sorts of breakthroughs
    that I do not need to go into here. The budget increases the
    work we are supporting to identify and develop a better
    understanding of genes that are important to agricultural
    production and crop biodiversity. We also intend to increase
    our competitiveness in the global market, production
    efficiency, and ultimately our farmers' profitability through
    our research.
        The budget emphasizes improving sustainable management
    systems to enhance the economic competitiveness of small farm
    producers and protecting the environment.
        Marketing is more important to American agriculture than
    ever before, particularly protecting the health and well-being
    of American agriculture at home and protecting us from
    unfounded sanitary and phytosanitary barriers to trade. For
    example, we are making excellent progress in combating many
    plant and animal pest and disease programs such as brucellosis.
        There are other budget increases that are useful in this
    area, in the area of pest detection, disease prevention, and
    border inspection. We have several proposals that will help
    farmers and ranchers stay competitive in an increasingly
    concentrated market, especially the meat and poultry markets.
    Our budget requests funds to carry out the organic
    certification program and broaden the pesticide data program.

                        National Food Safety Initiative

        In connection with our goal for a healthy, safe, and
    affordable food supply, the USDA budget includes $46 million,
    roughly one-half of a Governmentwide increase of $101 million,
    for the President's national food safety initiative. This
    initiative will focus on enhancing the safety of imported and
    domestic fruits and vegetables, food safety education,
    modernizing our meat and poultry inspection systems, and
    developing information and tools to control a greater range of
    potential food safety hazards.
        We are on our way to modernizing our 90-year-old meat and
    poultry inspection system. On January 26, 1998, or less than 2
    weeks ago, 300 of the largest slaughter and poultry
    establishments, producing about 92 percent of all meat and
    poultry, implemented the HACCP system. These firms are using
    the latest science to identify and correct food safety hazards
    setting the framework for change.
        For 1999 we proposed boosting food safety spending by $34
    million to a program level of $710 million. The resources will
    allow us to maintain a frontline inspection work force
    providing rigorous science-based inspection while working to
    involve a greater range of food safety risks from farm to
    table. As you know, we have proposed user fees in this area. I
    am well aware of the controversial nature of them. I dealt with
    them when I was in Congress.
        My point is that, as I go around the country and talk to
    people, the food safety issue is perhaps the dominant issue
    that people talk to me about everywhere. So, in order to do
    what we need to do in the food safety area, we have proposed
    the user fees because without them we will have to either make
    major cuts in those areas or major cuts in a lot of other
    program areas. Funding for research and conservation needs to
    be maintained but we also have to keep our frontline meat
    inspectors on the ground.
        Obviously, we are going to work with you to deal with this
    issue the best way we possibly can, but given the fact that the
    budget is going down, and we have a balanced budget, the old
    expression is something has got to give and I do not want the
    confidence that the public has in our food safety system
    threatened.
        I will have to tell you this. We have the safest food
    supply in the world, bar none, but that is dependent on
    consumer confidence. People in the industry also understand
    that safe food sells. So, what we are doing with this is trying
    to ensure that we have the infrastructure in order to keep that
    public confidence as high as possible.

                                Food Assistance

        In addition to that, not everybody has the advantages in
    this society. Low-income people still need food assistance. The
    budget requests full funding for the food stamps, child
    nutrition, and WIC programs to ensure that that takes place.
        With respect to food stamps, we propose to restore food
    stamps to legal alien families, which include children,
    elderly, and disabled persons.
        For WIC, we are requesting the funds to support 7.5 million
    recipients while we work to bring down the program's package
    costs. There are several other areas.
        One area I would like to tell you about is our budget
    proposal for a new $20 million food recovery and gleaning
    initiative to provide community-based grants to help
    neighborhoods recover edible food and use it to alleviate
    hunger. The research we have done documents that 25 percent of
    the food produced every day in America is thrown away. Twenty-
    five percent of food that is prepared in this country is
    uneaten and thrown away, and a lot of that food can go to feed
    hungry people and to supplement the Food Stamp Program and
    other Government programs. These initiatives I think will help.

                                  Conservation

        In the area of conservation, obviously we need to continue
    to have a vital, sustainable natural resource base. One of my
    top priorities is implementing the farm bill's conservation
    programs together with our State and local partners. To do so,
    USDA needs $825 million for the Natural Resources Conservation
    Service. That will help us to contribute to the
    administration's clean water initiative which will improve
    water quality in certain highly vulnerable watersheds that are
    impaired by agriculture.
        I will have to tell you that those programs are much more
    farmer friendly than they have ever been in the past. Working
    cooperatively with State conservation districts, with RC&D's,
    and with other public and private bodies, most folks now
    believe that we have gone to a carrot approach rather than a
    stick approach when it comes to farmer-led conservation
    measures around the country.
        We are making outstanding progress in our land conservation
    and cost share programs funded through the CCC.
        On the CRP, we held our first signup last year under new
    environmentally focused rules. We have just completed another
    signup. The response has been impressive. There were mistakes
    made, but by and large we have tried to correct those mistakes
    as they have come to our attention. I mentioned that I was out
    in the Pacific Northwest correcting one of those mistakes in
    Senator Gorton's area. It had to deal with the environmental
    benefit index as it related to air quality.
        I am pleased to report that in 1 year we have doubled the
    environmental benefits of CRP while at the same time saving
    taxpayers hundreds of millions of dollars, and we are doing
    similar things with the wetlands reserve program.
        Another popular and vital conservation program, established
    by the last farm bill and funded through the CCC, is the
    Environmental Quality Incentives Program. The budget includes a
    $300 million amount for EQIP, a one-third increase over 1998
    funding, which is critical to support the clean water
    initiatives. We also intend to manage EQIP to respond to
    recommendations made by the Civil Rights Action Team to
    increase participation by minority and low-income farmers and
    other underserved clientele.

                     Customer Service and Program Delivery

        In the area of customer service and program delivery, we
    place high priority in this area. We are streamlining. We
    intend to go down to approximately 2,550 service centers. Right
    now we are about 2,700. And, we are collocating the county-
    based agencies into one-stop USDA centers. We are also
    consolidating the administrative functions that support the
    county-based agencies. Many times you would have one office in
    a county with an NRCS xerox machine, an FSA xerox machine, and
    a rural development xerox machine. I use that colloquially to
    talk about the fact that we have operated our farmer-based
    decentralized systems as separate units for far too long from
    an administrative perspective. We are developing a common
    administrative and computing environment for these agencies to
    achieve further efficiencies, and we have contracted with an
    independent consultant to examine what further steps, if any,
    we can take to improve the efficiency of our farm and rural
    program delivery system. And, that study is to be completed
    this year.

                        Office of the Inspector General

        Our budget also includes an additional $22 million to
    support a Presidential initiative for our inspector general to
    crack down on abuse in our nutrition, rural development, and
    other programs. Our inspector general has had great success
    with a program called Operation Talon dealing with people who
    are fugitives who are getting food stamps. That led the effort
    for prosecutions all over the United States. This is another
    very high priority for us. I might say that we have one of the
    most aggressive and energetic inspector general operations of
    any Federal agency.
        So, I think to summarize in terms of our goal, to repeat
    it, because Senator Burns is here, our prime function is to
    protect the stability and security of America's food production
    capabilities. The budget is falling largely because there are
    fewer people on food stamps and the AMTA payment provisions of
    the Freedom to Farm bill have called for yearly reductions in
    farm program spending.
        At the same time, we will fund whatever we need to fund to
    protect our markets overseas because we believe that is the
    ultimate safety net that American agriculture has, and in
    addition to that, we need a strong and aggressive crop
    insurance program to provide the safety net when disasters hit.
        We also believe that funding for conservation programs and
    our food safety and security programs are necessary for the
    future of American agriculture as well.
        So, I thank you very much, Mr. Chairman, for bearing with
    me during this conversation. I would be glad to answer any
    questions that you have.

                               Prepared Statement

        Senator Cochran. Thank you very much, Mr. Secretary. 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 1999 budget for the Department of Agriculture
    (USDA).
        With the passage of the Balanced Budget Act of 1997 and the
    President's commitment to the first balanced budget in 30 years, we
    faced very tight funding constraints in developing the 1999 proposals
    for USDA. At the same time, our strategic plan contains goals and
    objectives we must achieve to meet the needs of the people we serve.
    These fundamental priorities include: increasing economic opportunities
    for family farms and for rural communities and expanding trade;
    providing more tools for the wise stewardship of our natural resources;
    feeding more needy children and families and raising consumer
    confidence in the safety of the Nation's food supply; and providing
    effective customer services and efficient program delivery and
    improving the Department's civil rights performance.
        The discipline we imposed on the 1999 budget forced us to make
    difficult decisions to restrain, reduce, and redirect resources to
    focus on the priority goals we established. We have had to propose new
    user fees and contain and absorb certain costs. We thoroughly
    scrutinized our employment and business practices. As a part of the
    Department's continuing reorganization, we are implementing a field
    office streamlining plan which collocates the county-based agencies in
    one-stop USDA Service Centers and that will consolidate administrative
    support functions for the county-based agencies. We are developing a
    common computing environment for these agencies to optimize the use of
    data and equipment and improve our efficiencies across the agencies.
    The Department has also entered into a contract with an independent
    consultant to examine what further steps, if any, we can take to
    improve the efficiency of our farm and rural program delivery system.
    That study will be completed by September 1, 1998. These efforts,
    combined with program reductions and reforms taken in prior years, have
    made a significant contribution to the President's balanced budget
    submission to the Congress.
        In addition to the improvements and strengthening in the economy,
    several factors account for the projected 14 percent reduction in our
    budget--from $63 million in 1993 to a projected $54 million for 1999.
    Farm programs are more market oriented today, significantly lowering
    outlays. The strong economy and welfare reform lowered participation in
    our food assistance programs. Declining interest rates have led to
    large savings in rural credit programs and the shift to user fees in
    certain programs has contributed to deficit reductions. Over this
    period USDA employment will be reduced by over 22,000 staff years
    through our reorganization and streamlining efforts.
        The President's balanced budget plan for 1999 contains a number of
    new governmentwide initiatives that include participation of USDA
    agencies, including:
      --A Food Safety initiative for improving the Federal food inspection
            system from farm-to-table, through increased inspection,
            expanded research and consumer education, better food
            surveillance, and improved Federal, State, and local
            coordination.
      --A Clean Water and Watershed Restoration initiative to achieve
            further progress in solving water quality problems and
            enhancing the environmental quality of agricultural and forest
            lands.
      --A Land, Water and Facility Restoration initiative so that the
            Forest Service can better protect wildlife habitat, maintain
            recreation sites and preserve the national forests.
      --A Climate Change Technology initiative to support research aimed at
            investigating mitigation tactics, including production
            practices which sequester greenhouse gases, to minimize the
            adverse effects of agricultural production practices on climate
            change.
      --A Food Gleaning initiative to increase food recovery by one-third
            above current levels by the year 2000, providing a significant
            source of food to food banks and other non-profit institutions
            to help feed hungry people.
      --A Law Enforcement initiative to provide funds and resources to
            crack down on fraud and abuse in the Food Stamp and other
            programs. This supports the President's commitment to assure
            that program benefits go only to those who are in need and
            eligible.
        The President's budget proposes $57.4 billion in budget authority
    for 1999 for USDA compared to a current estimate of $55.9 billion for
    1998. Budget authority for discretionary spending, which accounts for
    about 25 percent of USDA total budget authority, declines from $15.6
    billion in 1998 to $15.2 billion in 1999. The request before this
    Committee for discretionary budget authority is $12.6 billion.
        The budget also proposes legislation that affects the discretionary
    request before the Committee, including user fees for the Food Safety
    and Inspection Service; the Animal and Plant Health Inspection Service;
    the Grain Inspection, Packers and Stockyards Administration; the Farm
    Service Agency; and the Natural Resources Conservation Service. The
    budget also proposes shifting sales commissions for the crop insurance
    program from discretionary to mandatory spending. We will send this
    proposed legislation to the authorizing committees. If the entire
    package is enacted, it would lower the discretionary request to this
    Committee by $829 million.
        The budget also proposes legislative changes in some mandatory
    programs, including restoring food stamp benefits to most legal aliens,
    reducing the Federal share of administrative funding provided to the
    States in the Food Stamp Program to prevent cost shifting, reducing the
    cost of the crop insurance program, capping cotton step-2 payments,
    providing a flexible multi-year cap for the Export Enhancement Program,
    and increasing the Environmental Quality Incentives Program, Rural
    Empowerment Zones, and a change in the formula for Forest Service
    payments to States.
        Before addressing specifics of the budget, I want to emphasize the
    importance that the President has placed on our civil rights work at
    USDA; the priority is reflected in the budget. The President's budget
    calls for the largest increase in civil rights funding in two decades.
    For USDA, that means providing funding to carry out the recommendations
    of the Civil Rights Action Team (CRAT) as well as the recommendations
    of the National Commission on Small Farms which support our civil
    rights agenda. In total, we are requesting about $250 million for civil
    rights-related activities that would increase farm ownership and
    operating loans; increase loans and grants to construct housing for the
    Nation's farmworkers; support an integrated research, extension, and
    education competitive grants program for new technology adoption and
    transfer to small farms; eliminate disparities in funding and enhance
    the Department's cooperative efforts with institutions of higher
    education that are primarily devoted to the needs of minority students;
    and improve outreach and technical assistance to assure that all
    customers have full access to USDA programs and services, and to
    provide assistance to socially disadvantaged farmers and ranchers
    through a substantial increase in the Section 2501 outreach program.
    Also, we are requesting increased funds for more timely processing and
    resolution of complaints, as well as efforts to prevent disputes and
    discrimination.
                     farm and foreign agricultural services
        The mission of the Farm and Foreign Agricultural Services area is
    to secure the long-term vitality and global competitiveness of American
    agriculture. Implementation of planting flexibility and other
    provisions of the Federal Agriculture Improvement and Reform Act of
    1996 (the 1996 Act), in conjunction with strong export programs and
    sound trade policy, are helping us reach these goals. However, we
    remain concerned about the adequacy of the safety net for our producers
    and have been working to expand and improve programs which help
    producers manage their risk. We are also working hard to assure
    improved assistance and expanded opportunities for minority and limited
    resource producers in our farm programs.
        Maintenance of an effective economic safety net for our farmers and
    ranchers is a major priority for our plans in 1999, particularly in our
    proposals for risk management. Last year we proposed legislation to
    make some modest improvements in the safety net which were not acted
    upon by the Congress. The proposed improvements included, among other
    things, provisions to permit extension of the terms of marketing
    assistance loans during periods of extraordinary market disruption; and
    the expansion of revenue insurance. These proposals deserve further
    consideration by the Congress.
        The challenge of providing improved customer service with improved
    efficiency as resource constraints are tightened also remains a major
    focus of our efforts, particularly in the Farm Service Agency (FSA) and
    the other county-based farm conservation and rural development
    agencies. The independent study being conducted by a private consulting
    firm during 1998 of our county-based agencies will help us better
    assess county office workload and identify options to gain efficiencies
    while meeting customer needs.
    Farm Service Agency
        The consolidation of staffs and county offices, establishment of a
    common computing environment, and the convergence of administrative
    services at all levels of the county-based agencies, continue to be the
    focus of FSA streamlining efforts. FSA staffing has changed
    dramatically as a result of these streamlining efforts and workload
    changes brought about by the 1996 Act. FSA Federal and county staffing
    is projected to be down by over 500 staff years, from 17,267 staff
    years at the end of 1997 to 16,744 staff years at the end of 1998 as a
    result of buyouts, Reductions-In-Force (RIF's), and attrition. The 1999
    budget for FSA salaries and expenses proposes a program level of $976
    million, including $30 million earmarked for the establishment of a
    common computing environment in the service centers of the county-based
    agencies. The budget also incorporates a proposed increase in user fees
    to help offset some of the costs of providing information and other
    services to FSA clients. It is estimated that the budget will support a
    staff year level about 7 percent below 1998 levels.
    Farm Loan Programs
        Access to credit is one of the most important elements of success
    in farming. That point has been made in fairly dramatic fashion by
    USDA's Civil Rights Action Team and by the Small Farms Commission.
    Improved access to credit means more opportunities for beginning and
    small farmers and, in particular, members of socially disadvantaged
    groups. For that reason, the 1999 budget provides more funding for farm
    loans. Farm ownership loans would be increased to $85 million in direct
    loans and $425 million in loan guarantees, compared to 1998 levels of
    $45 million in direct and $400 million in guarantees. In terms of
    people served, this means that 3,500 beginning and small farmers will
    be given an opportunity to either acquire their own farm or to save an
    existing one--600 more than during 1998. About 1,000 of these farmers
    will receive direct loans and the rest will receive guarantees. The
    budget also provides for $2.4 billion in direct and guaranteed farm
    operating loans, which maintains the 1998 level of funding and would
    serve an estimated 28,000 beginning and small farmers about 12,000 of
    whom will receive direct loans.
        The share of direct loans made at the reduced interest rate for
    limited resource borrowers would be continued at current levels about
    61 percent for farm ownership loans and about 40 percent for farm
    operating loans. The budget also provides funding for emergency loans,
    credit sales, the boll weevil eradication program and credit for Native
    Americans.
        The Administration will also be proposing emergency legislation to
    modify the 1996 Act prohibition on loans to borrowers who received debt
    forgiveness. It is unfair to deny these borrowers a second chance.
    Commodity Credit Corporation
        Changes over the last decade in commodity, disaster, and
    conservation programs have dramatically changed the level, mix, and
    variability of the Commodity Credit Corporation (CCC) outlays. CCC
    outlays are projected to total $8.6 billion in 1998 and $8.4 billion in
    1999 and are projected to decline to a total of about $7.0 billion in
    2003. Since the late 1980's, commodity program spending has declined
    dramatically, spending for ad hoc crop disaster programs has been
    virtually eliminated, and spending for conservation programs has
    increased and has become a major portion of CCC's outlays. Commodity
    program outlays account for about two-thirds of total CCC outlays in
    1999, and they largely reflect the pattern of production flexibility
    contract (PFC) payments set in the 1996 Act. Outlays for the commodity
    programs are projected to decline from $6.0 billion in 1998 to $5.7
    billion in 1999 and to $4.0 billion in 2003.
        Conservation program outlays account for almost one-fourth of the
    CCC expenditures in 1999. The 1996 Act authorized direct CCC funding
    for the Conservation Reserve Program (CRP) administered by FSA and
    several new conservation programs administered by the Natural Resources
    Conservation Service (NRCS). CRP provides landowners annual payments
    and half the cost of establishing a conserving cover in exchange for
    retiring environmentally sensitive land from production for 10 to 15
    years. The 1996 Act authorized the program through 2002 and set maximum
    enrollment in the program at 36.4 million acres. Current enrollment
    totaled about 28 million acres at the end of calendar year 1997. The
    budget assumes that the acreage goal will be achieved gradually. Other
    conservation programs funded by CCC but administered by NRCS include
    the Wetlands Reserve Program and the Environmental Quality Incentives
    Program (EQIP), which along with the Conservation Farm Option give
    producers incentives to create long-term comprehensive farm plans. The
    budget proposes to help meet critical water quality goals by increasing
    CCC spending for EQIP by $100 million in 1999 and $350 million between
    1999 and 2003. Other new programs funded by CCC include the Wildlife
    Habitat Incentives Program which provides cost-share assistance to
    landowners to implement management practices improving wildlife
    habitat, and the Farmland Protection Program which provides for the
    purchase of easements limiting nonagricultural uses on prime and unique
    farmland.
    Risk Management Agency
        Implementation of the 1994 reform of the crop insurance program has
    been a major achievement for American agriculture. It has alleviated
    the need for ad hoc disaster assistance. About 63 percent of the
    insurable acreage nationwide is covered by the program, about 22
    percent at the catastrophic (CAT) level of coverage, which is fully
    subsidized by the Government, and 41 percent at higher levels of
    coverage for which producers pay a portion of the premium. Producers
    may buy-up to 75 percent of normal production and 100 percent of
    expected market price or purchase a relatively new product, Crop
    Revenue Coverage (CRC), which provides protection against price
    declines even without a production loss. CRC already accounts for about
    16 percent of the business.
        While the reform legislation allowed for a dual delivery system
    with FSA providing CAT coverage and private insurance companies
    providing both CAT and buy-up coverage, the private insurance industry
    has demonstrated that it can handle the job alone and has been given
    that opportunity beginning in 1998.
        There are 17 private insurance companies of various sizes
    participating in the program. Sales agents work for these companies,
    mostly on a commission basis, while loss adjusters are usually
    independent contractors. Companies sell policies that the Government
    reinsures. However, the companies are required to retain some risk of
    loss on the policies they sell, for which they may earn underwriting
    gains or incur underwriting losses.
        Weather has played a big role in the program performance over the
    last few years. In 1997, the weather was particularly good and
    indications are that the program had a very favorable loss ratio of
    less than .80, which is well below the statutory requirement of 1.10.
    Consequently, the companies received underwriting gains based on the
    risk they retained. Under normal conditions, the amount of underwriting
    gains received by companies would have been far less.
        The 1999 budget provides full funding of the crop insurance
    program, but proposes legislative changes to accommodate a shift in
    sales commissions for agents from discretionary to mandatory spending.
    This shift would consolidate all program spending into a single account
    and eliminate the possibility of the program being restricted by a
    limited appropriation of discretionary funds for sales commissions. In
    effect, the proposal is intended to fix a problem that dates back to
    the 1994 legislative reform of the program which divided the funding
    for company expense reimbursements between the mandatory and
    discretionary budgets for the sole purpose of meeting technical scoring
    requirements.
        Because the shift to mandatory spending will require PAYGO offsets,
    the Administration will also propose various program changes, including
    a reduction in the loss ratio, a limit on CAT coverage to $100,000, and
    other changes. These changes are expected to take effect in 2000
    because other program offsets are available for 1999.
        It should also be noted that the Risk Management Agency is charged
    with the responsibility for risk management education. About $5 million
    is budgeted in the agency's mandatory account for this activity in
    1999. The Cooperative State Research, Education and Extension Service
    and the Commodity Futures Trading Commission are assisting in the
    education program. This is expected to be an important part of helping
    producers adjust to the changes in price and income support programs
    that came about in the 1996 Act.
    International Trade and Export Programs
        The performance of U.S. agricultural exports was again robust in
    1997, reaching the second highest level ever at $57.3 billion. While
    this was somewhat below the all-time high achieved in 1996, many
    positive developments did occur. It was the third year running in which
    agricultural exports topped $50 billion, and new export records were
    established for both intermediate and consumer-oriented products. And,
    for the 37th consecutive year; U.S. agriculture made a positive
    contribution to the Nation's trade balance, with exports exceeding
    imports by $21.5 billion.
        The value of agricultural exports to the Nation's economy is very
    significant, but for the agricultural sector, exports are critical.
    Today, U.S. agriculture's reliance on exports as measured by gross
    receipts is approaching 30 percent, a level which is twice as high as
    for the U.S. economy as a whole. With improving productivity and slow
    growth in domestic demand, the future prosperity of our farmers and
    ranchers is increasingly linked to strong export markets. Recent
    changes in domestic farm policy also have reinforced the importance of
    global markets and have made export performance a critical component of
    the farm safety net.
        For these reasons, USDA's 5-year strategic plan has established the
    expansion of global market opportunities for U.S. agricultural
    producers as one of the Department's primary objectives. With this
    mandate, we are continuing our aggressive efforts of recent years to
    bolster export competitiveness, open new markets, and expand exports.
    The 1999 budget request supports these efforts by providing a total
    program level of nearly $6.4 billion for the Department's trade and
    export promotion activities.
        The CCC export credit guarantee programs are the largest of the
    Department's export promotion activities. These programs make an
    important contribution to meeting our export expansion objective by
    facilitating sales of U.S. agricultural products to buyers in markets
    where credit is necessary to maintain or increase sales. The value of
    these programs is being demonstrated this year. In recent months, we
    have made available to countries in southeast Asia and the Republic of
    Korea a total of $2 billion of export credit guarantees. This action is
    helping these countries tackle their import financing problems and
    allows them to continue to purchase agricultural products from the
    United States. By doing so, continued access to these important Asian
    markets will be ensured.
        The 1999 budget adopts a new approach for presenting the annual
    program levels and budget estimates for the guarantee programs. These
    estimates will now reflect the actual level of sales expected to be
    registered under the programs for which CCC guarantees will be issued.
    This change will result in more realistic estimates of the costs of
    these programs and will increase the accuracy of the CCC budget
    estimates. The actual level of guarantees to be issued during the
    course of the year will not be limited by the budget estimates but will
    instead be determined by market conditions and program demand.
        Based on this new approach, the budget projects a total program
    level for CCC export credit guarantees of $5 billion in 1998 and $4.6
    billion in 1999. These levels are substantially above sales
    registrations in 1997 and prior years, due primarily to the recent
    boost in programming to Asian countries.
        The Export Enhancement Program (EEP) has seen very little activity
    during the past 2\1/2\ years because of world commodity supply and
    competitive conditions. Nevertheless, the program remains in place and
    can be reactivated whenever market conditions warrant. To ensure our
    ability to do so, the budget provides a program level of up to $320
    million for EEP in 1999, an increase of $170 million above this year's
    level.
        In conjunction with the budget, we will be submitting proposed
    legislation to provide a flexible, multi-year program level
    authorization for EEP, which will apply to the 1999 to 2003 period. The
    proposal will authorize a total program level of $1.2 billion for EEP
    over the 5-year period and will provide administrative discretion to
    the Department to determine the annual level of funding for EEP. Any
    funding that is not used in 1 year will remain available for use in
    subsequent years. However, the annual level of programming will
    continue to be subject to the Uruguay Round export subsidy reduction
    commitments. The proposal would generate approximately $1.4 billion in
    savings during the 5-year period that will help to offset increased
    funding proposed in the budget for other mandatory programs.
        The pace of programming under our other subsidy program, the Dairy
    Export Incentive Program (DEIP), has increased significantly during the
    past year. This has helped to move additional dairy products into
    export markets and modify price fluctuations here at home. The budget
    projects a somewhat reduced level of programming under DEIP in 1999
    because of a projected tightening in the domestic supply situation;
    however, the actual level of programming will be determined by market
    conditions at that time.
        The budget continues funding for the Market Access Program (MAP) at
    its maximum authorized funding level of $90 million. In recent years,
    the Department has taken steps to make MAP more targeted and friendly
    to small businesses. These efforts continue and, in 1998, for the first
    time export promotion assistance will be provided to small companies or
    cooperatives only.
        The Public Law 480 foreign food assistance programs remain a
    mainstay of efforts to assist developing countries meet their food
    import needs and develop long-term trading relationships. For 1999, the
    budget requests a total program level of $979 million for Public Law
    480 programs, which is expected to provide 2.8 million metric tons of
    commodity assistance to recipient countries.
        For the Foreign Agricultural Service (FAS), the budget provides
    direct appropriated funding of $146 million, an increase of $6 million
    above the 1998 level. The budget includes a proposal to establish a
    buying power maintenance fund to assist FAS manage unanticipated
    changes in the costs of its overseas operations. These changes result
    from exchange rate losses or gains and overseas inflation which are
    difficult to predict when budget estimates are prepared. Under the
    proposal, a revolving fund would be established which can be drawn upon
    to meet higher costs resulting from exchange rate losses.
    Alternatively, exchange rate gains would be credited to the account and
    would be available for use to meet future cost increases. This proposal
    responds to a request of the Conference Committee on the 1998
    Agriculture Appropriations Bill.
        The budget also proposes that certain FAS Information Resources
    Management costs, including the operating costs of the CCC Computer
    Facility, will no longer be funded through a reimbursable agreement
    with CCC. Instead, these costs will now be funded through FAS
    appropriations. With this change, this funding will shift from
    mandatory to discretionary spending and will no longer be subject to
    the annual limitation on CCC reimbursable agreements established by the
    1996 Act.
                               rural development
        Rural development creates opportunities for people who live in
    rural America--the kind of housing they occupy; access to such
    amenities as running water, electricity, telecommunications; and the
    strengthening of local economic activity that affect their prospects
    for finding a job that will allow them to earn enough income to have a
    decent standard of living. The Department's rural development programs
    help rural residents achieve these benefits by providing financial
    assistance and by working with rural communities through partnerships,
    empowerment and technical assistance. Under this Administration,
    special attention has been given to serving those rural communities
    that have been underserved in the past--where poverty is persistent and
    unemployment remains high.
        Overall, the 1999 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 supports the Administration's
    National Home Ownership initiative to increase home ownership, and
    maintains rural rental assistance for low-income families and
    individuals, many of whom are elderly women. It continues programs that
    provide infrastructure for meeting electric, telecommunications and a
    variety of other community needs. Further, it encourages business and
    industry activity in rural areas through loan guarantees that create or
    save jobs.
        About $129 million of the rural development program funding would
    be targeted to Empowerment Zones and Enterprise Communities (EZ/EC).
    The EZ/EC initiative reaches communities with the most persistent
    poverty and other economic adversity, which have developed strategic
    plans for development. In addition, the budget proposes to provide $20
    million annually in mandatory spending to fund additional grants for 5
    new rural Empowerment Zones.
        About $715 million of the $2.2 billion in budget authority included
    in the 1999 budget for USDA's rural development programs would be
    funded under the provisions of the Rural Community Advancement Program
    (RCAP). RCAP was enacted in the 1996 Act. It provides flexibility for
    transferring funds among programs in order to meet local priorities. It
    also provides for the development of strategic plans to help guide the
    development process. The Department's proposal assumes the full
    flexibility to transfer funds among accounts as authorized in the 1996
    Act, which is an important tool in tailoring assistance to meet the
    unique needs of each rural community.
    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 water and waste disposal programs are one of the
    Administration's highest priorities. The budget provides $500 million
    in grants, essentially the same level as provided in 1998. In addition,
    the budget proposes a $73 million increase in the direct loan program.
    This level of funding 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.
        The 1999 budget provides for $1.65 billion in electric and
    telecommunications loans, about $55 million above 1998; however, there
    will be a shift in how this assistance will be provided in order to
    meet growing demand. The budget proposes greater reliance on direct
    Treasury rate and Federal Financing Bank insured loans. Legislation
    will be proposed to authorize direct Treasury rate loans under the
    electric program. This authority is currently available under the
    telecommunications program.
        The budget calls for $175 million in loans to be made by the Rural
    Telephone Bank, the same as 1998. The Administration continues to work
    with the industry towards its goal of privatizing the bank. In 1999,
    the bank is proposed to become a ``Performance Based Organization,'' in
    order to establish its commercial viability prior to being fully
    privatized in 10 years or less.
        With regard to the distance learning and medical link program, the
    1999 budget includes about $15 million for grants and $150 million in
    loans at the Treasury rate, requiring a total budget authority of $15.2
    million. In 1998, Congress provided a budget authority of $12.5 million
    which the Department converted into a grant program of about $12.5
    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.
    Rural Housing Service
        USDA's rural housing programs have been important in improving the
    availability and quality of housing in rural America since the 1970's.
    The programs reach those who cannot otherwise afford decent, safe, and
    sanitary housing, and those who cannot obtain credit from other sources
    to achieve home ownership.
        The 1999 budget supports $4.4 billion in rural housing loans and
    loan guarantees, an increase of about $200 million over 1998. This
    includes $1 billion in direct loans and $3.1 billion in guaranteed
    loans for single family housing. Direct loans are available only to
    low-income families, low-income meaning less than 80 percent of area
    median income. Guaranteed loans are available to families up to 115
    percent of area median income. Further, the Administration will propose
    legislation to make guaranteed loans available for refinancing existing
    direct loans--$100 million is included in the $3.1 billion overall
    funding level for this purpose.
        For rural rental housing, the budget includes $100 million in
    direct loans and $150 million in guaranteed loans. These levels
    represent a reduction of $29 million in direct loans from the amount
    available for 1998, but a significant increase in guaranteed loans,
    which were first introduced in 1997 and are limited to about $20
    million in 1998. The guaranteed loan program has operated on a pilot
    basis to date but has shown great potential, particularly where it can
    be used to leverage other Federal, State and local or private
    financing. It serves a higher income clientele than the direct loan
    program, yet reaches some lower income families and individuals, and
    operates at far less cost than the direct loan program.
        USDA currently has a portfolio of about 18,000 rural rental housing
    projects which contain about 470,000 units. About one-half of these
    units receive rental assistance payments. Tenants in units receiving
    rental assistance pay 30 percent of their income for rent. Rental
    assistance, provided through 5-year contracts, makes up the difference
    between what the low-income tenant pays and the rent required for the
    project owner to meet debt servicing requirements. The average income
    of tenants receiving rental assistance payments is $7,300. In 1999,
    contracts on an estimated 37,500 units are expected to expire. The
    budget provides for the renewal of these contracts and a limited number
    of contracts on additional units, and includes full funding of all new
    farm labor housing projects. No rental assistance is provided for
    projects financed with guaranteed loans.
        The 1999 budget also provides for $97.1 million in loans and $72.9
    million in grants for various specific purpose housing programs. This
    includes $32 million in loans and $13 million in grants for farm labor
    housing projects, an increase of $17 million in loans and $3 million in
    grants over last year's levels. This would allow the agency to finance
    658 new units and rehabilitate 199 units of existing housing for farm
    workers. The increase is proposed as part of USDA's CRAT report.
    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 in rural areas remain adequately funded.
        The business and industry (B&I) loan program is one of our best
    means to help foster the growth of rural businesses including
    cooperatives. The cooperative form of business is seeing a resurgence
    throughout rural America, agricultural producers are embracing
    cooperatives for a variety of purposes including: value-added
    processing, to return more of the value of farm products to producers;
    as a safety net, to protect against price fluctuations; and for the
    traditional use of purchasing farm supplies. Many ``new-wave''
    cooperatives are being organized and operated in a manner which is
    quite different from the historic cooperative principles. The 1996 Act
    helped to improve the effectiveness of the B&I loan program in
    developing cooperative businesses by authorizing loan guarantees to
    assist farmers and ranchers to purchase start-up capital stock in
    processing cooperatives where the cooperative will process the
    commodity being produced by the farmer. The 1999 budget maintains the
    direct loan program at $50 million, while the guaranteed loan program
    would be funded at $1 billion, including $200 million that will be
    directed to cooperative-owned businesses. Further, using the
    flexibility available under RCAP, the Department expects to fund a $1
    billion guaranteed loan program during the current fiscal year.
        Our investments in cooperative businesses, however, will not
    provide the expected returns unless there also is an investment in
    understanding the ``evolving'' cooperative form of business. Therefore,
    the budget also proposes an increase of $2 million in funding for
    research on cooperatives. These funds will be used to form cooperative
    agreements primarily with State departments of agriculture,
    universities, and colleges to conduct research on rural cooperatives.
    This funding will help provide vitally needed research and information
    at a time when available Federal resources in this area are dwindling.
        Through the intermediary relending program the Department provides
    low interest (1 percent) loans to a variety of public and private
    organizations who, in turn, provide loans to finance business
    facilities and community development projects in their local areas. By
    providing assistance through local organizations the Department ensures
    that funding is used on the basis of local priorities. The budget
    maintains support for the intermediary relending program at $35
    million, the same level as 1998.
        Rural business enterprise grants may be provided to public bodies,
    Indian tribes, and nonprofit corporations to finance and facilitate
    development of small and emerging businesses in rural areas. The budget
    provides $40 million for rural business enterprise grants in 1999, a
    small increase from 1998.
        The budget provides for an increase in the Alternative Agricultural
    Research and Commercialization (AARC) program from $7 million in 1998
    to $10 million in 1999. This program is particularly useful in meeting
    the needs for capital to commercialize innovative value-added products
    from agricultural and forestry materials and animal by-products.
    Salaries and Expenses
        The Department's rural development programs are delivered through
    about 800 field offices, located within USDA Service Centers. The
    delivery system has been noticeably improved by the introduction in
    1997 of a centralized system for servicing single family housing loans,
    which will save taxpayers $250 million through 2000 and allowed staff
    resources to be redirected to other urgent needs. Further, the rural
    development programs are included in our administrative convergence
    efforts for county-based agencies.
        The 1999 budget includes $529 million for the administration of
    USDA's rural development programs including AARC. This amount includes
    funding for an estimated 7,138 staff years, which is a decrease of
    about 150 below 1998.
                     food, nutrition and consumer services
        USDA's farm and food safety programs help ensure a safe and
    affordable food supply, while the nutrition assistance programs help to
    ensure that low-income families are adequately nourished. The Food
    Stamp, Child Nutrition and WIC (the Special Supplemental Nutrition
    Program for Women, Infants and Children) Programs are the primary
    programs for carrying out the Nation's food assistance policy. The 1999
    budget request combines better management with increased funding to
    advance the Administration's war on hunger and demonstrate our
    commitment to improve the nutritional levels of low-income households.
        The Food Stamp Program will be funded at a program level of $23.9
    billion in 1999. The Administration proposes to restore Food Stamp
    benefits for vulnerable groups of legal immigrants. Upon signing the
    1996 welfare law, the President pledged to work toward reversing the
    harsh, unnecessary cuts in benefits to legal immigrants that had
    nothing to do with moving people from welfare to work. The President
    believes that legal immigrants should have the same opportunity, and
    bear the same responsibility, as other members of society. The 1999
    budget would provide Food Stamp benefits to 730,000 legal immigrants at
    a cost of $535 million in 1999 and $2.5 billion over 5 years. The
    proposal expands access to Food Stamps for families with children,
    people with disabilities, the elderly, and refugees and asylees.
    Legislation will also be proposed to address the allocation of
    administrative costs between the Temporary Assistance for Needy
    Families program, Medicaid, and the Food Stamp Program which will
    result in a savings of $180 million in 1999.
        We are working to improve Food Stamp program integrity, and are
    requesting funds to improve accuracy in the food stamp certification
    process to achieve our annual performance plan of reducing error by at
    least 4 percent. The annual plan calls for an increase in food stamp
    overpayment collections of 5 percent a year. Achieving these goals will
    reduce program costs by over $60 million. We will also continue our
    integrity efforts to reduce State over-billing of State administrative
    expenses and trafficking.
        Child Nutrition will be funded at a program level of $9.6 billion,
    an increase of $0.4 billion from the 1998 estimate. This increase is
    needed for increased free meal claims in the School Lunch Program,
    increased school and child care enrollment and food cost increases.
    Child Nutrition Programs, both school and community based, help keep
    children nourished and ready to learn. The Child Nutrition Programs are
    particularly well positioned to provide nutrition assistance directly
    to children from low-income families, easing the transition from
    welfare to work for their parents and to support the President's
    initiative to assure reading skills by the end of the 3rd grade.
        With portions of the Child Nutrition Programs expiring at the end
    of 1998, we will also be seeking reauthorization legislation. We want
    to work with Congress to improve program integrity, reduce paperwork
    burden, support the President's child care initiatives, and foster
    improved dietary practices. As stated in the annual performance plan,
    we will work to assist school food service management to implement
    better business systems and increase the proportion of correctly
    claimed free meals. And we believe we can better meet the Recommended
    Daily Allowance and Dietary Guideline requirements for meals served, as
    well as improve the nutritional intake of school children. School
    programs are demonstrated to be a very effective way to shape the
    nutritional choices not only of our children, but their families as
    well.
        WIC will be funded at $4.2 billion, 4 percent more than the 1998
    appropriation and sufficient to support 7.5 million recipients.
    Improving Federal and State program management will be a major focus of
    our activities for 1999, including continued efforts to reduce the
    overall cost of WIC food packages by 10 percent by 2002. WIC State
    agencies have been highly successful in keeping unit food costs down
    for the past decade primarily through rebates on infant formula, and
    now we will be working together to expand other promising cost control
    activities. We are also undertaking a series of management reforms to
    improve WIC program integrity.
        The Commodity Assistance Programs will be funded at $317 million,
    including $96 million for the Commodity Supplemental Food Program, $45
    million for the Emergency Food Assistance Program (TEFAP), $140 million
    for the Nutrition Program for the Elderly, and the budget also requests
    $15 million for the farmers' market program, an increase from the $12
    million provided in 1998.
        The budget includes $20 million for a new gleaning initiative that
    would be used to support community-based grants and other incentives to
    help local neighborhoods recover edible food before it is lost and use
    it to help alleviate hunger and distress. With billions of pounds of
    food going to waste, we anticipate that the initiative will yield large
    returns in helping needy families through temporary hard times,
    supplementing food stamps for some; and for others providing necessary
    sustenance on an occasional basis.
        The budget also requests funds for research on nutrition assistance
    programs. The Administration places high priority on receiving
    accurate, relevant, and timely information from research and evaluation
    on the food assistance programs. To ensure that the policy and research
    needs of the nutrition programs are most effectively met in the context
    of administering the food programs, the Administration strongly
    believes that the Food and Nutrition Service (FNS) is the appropriate
    agency to oversee and administer these research funds.
        For Food Program Administration, the primary funding source for
    administrative management of the Nation's food assistance programs and
    the Center for Nutrition Policy and Promotion, we request $111.8
    million, an increase of $4.2 million. The increase will fund existing
    responsibilities at current levels and provide for increased Civil
    Rights effectiveness. In addition, the requested increase will improve
    food assistance program management, particularly financial system
    integrity. Also, funds will be used for work on year 2000 Dietary
    Guidelines for Americans.
                                  food safety
        On July 25, 1996, a milestone was reached in our strategy for
    making significant gains in improving the safety of America's food
    supply. The final rule for Pathogen Reduction and Hazard Analysis and
    Critical Control Point (HACCP) Systems for meat and poultry products
    was published. This rule modernizes a 90-year old inspection system and
    lays out the Administration's commitment to improve food safety and
    reduce the incidence of foodborne illness by 25 percent by the year
    2000 as stated in the Department's strategic plan.
        On January 27, 1997, the first implementation date for the final
    rule was reached. All meat and poultry establishments now have in place
    standard operating procedures for sanitation to ensure they are meeting
    their responsibility for preventing direct product contamination and
    maintaining sanitary conditions. 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. On January 26, 1998, the 300 largest establishments,
    which produce 92 percent of inspected meat and poultry products, were
    required to have HACCP systems in place. In addition to HACCP systems
    in place, those establishments that slaughter and those that produce
    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 in all establishments.
        The final rule sets an important framework for change, but is only
    part of our overall strategy to improve the safety of our meat and
    poultry supply. On January 25, 1997, the President announced the
    National Food Safety initiative. The initiative includes seven
    components for improving the Federal food inspection system from farm-
    to-table. Key components include expansion of the Federal food safety
    surveillance system, improved coordination between Federal, State, and
    local health authorities, improved risk assessment capabilities,
    increased inspection, expanded research, consumer education, and
    strategic planning. The initiative reflects a high level of
    coordination between agencies within USDA and the Department of Health
    and Human Services. For 1999, we plan to build on these investments
    which Congress supported in 1998. Continued investment in meat,
    poultry, and egg products inspection activities will enhance public
    health by minimizing foodborne illness from these products.
        For 1999 the budget requests $623 million, an increase of $34
    million over the 1998 current estimate. The additional resources will
    allow the Department to address a greater range of food safety risks
    from farm-to-table. At the farm level, we will work with producers to
    develop voluntary measures that producers can utilize to reduce
    pathogenic contamination of animals prior to presentation at the
    slaughter plant. In addition, we will provide support to State
    educational efforts that will improve the ability of producers to
    respond to new demands that slaughter and processing establishments may
    make with the implementation of HACCP. In order to improve inspection
    we will provide additional technology and training to Federal
    inspectors and provide special assistance to State programs to
    facilitate their transformation to HACCP. Another key component of the
    Department's strategy in 1999 will be targeted food safety education.
    In a coordinated effort between the public and private sectors product
    specific and audience specific messages that address food safety risks
    relevant to such groups will be developed, evaluated, and disseminated.
        The 1999 budget request proposes legislation to recover the full
    cost of providing Federal meat, poultry, and egg products inspection.
    We estimate that this proposal would generate approximately $573
    million in new revenues in 1999 and thereafter. The budget requests
    $150 million in appropriated funding to convert the program to user
    fees and to maintain State inspection programs. 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 and the special assistance proposed for 1999.
        Requiring the payment of user fees for Federal inspection services
    would not only result in savings to the taxpayer, but would also ensure
    that sufficient resources are available to provide the mandatory
    inspection services needed to meet increasing industry demand. The
    overall impact on prices as a result of these fees has been estimated
    to be less than one cent per pound for meat, poultry, and egg products
    production. The implementation of the user fee authority would be
    designed to be fair and equitable, promote accountability and
    efficiency, and minimize the impact on the affected industries.
                       natural resources and environment
        The 1999 budget reflects the Department's continuing commitment to
    voluntary, cooperative and well-financed conservation programs that
    provide farmers with the financial and technical assistance they need
    to remain competitive while not putting our vital natural resources in
    jeopardy. The 1996 Act recognized the need for this balance and
    dramatically expanded USDA's conservation mission by creating new or
    refocused existing conservation programs. The effects of programs like
    the Conservation Reserve Program and the Environmental Quality
    Incentives Program (EQIP) are already being felt as we focus on
    protecting mainly environmentally sensitive lands that need our
    attention while returning fertile lands to production.
        As farmers rely more on markets and utilize greater planting
    flexibility, it becomes even more critical that we maintain and
    strengthen our technical expertise in the field, where it is needed.
    The Department's field office streamlining initiative has been
    successfully implemented so far and has enabled NRCS to continue to
    provide high quality technical assistance to farmers with
    proportionately fewer management and support staff. In so doing, NRCS
    has reduced headquarters staff by over 50 percent, reduced State office
    staff by almost one-third, and consolidated a number of administrative
    functions, which will continue under the administrative convergence
    initiative for USDA's county-based agencies.
        The request for appropriated funds for NRCS totals $826 million
    which includes $650 million for conservation technical assistance and
    water resources assistance. This will fund critical NRCS technical
    support needed to meet the ambitious goals set out in the agency's
    Annual Performance Plan. For example, in 1999, NRCS will protect more
    than 4 million acres of cropland against excessive erosion and complete
    conservation management systems on 6.4 million acres of grazing land.
    The budget will also provide the resources needed by NRCS to maintain
    and enhance the conservation partnership that has grown over the years
    not only with conservation districts but also with farmers, ranchers,
    and other private landowners. As we approach the 21st century, this
    partnership becomes more vital when we consider how much more we can
    accomplish for the environment when we work together.
        The budget supports this continuing shift toward greater
    cooperation and includes an increase of $20 million for incentive
    payments to those States that are successful in increasing the level of
    non-Federal support for the private-public partnership. To further
    leverage the Department's conservation dollar, we are also proposing to
    collect $10 million in user fees for certain types of products or
    technical services that are available in the private sector or that
    provide mostly private benefits. Fee structures and applications will
    be developed by NRCS with direct input from State offices and other
    groups or individuals that are directly affected.
        The technical assistance budget also includes the NRCS contribution
    to the goal of improving water quality in certain highly vulnerable
    watersheds where it is impaired by agriculture. Through the proposed
    interagency Clean Water and Watershed Restoration initiative, in order
    to strengthen local leadership capacity, NRCS will direct $20 million
    to Competitive Partnership Grants. These funds will be awarded to
    locally-led institutions such as conservation districts or watershed
    councils, primarily for the hiring of non-Federal watershed
    coordinators who will take an active role in problem identification,
    goal setting and watershed restoration planning. An additional $3
    million is also provided for monitoring work to help target resources
    and document baseline conditions and performance. In addition to these
    appropriated funds, the budget includes an increase of $100 million for
    EQIP as proposed legislation in 1999 to provide added support to the
    Clean Water initiative as well as to meet other Administration
    priorities in the Civil Rights area.
        In the watershed planning and construction area, the Department
    will continue efforts that have begun in improving how these limited
    resources are allocated. Only the most cost-effective and
    environmentally beneficial projects will be funded with an emphasis on
    nonstructural management systems. We will also continue to examine
    approved watershed plans to eliminate those projects that are now
    infeasible in order to reduce the backlog of unfunded work. Beginning
    in 1999, technical support for NRCS' watershed planning and
    construction activities will come from the agency's conservation
    technical assistance program which will reduce the number of NRCS
    accounts that include payroll items. Also, we will try to help sponsors
    with implementation costs by allowing some of the funds to be used to
    subsidize rates of municipal loans administered by the Rural Utilities
    Service. Increases are provided for additional planning activities and
    for educational assistance to watershed sponsors to make them more
    aware of the need to examine and possibly repair older systems.
        Finally, the Department's 1999 budget continues its support of the
    290 authorized Resource Conservation and Development (RC&D) areas. It
    will also be sufficient to support the approximately 25 new area
    authorizations that I hope to announce later this year.
                       research, education, and economics
        The budget recommendations for the programs administered by the
    four Research, Education, and Economics (REE) mission area agencies
    reflect the importance of scientific, technological, and economic
    knowledge on future performance of the agricultural sector in the U.S.
    economy, and its competitiveness abroad. Driven by publicly funded
    research in Federal laboratories, land-grant universities, and private
    sector investments, agricultural productivity has grown at an annual
    average rate of 1.8 percent over the past 45 years. Yet hunger and
    malnutrition remain a problem for too many people in the U.S., and
    throughout the world, and with the projected population growth rates,
    there are moral challenges and economic opportunities to make our
    agricultural system even more productive in the future. Federally-
    supported agricultural research and education is needed to promote key
    Departmental objectives related to expanding agricultural-based
    economic and trade opportunities for all producers; ensuring a safe and
    affordable food supply; and protecting natural resources for the
    benefit of current and future generations.
        The ability of U.S. agriculture to help meet world food
    requirements relies on research and technology to enhance productivity
    growth, develop a safer food supply, and address critical human
    nutrition needs. Increased support for research and education will also
    lead to a better understanding of how agricultural production impacts
    the environment and how effective management practices can be applied
    to mitigate harmful effects. Federal support for research conducted at
    land-grant universities and private laboratories encourages these
    institutions to invest in science and technology needed to address
    critical issues at a level beyond what they could do on their own.
    Publicly supported research and extension programs provide the basis to
    complement much of the work carried out by the private sector.
        The activities proposed under REE aim to achieve the five general
    goals for research and extension set forth in the mission area
    strategic plan and in the agencies' performance plans: (1) an
    agricultural production 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) an agricultural system which protects
    the environment; and (5) enhanced economic opportunity and quality of
    life for American citizens. These goals are derived from the purpose
    statement for agricultural research in the 1996 Act and the advice we
    have received from users and stakeholders represented on the National
    Agricultural Research, Education, and Extension, and Economics Advisory
    Board.
        Total funding requested for REE agencies in 1999 is about $1.8
    billion. Within this total, research in ARS would be increased by $32
    million, funding for Federal facilities would be reduced by $43
    million, funding for university research and extension would be reduced
    by $9 million, and support for economic research and agricultural
    statistics would be increased by $3.1 million. ARS will be redirecting
    about $35 million from a number of ongoing research projects to support
    programs and initiatives of high national priority.
        An increase of $6 million in the ARS budget is provided for
    research efforts to reduce the incidence of emerging diseases and
    exotic pests that threaten the safety of the U.S. food supply. Of the
    total, $3.7 million will be used to enhance the development of
    diagnostic tests, vaccines, and other immune strategies that prevent
    the outbreaks and spread of exotic and zoonotic diseases, and
    pathogens. The remaining $2.3 million will be used to prevent the
    introduction of emerging plant diseases and pests.
        Enhanced genetic diversity supported under the Department's Food
    Genome initiative can reduce the likelihood of losses due to rapid
    environmental changes or epidemics of pests or pathogens. An increase
    of $3.5 million in the ARS budget is provided to support the continued
    development and maintenance of living germplasm collections for crops,
    animals, and microbes. New funding for this initiative is also proposed
    in the Cooperative State Research, Education, and Extension Service
    (CSREES) budget. Under proposed legislation, competitive grants
    totaling $10 million will fund selected projects that enhance the
    genetic knowledge base resulting in improved agricultural production
    and crop biodiversity. Also, within the total CSREES National Research
    Initiative (NRI) funds, $16 million is proposed for this initiative.
        The budget for ARS includes an increase of $14 million for the
    President's Food Safety initiative. Of the total, about $8 million is
    provided for pre-harvest food safety research to design effective
    control programs to prevent the spread of bacteria and parasites from
    animals to humans, and to improve post-harvest handling practices for
    fruits and vegetables. The remaining $6 million is provided for post-
    harvest research in support of the HACCP model implemented by the Food
    Safety and Inspection Service. Efforts will be focused on developing
    methods to reduce the pathogens and toxins infecting our food supply,
    including fruits and vegetables, and meat and poultry products. The $11
    million increase proposed in the CSREES budget for food safety research
    and education programs will complement the ARS efforts. Of the total
    CSREES request, $3 million is proposed to assess the impact of food
    handling and storage practices on selected population groups, and $3
    million of the NRI funds is proposed for research to improve the
    understanding of disease-causing pathogens. The remaining $5 million
    targets education programs for consumers in support of HACCP
    implementation for meat and poultry products.
        An increase of $5.5 million in ARS will support the development of
    substitute pest management technologies to replace pesticides that are
    slated for elimination under the new Food Quality Protection Act (FQPA)
    regulatory standards. The research will also support the Department's
    commitment to encourage the adoption of Integrated Pest Management
    (IPM) practices on 75 percent of the Nation's crop land by the year
    2000. The CSREES budget also includes funding to support the
    Departmental goal on adoption of IPM practices. Increased funding of
    $15.5 million is proposed for research and extension programs on
    improved IPM systems to provide pest control solutions that are
    economically and environmentally sound. All IPM activities in the
    Department will be coordinated by the newly established Office of Pest
    Management Policy which will work closely with EPA to promote safer
    pest control practices and coordinate data and analysis to support
    informed decisionmaking on pesticide regulations.
        The ARS budget also includes a $10.5 million increase in support of
    the Presidential Initiative on Human Nutrition. The overall objective
    of the human nutrition program, conducted at the six ARS Human
    Nutrition Research Centers, is to enhance nutritional means to promote
    optimum human health and well-being for individuals through improved
    nutrition. The impact of nutrition on childhood growth and development
    will be given special emphasis. Of the total request, $1.5 million is
    also proposed to expand the sample size of the ongoing dietary survey
    to provide more accurate and up-to-date information on food consumption
    patterns for pesticide tolerance review activities mandated under FQPA.
        Additional emphasis is placed on addressing pressing environmental
    issues. An increase of $7 million in the ARS budget is proposed in
    support of the President's Climate Change Technology Initiative. This
    will also complement the climate change research undertaken by the
    Forest Service. Efforts will be aimed at minimizing the adverse effects
    of agricultural production practices on climate change, as well as
    using agricultural practices to mitigate global warming. An additional
    $2 million is provided under the President's Clean Water and Watershed
    Restoration initiative to deal with the recent Pfiesteria outbreak in
    the Chesapeake Bay.
        ARS also plays an important role in the Administration's initiative
    to restore the South Florida Everglades ecosystem. The budget includes
    an increase of about $1 million to develop mechanisms to control the
    spread of invasive Melaleuca trees and $4 million for construction of a
    quarantine facility to house the study of biological control agents.
    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.
        The budget includes about $36 million for facility construction and
    modernization projects, a reduction of $43 million from 1998. Of the
    total, $2.5 million is provided for modernization of the Beltsville
    Agricultural Research Center at Beltsville, Maryland. The request
    includes $17.7 million for modernization of facilities at three ARS
    Regional Research Centers. Remaining funds provide $5.6 million for the
    renovation of facilities at the National Animal Disease Center at Ames,
    Iowa, $3.5 million for ongoing renovation projects at the Plum Island
    Animal Disease Center at Greenport, New York, and $1.4 million for the
    renovation of the Grain Marketing and Production Research Center at
    Manhattan, Kansas.
        The budget request for CSREES is reduced by $9 million from the
    1998 appropriation. Within this total, however, there are proposals for
    enhanced programs to support a number of high priority research and
    education projects and Presidential initiatives. Offsetting reductions
    are proposed for selected research and extension formula programs.
    Current law gives States broad authority to determine research program
    priorities and provide funding for selected projects accordingly. In
    addition, the Administration recommends legislative changes to permit
    States to use up to 10 percent of the Hatch Act and Smith-Lever formula
    funds for research and extension interchangeably.
        The CSREES budget includes an increase of $33 million for the NRI,
    bringing funding for this competitive grants program to $130 million.
    NRI grants support a wide range of environmental, health, food safety,
    and nutrition programs through a competitive, peer-reviewed grant
    process that is open to all of the Nation's scientists. NRI encourages
    breakthroughs and new approaches to problem-solving in biological
    sciences that equip scientists with powerful new tools to meet
    continuing and emerging challenges in agricultural and food sciences.
        CSREES also proposes a $2 million increase to develop and improve
    sustainable agriculture systems which require fewer off-farm inputs.
    The Sustainable Agriculture Research, and Education program, which has
    been funded at $8 million annually since 1995, is proposed to be funded
    at $10 million. Research and education grants under this program are
    awarded competitively at the regional level.
        In response to the recommendations of the Civil Rights Action Team
    and the National Commission on Small Farms, the CSREES budget also
    contains proposals of $27 million for selected activities to strengthen
    programs at minority-serving institutions and to enhance opportunities
    for small farm and minority producers. The request includes $4 million
    to address problems that are unique to small farm producers. Proposed
    legislation which authorizes grants for integrated research, extension,
    or education activities, is requested to carry out this program. Other
    proposals include $12 million for the renovation and construction of
    the 1890 facilities, $5 million to support additional extension agents
    under the Extension Indian Reservation Program, $3.5 million to expand
    the extension and teaching capacity at the 29 Native American
    Institutions, and $2.5 million to enhance the education capacity at the
    Hispanic Serving Institutions.
        The CSREES budget includes $2 million for continued expansion of
    the REE Data Information System begun in 1996. An increase of $1.2
    million above the 1998 appropriated level is provided to continue
    development of an interactive information system with the capability to
    manage administrative, financial, and management-related data for any
    research, education, extension, and economics activities. This
    information will be used for GPRA reporting and evaluation
    requirements.
        The Economic Research Service (ERS) is an important source of
    information on food and agricultural related issues, and the economic
    and social science research conducted by ERS helps both policymakers
    and producers make informed decisions. The budget request for ERS is
    $56 million, a decrease of $16 million below the 1998 appropriated
    level. The 1998 appropriation included $18 million for food program
    studies previously funded within FNS. The 1999 budget reflects this
    funding within FNS, which we believe is the appropriate agency to
    conduct this research.
        The ERS budget includes increases to support economic analysis on
    three high priority issues. Funding included as part of the President's
    Food Safety initiative would support work with the Centers for Disease
    Control and Prevention to more accurately assess the costs of foodborne
    illness and the economic consequences of efforts to improve food
    safety. ERS would also collaborate on the development of risk
    assessment models to identify where pathogens enter the food chain and
    where control efforts would be most cost effective. A second increase
    would support an assessment of the Department's role in meeting the
    information needs of small farmers. More specifically, ERS will assess
    how information needs vary by the type of operation, how well USDA and
    private information services meet the needs of small farmers, and what
    reforms and modifications in the Department's current market
    information programs are needed in order to better serve small farmers.
    Finally, an increase is included to support research on electric
    utility deregulation in order to assess the potential impacts of
    deregulation on the Department's rural utility loan programs, the
    competitiveness of rural businesses and communities, and rural
    households.
        The National Agricultural Statistics Service (NASS) is also an
    important source of information. NASS estimates and forecasts are
    relied upon by a wide range of participants in the agricultural
    economy, and NASS has earned and maintained an unmatched reputation for
    accurate, unbiased, and timely information. The implementation of the
    1996 Freedom to Farm Act has made reliable and timely information about
    production, supply and prices even more critical to participants in
    agricultural markets.
        This year for the first time, NASS is conducting the Census of
    Agriculture which has previously been conducted every 5 years by the
    Department of Commerce. The census serves as the main source of local
    level data about American agriculture, the only complete enumeration of
    farmers, and an important benchmark for USDA's program to produce
    national and State estimates. Overall, the budget for NASS reflects a
    net decrease of $11 million, from $118 million to $107 million, due to
    the cyclical funding needs of the Census. With the proposed NASS
    budget, 98 percent of total national agricultural production will be
    included in NASS' annual estimates program, an increase of 5 percent
    above 1998.
        The NASS budget includes increases for two follow-on surveys to the
    1997 Census of Agriculture: (1) the Agriculture Economics Land
    Ownership Survey (AELOS) which has historically been conducted as a
    follow-on survey to the Census of Agriculture since the 1950's; and (2)
    a national survey of the fast growing aquaculture industry for which
    very little data is currently available. For NASS' Agricultural
    Estimates program, an increase of $1.4 million is included to expand
    the current pesticide use surveys supporting implementation of FQPA to
    include the fast growing nursery and greenhouse industries. In addition
    to providing pesticide use data for an important sector of agriculture,
    this initiative also supports the CRAT recommendation to address
    concerns about farmworker exposure to pesticides and the
    Administration's IPM initiative.
                       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 $31 million in new user fees from those who directly
    benefit from USDA services. New license fees are requested to recover
    the cost of administering the Packers and Stockyards Act except for the
    one-time restructuring costs. Expanded user fees are requested for
    developing grain standards and developing methods for measuring grain
    quality, and for certain animal and plant inspection activities.
        The budget includes an increase of $11 million for the Agricultural
    Marketing Service (AMS). Modest increases are requested 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. The proposed rule to
    implement the Organic Foods Production Act was published on December
    16, 1997. In order to implement this new program, we are requesting
    additional funds to accredit organic certifiers. Program costs will be
    recovered through user fees. Funding for the Pesticide Data Program
    (PDP) was provided within AMS in 1998 after being funded through the
    Environmental Protection Agency (EPA) for 1997. For 1999, program
    increases are requested to initiate a rapid response capability
    necessary to support EPA's data requirements under FQPA. As part of the
    President's Food Safety initiative, an increase of $6.3 million is
    requested to broaden the scope of PDP to include microbiological
    testing of fruits and vegetables.
        For the Animal and Plant Health Inspection Service (APHIS), the
    budget contains $10 million in new user fees and a redirection of $12
    million from APHIS appropriations for the cotton growers' share of boll
    weevil eradication to a USDA loan program. This redirection in boll
    weevil eradication allows an appropriations decrease without a decrease
    in program operations. Program successes in brucellosis eradication
    allow an $8 million redirection to higher priority activities to help
    the agency comply with international trade agreements. APHIS
    anticipates that all 50 States will reach brucellosis Class ``Free''
    Status by the end of 1999. The budget assumes increased cost sharing
    from beneficiaries of Wildlife Services activities. Also, this budget
    supports activities that would increase agricultural exports. 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 Agricultural Quarantine Inspection at the borders.
    APHIS will likely inspect upwards of 85 million passengers potentially
    carrying banned agricultural products into the United States.
        The budget requests an increase in available resources of $4.8
    million to strengthen the Packers and Stockyards (P&S) 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
    related to livestock and poultry marketing. Specifically the agency
    would: (1) hire additional staff to monitor and analyze packer
    competitive practices and the implications of structural changes 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. P&S programs
    will be able to conduct upwards of 1,950 compliance investigations in
    1999. Legislation will again be proposed to authorize a dealer trust
    similar to that of the existing packer trust. The legislation would
    require dealers to maintain trust assets covering the value of
    livestock inventory and accounts receivable due from the sale of
    livestock until livestock is paid for. This proposed trust would be a
    valuable tool in assisting the recovery of payments for unpaid sellers.
    Finally, this budget proposes to fund the one-time costs of $3.0
    million associated with restructuring the P&S programs. The
    restructuring will strengthen P&S programs' ability to investigate
    anti-competitive practices and provide greater flexibility and
    efficiency in enforcing the trade practice and payment protection
    provisions of the Act.
        Funding for grain inspection is maintained at the 1998 level and
    GIPSA expects to officially inspect 260 million metric tons in 1999.
    The budget proposes to recover the cost of standardization and methods
    development through increased inspection fees.
                       departmental management activities
        Several offices are responsible for Departmental management
    activities. These offices provide leadership and administrative support
    to USDA agencies. The 1999 budget provides the resources necessary for
    these offices to enhance their leadership, coordination, and support
    the Department's Strategic Plan Management initiatives to: ensure that
    all customers and employees are treated fairly and equitably, with
    dignity and respect; improve customer service by streamlining and
    restructuring the county offices; create a unified system of
    information technology management; and improve financial management and
    reporting.
        As indicated previously, this request reflects a number of priority
    funding increases to carry out the recommendations contained in the
    report of the Department's Civil Rights Action Team. In both 1997 and
    1998, the Congress increased funding specifically for certain civil
    rights activities within Departmental Administration. These activities
    will continue. The 1999 budget includes an increase of $6.3 million for
    civil rights and other activities. These resources are needed to meet
    the Department's strategic objective of ensuring that all employees and
    customers are treated fairly and equitably with dignity and respect.
    The funds will support additional staffing to improve personnel
    services and assistance to USDA agencies, including ethics compliance;
    to improve outreach to USDA customers including support for the new
    USDA Office of Outreach that will assure all customers, especially
    underserved populations, have full access to USDA programs and
    services; and to enhance management-employee relations that support
    early resolution of employee grievances and conflicts within USDA.
        The Office of the General Counsel (OGC) provides critical legal
    support and advice to the Department and its agencies. An increase is
    proposed in 1999 to facilitate the processing and adjudicating of civil
    rights complaints by expanding the Civil Rights Division in OGC.
        The Office of the Chief Information Officer provides policy
    guidance, leadership, and coordination to USDA's information management
    and technology investment activities. The proposed increase for 1999
    includes $1.5 million for further development of the Department's
    information technology capital planning and investment control programs
    and the USDA information architecture. USDA is also taking a strong
    management approach to effectively respond to the challenges of year
    2000 remediation and we fully expect that all mission critical systems
    will be compliant by no later than March 1999.
        The Office of the Chief Financial Officer (OCFO) provides overall
    direction and leadership in the development of modern financial
    management structures and systems. In addition, the OCFO is responsible
    for implementation of the Government Performance and Results Act
    (GPRA). Additional funds are requested for 1999 to strengthen the
    Department's capability to provide cost accounting information for
    services provided, particularly with regard to implementing GPRA.
        The request includes additional funds to continue the
    implementation of the USDA Strategic Space Plan for the Washington
    metropolitan area. This plan has been tailored to meet the needs of
    USDA based on the projected staff levels at the Washington headquarters
    and to provide a safe, efficient work place for our employees. The
    Beltsville facility will be ready for occupancy in early 1998. The
    design for the first phase of the South Building renovation was
    completed and a construction contract is expected to be awarded in
    February. The design for phase 2 of the modernization is now underway
    and scheduled to be completed during 1998. The 1999 request includes
    funds for the construction of phase 2.
        The Office of the Chief Economist advises the Secretary on policies
    and programs related to U.S. agriculture and rural areas, provides
    objective analysis on the impacts of policy options on the agricultural
    and rural economy, and participates in planning and development
    programs to improve the Department's forecasts, projections, and policy
    analysis capabilities. The proposed increase would be used to continue
    USDA's initiative to provide enhanced weather and climate data for
    agricultural areas. This initiative includes modernization of USDA's
    weather and climate data acquisition equipment to allow USDA to
    continue to provide data to and receive data from the National Weather
    Service, and implementation of the second phase of the National
    Agricultural Weather Observing Network which will manage the
    collection, quality control, and dissemination of the weather and
    climate data in agricultural areas.
        An increase is proposed for the Office of Risk Assessment and Cost
    Benefit Analysis in support of the President's Food Safety initiative.
    Additional funding is also included for the Commission on 21st Century
    Agriculture. The Commission is conducting a comprehensive review and
    assessment of the future of production agriculture in the U.S. and the
    appropriate role of the Federal Government in support of production
    agriculture.
        An increase is proposed for the Office of Inspector General (OIG)
    including $21.7 million to support a Presidential Law Enforcement
    initiative. Included in the initiative is funding for OIG to expand
    activities to crack down on fraud and abuse in the food stamp and other
    nutrition programs. In this area, estimates indicate that over $50
    million a year in food stamps goes illegally to convicted felons and
    prison inmates, and that a sizable number of retailers who accept food
    stamps make money from them illegally. OIG's recent pilot effort,
    Operation Talon, has been extremely successful. In the 24 metropolitan
    areas around the country included in the pilot, Operation Talon
    resulted in the arrest of over 2,200 fugitive felons and the savings of
    millions of dollars to the U.S. Treasury. This initiative will allow
    OIG to expand these efforts nationwide.
        In addition to food stamp fraud, these funds will also enable OIG
    to dedicate more resources to rural rental housing programs, and
    disaster and health and safety programs. Health and safety of food from
    production to the consumer is of special concern because of such highly
    visible emergencies as contaminated strawberries in the School Lunch
    Program and the tainted meat in the food distribution chain resulting
    in the recall of 25 million pounds of ground beef from public
    consumption.
        That concludes my statement, I am looking forward to working with
    the Committee on the 1999 budget so that together we can meet the needs
    of our clients and at the same time balance the Federal budget.
    [GRAPHIC] [TIFF OMITTED] T01FE10.002

    [GRAPHIC] [TIFF OMITTED] T01FE10.003

                        Office of the Inspector General

        Senator Cochran. Mr. Secretary, you mentioned the Office of
    Inspector General. I just wanted to bring up the fact that I
    had a meeting with the inspector general in my office yesterday
    to talk about some of these initiatives.
        One thing which we discussed was the authority that we had
    written into the agriculture appropriations bill I think in
    1996 giving our OIG access to forfeited funds or funds that
    were forfeited to the Government by reason of actions taken by
    this office so that we would not have to appropriate as much
    money to operate that office in the future. But for some reason
    or another, the Department of Justice has blocked access to
    those forfeited funds. I wonder if you would take it up with
    the Attorney General and find out what is going on. For 2
    straight years, we have had that authority in the law, but the
    Department has prevented its being implemented.
        Do you know anything about that problem?
        Secretary Glickman. Not any more than you have just stated,
    although I have talked to Mr. Viadero, as my staff has, and I
    will follow it up with the Attorney General. The fact that it
    is in the law--and I think the law is pretty clear--we need to
    work this out.
        Senator Cochran. Well, I would like to work with you if you
    feel that we can be of any specific help in getting cooperation
    from the Department of Justice on that subject.

                             Asian Financial Crisis

        On another topic, the Asian financial crisis is something
    that is being talked about because it concerns us in
    agriculture with respect to pressure on markets for U.S.
    agriculture commodities in that part of the world. Many of
    these countries are major markets for U.S. agriculture
    commodities such as soybeans, poultry, beef, cotton, and
    others.
        What is the situation with respect to our access to those
    markets, whether we are going to sustain losses in sales in
    that part of the world? What about the use of our Federal
    programs such as GSM credit guarantees in helping to deal with
    that problem?
        Secretary Glickman. I dispatched a team to Asia: our Under
    Secretary, Gus Schumacher, and the head of our Foreign
    Agricultural Service, Lon Hatamiya. They were in virtually
    every country in Asia. Their assessment is basically that the
    crisis could reduce U.S. agricultural exports between 3 to 6
    percent from levels where it would have been had there been no
    crisis. Much as this loss will be in Korea and Indonesia, which
    is expected to account for the lion's share. I do not think
    they expect very much impact at all with Japan or China, Hong
    Kong, or the other nations.
        Now, we have just made available about 2 billion dollars'
    worth of CCC export credit guarantees to the Republic of Korea
    and five Southeast Asian countries. That action is helping to
    ease liquidity constraints. A lot of these people could not
    even get letters of credit because the banks would not issue
    them in some of the areas. So, this is the highest priority for
    us right now in terms of the farm sector, to make sure that
    those markets remain open to us.
        It is my understanding that there is no statutory limit on
    the amount of GSM credits that we can provide. It is a budget
    question determining how much of a loss there will be, and we
    obviously have to work with OMB on this particular issue. But
    it is my goal to use that provision of the law aggressively in
    order to ensure that goods keep flowing.
        Now, some of the other countries in the world are extremely
    unhappy with our use of these export credits--Australia, for
    example, I think their term for us was--how did they
    characterize it? Avaricious looters. The Americans were
    avaricious looters moving into a market which they believe
    perhaps was traditionally their own. The fact of the matter is
    the use of our credits is perfectly consistent with our
    obligations under all international trade arrangements.
        Again, these are not subsidies. These are Government
    guaranteed bank credits, a commercial credit. But this is at
    the heart of what we are doing in this particular area.
        As I mentioned just briefly, the livestock industry, which
    used to only export 2 or 3 percent of their product--but which
    now exports up to about 10 percent--is very much affected by
    this, pork and beef particularly. But the poultry industry has
    been a little more on historical trend to both Hong Kong as
    well as Eastern Europe.
        We are going to aggressively use our credit programs.
    Obviously we will have to look at the potential for taxpayers'
    losses in this particular area, but I would say that is the
    biggest line of defense right now for our exports. And it is
    not limited by the budget estimates.
        By the way, we have thought that we would use about--let's
    see. What are we talking about? About $5.7 billion this year?
        Mr. Dewhurst. $5 billion this year, $4.6 billion next year.
        Secretary Glickman. But that is based on what we considered
    the demand to be. That is not a cap. The level could go up if
    their utilization--and our desire is to move as much product as
    we possibly can.
        Senator Cochran. I think Mr. Dewhurst responded to you that
    the plan was to use up to $5 billion this year and $4.6 billion
    next year. Is that your understanding of the forecast?
        Secretary Glickman. I would just say that is an estimate,
    though. It is not a cap.
        Mr. Dewhurst. That is right. That is an estimate of our use
    of that authority, but it is not a limit. We could go above
    that number if that is what the situation requires.

                         Federal Crop Insurance Funding

        Senator Cochran. Speaking of limits, one of the caps that
    is proposed in the President's budget request is on the cotton
    program, proposing to save $110 million. This savings, as I
    understand it, would fund the Federal crop insurance sales
    commissions. And, there is another cap that is supposed to save
    an additional $48 million.
        These are troubling to those of us who come from cotton
    producing States. We worry about why the administration has
    singled out the cotton industry to impose these caps to help
    fund the crop insurance program. If enacted, the
    competitiveness of our cotton products may be harmed,
    particularly in light of this Asian financial crisis, making
    sales more difficult.
        Have you undertaken to assess what the effect of these caps
    would have as a practical matter on the marketability of U.S.
    cotton in the overseas markets?
        Secretary Glickman. I would ask Mr. Collins.
        Mr. Collins. Yes, Mr. Chairman; we have looked at that. You
    are right. It would hurt our competitiveness somewhat. Our
    estimate is that a total loss of sales might be a couple of
    hundred thousand bales as a result of these caps, $140 million
    cap in fiscal year 1999. We would have essentially $193 million
    total that we could spend in the year 2000 and beyond.
        I might point out just one thing, though, that for every
    dollar that we spend in step 2 payments on the export side, we
    are spending $2 to support domestic mills. There has been very
    little evidence that that $2 spending on the domestic mills has
    really made that much of a difference in domestic mill use.
        But overall, yes, there would be some effect on our export
    competitiveness.

                            CSREES Research Programs

        Senator Cochran. One other proposal in the budget that
    troubles me considerably is zeroing out Cooperative State
    Research Education Service research programs and the reduction
    of formula funds for the Hatch Act, Smith-Lever, McIntyre-
    Stennis cooperative forestry research.
        What is the rationale for proposing such significant
    reductions in formula research and extension programs? These
    enable the States to meet local priority needs, to set some
    goals for helping students, things like 4-H Club activities,
    others that are at the heart of rural communities and small
    schools around the country. I worry about the approval of that.
    I do not think we are going to approve that. Why do you propose
    it?
        Secretary Glickman. First of all, let me say with respect
    to both the cotton step 2 program, as well as this program, we
    obviously are going to work with you to try to devise the best
    dollars and language that we can get under the circumstances.
        The step 2 program has been the subject again of a serious
    amount of OIG audits and investigations. So, we need to work
    together to make sure we enhance our competitiveness, but at
    the same time have a program that gives the taxpayer a good
    bang for the buck and is not prone to being misused. I think we
    hopefully can do that.
        On the formula funding, obviously this is something else
    that relates to the total budget picture. We do not anticipate
    that the proposed reductions in the formula program will have a
    materially negative impact on activities carried out at the
    State level. States will have full discretion to fund their
    research and extension activities that they consider to be of
    high priority, and the reductions in Federal funding can be
    offset with modest increases in State and local funding, less
    than 1 percent I believe, the total amount.
        So, there are a lot of pieces of this puzzle. There are
    some increases in the research budget in other areas as well.
    We will work with you on this.
        Senator Cochran. Senator Bumpers.
        Senator Bumpers. Mr. Secretary, thank you very much for
    your statement, a big part of which I, of course, agree with.
    But Senator Cochran has touched on something that is becoming
    increasingly important to me because I have just been studying
    it a little bit.
        But a couple of years ago, as best I could tell, we were
    putting about $1.3 billion into research each year. Does that
    sound like about a right figure, Mr. Dewhurst?
        Mr. Dewhurst. Yes.
        Senator Bumpers. When you consider we spend about $40 to
    $45 billion a year over at the Pentagon to make things explode
    and then we spend, which everybody would agree with, roughly
    $15 billion at NIH for medical research, but when you consider
    the fact that we have roughly 435 million acres of arable land
    in the lower 48 and we are taking 2 million acres a year out
    for highways, urban sprawl, housing, shopping centers, and so
    on, and we are adding 2 million people to the population every
    year, and when you consider the addition of people to the
    population every year, 2 million, taking 2 million acres out of
    cultivation and we are spending $1.3 billion on research, that
    seems frankly like a pitifully small amount.
        Would you comment on that?
        Secretary Glickman. My personal reaction is I agree with
    you. We have to deal with the priorities in the total budget
    process, and working together, we do our best to try to make
    sure those priorities are an adequate amount.
        There are some increases on the research side of the
    budget. We have put some additional money into human and food
    genome research as well as the Pfiesteria and other key problem
    areas, but the total dollars have not been going up.
        I would say a couple of things here. If you had to ask me
    is every bit of agriculture research we are doing necessary or
    is there duplication of research being done at various
    universities around this country, I would say probably there is
    some duplication of research and not every bit of agriculture
    research that is being done is necessarily serving the good as
    much as it could.
        We do have an outside advisory group that is looking at our
    facilities now and trying to see if there is a way that we can
    better do our research job less expensively. It is difficult to
    close down a research facility, as you know.
        Senator Bumpers. I want you to close all the others. I do
    not want you to close the ones in Arkansas.
        Secretary Glickman. That is right.
        Overall, I do not think we spend enough in agriculture
    research.
        Senator Bumpers. We obviously do not.
        Secretary Glickman. That is a personal item, but we have to
    do the best we can and we have to make the best of the
    resources we have.
        Senator Bumpers. We have a gigantic train wreck that is
    going to happen probably long after I am dead, but you can see
    it developing and we are not really addressing it. That is the
    reason I raise that sort of macro, long-term problem.
        Secretary Glickman. Let us just take a few areas. How do we
    increase yields without using more pesticides, herbicides,
    fungicides, particularly in massive areas of both the arid area
    of the United States but also in the developing areas of the
    world. That is obviously one key area. How do we produce more
    nutrition in the crops that are grown, how do we protect
    production agriculture and still not have land wash away and
    blow away.
        As you look down the next 30 or 40 or 50 years in terms of
    crisis problems, how do we deal with global climate change,
    which I know is controversial, but I suspect that it is going
    on and we have to protect American agriculture in that process
    rather than just say it is not happening and we do not want
    anything to do with it. We have to make sure we do adequate
    planning, and that means research activities as well. So, we
    need to spend the money to do it.
        Senator Bumpers. Mr. Secretary, what kind of food safety
    inspection do we have on imported fruits and vegetables? I have
    never really known.
        Secretary Glickman. The FDA is essentially responsible for
    that. They do some spot inspections.
        Senator Bumpers. I will save that. They will be here, so I
    will save that question for them.
        Secretary Glickman. I would say they are rather limited in
    amounts, and that is one of the reasons the increase in the
    President's budget is to provide more resources for them.
        Senator Bumpers. I just will make one observation--two
    observations.
        No. 1, in connection with the train wreck that I have
    described, we have a piece of that problem which is slightly
    different in my State. The Mississippi alluvial aquifer which
    covers a good portion of Mississippi, a lot of Arkansas, a
    little of Missouri, the southern part, northern Louisiana. I
    had been successful in getting money to study the depletion of
    that aquifer. Those studies have been completed.

                                Rice Production

        As you know, we produce roughly 43 percent of all the rice
    produced in this country. Rice is very water intensive, and we
    have been depleting that aquifer for rice growing for many,
    many years now. We have reached the point where if something is
    not done, rather dramatically done, by the year 2015, rice
    production, because of the loss of that aquifer, will be so
    much lower, and by the year 2020, there will be no rice grown
    in my State, virtually none.
        I felt so strongly about it, I went over to talk to the
    President about it, and of course, coming from Arkansas, he was
    fully familiar with it and put some money in his budget request
    to start dealing with it.
        All I want to say is it is a $1 billion problem. In the
    budget, the President asked for $13.5 million to initiate a
    program that the Corps of Engineers--now the Corps does not
    like agricultural products. They are not prohibited from doing
    them, but they do not like them. They are going to have to
    learn to like them because this is not just a problem in my
    State. This is a problem that is developing everyplace, for
    example, the Ogallala aquifer that covers the Plains States.
    That aquifer is going to disappear too.
        So, what we are proposing to do is to divert surface water
    from the rivers to the rice fields. I tell you that simply
    because the Corps of Engineers is going to have to get actively
    involved, even though they would rather not, and the Department
    of Agriculture is going to have to help in coordinating these
    efforts and helping us determine where the most critical areas
    are.
        Now, finally, Mr. Secretary, let me laud you by saying I
    think you have done a superb job. You have been a very
    responsive Secretary. I have never called, I have never asked
    for anything that I did not get a fast response.

                         Food Safety Inspection Service

        But I must say when it comes to the Food Safety Inspection
    Service, the one big disagreement I have had with the
    Department is the way the Hudson Foods case was handled. I have
    been familiar with that company since I ran for Governor in
    1970 when it was just doing a few million dollars a year, until
    it became last year a $1.5 billion business. Let me just say
    what my concern is and ask you to respond to it.
        What Hudson Foods had was one meat packing--they are big in
    the turkey and poultry business. That is all they are. They
    built a meat packing company just to accommodate Burger King.
    It was a state-of-the-art facility. There is no question but E.
    coli was found in the plant. There is not any question that the
    Secretary of Agriculture, the Food Inspection Service had to
    move. They had to do something to find out about it.
        But what happened, I really felt that these were
    gratuitous, inflammatory, and unnecessary statements made that
    caused Hudson to have to sell a good company, built over a 30-
    year period, and they had no choice but to sell at what I have
    been told is $300 million less than the fair market value of
    the company. The publicity was so pervasive and so volatile
    they could not survive it.
        Yet, the E. coli that was found in that plant came from
    another USDA-inspected beef slaughtering plant. The question
    was why should Hudson have had to bear the brunt of it when the
    E. coli that came into that plant came from another FSIS-
    inspected facility, which so far as I know, till this day has
    never been named, and yet Hudson had to bear the whole brunt of
    it. It seems to me that USDA and FSIS should have taken the hit
    on the very fact that this beef came in from another inspected
    plant which Hudson had relied on. Hudson was relying on FSIS to
    make sure that the beef they got from these other packing
    plants--they bought from about 15, but they were all inspected.
    They had the right to rely on the safety and the efficacy of
    that beef.
        Secretary Glickman. Well, first of all, let me say that I
    am somewhat limited because there has been a U.S. Attorney
    investigation, and I do not know if there is a grand jury
    looking at this.
        Senator Bumpers. Well, I was not aware of that. I am not
    trying to prejudice the case.
        Secretary Glickman. I cannot talk about the specifics of
    that case.

                                    E. Coli

        The only thing I can tell you is this, that I think we have
    learned a lot from that episode. E. coli was either nonexistent
    or we had not identified it as recently as 15 years ago. It is
    new. It is virulent, it kills, and it is a troublesome problem,
    much more than a lot of other food safety problems. The fact is
    that we are learning about this and how to deal with these
    kinds of problems. The companies are learning as well how to
    manage their systems in order to keep problems from happening.
    We have to regulate that process. So, I cannot tell you today
    that everything we did was perfect in that context.
        But I would tell you this, that I have had some very
    successful meetings with the meat and poultry industry as a
    result of the new HACCP rules that went into effect. The new
    HACCP rules changed the way that they and we do business so
    that no longer do you wait until you find a problem in a piece
    of meat that has gone out in the countryside before you take
    action. You try to deal with the systems approach so that you
    test and the company itself focuses on those critical systems
    at every stage of the operation.
        Right now the focus is primarily on the packers,
    slaughterers, and processors. Restaurants are beginning to use
    this system as well. We obviously need a farm-to-table system
    that involves production agriculture and involves the consumers
    because they are the last line of defense.
        Hopefully with the new system there will be a process that
    will provide greater public safety so unsafe products will not
    be distributed. We will discover hazards inside the operations
    of the plant, and at the same time we will be involved with the
    companies in a way that still preserves our arm's length
    regulatory approach but in a cooperative way to try to find a
    problem when it occurs early on.
        So, Senator, I cannot tell you that I would do it exactly
    every iota of the way we did it before, but I will tell you
    this, that this issue is one that is going to grow in magnitude
    and complexity, the concern about food safety. What we have to
    do as a country is to make sure that the industry and USDA are
    working together to try to understand that the public cares
    about food safety more than they care just about any other
    thing in the world. So, we are just going to continue to do the
    best that we can, and the new system I think will help a lot.
        Senator Cochran. Mr. Secretary, we have a vote in progress.
    We are going to have to go over there and be recorded and we
    will be right back. We will stand in recess temporarily.
        [A brief recess was taken.]
        Senator Cochran. If the committee could return to order. We
    apologize for the interruption for the votes on the floor of
    the Senate.
        We are prepared now to resume our questioning of the
    Secretary of Agriculture. Senator Bumpers was in the process of
    asking questions. He will be returning, and we will yield to
    him when he does return to continue his questioning, but until
    he returns, I am going to call on Senator Burns, if you are
    ready, or Senator Kohl.
        Senator Burns. Mr. Chairman, I will be very quick. The
    Secretary and I have talked over a couple of things. We are
    going to have a sit-down when we come back, and we have some
    very specific things we would like to go over and maybe we can
    find some answers. We are very concerned not only with the road
    moratorium and how that is being held, but also what the
    designs are on the Royal Teton Ranch and how that plays into
    the public land management there north of the Yellowstone Park.
    We just talked about the buffalo situation and APHIS and the
    things that we have to do to deal with that situation.
        So, Mr. Chairman, rather than take up a lot of time, I have
    a whip meeting anyway. We have agreed to sit down and visit
    about it because these are isolated instances that probably
    have very little to do with the overall picture of funding the
    Department of Agriculture.
        Senator Cochran. Thank you, Senator.
        Senator Burns. Thank you. I want to thank the Secretary for
    that, and I want to thank the chairman.
        As far as Mr. Bumpers going through his final hearings on
    agriculture appropriations, I for one am very disappointed that
    he is leaving because he is one of the easiest guys to imitate.
    I can give his space station speech on the floor now if they
    give me a pointer. And I got them all up and we can do all
    those things. I will miss him because he is a great source of
    good humor. So, I will be sorry to see him go.
        Thank you, Mr. Chairman.
        Senator Cochran. Thank you, Senator.
        Senator Kohl.

                            New Milk Marketing Order

        Senator Kohl. Thank you very much, Mr. Chairman.
        Secretary Glickman, when USDA announced the new milk
    marketing order, two options were proposed which you called 1-A
    and 1-B, 1-A being the status quo and 1-B recognizing the need
    to make some movement.
        You have said on innumerable occasions that you do not
    support status quo, that you support movement. The nature of
    that movement is the contentiousness that exists in terms of
    what is finally going to be done, but there has never been any
    question about your position that the present system needs to
    be changed. I am troubled by the fact that 1-A, which
    represents the present system, is still out there.
        Now, is that a misunderstanding in my interpretation of
    what you said, or do I have cause to wonder about what is this
    1-A?
        Secretary Glickman. Senator, somehow I believed you would
    ask this question. So, let me just say this.
        We have indicated that 1-B is our preferred option. So, we
    are clearly on record as saying 1-B, which reflects some
    changes in the order of price determination for class 1 milk,
    is our preferred option.
        We had examined several options before, five or six, and 1-
    A and 1-B had clearly the most public interest as well as
    congressional and academic support. So, we chose to pool those
    two options into this final review process for comment. There
    is no question the Department prefers 1-B, but we also now have
    to go out to the public and get the input in the hearing
    process that is necessary. In a sense, what we have done is we
    have given people a clear choice, and now it is up to farmers,
    dairymen, consumers and others around the country to help us
    augment the record in order to make the decision that we have
    to make.
        By the way, even if I had only gone with one option, under
    the law, I would have been required to accept testimony and,
    where relevant, make modifications in that anyway in accordance
    with the Administrative Procedure Act.
        Senator Kohl. I appreciate that and I understand how----
        Secretary Glickman. If I just may make a couple of other
    points.
        Senator Kohl. Go right ahead, yes.
        Secretary Glickman. In the 1-B option, we also provide a
    transition option, a suboption of 1-B. So, what we have in 1-B
    is differentials for class 1 milk in some regions of the
    country flattened out. Some class 1 milk price reductions do
    occur, although reductions would not be as great as some would
    expect for all milk prices because of the way it is computed.
    We have also proposed a transition option where there would be
    a bump-up on the price in certain areas. We proposed two or
    three different ways of doing that, and that is also out there
    for public comment as well.
        Dairy did not get transition assistance in previous farm
    bills as we went to a more market oriented system. So, what we
    have tried to do is provide some transition assistance in this
    bill.
        One final thing, if I might. We have also proposed flooring
    the basic formula price until such time as all of this milk
    marketing order reform is done, and there will be a hearing
    next week on the 17th on that issue as well. That is a separate
    issue but they kind of relate.
        Senator Kohl. Yes; and I appreciate that answer, but I
    still must say that having heard you say so often that the
    present system cannot endure and will not endure, and
    recognizing that the Department has the authority to make the
    change--it does not have to come up for a congressional vote--
    --
        Secretary Glickman. But we have to take public comment.
        Senator Kohl. That is all right and I understand that, but
    it is not as though USDA is not aware or has been unaware of
    the problem and has gone into this whole process starting from
    ground zero. USDA is pretty expert at the order, and you as the
    leader of the USDA, having taken a position, which I respect
    and, as you know, agree with, that the present system must
    change, it still is troubling to have you put out the present
    system as though it were maybe not your alternative but an
    alternative. And I do not understand that.
        I know how contentious this is and what kind of powerful
    forces are arrayed, and then I hear Senator Leahy representing
    his own district saying, hey, we cannot change the system, the
    system benefits us. Any change in the system will be a disaster
    for Vermont. And you hear that I am sure from other States.
        And then I see, yes, the present system is still out there
    as an alternative, maybe not yours, but an alternative. You can
    understand how, as I learn more and more about the political
    system and how it operates, that the fact that you put that out
    as an alternative is troubling to those of us who want change,
    particularly in light of your stated position that change must
    occur. If change must occur, then why is 1-A, the status quo,
    out there?
        Secretary Glickman. Well, let me say a couple things. One
    is that we do provide preferred alternatives and options on
    environmental impact statements all the time. We do it on
    proposed rules. We will provide options on proposed rules
    sometimes when there is a very strong public interest
    perspective, and we decide to put options in there. So, that is
    not unusual. This is not the only case we have ever done that
    before.
        The second thing I would say is that it is incumbent upon
    us to get folks in your district and your constituents to
    actively engage in this rulemaking process. We are going to get
    inundated with comments on these rules. It is very important
    that your perspective on this be known. I am not sure if it
    conforms with the 1-B option--I think you had even further
    ideas on what to do, but it is very important that your
    perspective is reflected in that rulemaking process.
        The third thing I would say is that beyond 1-A and 1-B,
    which really just relates to differential prices on class 1
    milk, there is a lot in this rule that affects the price of
    milk. For example, we changed the way the basic formula price
    is computed which will probably have the benefit of reducing
    the wide variations. It will be based on a longer time period
    and there will be some consolidations and are other things in
    there as well.
        So, my hope is that we get the kind of comment that we are
    hearing now.
        But again, I want to make it clear. We have set forth a
    preferred option. It is not as if I am bucking or ducking the
    issue, but we do have a preferred option.
        Senator Kohl. All right. I do appreciate that.

                           State Trading Enterprises

        Mr. Secretary, charges have been brought in state trading
    enterprises in England for illegal importing schemes, but
    problems do exist in prosecuting STE's in England. I am asking
    what is being done to ensure that state trading enterprises,
    which may well be engaging in unfair transfer pricing of dairy
    products, are compelled to compete fairly with United States
    farmers.
        Secretary Glickman. Well, generally, I am aware that the
    IRS and Treasury are looking at this issue to see if there are
    any violations of Federal revenue laws. So, I have asked our
    folks to provide them whatever assistance that they need. That
    is on the pricing issue. So, we need to make sure they comply
    with our laws.
        I also would say that we are generally concerned about
    state trading enterprises, and we intend to highlight this
    issue in the next round of trade discussions. The Deputy was in
    Singapore last year where this was one of the dominant issues
    raised. The state trading enterprises in Canada, and there are
    others.
        Senator Kohl. New Zealand particularly.
        Secretary Glickman. There are dairy boards.
        Senator Kohl. You understand, which I am sure you do, what
    they do at the worst--and they do do that--is they price their
    products to the American affiliate so high that the American
    affiliate does not make any profit, and then there are no taxes
    to be paid. As a result of that, the American affiliate is able
    to undersell local domestic companies and take away business
    because of this unfair pricing procedure that they go through
    which brings their tax liability down to zero.
        Now, that is something which I know you do not agree with
    and the IRS does not agree with, and we need to get to a
    resolution of that. I would like to hope that will be on a list
    of priorities that you have.
        Secretary Glickman. It will be.

                                 European Union

        Senator Kohl. Last question. The European Union is
    aggressively targeting our traditional barley malt markets in
    Central and South America. Five years ago the malt industry
    exported 6 to 9 million bushels. This year only 50,000 bushels
    were exported from the United States. This business was
    essentially lost by three Wisconsin companies, so I am very
    concerned.
        You have the Export Enhancement Program which helps
    companies compete against unfair competition. My question is,
    can we expect that you are going to give the companies in this
    industry, the barley malt industry, the help they need to
    compete with other companies in Europe who are subsidized by
    their governments and have thereby been able to take away this
    6 to 9 million bushels market in Central and South America on
    barley malt?
        Secretary Glickman. Well, I need to look at the issue
    specifically. The EEP program, the Export Enhancement Program,
    is geared to the specific issue of dealing with unfair farm
    subsidies--it's not just a trade tool. It must be focused on,
    let us say, the EU or other places that are undercutting us in
    a way that we need to use this authority to keep markets. So,
    if what you are saying is an accurate reflection, it would seem
    to be something that would be suitable for EEP. But we will
    take a look at this. I presume our folks know about this
    particular issue, but we may need to contact your office to get
    more information.
        Senator Kohl. I would appreciate that. I think we can
    provide you with enough information that would hopefully
    satisfy you that there is some assistance here that is
    deserved.
        Secretary Glickman. Have these constituents of yours filed
    any other trade complaints under various sections of our trade
    laws?
        Senator Kohl. Well, maybe I can be in touch or you can be
    in touch and we can work out the facts and maybe some
    resolution.
        Secretary Glickman. Yes.
        Senator Kohl. I would appreciate it.
        Secretary Glickman. OK.
        Senator Kohl. Thank you, Mr. Secretary. Thank you, Mr.
    Chairman.
        Senator Cochran. Thank you, Senator.
        Senator Bumpers.
        Senator Bumpers. Thank you, Mr. Chairman. I just have one
    or two items.

                             Status of Agriculture

        Mr. Secretary, first of all, does the Department have any
    studies as to what the status of agriculture in this country
    will be, good or bad or somewhere in between, once the farm
    subsidies expire?
        Secretary Glickman. I will ask our Chief Economist to
    determine what we are doing there.
        But as you know, Congress authorized a Commission on 21st
    Century Agriculture. In fact, there is a representative. I
    believe Jim DuPree from Arkansas is on it. You do have somebody
    from Mississippi on there as well.
        They have started to meet and their task is to look at this
    issue, but not as much from an economic perspective. It is more
    what comes next, and they are currently doing that. We are
    having trouble, frankly, providing them the resources they need
    because our advisory committee budget is so limited. We are
    trying to do our best to make sure they can at least do some of
    their work.
        Perhaps Mr. Collins might talk about what we are doing in
    the post-1996 farm bill environment to look at what is going
    on.
        Mr. Collins. That is in our plans to look at, Mr. Bumpers.
    We are going to be releasing on February 23 a 10-year
    assessment that looks out at agriculture over the next 10
    years. But in that assessment, we used the conventional
    assumption that in years beyond the expiration of the farm
    bill, we use the level of CCC payments that were available in
    the last year of the farm bill which is roughly $4 billion. So,
    we assume a $4 billion annual continuation beyond 2003.
        But certainly as we move closer to the year 2003, we are
    going to look at this question in more detail, and I think we
    will also do it in conjunction with the Commission on 21st
    Century Production Agriculture.
        Secretary Glickman. Yes.
        The other thing I would say is that crop insurance is going
    to have to be the center piece for risk management. This
    program works pretty well for some, not very well for others.
    We really need to make it an effective operating tool for all
    producers. If you are in the Northern Plains and you suffer
    two, three, four disasters in a row, given the actuarial nature
    of it, it is a problem. If you are in a place that does not get
    disasters all that frequently, it can work out very
    effectively. That is one of the reasons why we have asked for
    moving it on the mandatory side in order to give it some long-
    term predictability so it can operate. So, we have looked at
    that as well.
        We have provided some other safety net proposals like loan
    extensions, other kinds of things that we have asked in our
    budget before.
        But the question is a good question. What happens post-
    2002? Actually the question may be more relevant, what happens
    next year and the year after? The first 2 years of Freedom to
    Farm were quite good for most producers with the payments and
    the market. They have come out ahead. I think the majority of
    producers have come out ahead, but I do not know what happens
    next.

                          Commodity Yield Comparisons

        Senator Bumpers. Mr. Secretary, let me ask you--and if you
    could just give me a short answer to this--what is the
    comparison on a per-acre-yield basis of corn, wheat, soybeans?
    Just take those. Those are basic food crops. What is the
    comparison of yields now per acre as compared over the last 3
    or 4 years? Are they not rather static? Are the yields in this
    country not rather static? Secretary Rominger or Mr. Collins?
        Mr. Collins. Actually we are doing much better in soybeans
    over the last couple of years.
        Senator Bumpers. Is that because of irrigation?
        Mr. Collins. It is because of a change in agricultural
    practices. Much higher plant populations per acre are being
    used in the Midwest, and we also have much better varieties in
    the South. So, the South is getting much better soybean yields.
        We have actually gone up a little bit on wheat yields. If
    you just look at this past year, 1997, we had the largest wheat
    crop that we have had in the 1990's, and in the winter wheat
    areas, Kansas and other areas, we had record high yields.
        For corn, we had a 127-bushel-per-acre yield this past
    year. I think it was the fourth highest in history, the record
    being in 1994 of about 139 bushels.
        So, actually we still do continue to trend up. I know your
    concern earlier about research is whether we will be able to
    sustain that trend given the research investment that we have
    been making.

                           Agricultural Trade Balance

        Senator Bumpers. Well, I am concerned about another matter,
    and that is we depend on farm exports to keep our balance of
    trade sort of halfway in balance. You stated I think maybe in
    your statement, Mr. Secretary, that the trade balance afforded
    by agriculture last year was a plus $21 billion----
        Secretary Glickman. Correct.
        Senator Bumpers. Even though overall exports were $3 or $4
    billion less than the preceding year.
        I am sort of coming back to where I was a moment ago, and
    that is I do not see, unless we have some unbelievable
    breakthroughs in research, any way that we can continue to
    export unless we have much bigger yields than we have had in
    the past. I do not think we can feed an ever-increasing
    population in this country and continue to increase our exports
    abroad unless yields go up much faster than they have been
    going up.
        This is just a country lawyer's sort of common sensical
    approach to it. It seems to me that where we are headed is for
    lower exports, not higher, because we are going to have to feed
    an ever-increasing population in our own country and we are
    taking a lot of land out of cultivation every year.
        Secretary Glickman. I think you have to segregate
    agriculture a little bit. Bulk commodities--well, there has
    been some growth and some decline. The big increases in exports
    have been in value-added, which is livestock, meat, poultry,
    and fresh fruits and vegetables, and those have been dramatic,
    profound increases. We talked a little bit about the poultry
    exports to Russia and related countries. Our export growth has
    doubled in the last decade, roughly. And much of that growth
    has occurred in the value-added fresh fruits and vegetables
    horticulture products.
        In terms of the bulk commodities, I cannot give you a
    projection. A lot of that frankly depends on the income levels
    of these importing countries. Most of these countries want to
    be self-sufficient in those commodities, and they look to us
    kind of as a reservoir of last resort when things get bad.
        So, I still think there is great positive potential out
    there, particularly in the value-added side of the picture.
        Senator Bumpers. I am not quite as sanguine about our
    future on this as you are.

                         Asia's Commodity Export Value

        The final question, Mr. Chairman. Of the $56 or $57 billion
    in exports in 1997, what percentage of that went to Asia or
    what dollar figure went to Asia?
        Secretary Glickman. I think 40 percent of our exports go to
    Asia.
        Senator Bumpers. Have you already seen a decline in demand
    for exports?
        Secretary Glickman. A small decrease.
        Mr. Collins. Our most recent data is only through the month
    of November from Commerce, but it does look like that, plus
    anecdotal data do show that our sales have fallen off some.
        Secretary Glickman. But let me just tell you the real worry
    of the dropoff is Korea and Indonesia. We have not seen any
    material dropoff in China, Hong Kong, Japan, other major
    markets.
        Senator Bumpers. How did exports to China in 1997 compare
    with 1996? Can anybody answer that?
        Mr. Collins. They were a little bit lower. China usually
    buys about 2 to 3 billion dollars' worth of our products. In
    1997 they had a superb wheat crop. They had very large corn
    stocks, and so they actually became a net grain exporter. This
    is a country that in the early 1990's was importing 12 million,
    13 million tons of wheat, in 1995-96 actually imported 3
    million tons of coarse grain, and here in 1997 they became a
    net grain exporter. So, there has been quite a shift in China
    because they have been promoting a policy of self-sufficiency
    in grains.
        Senator Bumpers. They do not import cotton anymore either,
    do they?
        Mr. Collins. They are importing our cotton this year. I
    think we expect somewhere in the neighborhood of 1 million
    bales of cotton to China this year.
        Senator Bumpers. Thank you, Mr. Chairman.
        Senator Cochran. On that subject, I think India is another
    country that has had a turnaround in production in wheat. It
    used to be a big importer. Now it is self-sufficient and even
    exporting some as I understand it.
        Mr. Collins. That's true. They're also increasing their
    exports of soybeans and they have become a competitor for us in
    oilseed products in Asia because of their own soybean
    production.
        Secretary Glickman. But notwithstanding that, there is
    population growth of the world. I hope that you are wrong and I
    am right. The population growth is significant enough to allow
    for radically increased demand over the next 10 years if we can
    capitalize on that.

                             Conservation Programs

        Senator Cochran. There is a substantial commitment in this
    budget request to conservation which I applaud. We have done a
    good job, I think, in helping to devise programs to protect
    more effectively soil and water resources. We have also added
    another dimension and that is incentives for development of
    wildlife habitat on privately owned land where land is idle.
    The conservation reserve program has been a big contributor to
    nurturing wildlife, endangered species, and the rest.
        I noticed in the EQIP program, the Environmental Quality
    Incentives Program, there is a big increase in the request from
    $100 million in mandatory funding to a total program level of
    $300 million.
        What is the justification? Given all these programs that we
    have seen working effectively, like CRP and the wildlife
    habitat incentives program, why is it necessary for that big
    jump proposed in that one EQIP program?
        Secretary Glickman. There is a tremendous demand for this
    program. A lot of it involves small and medium-size livestock
    operators who sense a lot of problems associated with
    environmental issues affecting livestock production and the
    need for water systems and sewer systems and control mechanisms
    to deal with effluent. That is one thing.
        There has also been a big demand from farmers installing
    practices that improve water quality and the overall health of
    their watershed. A lot of this was a result of State
    conservationists and our farm folks around the country saying
    there is a tremendous amount we could be doing in land
    practices.
        The Deputy might want to comment on this too.
        Mr. Rominger. I think one reason, as the Secretary
    mentioned, is water quality and the fact that as a country we
    are beginning to focus now on the nonpoint source pollution,
    which means in this case agriculture being one of those. So,
    this is a program that will help farmers address those areas so
    that they can improve water quality in the watersheds where
    they are operating.

                                  EQIP Program

        Senator Cochran. Some are suspicious that this program just
    gives the Department of Agriculture more people to go out and
    beat up on farmers. But you are saying it provides technical
    assistance and helps them meet the challenges of meeting these
    goals and targets.
        Mr. Rominger. Technical assistance and cost share money.
        Secretary Glickman. I think that in the NRCS--the old Soil
    Conservation Service--there was this belief that they had this
    club and they hit people over the head, but I think by and
    large, it is not true any longer. I mean, there may be some
    Government programs that still do that, but by and large, NRCS
    is cooperative with the farm groups, conservation districts,
    related folks.
        Senator Cochran. So, in this program when the person comes
    to your farm gate and says, I am from the Government and I am
    here to help you, he is really on the level? Is that what you
    are saying?
        Secretary Glickman. Theoretically. He would not be coming
    unless he was asked to come.
        Senator Cochran. Well, that would be a good attitude to try
    to develop in the Department in these conservation programs
    because a lot of farmers are still nervous that when you add
    money to this program, you are just creating more trouble for
    them rather than providing technical assistance, as it is
    called.
        Secretary Glickman. It also keeps land in production.
    Farmers like to farm and if we can provide them assistance to,
    let us say, prevent soil from washing away, they view this
    positively.
        Senator Cochran. I would like for the record to reflect
    what our enrollment in the wildlife habitat incentives program
    is anticipated to be in 1998 and what level of CCC funds will
    be needed to support the enrollment number, what enrollment and
    level of funding is projected to be needed to support the
    program in 1999. Those can be submitted for the record. I do
    not expect you to have all those details in front of you.

                       Lower Mississippi Delta Commission

        There is a submission in the Interior appropriations budget
    I presume--at least I know there is a request for $26 million
    for new economic development initiatives in the lower
    Mississippi River Delta. Some years ago, Senator Bumpers and I
    and others proposed a commission to study the lower Mississippi
    Delta to come up with some answers to the serious problems
    because of economic stagnation in that area and human resource
    problems of various kinds. The commission worked for a couple
    of years, made some recommendations. We implemented some of
    those. But now the President's budget is suggesting a $26
    million new program to be under the auspices of the Appalachian
    Regional Commission and its staff.
        My question to you is, would this be just as well
    administered by the Department of Agriculture's Rural
    Development Agency or some other agency that is available for
    that job?
        There are some of these States, for example, like
    Louisiana, Arkansas, Illinois, Missouri, which will be in this
    new program--be beneficiaries of this new program--but they are
    not in the Appalachian Regional Commission area. Some of the
    Governors have--in particular, the Governor of my State is
    worried that this is going to weaken the Appalachian regional
    program and there is some controversy about that aspect of it.
        It would be nice to have the benefit of your thoughts on
    that. I do not want to put you at cross purposes with the
    President right now in public.
        Secretary Glickman. Of course, I will take jurisdiction
    over anything you want to give us.
        The only thing I can say is that I am not personally
    familiar with the specifics of this. I do know that we have our
    empowerment zone program. One is in the Mississippi Delta
    region, and we are working with the Southern EZ/EC Forum, which
    is an informal organization of communities in the region,
    including Arkansas, Louisiana, Mississippi, to form a
    partnership to implement many of the recommendations in the
    original Lower Delta Commission report. We are talking about
    expanding the number of zones.
        As you know, the empowerment zone concept is basically to
    do a lot of what they have talked about, which is to bring
    various Federal agencies together but allow it to be locally
    driven.
        So, all I can tell you is that we will--we are still
    working on the delta empowerment zone because it has done a lot
    of good.
        But I cannot tell you what the conflicts are. We will raise
    the issue internally to see what else we might be doing on it.

                           Cochran Fellowship Program

        Senator Cochran. There is a request, I understand, in the
    budget for $3 million for funding a fellowship program which we
    started some years ago to bring students, midlevel managers and
    others in agriculture and agriculture-related activities, to
    the United States to learn more about our market economic
    system and political institutions, hoping that this would
    develop better relationships between our country and others.
        Tell me how that program is working, and if you can for the
    record, give us a status of that fellowship program so we can
    see where the money has been spent last year and whether we
    should add money to that or $3 million is all we need to fully
    fund that program.
        Secretary Glickman. I would have to tell you this is a very
    popular, successful program. The Vice President has a
    commission with South Africa, and it is fascinating to see the
    impact of the Cochran program with respect to people who have
    been trained, South Africans who come to this country and train
    in a variety of areas.
        My records indicate in fiscal year 1997 about 700
    participants from 45 countries received training through the
    program. For fiscal year 1998, the number of countries is
    expected to increase to 49 with the addition of Guatemala,
    Senegal, Tanzania, and Uganda, and about 760 participants are
    expected to participate.
        So, we have asked for a basic $3 million which is the same
    funding level, but I can tell you this program is extremely
    popular.

                              Submitted Questions

        Senator Cochran. Thank you for that, and we will continue
    to monitor it and try to be supportive in our committee of the
    program goals.
        There are a number of other questions and areas that we
    want to explore with you, but my hope is that we can submit all
    those questions to you and have the answers printed in our
    record. Other Senators may very well want to submit questions
    too, and we hope you will be able to respond to them in a
    timely way.
        [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
                       food safety and inspection service
        Question. User fees to require industry to pay the cost of meat and
    poultry inspection have been consistently proposed by the
    Administration although they have never been authorized. The fiscal
    year 1999 budget for FSIS again assumes collections from these
    unauthorized user fees. In the past, the Administration has proposed
    user fees to cover the costs of pay for overtime of inspectors. The
    fiscal year 1999 budget user fees to recover the full costs of
    inspections. Why does the Administration believe this proposal will
    have any greater success this year?
        Answer. User fees are essential to the successful long-term
    implementation of meat, poultry, and egg products inspection reform.
    The time for user fees is now before budget restrictions hamper our
    ability to ensure the safety of the food supply. Each year
    discretionary funds for USDA have been getting reduced, which has made
    it more difficult to ensure a stable budget for food safety inspection
    activities. By converting the program to user fees now, we can ensure
    that meat, poultry, and egg products inspection get the resources
    needed to protect the safety of the food supply without an adverse
    impact on other important USDA programs.
        Question. Mr. Secretary, it is unlikely that Congress will
    legislate these proposed user fees. What impact will adoption of the
    FSIS's appropriations request have on the country's food safety if the
    legislative proposal is not accepted?
        Answer. In the event that the proposed user fees are not enacted,
    we will have to seek additional funding for meat, poultry, and egg
    products inspection to the level needed under current law.
        Question. The FSIS proposed budget also requests increases for
    other food safety program activities. What is the priority of these new
    increases if an appropriation for inspection activities are required
    and the full request cannot be provided for these additional
    activities?
        Answer. Maintaining an adequate inspection work force that has the
    training and tools necessary for conducting effective inspection,
    facilitating the adoption of HACCP by State inspection programs, and
    ensuring food safety from farm-to-table are all essential to our
    mission of improving the safety of the food supply.
        Question. The fiscal year 1999 request for the President's Food
    Safety Initiative includes an $11 million increase for the Food Safety
    Inspection Service (FSIS). How will the agency use this money to fund
    the FSIS portion of this initiative? Please designate which activities
    are new and which ones are a continuation of current programs. Please
    prioritize these activities.
        Answer. Under the President's Food Safety Initiative, the Food
    Safety and Inspection Service will facilitate the transformation of
    State programs to Hazard Analysis and Critical Control Point systems,
    work cooperatively with other Federal agencies to expand consumer
    education, and develop voluntary measures to reduce the risk of
    pathogenic contamination of animals on the farm. These new activities
    would build on the successes and fill the gaps identified in the
    President's 1998 Food Safety Initiative. The food safety activities
    identified as part of the initiative are all of high priority and we
    urge Congress to fund it as an integrated approach within available
    resources to reducing foodborne illness.
        Question. Farmers are currently over-burdened with regulations.
    There is much speculation that FSIS will eventually implement
    regulations which will affect the farmer and his farming operation. In
    the fiscal year 1999 USDA explanatory notes, there is mention of
    voluntary activities to deal with food safety issues from the farm-to-
    table and the collection of data linking ``food animal production to
    processing contamination.'' Would you please explain these voluntary
    activities and how the agency plans to implement them?
        Answer. We do not have, nor are we seeking, authority to mandate on
    farm practices. The FSIS Animal Production Food Safety Program is
    actively working with producers to develop voluntary science-based
    animal management practices to improve food safety on the farm. To
    assist producers in dealing with marketing pressures and to improve the
    safety of the food supply, we are proposing risk assessment and
    education activities. Risk assessments will help producers identify
    food safety hazards and measures that can be taken on a voluntary basis
    to mitigate them on their own behalf. Education is necessary to ensure
    that producers understand the changes that are occurring within the
    industry due to HACCP implementation and to communicate the ways risk
    assessment can assist them in meeting these new challenges.
        Question. Does the agency see the need in the future to make these
    activities mandatory?
        Answer. We do not see the need to make any on farm food safety
    practices mandatory.
        Question. How does the agency plan to collect this data and use it
    once it is collected?
        Answer. Successful development of risk assessments and education
    strategies will require a collaborative effort between producers,
    academia, and State agriculture and public health agencies. Any data
    collected to support these activities will be used to assist producers
    in identifying food safety hazards and cost-effective intervention
    strategies they can voluntarily utilize on their own behalf.
        Question. Mr. Secretary, the National Academy of Sciences is
    publishing a report this summer on the creation of a single food
    agency. Are there any joint initiatives that FSIS and the Food and Drug
    Administration (FDA) are undertaking currently?
        Answer. FSIS, FDA, and several other Federal agencies have a close
    working relationship, which can be seen through the joint
    implementation of the President's Food Safety Initiative.
        Question. What is the Administration's current position on the need
    to create one single food agency?
        Answer. Like Congress, we are also interested in seeing the
    conclusions of the National Academy of Science and would not like to
    prejudge them at this time.
        Question. The fiscal year 1999 budget request indicates an increase
    of $130,000 to provide additional resources to the Under Secretary and
    the Secretary to support activities associated with the President's
    Food Safety Initiative. What sort of resources do you mean?
        Answer. With the additional resources requested we will be able to
    support the level of staffing necessary for this office to fulfill its
    role of building greater public confidence in the safety of the food
    supply and maintaining the integrity of the Federal inspection system.
        Question. The fiscal year 1999 budget request proposes a number of
    funding increases in support of the President's Food Safety Initiative.
    Please rank these increases in order of priority.
        Answer. The Administration has proposed an integrated food safety
    initiative that encompasses several high priority activities and
    involves several Departments and agencies. We encourage Congress to
    fund this proposal within available resources as a part of the
    integrated initiative.
                       national commission on small farms
        The Secretary of Agriculture established the National Commission on
    Small Farms on July 9, 1997, and identified the Natural Resources
    Conservation Service (NRCS) to provide support to the Commission.
        Question. What recommendations were made by the Commission and does
    the President's fiscal year 1999 budget incorporate these
    recommendations?
        Answer. There were in excess of 140 recommendations made by the
    National Commission on Small Farms. All of the recommendations are
    outlined in the January 1998 Report entitled ``A Time To Act--A report
    to the USDA National Commission on Small Farms.'' A copy of the report
    is being provided for the record. No additional funds have been
    requested in the President's fiscal year 1999 budget to implement
    recommendations of the commission's report. It is anticipated that
    recommendations can be accommodated through ongoing operations.
        Question. Why was the NRCS chosen to support the Commission?
        Answer. NRCS was selected because of its long standing history and
    success in working with outside groups and locally led initiatives.
        Question. Is the Commission still in formation and meeting
    formally?
        Answer. The Commission was chartered for a period of up to two (2)
    years. Although the commission is currently not meeting, it is
    scheduled to reconvene within nine (9) months of the receipt of their
    report to provide input on emerging concerns within the Commission's
    domain.
                      wildlife habitat incentives program
        Question. What is the enrollment in WHIP anticipated to be in 1998?
        Answer. Enrollment is anticipated to be approximately 170,000 acres
    under 3,400 agreements.
        Question. What level of CCC funds will be needed to support this
    enrollment in fiscal year 1998?
        Answer. This enrollment level will require up to $30 million in CCC
    funding.
        Question. What enrollment and level of funding is projected to be
    needed to support the program in fiscal year 1999?
        Answer. The enrollment level is expected to be 114,000 acres under
    2,300 agreements with a funding requirement of $20 Million.
                clean water and watershed restoration initiative
        The Clean Water and Watershed Restoration Initiative is proposed to
    be funded under the new interagency Environmental Resources Fund for
    America. Funding of $23 million is designated for NRCS participation in
    this initiative.
        Question. Which activities are proposed to be funded through the
    ``Clean Water and Watershed Restoration Initiative''?
        Answer. NRCS funding for the Clean Water and Watershed Restoration
    Initiative in fiscal year 1999 is proposed at $23 million. This
    includes a requested increase of $20 million for partnership grants and
    $3 million for natural resources inventory evaluation needs.
        Question. Please describe each one and provide the cost of each
    activity.
        Answer. The activities proposed to be funded include partnership
    grants designed to comprehensively improve water quality to be funded
    at a level of $20 million. The partnership grants will enable State and
    local organizations to hire non-federal watershed coordinators. Also
    included in the increased funding is $3 million for improved natural
    resource inventory evaluation needs. This will enable the development
    of baseline assessments, integration of compatible inventories, and the
    evaluation of program impacts and will fund an additional 30 FTE's.
                                debt forgiveness
        Question. Mr. Secretary, you are proposing that the Congress pass
    ``emergency legislation'' to modify the 1996 Farm Bill prohibition on
    loans to allow farmers with past debt problems and restore
    creditworthiness to once again be eligible for USDA loans. What is the
    pressing need for this legislation?
        Answer. There are several thousand family farmers who may need USDA
    farm loan assistance but are prohibited from obtaining it because they
    received a debt forgiveness on loans that were made to them in the
    past. This isn't fair. Even the bankruptcy code allows borrowers
    restore their credit worthiness. Moreover, much of the debt USDA has
    forgiven over the last several years traced back to the mid-1980's when
    an accumulation of too much debt coupled with a decline in farm income
    and land prices produced an credit crisis. These were circumstances
    beyond the control of borrowers. Further, USDA actually encouraged
    borrowers to restructure their loans in ways that lead to the debt
    forgiveness, and borrowers did so without knowing that it would mean
    they would not be eligible for new loans. In fact, these borrowers were
    eligible for new loans until the 1996 Farm Bill changed the ground-
    rules.
        Question. Should this legislation be passed by the Congress, how
    many farmers in your estimation would then be eligible for farm loans?
        Answer. Since 1989, USDA provided debt forgiveness to about 73,000
    farm borrowers. About 11,000 of these borrowers still have active
    accounts. There is no information available on the status of the rest
    of these borrowers. A sizable number may no longer be farming; however,
    the Department has heard from many former borrowers who are still in
    business and could use new loans. The legislative proposal would also
    affect those borrowers who receive a debt forgiveness in the future.
        Question. Does the fiscal year 1999 President's Budget assume that
    these farmers with past debt problems would be eligible for loans? If
    so, what number of farm loans are estimated?
        Answer. The President's 1999 budget is based on current law, which
    includes limits on the authorized levels for both farm operating and
    farm ownership loans. With the enactment of the proposed legislation,
    the additional demand for these loans would be accommodated within the
    authorized levels. In general, this would mean that there would be
    increased competition for direct loans, which would most likely affect
    applicants who do not qualify for targeted assistance as beginning
    farmers or members of socially disadvantaged groups. Borrowers who do
    not receive direct loans may, however, be able to obtain a guaranteed
    one.
                             county office closings
        Question. Mr. Secretary you have committed not to close any county
    offices without Congressional input beyond those already named. At the
    same time, the Department is currently streamlining and collocating
    offices at the state level.
        A. Is there an employee reduction number each State Director is
    required to meet as a result of the streamlining and collocation of
    offices.
        B. Is staff being reduced on a state-by-state or county-by-county
    basis? Please explain the rationale used to decide where staffing
    reductions occur.
        C. What are you doing to make reductions in staffing at the state
    level do not predetermine further county office closures.
        Answer. USDA has been downsizing its county-based program delivery
    offices since 1994 when Congress passed major reorganization
    legislation. Pursuant to commitments made when that legislation was
    passed USDA developed a plan to close or consolidate USDA field offices
    into service centers. We have reduced the number of offices from 3,700
    to approximately 2,700 and will be down to below 2,600 by the end of
    the year. Beyond these office closures we have no specific actions
    identified at this time.
        No employee streamlining plans have been established in relation to
    the service center collocation effort. However, individual service
    center partner agencies are managing within their assigned resources
    and budgets which may impact staffing levels in the field and require
    further office closures. In addition, we are awaiting the outcome of
    the Departmental study on the structure and delivery systems of FSA,
    NRCS, Rural Development and the Risk Management Agency.
                                 workload study
        Question. USDA has an outside consulting firm conducting a workload
    study of the farm and rural program delivery system of county-based
    agencies (FSA, NRCS, and RD) to be completed on September 18, 1998.
    What has the consulting firm been told to look at specifically?
        Answer. We have contracted with Coopers and Lybrand to conduct a
    study of the farm and rural program delivery system of FSA, NRCS, and
    RD. The study will evaluate the county office workload and resources of
    these agencies in relation to their program responsibilities and
    customer needs. It will also review ongoing efforts to improve
    efficiency and identify, assess and, as appropriate, recommend
    alternative approaches for the organization and staffing of the county
    based agency delivery system. The results will be drawn upon in
    developing budget and operational plans for subsequent years.
        Question. Are streamlining and collocating of offices postponed
    until the study is completed?
        Answer. We have proceeded with the closure of FSA county offices
    according to the 1994 plan. The current target for the number of
    service centers is 2,554. The number of field office locations has been
    reduced from 3,726 in 1994 to 2,775 at the end of calendar year 1997.
    Under current plans, office moves and closures will reduce our
    locations by 221 service centers. However, staffing reductions proposed
    for 1999 may require a reexamination of our county office structure.
    Because there is a point at which an office can be too small to
    function effectively, it may become necessary to further consolidate
    offices where staffing reductions take place. Results of the study
    should be useful in any such reexamination of further restructuring and
    consolidation of field offices. I will consider any closure decisions
    in light of cost effectiveness and quality of service to the producer,
    and I will keep the Committee apprised of any prospective closures.
                 county committee conversion to federal status
        Question. Much concern exists regarding the impact of converting
    county committee workers to federal status. Please explain this
    conversion process of federal employees and county employees. Is this
    process also postponed by the workload study?
        Answer. As you know, I favor converting FSA non-Federal county
    committee employees to Federal civil service status. Conversion would
    eliminate the challenges we face in operating two different personnel
    systems for FSA employees in county offices. We are working with
    Congress to enact changes in authorization needed to implement the
    conversion, and the process has not been postponed by the study being
    carried out by Coopers and Lybrand.
        Question. What criteria is being used in this conversion?
        Answer. We have proposed that current employees with 3 years of
    permanent county committee service be given career civil service
    appointments. Employees with less than 3 years of permanent county
    committee service would be given career-conditional civil service
    appointments and the period of current permanent county committee
    service would be counted when determining the 3 years of service
    necessary for converting to career civil service status. Temporary
    county and area office employees with appointments of 1 year or less
    could be converted to temporary Federal civil service appointments.
    Former permanent county committee employees would retain reemployment
    rights resulting from a reduction-in-force. Other provisions would
    facilitate certification of agreements between labor organizations and
    USDA concerning bargaining units and their representation.
        Question. How does this conversion process play a role in the
    streamlining and collocation of offices?
        Answer. The conversion process is intended to enhance management
    capabilities and office productivity which should facilitate office
    streamlining and collocation initiatives. Equitable re-employment
    procedures are central in both conversion and streamlining activities.
        Question. Please explain this Common Computing Environment (CCE)
    implementation. Why is CCE exempt from the Department's current
    moratorium on purchases of information technology?
        Answer. The county-based field offices are being restructured into
    Service Centers to improve customer service. At the core of this
    initiative is a shared information system built on a Common Computing
    Environment (CCE) that will provide Service Center staffs access to
    customer, program, technical, and administrative information,
    regardless of the agency they represent. The CCE is based on identified
    business needs and will provide the enabling technology for
    implementing reengineered business processes to provide one-stop
    service to customers.
        The CCE will enable USDA to: optimize the data, equipment, and
    staff sharing opportunities at the service centers; overcome the
    extreme limitations of the current legacy systems; and enhance customer
    service into the 21st Century.
        In fiscal year 1998, a business integration center has been
    established to facilitate the development of reengineered business
    applications and pilot testing at nine USDA Service Centers, as well
    as, test and evaluate information technology alternatives. Depending on
    the availability of funding, the plan is to achieve complete migration
    from legacy systems to the identified CCE by 2002.
        CCE is not exempt from the current moratorium on purchases of
    information technology. OCIO is working closely with the Service Center
    Implementation Team and will review any contract actions requiring
    waivers, as necessary.
                            lower mississippi delta
        Question. The fiscal year 1999 budget proposes a $26 million
    increase in the Interior budget for a new economic development program
    for the lower Mississippi Delta.
        Does the Rural Development Agency have the existing structure to
    implement a new economic development program in the lower Mississippi
    River Delta? If so, why is this proposal not under USDA's jurisdiction?
        Answer. I cannot answer the question as to why the proposal for the
    new economic development initiative for the lower Mississippi Delta was
    in the budget as it was. The proposal was not discussed with the
    Department. However, USDA does have a structure in place that could
    administer the program and we have been working on an effort involving
    the lower Mississippi Delta Center and the Empowerment Zone and
    Enterprise Communities in the Delta to pool their resources and efforts
    to more comprehensively address the economic and community development
    problems in the Delta. A Memorandum of Agreement between these parties
    is scheduled to be signed in March of this year.
                             salaries and expenses
        Question. The fiscal year 1999 budget includes $529 million for the
    administration of USDA's rural development programs, including the
    Alternative Agricultural Research and Commercialization Corporation
    (AARC). This amount includes funding for 7,138 staff years, which is a
    decrease of about 150 staff years below the fiscal year 1998 level.
        In what areas of Rural Development does the decrease of 150 staff
    years occur, and how will the reductions be accomplished?
        Answer. The reductions occur throughout the Mission Area; 80 in the
    Rural Housing Service; 49 in the Rural Utilities Service; and 24 in the
    Rural Business-Cooperative Service. My policy is that the reductions
    will primarily come from administrative areas rather than program
    areas. I anticipate that administrative convergence will provide the
    reductions.
                    environmental resources fund for america
        Question. The fiscal year 1999 Budget proposes the Environmental
    Resources Fund for America which would include funding for the Rural
    Community Advancement Program (RCAP). Why did the Administration
    include the RCAP in its proposal for the Environmental Resources Fund?
    What areas of the RCAP are included in this fund?
        Answer. The Environmental Resources Fund is an attempt to show all
    environmental expenditures in one area. Only the Water and Waste
    funding for Water 2000 is included in the Fund.
                         boll weevil eradication loans
        Misinformation regarding the interest rate in calculating the boll
    weevil eradication loan program was given last year, resulting in a
    shortfall of $250,000 in appropriated funds which would have supported
    approximately $22 million in guaranteed loans.
        Question. How many loans were made to farmers and what as the total
    of those loans in fiscal year 1997?
        Answer. Three loans were made in fiscal year 1997 totalling
    $39,999,500.
        Question. What is the anticipated number of loans that will be made
    this year?
        Answer. The 1998 budget assumes that five boll weevil loans will be
    made this year. However, there are no applications on hand at this
    time, so it is difficult to tell what will happen.
        Question. How much is needed in additional funds to fully meet the
    demand for these loans in fiscal year 1998?
        Answer. As I mentioned, we do not have any applications on hand at
    this time, and it is very difficult to predict the demand for this
    program because the amount requested per application is relatively
    large. The $30 million included in the 1999 budget should, however, be
    adequate to meet the demand.
                        1998 supplemental appropriations
        I understand the administration will be proposing supplemental
    funding for fiscal year 1998 to increase the Departmental
    Administration budget by $4.8 million and the Office of the General
    Counsel budget by $235,000 to enhance funding for the Department's
    Civil Rights. To offset these amounts, the Department has proposed to
    reduce the largest USDA salaries and expenses accounts across the
    board. In particular, the Farm Service Agency's salaries and expenses
    account has been targeted to be cut by $1,080,000.
        Question. Currently, the FSA has had to RIF 170 people this year.
    What additional reductions in force, if any, will be required if this
    proposed rescission to cut salaries and expenses in FSA funding is
    enacted?
        Answer. The Farm Service Agency (FSA) is anticipating a reduction
    in force of 152 people in fiscal year 1998. The proposed rescission of
    $1.080 million is not expected to result in any additional staff
    reductions beyond the expected 152. Instead, the impact of this cut
    will mainly affect the non-salary portion of FSA's budget which
    includes funds for equipment, travel, supplies and contracted services.
        Question. In Rural Development, the budget reflects a 153 staff
    year reduction from fiscal year 1998 to fiscal year 1999. What
    additional reduction in staff will be required if this proposed
    rescission to cut salaries and expenses in RD funding is enacted?
        Answer. There will be no further staff year reductions resulting
    from the proposed rescission. Rural Development will defer planned
    expenditures in information systems to compensate for the proposed
    rescission.
        Question. What will be the impact of each of the other proposed
    rescissions in salaries and expenses funding, by account, on each
    agency activities?
        Answer. The proposed rescissions are based upon total FTE's and the
    use of the Department's civil rights resources, and in total, represent
    about one-tenth of one percent of the total appropriations, The
    rescissions will not have a noticeable impact on the involved programs.
    The agencies affected by the rescissions will be making small across-
    the-board reductions.
        Question. What is the urgency of providing the supplemental funding
    requested for the Department's civil rights efforts?
        Answer. These resources are needed to meet the Department's
    strategic objective of ensuring that all customers are treated fairly
    and equitably with dignity and respect. The funds will support
    additional staffing to improve personnel services and assistance to
    USDA agencies, including ethics compliance; to improve outreach to USDA
    customers including support for the new USDA Office of Outreach that
    will ensure all customers, especially under served populations, have
    full access to USDA programs and services; and to enhance management
    employee relations that support early resolution of employee grievances
    and conflicts within USDA.
        It is hoped that these supplementals will be enacted by the end of
    March.
        An increase of $4.8 million is requested for Departmental
    Administration consisting of:
      --$1,123,000 for Human Resources Management activities,
      --$1,004,000 for outreach to USDA customers, institutions, and
            businesses,
      --$273,000 for conflict resolution,
      --$1,900,000 for ongoing policy, oversight,and program activities
            conducted by Human Resources Management, Office of Operations,
            Procurement and Property Management, Office of Administrative
            Support, and Small and Disadvantaged Business Utilization,
      --$500,000 to establish a commission on civil rights.
        An increase of $235,000 is requested for the Office of the General
    Counsel which would staff the newly created Civil Rights Division and
    continue to reduce the backlog of complaints pending.
             agricultural research service buildings and facilities
        The President used his line-item veto authority to cancel funds
    appropriated for fiscal year 1998 for planning and design of two ARS
    replacement facilities: (1) the Biocontrol and Insect Rearing Facility
    in Stoneville, Mississippi (-$900,000), and (2) the Poisonous Plant
    Laboratory in Logan, Utah (-$600,000).
        The rationale given for cancellation of funding for each project
    was: (1) the funds weren't requested by the President; (2) additional
    appropriations would be required in the future; and (3) the need for
    additional research facilities is under review by the Strategic
    Planning Task Force, due to report in April 1999.
        Funding for the Biocontrol and Insect Rearing Facility in
    Stoneville, Mississippi, was initiated on the basis of a USDA report on
    insect rearing capabilities which the Committee requested in fiscal
    year 1997. While the President's cancellation message notes the fact
    that ARS conducts insect rearing at nearly 30 locations as a reason for
    removing the funding for the new insect rearing facility, the ARS
    report notes that ``most of these operations are not of major concern *
    * * as they are location specific and produce only a small number of
    insects for limited use.'' The USDA report indicates that the only
    three major facilities that produce large numbers of insects in support
    of many important projects that are in Starkville and Stoneville, MS,
    and Honolulu, Hawaii--the Starkville facility being ARS' primary insect
    rearing laboratory.
        A copy of the report is submitted for inclusion in the record.
                           Insect Rearing Facilities
                                  introduction
        Senate Report No. 104-317, accompanying the Agriculture, Rural
    Development, Food and Drug Administration, and Related Agencies
    Appropriation Act for fiscal year 1997, contained the following request
    by the Senate Committee on Appropriations:

              The Committee is informed of the critical importance of the
            role of ARS in terms of insect rearing capabilities for
            purposes of the development of new technology in crop
            production. The Committee is interested in obtaining a summary
            of the capabilities of FIRS to meet present and future needs
            for insect rearing, and specifically requests that a proposal
            be submitted to the Committee outlining these needs prior to
            the submission of the fiscal year 1998 budget. The Committee
            further directs ARS to refrain from closing any existing
            facilities or programs aimed at insect rearing until the
            results of this study have been reviewed by the Congress.

        In response to this directive, an internal Agricultural Research
    Service (ARS) assessment of insect rearing facilities was conducted
    with input acquired from external location review committees. Based on
    these assessments, this report outlines facility needs in support of
    two primary areas of crop production. The proposed facilities will
    support new insect and weed control technologies for the southern U.S.,
    California, and Hawaii.
                                   background
        ARS conducts research on, and pilot scale production of, many
    different insects in support of Integrated Pest Management (IPM)
    programs in a variety of crops. Efficient production of high quality
    insects is essential for their successful use. Mass reared insects are
    used as test organisms when developing resistant host plants,
    biorational/chemical controls and in basic biological studies, or are
    used directly in biologically-based control strategies such as the
    release of sterile insects or biological control agents. Application of
    these technologies using mass reared insects has allowed the
    eradication of the screwworm fly from North America; aided in the
    elimination of the Mediterranean and/or other fruit flies from
    California, Florida, and Texas; and many similar successes with pests
    from various crops.
        A number of new technologies now being developed by ARS are
    dependent on the release of large numbers of beneficial insects,
    however, the efficiency of insect rearing has been identified as a
    limiting factor that needs additional research. Examples of
    biologically-based technologies in this category include, but are not
    limited to, viruses that control Heliothis, parasites that control the
    boll weevil, beetles capable of killing leafy spurge, parasites that
    search out and attack fruit flies, and many of the pests themselves
    that can be used directly in sterile insect release programs for
    control. These organisms are typically grown under controlled
    environmental conditions, packaged and distributed by the insect
    producer, and then taken to the field where they are applied to control
    the target pests. Unfortunately, mass rearing technology and facilities
    within ARS are based on 1960's (or earlier) technology, and thus are
    severely outdated and no longer capable of fulfilling the current or
    anticipated research and development needs.
               the role of major insect rearing facilities in ars
        Mass rearing facilities fulfill two primary roles in ARS research
    programs. First, they produce large quantities of test organisms to
    supply researchers with adequate amounts of products to test new
    control strategies at realistic levels of operation. This is extremely
    important in the development and evaluation of new area-wide IPM
    technologies prior to full implementation by action agencies or
    farmers. Second, they allow limited laboratory rearing methods to be
    scaled up for mass production using industrial-sized equipment and
    handling techniques. Making the step from the laboratory bench to
    production scale operations is a significant component of ARS research
    that involves designing new equipment, improving handling methods, and
    evaluating product quality.
                     current ars insect rearing facilities
        ARS conducts insect rearing at nearly 30 locations in support of
    local research and action programs. Most of these operations are not of
    major concern for this report as they are location specific and produce
    only a small number of insects for limited use. ARS, however, operates
    three major facilities that produce large numbers of insects in support
    of many important projects. These facilities are located in Starkville
    and Stoneville, Mississippi, and Honolulu, Hawaii, and are the focus of
    this report.
    Mississippi
        The facility in Starkville (Robert T. Gast Insect Rearing Facility)
    is housed in a 24,000 sq. ft. State owned building adjacent to ARS
    laboratories on the campus of Mississippi State University. Although
    the Gast Facility is ARS' primary insect rearing laboratory, it is
    severely limited in its production capabilities as the building,
    supporting utilities, air handling capabilities, and existing equipment
    are inadequate to meet production requirements and also do not meet
    existing safety specifications. Future expansion of the University
    campus is expected to displace the existing Gast Facility building.
        Insect rearing in Stoneville is temporarily and inadequately housed
    within the main laboratory building at the ARS Jamie Whitten Delta
    States Research Center. Several different species of insects important
    for corn and cotton production and an insect pathogenic virus being
    used in a 201,000 acre area-wide management program for Heliothis are
    produced in this temporary housing. The building in which insects are
    reared was built for biology research and is not properly designed to
    handle insect rearing or microbial production which needs to be
    conducted under highly sanitary conditions, with specialized air, water
    and waste handling systems.
        ARS proposes to combine the two facilities from Stoneville and
    Starkville into a new 50,000 sq. ft. laboratory and pilot plant that
    will be located adjacent to the main laboratory at Stoneville.
    Hawaii
        The ARS fruit fly rearing facility is located on University of
    Hawaii property in a residential area of Honolulu and is housed in old
    World War II Quonset huts. Being surrounded by a densely populated
    residential area has caused ARS problems of compatibility with the
    local community due to odor and waste disposal. Several species of
    fruit flies and parasites are mass produced in this facility that is in
    severe need of replacement. The State has requested that ARS vacate
    this facility in the near future.
                            need for new facilities
        Despite hundreds of millions of dollars spent by agricultural
    producers on insect and weed control, and millions of pounds of
    pesticides being applied to vast areas of the U.S. each year, pests
    continue to cause severe losses to a large number of crops. In two
    recent reports, the National Academy of Sciences (1996) and the
    Congressional Office of Technology Assessment (1995) called for
    increased research and development of new biologically-based pest
    control technologies to improve control effectiveness and reduce the
    use of chemical pesticides. One of the primary factors limiting the
    development of new biologically-based technologies (biological control,
    sterile insect release, etc.) is our lack of ability to mass produce
    high quality and effective agents at economically acceptable costs. The
    proposed new facilities should eliminate this constraint.
    Laboratory and Pilot Plant Facility at Stoneville, Mississippi
        Although ARS has developed and successfully demonstrated
    augmentative biological control technology and products on a small
    scale, specific scale-up research and pilot plant production needs to
    be investigated and improved so that industry can further develop and
    commercialize these new technologies for U.S. producers. The proposed
    mass propagation facility will include both developmental laboratories
    and a pilot plant to address these needs. The pilot plant concept was
    created to allow co-development of commercial scale equipment, improve
    operational level processing systems, to develop and test other
    scientific advances in insect mass rearing, and to accelerate
    technology transfer in cooperation with industry. The projected cost of
    construction for a new 50,000 sq. ft. facility is estimated to be $10
    million ($200 per sq. ft.).
    Laboratory and Quarantine Facilities in Hawaii
        The fruit fly rearing laboratory in Hawaii is needed to provide
    adequate facilities and equipment in support of evaluating new fruit
    fly strains for use in action agency programs; to develop new rearing/
    handling methodologies to improve the quality, longevity,
    competitiveness and economics of mass reared fruit flies for use in
    sterile insect release programs; and to develop new cost-effective
    means of mass producing beneficial parasites of fruit flies that can be
    released into the environment to control these pests. Due to the
    quarantine status of many fruit flies in the U.S., this facility must
    maintain a limited number of quarantine laboratories and small scale
    rearing rooms. The projected costs of construction for a new 20,000 sq.
    ft. facility are estimated to be $5 million ($250/sq. ft. due to
    quarantine needs). The proposed ARS Fruit Fly Rearing Research
    Laboratory will be located adjacent to the U.S. Department of
    Agriculture, Animal and Plant Health Inspection Service (USDA-APHIS)
    and the California Department of Food and Agriculture facilities in
    Waimanalo, Hawaii. This facility will address research needs for fruit
    fly control in fruit and vegetable crops supporting implementation
    programs conducted by the States of California and Hawaii. This
    facility will complement the existing APHIS mass production facility in
    Hawaii which collectively will support fruit fly suppression and
    eradication in Hawaii to prevent mainland infestation and greatly
    enhance the agricultural production and export potential from Hawaii.
                                   conclusion
        The need for new insect mass rearing facilities within ARS that
    support research and control efforts for major pests such as the boll
    weevil, cotton bollworm, European corn borer, Mediterranean fruit fly
    and other pests is clear. By combining two old and inadequate
    facilities in Mississippi into a single new facility at Stoneville, ARS
    will be better able to develop and support USDA and grower action
    programs in field crop pest control. This facility Will be linked with
    private industry through pilot plant operations for scale-up production
    of organisms of commercial value. Operations at the proposed Stoneville
    facility will be housed in a new 50,000 sq. ft. building that is
    projected to cost $10 million. The proposed ARS Fruit Fly Rearing
    Research Laboratory in Hawaii will address research needs for fruit fly
    control in fruit and vegetable crops supporting implementation programs
    conducted by the States of California and Hawaii, and USDA-APHIS, and
    is estimated to cost $5 million. A small section of the Hawaii facility
    will be constructed to maintain pest and beneficial insects under
    quarantine conditions.
        Question. Does the Department recommend new insect rearing
    facilities, as the USDA report to the Committee submitted by Dr. Woteki
    indicates?
        Answer. The Department still believes that two new high production,
    modern insect rearing facilities will need to be constructed as
    described in the USDA/ARS Insect Rearing Facilities Report submitted to
    Congress in fiscal year 1997. This will require combining the two
    facilities at Stoneville and Starkville into a new 50,000 square feet
    laboratory and pilot plant in Stoneville to address corn and cotton
    pests. Also required is construction of a new fruitfly rearing facility
    in Hawaii to develop new rearing/handling methodologies to improve the
    quality, longevity, competitiveness and economics of mass-reared
    fruitflies for use in sterile insect release programs, as well as to
    develop new cost-effective means of mass producing beneficial parasites
    of fruit flies than can be released into the environment to control
    these pests in Hawaii and in the continental United States.
        Question. When will each of these new facilities be needed?
        Answer. Although the need is not immediate, ARS will eventually
    need to move forward with construction and completion of these projects
    to fulfill the Department's and the nation's long-range IPM goals, to
    furnish new biologically-based replacements for chemical pesticides
    that will be removed in the next several years as a result FQPA, and to
    fulfill the needs of USDA and grower action programs in field crop pest
    control. Decisions on when to make these investments in new facilities
    will be reviewed annually as system-wide facility needs are considered
    and priorities established for the annual budget.
        Question. The President's fiscal year 1999 budget again proposes to
    closed down the ARS Prosser, WA; Mandan, ND; Orono, ME; and Brawley, CA
    facilities and to transfer the Melaleuca, FL facility from the Corps of
    Engineers to USDA and initiate construction funding for this facility
    in fiscal year 1999. Why isn't the Administration proposing to wait for
    the Task Force conclusions before making these proposals?
        Answer. The President's budget requires the reallocation of
    existing resources to finance new, high priority research needs. A
    number of projects carried out in ARS research stations at Prosser,
    Washington; Mandan, North Dakota; Orono, Maine and Brawley, California,
    were identified as less critical. Given these programmatic decisions,
    management considerations lead to recommendations to terminate and
    redirect resources to new research initiatives and close the mention
    research stations. We believe there is adequate information for
    Congress to act on these relatively straight forward recommendations at
    this time without formal input from the Strategic Planning Task Force.
        Question. Please give the Department's assessment of the adequacy
    of the current ARS Poisonous Plants Laboratory office and laboratory
    space.
        Answer. The structure that currently houses the 20 staff of the ARS
    Poisonous Plants Laboratory in Logan, Utah, is inadequate. The patch-
    work building is too small and outmoded to fill the needs of the
    current research program. The original metal building was constructed
    in 1962. Four additions were constructed, the latest in 1984, but the
    building is again too small to provide sufficient office and laboratory
    space. The design is inefficient and awkward to utilize, difficult to
    manage, and expensive to maintain. The building has 7,725 sq. ft. of
    floor space, including laboratories and offices. The heating,
    ventilation, and air conditioning (HVAC) system does not properly heat
    and cool the building, causing personal discomfort and analytical
    instruments to malfunction. The HVAC system is marginal in terms of
    meeting OSHA laboratory standards for air quality. Corrective measures
    have been taken, but expensive repairs and replacement of HVAC
    equipment on this old structure are not justified.
        Question. Why didn't the reasons given by the President for
    cancellation of the Stoneville, MS, and Logan, Utah, ARS replacement
    facilities also apply to the unrequested funds provided for fiscal year
    1998 for planning and initial construction of the Western Human
    Nutrition Research Center in Davis, CA, replacement facility, and the
    Jornado Range Research Center in Las Cruces, NM?
        Answer. Funding provided for the construction projects in Utah and
    Mississippi was vetoed by the President under the line-item veto
    authority for the following reasons: (1) the projects were not
    requested in the fiscal year 1998 budget; (2) the funding was for
    planning only and would require future additional resources for
    construction costs; (3) the need for additional research facilities is
    currently under review by the Strategic Planning Task Force mandated by
    the 1996 Farm Bill to review potential consolidations of Federal
    agricultural research facilities. The Task Force report is due in late
    spring of 1999. In addition, ARS conducts insect rearing at nearly 30
    other locations.
        Because of other factors, funding for the Davis and Jornado
    projects was not vetoed. In the case of the Davis, CA project,
    relocation of the WHNRC from San Francisco, is necessary due to the
    likelihood of substantially increased leasing costs at the current
    site. This facility is one of six ARS Human Nutrition Research Centers
    and the only Center responsible for testing the biological efficacy of
    nutrition intervention programs. Research conducted at the Jornado
    Research Center in Las Cruces, NM is a key component of the ARS grazing
    lands program. ARS scientists, and collocated collaborators from NRCS,
    EPA, and NSF are currently housed in a temporary facility. Both
    relocations will foster continued cooperation between ARS and
    university scientists by co-locating the ARS lab with university
    facilities.
                           food recovery and gleaning
        Question. Mr. Secretary, last year we spoke about the Department's
    food recovery and gleaning efforts. You commented at the time that this
    is an area ``where government can be a facilitator, without costing any
    money.''
        The fiscal year 1999 budget proposes $20 million for a new
    community-based food recovery and gleaning program. Would you please
    explain this proposal and why federal funding is now required for what
    you last year described to be a ``no-cost'' federal effort?
        Answer. Senator Cochran, you are correct. Last year I noted that
    government can be a facilitator without costing any money. Government
    can also take a more active role. And in this case, an active role is
    warranted. We can multiply the value of the money we provide to local
    charities working on food rescue, and dramatically increase the amount
    of food that they can safely acquire distribute to the needy.
        As you may know, the Department estimates that 96 billion pounds of
    foods was lost in 1995. Not all of this is wholesome and nutritious, or
    food that could be economically recovered by volunteer groups. However,
    with a little bit more effort, we can rescue a whole lot more than we
    are today--currently we rescue less than one half of one percent--and
    we can use that food to feed hungry people. A key impediment is one-
    time ramp up expenses that local organizations and charities must incur
    as they take on the challenge of safely acquiring and distributing
    perishable foods. Our proposal will help local communities pay for vans
    and trucks, specialized containers to pick up usable food, other
    supplies, and training for both staff and volunteers in how to safely
    handle the food.
                      food and nutrition program research
        Question. Would you please explain how the Economic Research
    Service is executing the nutrition research and evaluation program for
    fiscal year 1998 and why the Administration believes the Food and
    Nutrition Service can better oversee and administer these research
    funds?
        Answer. I understand that ERS has consulted with many government
    agencies, private and non-profit organizations, universities, and the
    Food and Nutrition Service to solicit input for program development. A
    recent conference under the auspices of the National Academy of
    Sciences was sponsored by ERS to help design and focus the program. ERS
    plans to operate a nationally diverse program which draws on the
    research capabilities of the public and private sectors, including the
    nation's academic institutions.
        Despite the excellent work that ERS has done, the Administration
    believes this research and evaluation program should be overseen and
    administered by the Food and Nutrition Service. FNS has detailed
    knowledge of the country's food programs and, because they administer
    and have oversight responsibility for the programs, they better
    understand the research and evaluation needs of the food programs.
        Question. Would you please describe this initiative, its
    importance, and long-term cost?
        Answer. The National Food Genome Initiative (NFGI) is an essential
    component of USDA's Research Agenda. It will vastly expand our
    knowledge of the genetic make-up for species of importance to the food
    and agricultural sectors. This knowledge is the key that will permit
    the U.S. to develop and use new genetic technologies for improvement in
    yield, pest resistance, production, and quality of the domestic
    agricultural output. The Initiative will focus on mapping, identifying,
    and understanding the function and control of genes responsible for
    economically important traits in the major agriculturally important
    species of plants and animals and associated microbes. The Initiative
    expands the scope of the National Plant Genome Initiative (NPGI)--a
    long term project of the National Science Foundation, the National
    Institute of Health (NIH), the Department of Energy, USDA, and the
    international research community. NPGI is described in the recently
    published report from the National Science and Technology Council
    (NSTC). (A copy of the NSTC report is being provided to the committee.)
        The research for NFGI will build upon the foundation established in
    the current USDA genetic research programs. In this way, USDA will
    continue to acquire a full understanding of the genetics of
    economically desirable plants, animals, and microbes, and will
    simultaneously enhance the employment of new and developing genomic
    technology needed to achieve a safe and secure food supply. It will
    build upon current genomic research, such as the Human Genome
    Initiative and the Arabidopsis Genome Research Project, to understand
    gene structure and function which is expected to have considerable
    payoff in crop species ranging from corn to soybean to cotton and
    animal species ranging from cattle to swine to poultry.
        In fiscal year 1999, the Department proposes investing $40 million
    in the NFGI. The funds would be used primarily for whole genome
    sequencing for rice and Arabidopsis; expressed sequence tag (EST)
    analysis for corn, soybean, cattle and pig; data base enhancement and
    interface for species data bases; and functional genomics. In fiscal
    year 2000 and 2001, it is envisioned that the Initiative will increase
    to $70 million and $100 million respectively, and then continue at $100
    million per year, adjusted as appropriate for advances in technologies
    and scientific knowledge, and as funds are available within overall
    spending limitations.
        I understand that the Department's fiscal year 1999 request
    includes $30 million increase in discretionary appropriations for this
    initiative and proposes legislation to provide for an additional $10
    million.
        Question. What authorization is needed for this proposed research
    initiative and is the additional $10 million proposed an authorization
    for appropriations or direct spending?
        Answer. The fiscal year 1999 budget proposes new legislation to
    establish a Food Genome Competitive Research Grants Program to support
    the Federal investment in NFGI and to authorize annual appropriations
    to finance the program. The budget recommends $10 million in
    discretionary spending for the Initiative under this new authority to
    support competitively awarded projects.
               commission on 21st century production agriculture
        The fiscal year 1999 budget request an increase of $350,000 to fund
    the Commission on 21st Century Production Agriculture authorized by the
    Federal Agriculture Improvement and Reform Act. Last year, the budget
    request a separate appropriation of $1 million for the Commission. The
    Committee did not approve that request but left it to the Department to
    make funding available for the Commission within the overall limitation
    on obligation for activities of advisory committees, panels
    commissions, and task forces.
        Question. Why has the request for the Commission fallen from $1
    million last year to $350,000 for fiscal year 1999?
        Answer. Last year's request assumed the Commission would employ a
    staff of several persons, hold an ambitious schedule of meetings and
    hearings, award research contracts, and publish the reports. Since that
    request was submitted, the Commission members have been appointed and
    met. This year's request was developed in consultation with the
    Commission. Given the lack of appropriations last year, the Commission
    has scaled down their planned activities. Current plans for fiscal year
    1999 call for the employment of only one staff person, no research
    contracts, less frequent meetings, and limited distribution of printed
    copies of the reports.
        Question. Is funding being made available for the Commission for
    fiscal year 1998 within the overall $1 million limitation on
    obligations for such activities? If so, how much is being provided and
    which agency is bearing the cost?
        Answer. The Commission is being provided up to $50,000 for fiscal
    year 1998. The $50,000 will be made available within the overall $1
    million limitation on obligations for such activities. At this time, no
    funds have yet been made available to the Commission and the decision
    has not been made as to which agency is bearing the costs.
                 chief economist: agricultural weather services
        Increased funding was provided to the Office of the Chief Economist
    for fiscal year 1998 to improve weather and climate data for
    agricultural areas.
        Question. Would you please explain the agricultural weather
    initiative more fully. Also, how are the fiscal year 1998 funds being
    spent and what additional resources will be required in fiscal year
    1999 and each future fiscal year to fully carry out this program and
    for what specific purposes will these funds be required?
        Answer. Weather data is a key input to agricultural production
    forecasts, disaster assessments, fire and flood control, conservation
    and natural resource programs, global change analysis, environmental
    monitoring, and drought mitigation. Program and budget cuts underway in
    the National Weather Service (NWS) have significantly curtailed
    meteorological data and services formerly available to USDA. For
    example, as a cost cutting measure, NWS recently announced it will
    cease delivery of weather charts and satellite imagery used extensively
    by USDA.
        The Office of the Chief Economist (OCE) is using a portion of the
    fiscal year 1998 funding to purchase computer hardware and software
    compatible with that being adopted by NWS. When fully implemented, this
    will be USDA's only source for obtaining NWS data products.
        The remainder of fiscal year 1998 funds are being used to collect,
    quality control, and disseminate weather and climate data in
    agricultural regions no longer covered by the NWS. In fiscal year 1998,
    USDA is acting to mitigate NWS data losses in the southeastern United
    States, a prime agricultural area where weather and climate data gaps
    in agricultural areas have been well documented. A data collection
    center is being staffed at Stoneville, Mississippi which will
    concentrate on improving data collection in key agricultural states
    including, Mississippi, Florida, Alabama, Georgia, and South Carolina.
        For fiscal year 1999, OCE is seeking additional modernization funds
    and staff to continue software development to improve access to and
    delivery of NWS data and forecasts to additional USDA field sites.
        Also during fiscal year 1999, data collection efforts will expand
    beyond the southeastern United States. The staff at Stoneville will be
    increased, and additional cooperative agreements will be established to
    acquire agricultural weather and climate information in Texas,
    Louisiana, and parts of the southern and central Plains.
        Beyond fiscal year 1999, initiatives will be directed at completing
    data acquisition activities across the remainder of the nation's
    agricultural areas, specifically, the Plains, Great Lakes, and Midwest.
    The exact funding requirements will vary depending on the extent of
    weather data collected and the agricultural areas covered.
                                  civil rights
        Question. Mr. Secretary, at your request, additional funds were
    provided for fiscal year 1997 and again for the current year for the
    Office of Civil Rights to address the backlog of pending equal
    employment opportunity and program discrimination complaint cases.
    However, the backlog of cases seems to have grown, not diminish.
        Is any progress being made in this area?
        Answer. Significant progress has been made with both program
    complaints and employment complaints. Experience by others has shown
    that when an agency starts to address complaints after a period of time
    in which they were not acted upon there is a sudden flood of complaints
    filed by those who are hopeful that their case will be seriously
    considered. Once these complaints are filed, the filing rate
    diminishes.
        Question. How many cases were closed at the end of fiscal year
    1997, how many were pending in the courts; and how many had not been
    addressed?
        Answer. When the Department focused on addressing complaints filed
    with USDA in late fiscal year 1997 and early fiscal year 1998, we
    discovered that the basic case load information was confused and
    incomplete. Some complaints that were submitted over the past few years
    had not been properly logged into the system, and others were
    inaccurately included in the case file with similar cases instead of
    being counted as new ones. The backlog of program complaints were not
    updated and verified until November 1, 1997, and employee complaints
    until January 1, 1997. As of these dates, 1,129 of the 3,179 complaints
    filed were closed, and 2,050 were active. Normally there would be no
    active program complaints pending in court. However, the latest amended
    list in the Pigford class litigation contains 351 names of which 143
    have complaints filed with the Office of Civil Rights. Of these, 43
    were filed before February 21, 1997.
        Question. Please provide this same information for fiscal year 1998
    to date.
        Answer. Two hundred eighty new cases have been filed since the
    backlog was verified. Fifteen of these cases have been closed and two
    hundred sixty five are active cases.
        Question. How many of the above cases are employee complaints and
    how many are complaints by farmers?
        Answer. Out of the 3,459 complaints that we have on file, 1,118 are
    program complaints and 2,341 are employee complaints. Of the program
    complaints, 155 are from farmers. USDA has closed 229 of the program
    complaints and 915 of the employee complaints.
        Question. What are the Department's plans to address the pending
    cases?
        Answer. In addition to re-establishing the program complaints
    investigations unit this year, the program complaint process is being
    accelerated through contracts with 10 investigative firms, 14 temporary
    investigators, more than 20 part-time law students, 10 temporary
    support staff, and about 10 detailed employees to resolve the entire
    backlog in a methodical and organized manner. New cases that have been
    received are being addressed using a re-engineered process that should
    process and resolve each new complaint within 180 days under normal
    circumstances.
        Backlogged employee complaints are being resolved to the extent
    possible through a mediation process that uses USDA employees and
    mediators outside the Department. For example, the Forest Service
    resolved 75 percent of its backlog cases through mediation during a
    special initiative this past fall and winter. New cases that are
    relatively clear cut are being quickly addressed by in house staff to
    reduce the time and cost to resolve them.
        Question. Last year, you indicated to Senator Robb that the most
    pressing need for the Office of Civil Rights was to establish the civil
    rights investigative unit and that unit was critical to addressing the
    backlog of cases and ensuring timely resolution of future complaints.
    Why wasn't that unit funded from the funding increase the Department
    received for fiscal year 1997, and has that unit now been established?
        Answer. We did not want to simply hire more employees until we had
    examined and understood the extent of the workload and how past
    procedures used by USDA to handle these cases had contributed to the
    backlog. Consequently, most of last year's funds were used for these
    purposes. We also concentrated on addressing those cases which had a
    potential to be quickly resolved.
        Our intention is to improve both how we deal with the complaint
    process and how we can make institutional changes in USDA policy and
    employee attitudes and actions that will prevent future situations that
    lead to complaints. The program complaints investigations unit has been
    established and is responding to the program complaints that have been
    made against the Department. At the same time, other oversight, policy
    and program actions have been proposed to further ensure that fair and
    equitable treatment is provided to USDA customers through services to
    the public.
        Question. Of the increased funding requested for fiscal year 1999
    for civil rights related, how much of this is for the processing and
    resolution of complaints?
        Answer. The increased funding requested for civil rights activities
    will be used to strengthen the Office of Human Resources Management,
    the Office of Outreach and conflict resolution capabilities, so we can
    serve USDA customers and employees better and prevent future
    discrimination complaints.
        About $170,000 of the total proposed increase for fiscal year 1999
    would be used to cover increased pay and operating costs for the Office
    of Civil Rights to process and resolve complaints.
        Question. How does this compare with the current level of resources
    devoted to these activities?
        Answer. About $3.5 million will be spent to resolve program
    complaints in fiscal year 1998 and nearly $3.7 million will be needed
    for fiscal year 1999.
        The fiscal year 1999 budget proposes $250 million for civil rights-
    related activities. This is an increase of $150 million above the
    fiscal year `98 level.
        Question. Please list the individual activities for which increased
    funding is requested in the fiscal year 1999 budget and indicate the
    fiscal year 1998 funding level and staffing levels for each activity
    compared with those requested for fiscal year 1999.
        Answer. We will provide this information for the record.
        [The information follows:]

                 USDA CIVIL RIGHTS INITIATIVE--BUDGET AUTHORITY
                              [Dollars in millions]
    ------------------------------------------------------------------------
                                                        1998
                        Program                       current    1999 budget
                                                      estimate
    ------------------------------------------------------------------------
    Fund Civil Rights Activities in DA............        $12.8        $17.8
    Improve Outreach to USDA Customers and                  3.0         10.0
     Socially Disadvantaged Farmers and Ranchers..
    Civil Rights Division Within OGC..............          0.2          0.9
    Fund Small Farms Initiative...................  ...........          4.0
    Address Disparities in Funding of Institutes
     of Higher Education:
        1890 Facilities...........................          8.0         12.0
        Extension Services--1994 Institutions.....          2.0          3.5
        Hispanic Serving Institutions Education             2.5          2.5
         Grants...................................
    Extension Indian Reservation Program..........          1.7          5.0
    Farm Ownership and Farm Operating Loans:
        Farm Ownership at $85 million level in              6.0         13.0
         1999.....................................
        Farm Operating Loans at $500 million level         32.0         34.0
         in 1999..................................
    Farm Labor Housing Program:
        Subsidy for $32 million in loans in 1999..          7.3         17.0
        Farm Labor Housing Grant Level............         10.0         13.0
        Rural Rental Assistance Payments..........          5.0         10.0
    Address the Needs of Farmworkers: Fund NASS             5.7          7.1
     Pesticide Use Survey.........................
    Provide Increased EQIP Funds to Low-Income      ...........        100.0
     Farmers and to Address Environmental Needs...
                                                   -------------------------
          Total, Civil Rights.....................         96.2        249.8
    ------------------------------------------------------------------------

        In addition to the request for funding, the budget also reflects
    increased staffing levels for some of the previously listed activities.
    These include the following:
        Administration.--An increase of 62 staff years. This will improve
    civil rights related personnel services and technical assistance to
    agencies, increase outreach and assistance efforts to under represented
    customers and groups, enhance management-employee relations and support
    early resolution of complaints. The increase includes staffing for the
    newly established Office of Outreach within DA to assure that all
    eligible customers have access to USDA programs and services and for
    the Socially Disadvantaged Farmers Outreach Program, which is
    authorized by Section 2501 of the Food, Agriculture, Conservation and
    Trade Act of 1990.
        An increase of 8 staff years is proposed to facilitate the
    processing and adjudicating of civil rights complaints by expanding the
    civil rights division in OGC.
        Research, Education, Extension and Statistics.--Funds are requested
    to support an integrated research, extension, and education competitive
    grants program through CSREES for new technology adoption and transfer
    to small farms. This initiative is intended to foster greater diversity
    in small farm enterprises as well as enhance current small farms
    production capabilities.
        Additional funds are requested to address disparities in funding
    and enhance the Department's cooperative efforts with institutions of
    higher education that are primarily devoted to the needs of minority
    students. Funds will also be targeted to improve outreach to socially
    disadvantaged farmers and ranchers in cooperation with these
    institutions to help stem the reduction of minority small farmers. The
    Extension Indian Reservation program will be expanded to meet the need
    for greater outreach by Extension Agents. One additional staff year is
    included for the Small Farms initiative. The NASS proposal to support
    collection of data on pesticide usage in nursery and greenhouse crops,
    where the potential for farmworker exposure is high reflects an
    increase of 10 staff years.
        Farm Credit.--Funds are proposed to support farm ownership and
    operating loans at the levels recommended by the CRAT report. Direct
    farm ownership loans would be increased from $46 million in 1998 to $85
    million in 1999. This funding increase will allow over 1,000 family
    farmers to either acquire their own farm or to save an existing one--
    nearly 500 more than in 1998. Roughly 60 percent of these loans are
    provided to limited resource borrowers.
        Farm Labor Housing.--Funds are provided to support a total of $55
    million in loans and grants to construct housing for some of the
    Nation's neediest families. This is over an 80 percent increase from
    the 1998 level.
        Environmental Quality Incentives Program.--An increase of $100
    million is requested to address CRAT recommendations and Clean Water
    Initiative goals. While this will not be used to support an overall
    increase in staff for NRCS, we expect up to 50 staff years will be
    devoted to CRAT related activities.
                                  foreclosures
        Question. In April 1997, USDA halted foreclosures on USDA farm
    loans, pending civil rights reviews. As a result, 116 foreclosures were
    postponed. In each state USDA office, a Civil Rights Independent Review
    Group has been created to review these foreclosures. Have these Civil
    Rights Independent Review Groups reported that discrimination
    contributed to any of these foreclosures? If so, how many and in which
    states?
        Answer. The 116 cases mentioned were reviewed by the Independent
    Review Team in the National Office. The Review Team was established to
    review all cases in the foreclosure process only to determine whether a
    question of discrimination was raised, not whether it occurred. Upon
    the completion of their review, twenty-eight of the 116 cases were
    referred to the USDA Office of Civil Rights, Program Complaint
    Adjudication Division (PCAD). Of the twenty-eight cases referred to
    PCAD, only eighteen discrimination complaints were filed, while the
    other ten were determined to need additional loan servicing. Of the 18
    discrimination complaints filed, one has been closed by settlement and
    not foreclosure. Seventeen discrimination complaints remain open until
    a decision is made whether discrimination occurred. Based on the
    twenty-eight cases reviewed none have been foreclosed. With respect to
    88 cases remaining from the 116 reviewed, additional servicing needs
    are being carried out and none have been foreclosed. The Independent
    Review Team was disbanded on September 12, 1997.
        Question. How were these conclusions about discrimination
    determined?
        Answer. The Independent Review Group was given guidance through a
    National written directive that includes a detailed checklist to assist
    in the review. The checklist, when completed, provides a history of the
    servicing actions taken and any documentation submitted by the borrower
    that alleges discrimination. However, as indicated earlier, the
    Independent Review Team did not make any determination that
    discrimination occurred.
                           departmentwide obligations
        Question. Please provide a summary of obligations, Departmentwide,
    for each of fiscal years 1997-1999, 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 1997, 1998, and the 1999 budget in millions of dollars, excluding
    Forest Service:

    ------------------------------------------------------------------------
                                           1997         1998         1999
               Object class              estimate     estimate     estimate
    ------------------------------------------------------------------------
    Salaries and benefits............       $3,424       $3,576       $3,617
    Travel...........................          159          166          170
    ADP hardware/software purchases..           65          123          152
    Contracts, grants and other              1,537        1,623        1,396
     extramural agreements...........
    Equipment (other than ADP                  107           93           98
     related)........................
    ------------------------------------------------------------------------

        Question. Please provide the Committee with a consolidated listing
    of obligations for fiscal years 1997-1999 for the following
    crosscutting program activities:
      --civil rights activities;
      --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; and
      --natural resources and environmental programs.
        Answer. The following table contains the information. Please note
    the amounts are dollars in millions.

    ----------------------------------------------------------------------------------------------------------------
                               Activities                              1997 estimate   1998 estimate   1999 estimate
    ----------------------------------------------------------------------------------------------------------------
    Civil rights activities.........................................             $23             $34             $37
    1890 Institutions and HBCU's....................................              95              92              96
    Pest management and related programs............................             231             260             266
    Food safety.....................................................             631             654             721
    Nutrition.......................................................             411             421             457
    Information activities..........................................              46              47              48
    Congressional relations and legislative affairs offices:
        USDA (w/o FS)...............................................               3               3               3
        FS..........................................................               1               1               1
    Natural resources and environment programs......................           3,310           3,298           3,223
    ----------------------------------------------------------------------------------------------------------------

                            administrative staffing
        Question. What is the total number of administrative staff for USDA
    broken out by headquarters, regional, State, and field office levels?
        Answer. The following table contains the information.

                            USDA Administrative Staff

            Location                                           1997 estimate
    Headquarters..................................................     4,298
    Regional......................................................     4,353
    State.........................................................     1,457
    Field Offices.................................................     4,600
                        --------------------------------------------------------------
                        ____________________________________________________

          Total...................................................    14,708
                          employee details/assignments
        Question. The fiscal year 1998 appropriations Act specifies that
    ``No employee of the Department of Agriculture may be detailed or
    assigned to an 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.''
        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 1997 and 1998 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 following table contains the information.

                                                                            DETAILED FOR LESS THAN 30 DAYS--FISCAL YEAR 1998
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
               Position/agency                              Detailed to                             Date/length                                     Purpose                             Reimbursed
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    William Digdo (GIPSA)................  APHIS........................................  15 days.......................  APHIS Medfly..............................................          $3,837
    Michael Haley (GIPSA)................  APHIS........................................  15 days.......................  APHIS Medfly..............................................           3,934
    James Ledoux (GIPSA).................  APHIS........................................  20 days.......................  APHIS Medfly..............................................           2,993
    Bradley O'Neal (GIPSA)...............  APHIS........................................  15 days.......................  APHIS Medfly..............................................           3,118
    Robert Simpson (GIPSA)...............  APHIS........................................  2 days........................  APHIS Medfly..............................................             411
    Dan White (GIPSA)....................  APHIS........................................  2 days........................  APHIS Medfly..............................................             441
    Sylvia Magbanua (NASS)...............  Office of Civil Rights.......................  28 days.......................  Civil Rights training program.............................  ..............
    N. Blair (FS)........................  Office of the Secretary......................  10/6/97 to 11/6/97............  Civil Rights Action Team..................................  ..............
    G. Renteria (FS).....................  Office of the Secretary......................  11/3/97 to 11/20/97...........  Civil Rights Action Team..................................  ..............
    M. Warren (FS).......................  Natural Resources and Environment............  10/01/97 to 10/24/97..........  Support...................................................  ..............
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                            DETAILED FOR MORE THAN 30 DAYS--FISCAL YEAR 1998
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
             Position/agency                          Detailed to                          Date/length                                  Purpose                                   Reimbursed
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Special Assistant to Adm. (FSA)..  White House..............................  10/01/97 to 09/30/98........  Personnel liaison for all White House personnel of       $73,638 Est. (Reimb.
                                                                                                                 Cabinet agencies and Boards and Commissions within       limited by 3 U.S.C. 112).
                                                                                                                 assigned portfolio.
    Computer Specialist (FSA)........  OSEC/Modernization of Admin. Processes     1/19/98 to 05/09/98.........  To provide Agency expertise to MAPP project managers...  $20,519 est.
                                        Program (MAPP).
    Management Analyst (FSA).........  U.S. Environmental Protection Agency.....  10/01/97 to 11/22/97........  Assisted in the Information Resources Management Policy  $15,409.
                                                                                                                 area involving contract resources.
    Confidential Assistant to          Rural Development, Office of Community     10/01/97 to 09/30/98........  To assist the Empowerment Zone initiative in helping     $88,500 est.
     Administrator (FSA).               Development.                                                             the program/communities achieve economic and
                                                                                                                 sustainable development.
    Confidential Assistant to          Office of Communications, Photography      10/01/97 to 09/30/98........  Provide Agency expertise to the Photography Division...  $52,000 est.
     Administrator (FSA).               Division.
    Director, Performance Engineering  NASA, Ames Research Center...............  2/01/98 to 05/23/98.........  Provides assistance on the planning, technical           $33,000 est.
     and Analysis Group (FSA).                                                                                   guidance, and direction of the Independent
                                                                                                                 Verification and Validation (IV&V) facility operations.
    Robert Cummings (FAS)............  Office of the U.S. Trade Representative..  2 years 6/97-6/99...........  Work on agricultural trade issues......................  Non-reimbursable.
    Nancy Hirchhorn (FAS)............  The World Bank...........................  1 year 7/97-7/98............  Articulate USDA interests on project activities........  Non-reimbursable.
    Stephen Huete (FAS)..............  Inter-American Development Bank..........  1 year 8/97-8/98............  Articulate USDA interests onproject activities.........  Non-reimbursable.
    David Schoonover (FAS)...........  Office of the U.S. Trade Representative..  2 years 6/97-6/99...........  Work on agricultural trade issues......................  Non-reimbursable.
    Ragiv Rastogi (RUS)..............  Foreign Agricultural Service.............  39 months...................  .......................................................  $252,549.
    Thomas Bennett (RHS).............  Natural Resources Conservation Service...  1 yr. to date Temporary       Test Laboratory (Peoplesoft)...........................  None.
                                                                                   Promotion.
    LaJaycee Brown (RHS).............  White House..............................  180 days....................  Communications--Schedule C.............................  None.
    Marylan Chapman (RHS)............  Under Secretary's Office.................  120 days....................  Women in Agriculture Initiative........................  None.
    Cheryl Cook (RHS)................  Office of the Secretary, Assistant         45 days.....................  Administrative Convergence--Schedule C.................  None.
                                        Secretary for Administration.
    Carolyn Cooksie (RHS)............  Farm Service Agency......................  2 years.....................  Minority Farming.......................................  None.
    Stan Gray (RHS)..................  Office of the Secretary, Chief             3 months to date............  Business Process Reengineering.........................  None.
                                        Information Officer.
    Debbie Matz (RHS)................  Farm Service Agency......................  2 years.....................  Loan Resolution Task Force--Political Appointee........  $110,000.
    Debbie Matz (RHS)................  Office of the Secretary, Assistant         5 months....................  Deputy Assistant Secretary for Administration--          $96,411.
                                        Secretary for Administration.                                            Political Appointee.
    Mary McNeil (RHS)................  Office of Congressional Relations--        2 years to date.............  Communications--Schedule C.............................  $120,089.
                                        Intergovernmental Affairs.
    Angela Morrall (RHS).............  Office of the Secretary, Assistant         40 days.....................  Civil Rights Implementation Team (CRIT)................  None.
                                        Secretary for Administration.
    Charles Wehrwein (RHS)...........  Housing and Urban Development............  90 days.....................  Housing Initiative.....................................  $25,000.
    Karen Murray (RBS)...............  Extension Service........................  9 months to date............  Partnering.............................................  $52,000.
    Carolyn Parker (RBS).............  Office of the Secretary, Assistant         2 months to date............  Civil Rights Outreach..................................  $73,733.
                                        Secretary for Administration Office of
                                        Outreach.
    Carolyn Parker (RBS).............  Deputy Administrator, Office of Assistant  9 months....................  Civil Rights Implementation Team.......................  None.
                                        Secretary.
    Vivian Peters (RBS)..............  Foreign Agricultural Service.............  120 days to date............  Scheduler--Schedule C..................................  $50,997.
    Samantha Speight (RBS)...........  White House..............................  180 days....................  Scheduler..............................................  None.
    K. Basu (FSIS)...................  Food and Ag Council......................  2/98-2/99...................  Civil Rights Assistance................................  Agreement developed.
    P. Cohen (FSIS)..................  DOJ/Criminal Division....................  12/97-6/98..................  Assistance in the development of strategic plans for     None (determining if detail
                                                                                                                 projects.                                                benefits FSIS).
    M. Eldakdoky (FSIS)..............  FAS......................................  3/96-5/31/98................  Food technology support................................  Detail benefits FSIS.
    J. Gettleman (FSIS)..............  DA: Appeals and Grievances Staff.........  1/98-4/7/98.................  Senior Staff Assistance................................  None--just received SF-52--
                                                                                                                                                                          determiningif detail
                                                                                                                                                                          benefits FSIS.
    F. Gwozdz (FSIS).................  ARS......................................  1/97-5/98...................  Staff Assistance.......................................  Detail benefits FSIS.
    C. Romeo (FSIS)..................  Office of Under Secretary for Food Safety  10/97-3/98..................  Unclassified Duties....................................  Detail benefits FSIS.
    L. Wright (FSIS).................  Departmental Administration..............  3/97-12/97..................  To work on a CRIT......................................  Detail benefits FSIS.
    Stephen Balson (FNS).............  USDA/OCFO................................  10/01/96 to 09/30/98........  FISVIS.................................................  $118,362.
    Lawrence Blim (FNS)..............  USDA/OCFO................................  10/1/96 to 9/30/98..........  FISVIS/Accounting Standards Manual.....................  $105,593.
    Renee Brown (FNS)................  Under Secretary/FNCS.....................  10/6/97 to 1/13/98..........  Secretarial Support....................................  $5,732.
    Kathleen Crampton (FNS)..........  USDA/OCFO................................  10/1/96 to 9/30/98..........  FISVIS.................................................  $91,752.
    Daniel Dager (FNS)...............  Under Secretary/FNCS.....................  10/1/96 to 3/24/98..........  Budget and Legislative Support.........................  $33,582.
    Bruce Klein (FNS)................  U.S. Congress/Joint Econ. Committee......  10/20/97 to 2/20/98.........  Analytical Support.....................................  $30,152.
    Jane Manley (FNS)................  Under Secretary/FNCS.....................  10/6/97 to 12/20/97.........  Secretarial Support....................................  $8,537.
    Sharon Phillips (FNS)............  USDA/FSIS................................  4/21/97 to 1/17/98..........  Secretarial Support....................................  $16,711.
    Ismael Tercero (FNS).............  DHHS.....................................  10/1/96 to 10/13/97.........  Tribal Health Programs.................................  $1,542.
    Velma Brooks (NRCS)..............  FISVIS...................................  10/1/97 to 9/30/98..........  To provide clerical assistance.........................  $38,703.
    Rebekah Davis (NRCS).............  FAS......................................  1/20/98 to 5/20/98..........  To provide research and writingsupport.................  $7,000.
    Pam Folson (NRCS)................  USDA/DAMS................................  6/29/97 to 9/3/98...........  Provides support to the Office of the Senior Policy      $37,417.
                                                                                                                 Advisor for Service Implementation and to serve on
                                                                                                                 Team I of the Admin. Convergence.
    Lois Loser (NRCS)................  USDA/NSD.................................  9/29/97 to 6/20/98..........  Provides technical support and is Acting Branch Chief..  $68,032.
    Robert Reaves (NRCS).............  USDA/Administrative Management Service...  6/22/97-3/1/98..............  Provides leadership and direction to staff, assign       $43,427.
                                                                                                                 work, set goals, participates in Departmentwide and
                                                                                                                 Governmentwide multi-organization project.
    John Sutton (NRCS)...............  FAS/ICD/DRD..............................  8/21/97 to 8/31/99..........  Detailed to acting Branch Chief NTE 2 years............  $95,529.
    Joan Conway (ARS)................  FAO......................................  9/97-present................  Special Management Intern Program......................  ...........................
    Robert Harmon (ARS)..............  FSIS.....................................  7/96-present................  Training and to provide support to Microcomputer         $25,613.
                                                                                                                 Support Section.
    Stephen Heller (ARS).............  NIST.....................................  10/97-present...............  To exchange high level expertise and knowledge related   $59,228.
                                                                                                                 to leading edge technology.
    Al Kemezys (ARS).................  MAPPS....................................  8/96-12/97..................  Provide support for MAPPS..............................  $75,222.
    Adrienne Labega (ARS)............  Metro Area Reemployment Center...........  8/97-present................  Nonreimbursable--medical accommodation.................  None.
    Carl Momberger (ARS).............  MAPPS....................................  11/96-present...............  Provide technical expertise on MAPPS...................  $96,033.
    Anne Riordan (ARS)...............  USDA, Procurement Policy Division........  11/97-present...............  Provide support to Phase II of USDA Procurement          None.
                                                                                                                 Modernization Project.
    Charlotte Sorrentino (ARS).......  Office of the Secretary..................  7/97-present................  Provide administrative support.........................  Reimbursement being
                                                                                                                                                                          requested.
    James Spurling (ARS).............  Under Secretary for Research, Education,   8/97-present................  Mission Support........................................  None.
                                        and Economics.
    Mitch Geasler (CSREES)...........  Under Secretary for Research, Education,   10/97-present, half time....  Mission Support........................................  None.
                                        and Economics.
    Mary Humphreys (CSREES)..........  Under Secretary for Research, Education,   10/97-9/98..................  Secretarial support, Secretary, Research, Education,     Reimbursement requested.
                                        and Economics.                                                           and Economics.
    Dafina Williams (CSREES).........  Under Secretary for Research, Education,   11/97-11/98.................  Secretarial support, Under Secretary, Research,          Reimbursement requested.
                                        and Economics.                                                           Education, and Economics.
    Audrae Erickson (ERS)............  USTR Office of Agricultural Affairs        3 months....................  Agricultural Trade.....................................  None.
                                        (White House).
    Paul Flaim (ERS).................  President's Council on Sustainable         8 months....................  White House Committee on Sustainable Development.......  None.
                                        Development (White House).
    Christian Foster (ERS)...........  FAS......................................  9 months....................  To work as an agribusiness policy analyst with USAID/    $111,490.
                                                                                                                 Global Bureau.
    Keith Fuglie (ERS)...............  Council of Economic Advisers (White        9 months....................  Senior Economist for Agriculture and Natural Resources.  None.
                                        House).
    Carl Mabbs-Zeno (ERS)............  USDA/FAS/ICD.............................  1 month.....................  To work under the Environment and Natural resources      $10,650.
                                                                                                                 project.
    Sara Mazie (ERS).................  USDA/REE/OSEC............................  10/1/96-present.............  Mission Support/Budget Coordination....................  None.
    Toni Bradly (NASS)...............  Office of Civil Rights...................  120 days....................  Civil Rights enforcement support.......................  None.
    Jorge Garcia-Pratts (NASS).......  CSREES...................................  261 days....................  USDA Liaison to the University of Puerto Rico..........  $95,000.
    Craig Kirby (AMS)................  Assistant Secretary--MRP.................  9/22/97 to present..........  Provide support to the Asst. Secy......................  None.
    Mark Kreaggor (AMS)..............  MAP, then PACC...........................  10/1/97 to 3/28/98..........  Assist MAP and PACC with Time and Attendance BPR         $8,000.
                                                                                                                 Project.
    Kevin Clarke (APHIS).............  OCIO.....................................  10/1/97 to present..........  USDA Enterprise Network designteam.....................  None.
    Evelyn Davis (APHIS).............  OCIO.....................................  11/1/97 to 9/30/98..........  Assist with USDA Program...............................  $69,909.
    Walter Moczydlowsky (APHIS)......  OCIO.....................................  10/1/97 to present..........  USDA Enterprise Network designteam.....................  None.
    Karen Murray (APHIS).............  OCFO.....................................  10/1/97 to 9/30/98..........  Assist with USDA financial systems development.........  $77,382.
    Patricia Peer (APHIS)............  Assistant Secretary--MRP.................  12/21/97 to present.........  Provide support to the Assistant Secretary.............  None.
    Frank Sanders (APHIS)............  OCFO.....................................  10/1/97 to 9/30/98..........  Assist with USDA financial systems development.........  $61,999.
    Joe Taylor (APHIS)...............  OPPM.....................................  2/97 to 9/98................  VISA card implementation...............................  None.
    Mary Carmouche (GIPSA)...........  APHIS....................................  73 days.....................  APHIS Medfly...........................................  $7,340.
    Michael Caughlin (GIPSA).........  FAS......................................  10/1/97-7/1/98..............  Agribusiness Advisor...................................  $97,500.
    John Cox (GIPSA).................  APHIS....................................  115 days....................  APHIS Medfly...........................................  $6,183.
    Roy Johnson (GIPSA)..............  APHIS....................................  147 days....................  APHIS Medfly...........................................  Still on detail.
    William Napoleon (GIPSA).........  APHIS....................................  73 days.....................  APHIS Medfly...........................................  $13,642.
    Wanda Pitiman (GIPSA)............  APHIS....................................  73 days.....................  APHIS Medfly...........................................  $7,976.
    Steve Reams (GIPSA)..............  APHIS....................................  147 days....................  APHIS Medfly...........................................  Still on detail.
    Mark Reimer (GIPSA)..............  APHIS....................................  73 days.....................  APHIS Medfly...........................................  $8,686.
    George Wright (GIPSA)............  APHIS....................................  37 days.....................  APHIS Medfly...........................................  $2,425.
    Marci Hilt (OC)..................  DA.......................................  5 months....................  Civil Rights Action Team (CRAT)........................  $38,995.
    Barnedia Talley (OCFO)...........  ASA......................................  3 months....................  Civil Rights Implementation Team.......................  $9,000.
    Frances Trout (OCFO).............  OSEC.....................................  Being Negotiated............  Travel Assistance......................................  None.
    Jeff Knishkowy (OGC).............  Office of Acting Assistant Secretary for   1/13/97 to 1/31/98..........  Provide assistance to the Civil Rights Action Team to    None.
                                        Administration.                                                          include implementation of recommendations.
    John Lom (OGC)...................  U.S. Trade Representative Office.........  10/20/97 to 3/19/98.........  To better serve USDA in dealing with international       None.
                                                                                                                 trade disputes and related matters.
    Lauretta Miles (OIG).............  USDA/Office of the Secretary.............  1/18/98 to 6/20/98..........  To provide six month detail assignment to perform        $17,000.
                                                                                                                 clerical duties.
    Robert Franco (DA)...............  OPM......................................  2/17/97 to NTE 2 yrs........  Develop SES Recruitment Strategies.....................  $116,495.
    J. Phelps (DA)...................  OCFO.....................................  12 months...................  Financial Info. Systems Vision project (FISVIS)........  $48,000.
    C. Bailey (FS)...................  Office of the Secretary..................  10/1/97 to 1/2/98...........  Civil Rights Action Team...............................  None.
    A. Brown (FS)....................  Office of the Chief Financial Officer....  10/1/97 to 9/30/98..........  FS Liaison.............................................  $71,000.
    J. Comanor (FS)..................  Natural Resources Conservation Service...  10/1/97 to present..........  Support................................................  $70,000.
    J. Dudley (FS)...................  Office of Operations.....................  10/1/97 to 3/27/98..........  FS Liaison.............................................  $47,116.
    M. Fletcher (FS).................  Office of the Secretary..................  10/12/97 to 1/2/98..........  Civil Rights Action Team...............................  None.
    C. Franz (FS)....................  Modernization of Administrative Proc-      10/1/97 to 1/2/98...........  Civil Rights Action Team...............................  $88,000 est.
                                        esses.
    J. Gavin (FS)....................  Office of the Chief Information Office...  10/1/97 3/31/98.............  Support................................................  $31,000.
    M. Hamilton (FS).................  Office of the Secretary..................  10/1/97 to 11/30/97.........  Civil Rights Action Team...............................  None.
    T. Harwood (FS)..................  Hazardous Waste Management...............  10/1/97 to present..........  FS Liaison.............................................  $123,300.
    J. King (FS).....................  Office of the Chief Financial Officer....  10/1/97 to present..........  FS Liaison.............................................  $88,000.
    Z. Okrak (FS)....................  Office of the Chief Financial Officer....  10/1/97 to present..........  FS Liaison.............................................  $74,000.
    B. Preston (FS)..................  Natural Resources and Environment........  10/1/97 to present..........  FS Liaison.............................................  None.
    C. Pytel (FS)....................  Assistant Secretary. (ADM)...............  10/1/97 to 1/3/98...........  Acting Deputy Assistant Secretary for Administration...  $38,212.
    V. Ross (FS).....................  Office of the Secretary..................  10/1/97 to 12/31/97.........  Civil Rights Action Team...............................  None.
    G. Sundstrom (FS)................  Hazardous Waste Management...............  10/1/97 to present..........  FS Liaison.............................................  $85,860.
    B. Velde (FS)....................  Hazardous Waste Management...............  10/1/97 to present..........  FS Liaison.............................................  $96,484.
    K. Waldvogel (FS)................  Hazardous Waste Management...............  10/1/97 to present..........  FS Liaison.............................................  $83,656.
    S. Yaddof (FS)...................  Cooperative State Research, Educ. And      10/1/97 to 1/31/98..........  Support................................................  $25,000.
                                        Ext. Srvc.
    J. Zeller (FS)...................  Office of the Secretary..................  10/1/97 to 11/7/97..........  Civil Rights Action Team...............................  None.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                            DETAILED FOR MORE THAN 30 DAYS--FISCAL YEAR 1997
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
             Position/agency                          Detailed to                            Dates                                    Purpose                                    Reimbursed
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Special Assistant to               White House..............................  10/01/96 to 09/30/97......  Personnel liaison for all White Housepersonnel of        $71,071 (Reimb. limited by 3
     Administrator (FSA).                                                                                      Cabinet agencies and Boards and Commissions within       U.S.C. 112).
                                                                                                               assigned portfolio.
    Supervisory Computer Specialist    OSEC/Modernization of Administrative       10/01/96 to 09/30/97......  To provide Agency expertise to MAPP project managers...  $85,042.
     (FSA).                             Processes Program (MAPP).
    Supervisory Systems Accountant     Alternative Agricultural Research and      3/09/97 to 05/03/97.......  To develop the format for the AARC financial statements  $17,816.
     (FSA).                             Commercialization Corporation (AARC).                                  for fiscal year 1997 and provide guidance on
                                                                                                               accounting principles as they relate to government
                                                                                                               corporations.
    Confidential Assistant to Adm.     Rural Development Office of Community      4/11/97 to 09/30/97.......  To assist the Empowerment Zone initiative in helping     $31,025.
     (FSA).                             Development.                                                           the program/ communities achieve economic and
                                                                                                               sustainable development.
    Computer Specialist (FSA)........  OSEC/Modernization of Administrative       1/19/97 to 09/30/97.......  To provide Agency expertise to MAPP project managers...  $45,748.
                                        Processes Program (MAPP).
    Management Analyst (FSA).........  Office of the Chief Information Officer..  2/24/97 to 08/18/97.......  To assist in the development and implementation of       $45,270.
                                                                                                               USDA's Information Systems Technical Architecture and
                                                                                                               Information Technology Capital Planning, and
                                                                                                               Investment Control projects.
    Robert Cummings (FAS)............  Office of the U.S. Trade Representative..  6/97-6/99.................  Work on agricultural trade issues......................  Non-reimbursable.
    Nancy Hirschhorn (FAS)...........  The World Bank...........................  7/97-7/98.................  Articulate USDA interests on project activities........  Non-reimbursable.
    Stephen Huete (FAS)..............  Inter-American Development Bank..........  8/97-8/98.................  Articulate USDA interests on project activities........  Non-reimbursable.
    David Schoonover (FAS)...........  Office of the U.S. Trade Representative..  6/97-6/99.................  Work on agricultural trade issues......................  Non-reimbursable.
    Ragiv Rastogi (RUS)..............  FAS......................................  39 months.................  .......................................................  $252,549.
    David Adams (RHS)................  Office of the Secretary, Assistant         60 days...................  Civil Rights Implementation Team (CRIT)................  None.
                                        Secretary for Administration.
    Victor Agresti (RHS).............  Department of Justice....................  90 days...................  In advance of his permanent reassignment...............  $20,000.
    Joyce Allen (RHS)................  Office of the Secretary, Assistant         60 days...................  Civil Rights Implementation Team (CRIT)................  None.
                                        Secretary for Administration.
    Steve Anaya (RHS)................  Office of the Secretary, Assistant         90 days...................  Civil Rights Action Team (CRAT)........................  None.
                                        Secretary for Administration.
    Tracey Anderson (RHS)............  Office of the Secretary, Assistant         60 days...................  Civil Rights Implementation Team (CRIT)................  None.
                                        Secretary for Administration.
    Mark Brad Benson (RHS)...........  Center for Rural Pa......................  3\1/2\ years..............  Partnering (Intergovt Pers Act--IPA)...................  None.
    Terry Bishop (RHS)...............  Office of the Secretary, Assistant         60 days...................  Civil Rights Implementation Team (CRIT)................  None.
                                        Secretary for Administration.
    Edith Brown (RHS)................  Office of the Secretary, Assistant         60 days...................  Civil Rights Implementation Team (CRIT)................  None.
                                        Secretary for Administration.
    Rhonda Brown (RHS)...............  Office of the Secretary, Assistant         5 weeks...................  Civil Rights Implementation Team (CRIT)................  None.
                                        Secretary for Administration.
    Helen Cordero (RHS)..............  Office of the Secretary, Assistant         60 days...................  Civil Rights Implementation Team (CRIT)................  None.
                                        Secretary for Administration.
    Angela Corley (RHS)..............  Office of the Secretary, Assistant         120 days..................  Civil Rights Implementation Team (CRIT)................  None.
                                        Secretary for Administration.
    Mary Fox (RHS)...................  Office of the Secretary, Assistant         60 days...................  Civil Rights Implementation Team (CRIT)................  None.
                                        Secretary for Administration.
    Leonard Hardy, Jr. (RHS).........  Office of the Secretary, Assistant         90 days...................  Civil Rights Action Team (CRAT)........................  None.
                                        Secretary for Administration.
    Carlton Lewis (RHS)..............  Office of the Secretary, Assistant         90 days...................  Civil Rights Implementation Team (CRIT)................  None.
                                        Secretary for Administration.
    Jacquiline Micheli (RHS).........  Office of the Secretary, Assistant         60 days...................  Civil Rights Implementation Team (CRIT)................  None.
                                        Secretary for Administration.
    Mary Parker (RHS)................  Office of the Secretary, Assistant         60 days...................  Civil Rights Implementation Team (CRIT)................  None.
                                        Secretary for Administration.
    S. Leanne Powell (RHS)...........  White House..............................  180 days..................  Women's Issues Program--Schedule C.....................  None.
    John Soles (RHS).................  Rural Center, NC.........................  4 years...................  Partnering (Intergovt Pers Act--IPA)...................  None.
    Joseph Taggert (RHS).............  Office of Congressional Relations--        11 months.................  Communications--Schedule C.............................  None.
                                        Intergovernmental Affairs.
    Quinton Wilform (RHS)............  Office of the Secretary, Assistant         150 days..................  Civil Rights Implementation Team (CRIT)................  None.
                                        Secretary for Administration.
    James Coyle (RBS)................  USDA National Service....................  7 months..................  America Reads and Gleaning.............................  None.
    Amy Donoghue (RBS)...............  Extension Service........................  120 days..................  Partnering.............................................  $11,000.
    Stephen Balsan (FNS).............  USDA/OCFO................................  10/1/96 to 9/30/98........  FISVIS.................................................  $108,424.
    Jordan Benderly (FNS)............  DOJ......................................  10/1/96 to 1/3/97.........  Financial Crime Enforcement............................  None.
    Lawrence Blim (FNS)..............  USDA/OCFO................................  10/1/96 to 9/30/98........  FISVIS/Accounting Standards Manual.....................  $77,420.
    Gail Brown (FNS).................  Under Secretary FNCS.....................  10/1/96 to 10/5/97........  Deputy Under Secretary Administrative Support..........  $3,754.
    Donna Buntrock (FNS).............  Under Secretary FNCS.....................  10/1/96 to 2/24/97........  Administrative Support.................................  None.
    Kathleen Crampton (FNS)..........  USDA/OCFO................................  10/1/96 to 9/30/98........  FISVIS.................................................  $83,316.
    Daniel Dager (FNS)...............  Under Secretary FNCS.....................  10/1/96 to 3/24/98........  Budget and Legislative Support.........................  $29,120.
    Dorothy Ford (FNS)...............  Under Secretary FNCS.....................  10/1/96 to 9/21/97........  Legislative Support....................................  None.
    Donna Hines (FNS)................  USDA/Office of Comm......................  10/1/96 to 9/30/97........  Americorp Program Activities...........................  None.
    Kelly Jackson (FNS)..............  Under Secretary FNCS.....................  10/1/96 to 8/9/97.........  Secretarial Support....................................  $16,698.
    Sharon Phillips (FNS)............  USDA/FSIS................................  4/21/97 to 1/17/98........  Secretarial Support....................................  $21,667.
    Ismael Tercero (FNS).............  DHHS.....................................  10/1/96 to 10/13/97.......  Tribal Health Programs.................................  $40,111.
    C. Baker (FSIS)..................  DA: Policy Analysis and Coordination       2/97-8/97.................  Honor Awards Ceremony..................................  Agreement developed.
                                        Center.
    D. Barnes (FSIS).................  Office of the Secretary..................  11/95-4/97................  Clerical Support.......................................  Unsure if agreement
                                                                                                                                                                        developed--Resigned.
    M. Eldadoky (FSIS)...............  FAS......................................  3/96-5/31/98..............  Food technology support................................  Detail benefits FSIS.
    F. Gwozdz (FSIS).................  ARS......................................  1/97-5/98.................  Staff Assistance.......................................  Detail benefits FSIS.
    A. Kirk (FSIS)...................  DA: Policy Analysis and Coordination       2/96-8/97.................  Clerical Support.......................................  Detail benefits FSIS--
                                        Center.                                                                                                                         Resigned.
    M. Penner (FSIS).................  NRCS.....................................  12/96-2/97................  Office of Civil Rights Work Group......................  Detail benefits FSIS.
    T. Powell (FSIS).................  OP.......................................  5/12/97-9/30/97...........  Clerical Support.......................................  Agreement developed.
    Dawn Frobish (ARS)...............  USDA-OIRM................................  8/96-1/97.................  Provide fiscal and accounting support..................  $42,185.
    Robert Harmon (ARS)..............  FSIS.....................................  7/96-present..............  Training and to provide support to Microcomputer         $25,613.
                                                                                                               Support Section.
    Eliot Herman (ARS)...............  National Science Foundation..............  10/96-5/97................  Cell Biology and Molecular Biology Program Manager--to   $64,560.
                                                                                                               gain skills in competitive grant process.
    Al Kemezys (ARS).................  MAPPS....................................  8/96-12/97................  Provide support for MAPPS..............................  $75,222.
    Adrienne Labega (ARS)............  Metro Area Reemployment Center...........  3/97-7/97.................  Nonreimbursable--medical accommodation.................  None.
    Carl Momberger (ARS).............  MAPPS....................................  11/96-10/98...............  Provide technical expertise on MAPPS...................  $96,033.
    Michelle Snowden (ARS)...........  Purchase Card Implementation Team........  4/96-3/97.................  Response to an EEO settlement agreement................  $62,369.
    Charlotte Sorrention (ARS).......  Office of the Secretary..................  7/97-Present..............  Provide administrative support.........................  Reimbursement being
                                                                                                                                                                        requested.
    James Spurling (ARS).............  Under Secretary for Research, Education,   8/97-Present..............  Mission Support........................................  None.
                                        and Economics.
    Linda Wilson (ARS)...............  MAPPS....................................  Fiscal year 1997..........  Provide support for MAPPS..............................  None.
    Tammara Wright (ARS).............  USDA--Office of the Secretary, Civil       Fiscal year 1997..........  Civil Rights Task Force................................  $21,938.
                                        Rights Task Force.
    Josephine King (CSREES)..........  Office of the Secretary..................  10/96-9/97................  Secretarial Assistance.................................  Fiscal year 1997, $38,352;
                                                                                                                                                                        fiscal year 1998 $2,694.
    John Dunmore (ERS)...............  FAS......................................  9/96-2/97.................  Technical Assistance--Turkey...........................  $39,860.
    Lowell Dyson (ERS)...............  ARS/NAL..................................  2/97-8/97.................  File Automation........................................  None.
    Ann Effland (ERS)................  USDA Civil Rights Task Force.............  12/96-2/97................  Civil Rights Task Force................................  None.
    Audrae Erickson (ERS)............  USTR Office of Agricultural Affairs        3 months..................  Agricultural Trade.....................................  None.
                                        (White House).
    Paul Flaim (ERS).................  President's Council on Sustainable         4 months..................  White House Committee on Sustainable Development.......  None.
                                        Development (White House).
    Keith Fuglie (ERS)...............  Council of Economic Advisors (White        3 months..................  Senior Economist for Agriculture and Natural Resources.  None.
                                        House).
    George Gardner (ERS).............  USDA/FAS/ICD.............................  1 year....................  To work under the Africa RSSA project..................  $84,575.
    Carl Mabbs-Zeno (ERS)............  USDA/FAS/ICD.............................  1 year....................  To work under the African RSSA Project.................  $119,921.
    Sara Mazie (ERS).................  USDA/REE/OSEC............................  10/1/96-present...........  Mission Support/Budget Coordination....................  None.
    Sharon Sheffield (ERS)...........  USDA/FAS.................................  5 months..................  To provide research and analysis of trade and            $40,375.
                                                                                                               agricultural policy developments in the countries of
                                                                                                               the NiS/Baltic region, pertaining to their accession
                                                                                                               to the WTO.
    Teri Wray (ERS)..................  USDA/PACC/MAP............................  6 months..................  To serve as Customer Service Liaison, Executive Order    $26,347.
                                                                                                               on Customer Standards for MAP.
    Sylvia Magbanua (NASS)...........  Office of Civil Rights...................  137 days..................  Civil Rights training program..........................  None.
    Linda Becker (APHIS).............  FSIS.....................................  4/97-7/97.................  Assist with Merit Promotion............................  $11,409.
    Phuong Callaway (APHIS)..........  BAD......................................  7/29/97 to 10/29/97.......  Learning Assignment....................................  $11,000.
    Joyce Key (APHIS)................  ASA-CRAT.................................  4/14/97-6/6/97............  Complaints Backlog.....................................  None.
    Craig Lambert (APHIS)............  ASA-CRAT.................................  4/1/97 to 7/31/97.........  Complaints Backlog.....................................  None.
    Kevin McGrath (APHIS)............  ASA-CRAT.................................  4/14/97 to 5/30/97........  Complaints Backlog.....................................  None.
    Doris McLaughlin (APHIS).........  ASA-CRAT.................................  7/1/97 to 8/31/97.........  Complaints Backlog.....................................  None.
    Linda Moore (APHIS)..............  ASA-CRAT.................................  6/97-7/97.................  Environmental Justice/Native American Programs.........  None.
    Ed Psaltis (APHIS)...............  ASA-CRAT.................................  4/7/97-8/1/97.............  Complaints Backlog.....................................  None.
    Mary Royster (APHIS).............  OHRM.....................................  9/1/97 to 10/10/97........  Assist with USDA Ethics Program........................  None.
    Christopher Sikes (APHIS)........  ASA-CRAT.................................  4/7/97-8/1/97.............  Complaints Backlog.....................................  None.
    Joe Taylor (APHIS)...............  OPPM.....................................  2/97 to 9/98..............  VISA card implementation...............................  None.
    Rosemary Witcoff (APHIS).........  ASA-CRAT.................................  9/1/97 to 10/10/97........  Complaints Backlog.....................................  None.
    Clerance Abrom (GIPSA)...........  APHIS....................................  92 days...................  APHIS Medfly...........................................  $5,796.
    Mary Carmouche (GIPSA)...........  APHIS....................................  95 days...................  APHIS Medfly...........................................  $9,423.
    Michael Caughlin (GIPSA).........  FAS......................................  10/1/96 to 9/30/97........  Agribusiness Advisor...................................  $127,000.
    Stuart Conser (GIPSA)............  APHIS....................................  90 days...................  APHIS Medfly...........................................  $9,385.
    John Cox (GIPSA).................  APHIS....................................  115 days..................  APHIS Medfly...........................................  $6,183.
    William Digdo (GIPSA)............  APHIS....................................  86 days...................  APHIS Medfly...........................................  $20,621.
    Robert Fuller (GIPSA)............  APHIS....................................  70 days...................  APHIS Medfly...........................................  $7,438.
    Michael Haley (GIPSA)............  APHIS....................................  116 days..................  APHIS Medfly...........................................  $28,518.
    Ray Hollis (GIPSA)...............  APHIS....................................  47 days...................  APHIS Medfly...........................................  $8,820.
    David Johnson (GIPSA)............  APHIS....................................  45 days...................  APHIS Medfly...........................................  $7,817.
    Roy Johnson (GIPSA)..............  APHIS....................................  99 days...................  APHIS Medfly...........................................  Still on detail.
    Jeff LaHaie (GIPSA)..............  APHIS....................................  109 days..................  APHIS Medfly...........................................  $14,117.
    James Ledoux (GIPSA).............  APHIS....................................  103 days..................  APHIS Medfly...........................................  $14,679.
    Phillip Meachem (GIPSA)..........  APHIS....................................  63 days...................  APHIS Medfly...........................................  $7,739.
    William Napoleon (GIPSA).........  APHIS....................................  95 days...................  APHIS Medfly...........................................  $17,513.
    Bradley O'Neal (GIPSA)...........  APHIS....................................  99 days...................  APHIS Medfly...........................................  $19,294.
    Wanda Pitiman (GIPSA)............  APHIS....................................  88 days...................  APHIS Medfly...........................................  $9,485.
    Steve Reams (GIPSA)..............  APHIS....................................  116 days..................  APHIS Medfly...........................................  Still on detail.
    Mark Reimer (GIPSA)..............  APHIS....................................  88 days...................  APHIS Medfly...........................................  $10,329.
    Linda Remondet (GIPSA)...........  APHIS....................................  63 days...................  APHIS Medfly...........................................  $7,537.
    Larry Rice (GIPSA)...............  APHIS....................................  91 days...................  APHIS Medfly...........................................  $14,835.
    Rayfield Riley (GIPSA)...........  APHIS....................................  63 days...................  APHIS Medfly...........................................  $13,329.
    Robert Simpson (GIPSA)...........  APHIS....................................  116 days..................  APHIS Medfly...........................................  $15,908.
    Howard Suter (GIPSA).............  APHIS....................................  92 days...................  APHIS Medfly...........................................  $10,722.
    Gregory Tomas (GIPSA)............  APHIS....................................  54 days...................  APHIS Medfly...........................................  $14,096.
    Vince Volpe (GIPSA)..............  APHIS....................................  84 days...................  APHIS Medfly...........................................  $15,747.
    Dan White (GIPSA)................  APHIS....................................  116 days..................  APHIS Medfly...........................................  $17,041.
    James Winters (GIPSA)............  APHIS....................................  84 days...................  APHIS Medfly...........................................  $12,764.
    George Wright (GIPSA)............  APHIS....................................  103 days..................  APHIS Medfly...........................................  $6,574.
    Marci Hilt (OC)..................  DA.......................................  7 months..................  Civil Rights Action Team (CRAT)........................  $50,337.
    Albert Jaeger (OC)...............  DA.......................................  7 months..................  G-7 Conference.........................................  $66,058.
    Dale Alling (OCIO)...............  RHS......................................  180 days..................  Program Analysis.......................................  $30,000.
    Franklin Johnson (OCIO)..........  MAP......................................  1 year....................  TOBI Project...........................................  None.
    Chris Arrington (OCFO)...........  ASA......................................  6 months..................  Modernization of Admin. Processes project..............  $19,000.
    Gary Barber (OCFO)...............  ASA......................................  6 months..................  Civil Rights Action Team...............................  None.
    Martha Joseph (OGC)..............  NRCS.....................................  10/1/96 to 3/31/97........  Assist with Wetlands Reserve Program...................  $23,362.
    Jeff Knishkowy (OGC).............  Office of Acting Associate, Assistant      1/13/97 to 1/31/98........  Provide assistance to the Civil Rights Action Team to    None.
                                        Secretary for Administration.                                          include implementation of recommendations.
    Vincent Vukelich (OGC)...........  GSA,OGPA.................................  5/5/97 to 9/4/97..........  Assisting in developing governmentwide guidance          $22,184.
                                                                                                               regarding implementation of policies in statutes,
                                                                                                               Executive Orders and regs.
    Joyce Fleishman (OIG)............  Department of Transportation Office of     10/1/96-4/11/97...........  To serve as Principal Deputy Inspector General for       $79,864.
                                        the Inspector General.                                                 Department of Transportation.
    Robert Franco (DA)...............  OPM......................................  2/17/97 to NTE 2 yrs......  Develop SES Recruitment Strategies.....................  $116,495.
    J. Phelps (DA)...................  OCFO.....................................  4 months..................  Financial Info. Systems Vision project (FISVIS)........  $20,600.
    Pam Folson (NRCS)................  USDA/DAMS................................  6/29/97-9/3/98............  Provides support to the Office of the Senior Policy      $37,417.
                                                                                                               Advisor for Service Implementation and to serve on
                                                                                                               Team I of the Admin. Convergence.
    Lois Loser (NRCS)................  USDA/NSD.................................  9/29/97-6/20/98...........  Provides technical support and is Acting Branch Chief..  $68,032.
    Robert Reaves (NRCS).............  USDA/Department Administrative Management  6/22/97-3/1/98............  Provide leadership and direction to staff, assign work,  $43,427.
                                        Service.                                                               set goals, participates in Departmentwide and
                                                                                                               Governmentwide multi-organization project.
    John Sutton (NRCS)...............  FAS/ICD/DRD..............................  8/21/97-8/31/99...........  Detailed to Acting Chief NTE 2 years...................  $95,529
    C. Bailey (FS)...................  Office of the Secretary..................  3/27/97 to 9/30/97........  Civil Rights Action team...............................  None.
    C. Brannon (FS)..................  Office of the Secretary..................  4/1/97 to 6/30/97.........  Civil Rights Action Team...............................  None.
    A. Brown (FS)....................  Office of the Chief Financial Officer....  10/1/96 to 9/30/97........  FS Liaison.............................................  $69,000.
    J. Dudley (FS)...................  Modernization of Administrative Proc-      10/1/96 to 9/30/97........  FS Liaison.............................................  $95,266.
                                        esses.
    M. Fletcher (FS).................  Office of the Secretary..................  4/1/97 to 6/6/97..........  Civil Rights Action Team...............................  None.
    C. Franz (FS)....................  Modernization of Administrative Proc-      10/1/96 to 9/30/97........  FS Liaison.............................................  $86,000 est.
                                        esses.
    J. Frey (FS).....................  Office of the Secretary..................  7/1/97 to 8/8/97..........  Civil Rights Action Team...............................  None.
    D. Gentry (FS)...................  Office of the Secretary..................  8/4/97 to 9/30/97.........  Civil Rights Action Team...............................  None.
    L. Goldman (FS)..................  Office of the Secretary..................  4/1/97 to 6/30/97.........  Civil Rights Action Team...............................  None.
    R. Grand (FS)....................  Natural Resources and Environment........  3/16/97 to 8/8/97.........  FS Laison..............................................  None.
    S. Hague (FS)....................  Natural Resources and Environment........  2/2/97 to 9/30/97.........  FS Laison..............................................  None.
    M. Hamilton (FS).................  Office of the Secretary..................  7/1/97 to 9/30/97.........  Civil Rights Action Team...............................  None.
    T. Harwood (FS)..................  Hazardous Waste Management...............  1/5/97 to 9/30/97.........  FS Liaison.............................................  $81,734.
    F. Johnson (FS)..................  Office of Information Resource Management  10/1/96 to 11/24/96.......  Computer Specialist....................................  None.
    J. King (FS).....................  Office of the Chief Financial Officer....  10/1/96 to 9/30/97........  FS Liaison.............................................  $86,000.
    S. McCourt (FS)..................  Natural Resources and Environment........  10/1/96 to 3/14/97........  Communications Liaison.................................  None.
    B. McDonald (FS).................  Office of the Secretary..................  6/1/97 to 8/31/97.........  Civil Rights Action Team...............................  None.
    S. Medlyn (FS)...................  Public Affairs Specialist................  10/1/96 to 12/7/96........  Office of Communication................................  None.
    J. Morris (FS)...................  Office of the Secretary..................  4/1/97 to 7/19/97.........  Civil Rights Action Team...............................  None.
    Z. Okrak (FS)....................  Office of the Chief Financial Officer....  10/1/96 to 9/30/97........  FS Liaison.............................................  $72,000.
    B. Preston (FS)..................  Natural Resources and Environment........  10/1/96 to 9/30/96........  FS Liaison.............................................  None.
    C. Pytel (FS)....................  Assistant Secretary (ADM)................  3/16/97 to 9/30/97........  Acting Deputy Assistant, Secretary for Administration..  $70,563.
    G. Renteria (FS).................  Office of the Secretary..................  6/2/97 to 8/1/97..........  Civil Rights Action Team...............................  None.
    V. Ross (FS).....................  Office of the Secretary..................  3/27/97 to 9/30/97........  Civil Rights Action Team...............................  None.
    S. Segovia (FS)..................  Office of the Secretary..................  7/1/97 to 9/30/97.........  Civil Rights Action Team...............................  None.
    G. Sundstrom (FS)................  Hazardous Waste Management...............  10/1/96 to 9/30/97........  FS Liaison.............................................  $83,544.
    T. Sherwood (FS).................  Office of the Chief Financial Officer....  10/1/96 to 9/30/97........  FS Liaison.............................................  $56,000.
    F. Shon (FS).....................  Office of the Secretary..................  3/27/97 to 6/27/97........  Civil Rights Action Team...............................  None.
    P. St. Peter (FS)................  Office of the Secretary..................  7/1/97 to 11/21/97........  Civil Rights Action Team...............................  None.
    D. Stennis (FS)..................  Office of the Secretary..................  4/1/97 to 7/19/97.........  Civil Rights Action Team...............................  None.
    L. Turner (FS)...................  Natural Resources and Environment........  10/1/96 to 7/17/97........  Support................................................  $15,000.
    B. Velde (FS)....................  Hazardous Waste Management...............  10/1/96 to 9/30/97........  FS Liaison.............................................  $93,909.
    K. Waldvogel (FS)................  Hazardous Waste Management...............  10/1/96 to 9/30/97........  FS Liaison.............................................  $79,239.
    M. Warren (FS)...................  Natural Resources and Environment........  10/1/96 to 11/8/96........  Support................................................  $4,127.
    S. Yaddof (FS)...................  Coop. State Research, Educ. and Ext.       5/1/97 to 9/30/97.........  Support................................................  $31,000.
                                        Service.
    J. Zeller (FS)...................  Office of the Secretary..................  7/7/97 to 8/23/97.........  Civil Rights Action Team...............................  None.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                                 DETAILS UNDER 30 DAYS--FISCAL YEAR 1997
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
               Position/agency                              Detailed to                               Dates                                         Purpose                             Reimbursed
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Reginald Pasteur (AMS)...............  ASA-CRAT....................................  3/97-4/97......................  Complaints Backlog........................................  ..............
    Charles Rush (AMS)...................  FAS.........................................  6/30/97 to 7/29/97.............  Career Enhancement opportunity............................  ..............
    Judy Hawkins (GIPSA).................  APHIS.......................................  29 days........................  APHIS Medfly..............................................          $2,929
    Kenny Layne (GIPSA)..................  APHIS.......................................  28 days........................  APHIS Medfly..............................................           2,827
    Lynn Luster (GIPSA)..................  APHIS.......................................  28 days........................  APHIS Medfly..............................................           3,078
    Robert Starr (GIPSA).................  APHIS.......................................  30 days........................  APHIS Medfly..............................................           4,263
    Lauretta Miles (OIG).................  USDA/Office of Small and Disadvantaged        10/14/97-11/14/97..............  To provide 30-day detail assignment to perform clerical     ..............
                                            Business Utilization.                                                          and administrative duties.
    Ghulan Sambal (RHS)..................  Office of the Secretary, Assistant Secretary  30 days........................  Civil Rights Implementation Team (CRIT)...................  ..............
                                            for Administration.
    Cherry Smith (RHS)...................  Office of the Secretary, Assistant Secretary  21 days........................  Civil Rights Implementation Team (CRIT)...................  ..............
                                            for Administration.
    Vermell Wheeler (RHS)................  Office of the Secretary, Assistant Secretary  30 days........................  Civil Rights Implementation Team (CRIT)...................  ..............
                                            for Administration.
    Jada Johnson (FNS)...................  OSEC........................................  1/21/97-2/21/97................  Secretarial Support.......................................  ..............
    G. Crawley (FS)......................  Office of the Secretary.....................  6/1/97 to 6/30/97..............  Civil Rights Action Team..................................  ..............
    J. Comanor (FS)......................  Natural Resources Conservation Services.....  9/1/97 to 9/30/97..............  Support...................................................  ..............
    G. Dyer (FS).........................  Office of the Secretary.....................  6/1/97 to 6/3/97...............  Civil Rights Action Team..................................  ..............
    S. Dykes (FS)........................  Office of the Secretary.....................  4/28/97 to 5/25/97.............  Civil Rights Action Team..................................  ..............
    G. Edmondson (FS)....................  Assistant Secretary, ADM....................  10/1/96 to 12/26/96............  Support...................................................  ..............
    J. Gavin (FS)........................  Office of the Chief Information Office......  9/29/97 to 9/30/97.............  Support...................................................  ..............
    N. Hall (FS).........................  Office of the Secretary.....................  3/24/97 to 4/18/97.............  Civil Rights Action Team..................................  ..............
    S. Hooper (FS).......................  Office of the Secretary.....................  3/27/97 to 3/31/97.............  Civil Rights Action Team..................................  ..............
    L. Lewandowski (FS)..................  Policy Analysis and Coordination Center.....  10/1/96 to 10/31/96............  Purchase Card Automation Project..........................  ..............
    L. Lewandowski (FS)..................  Policy Analysis and Coordination Center.....  3/3/97 to 3/31/97..............  Purchase Card Automation Project..........................  ..............
    L. Peressini (FS)....................  Office of the Secretary.....................  6/1/97 to 6/30/97..............  Civil Rights Action Team..................................  ..............
    C. Reynolds (FS).....................  Office of the Secretary.....................  5/1/97 to 5/30/97..............  Civil Rights Action Team..................................  ..............
    S. Risbrudt (FS).....................  Office of the Secretary.....................  10/1/96 to 10/18/96............  Support...................................................  ..............
    J. Synder (FS).......................  Natural Resources and Environment...........  10/1/96 to 10/31/96............  Support...................................................  ..............
    J. Synder (FS).......................  Office of the Deputy Secretary..............  11/1/96 to 11/12/96............  Support...................................................  ..............
    M. Warren (FS).......................  Natural Resources and Environment...........  9/29/97 to 9/30/97.............  Support...................................................  ..............
    J. Worley (FS).......................  Office of Civil Rights......................  10/1/96 to 10/31/96............  Support...................................................  ..............
    J. Zeller (FS).......................  Office of the Secretary.....................  9/15/97 to 9/30/97.............  Civil Rights Action Team..................................  ..............
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

     supplemental nutrition program for women, infants, and children (wic)
        The Administration is seeking an increase of $145.5 million for
    fiscal year 1999 to ``meet the long-standing bi-partisan commitment to
    funding in the WIC Program at a full participation level of 7.5
    million.'' Further, the budget indicates that this requested increase
    for fiscal year 1999 mainly offsets expected food and administrative
    cost increases.
        Question. On what basis has the Administration determined that 7.5
    million represents the ``full participation'' level for the WIC
    program?
        Answer. Our estimate is based on Census data and medical evidence
    which suggests that 9 million women, infants and children were fully
    eligible for WIC in 1996, the most recent year for which we have
    figures. In a fully funded program we would not expect that all
    eligibles would participate. However, with funds available,
    participation reached 7.5 million last January, and has hovered just
    below that figure ever since. On that basis, the Administration has
    determined that 7.5 million represents the full participation level for
    WIC.
        Question. The fiscal year 1998 appropriations Act granted the
    Secretary of Agriculture the authority requested in the President's
    budget to allocate WIC funds outside the regulatory funding formula.
    How are WIC funds made available for fiscal year 1998 being allocated
    to states and how does that allocation differ, by state, from the
    statutory/regulatory WIC funding distribution formula?
        Answer. At this point, we have not used the flexibility granted to
    us by the Appropriations Act. We requested it as a contingency to
    ensure that WIC funds went where they were most needed. We estimate
    that the total available fiscal year 1998 funds will be adequate to
    bring States to stability funding with only a small amount left over
    for distribution to States that have received less than their fair
    share of funds. Therefore, we do not anticipate that it will be
    necessary to utilize the additional flexibility.
        Question. Mr. Secretary, you indicate in your prepared testimony
    that efforts continue to reduce the overall cost of WIC food packages
    by 10 percent by 2002. When did this effort begin and what reductions
    have we achieved to date in the overall cost of WIC food packages?
        Answer. We established this goal in the Government Performance and
    Results Act Strategic Goals development process. This goal was
    mentioned in those sent to the Congress last fall.
        As far as specific reductions to date, WIC cost containment is one
    of the more remarkable success stories in government. In fact, food
    costs were lower in 1997 (at $31.66 per person) than they were in 1987
    (at $32.68 per person). This is true despite 10 years of general
    inflation in the economy and immense growth in the program. This was
    achieved in large part because, in 1997 nearly $1.3 billion was saved
    from infant formula rebates.
        Our efforts to improve WIC management and to reduce food package
    costs are expected to help improve the overall quality of WIC. Many
    States have achieved notable successes in efficient and effective
    management, and as their practices are adopted and adapted by other
    States, program quality will improve along with cost efficiencies. WIC
    is a mature program and simply needs some fine tuning. If we can keep
    food costs low we can serve more participants with the same money. That
    is our strategic goal.
        Question. You also indicate in your testimony that the Department
    is working with states to expand other promising cost control
    activities and is undertaking a series of management reforms to improve
    WIC program integrity. Would you summarize the cost control activities
    and management reforms which have been implemented?
        Answer. We are committed to improving WIC management and have
    several initiatives underway to reduce errors and save money. For
    example, now that WIC is a mature program we are beginning to see
    evidence of errors in eligibility determinations similar to food stamps
    and school lunch. Therefore we are proposing to require that all States
    obtain income documentation before certifying individuals to
    participate. That is not currently a Federal requirement and not all
    States ask for income documentation at certification. We are also
    reviewing our income verification requirements to see if they need
    strengthened or brought in line with food stamps and school lunch.
    Another area that we are working on concerns nutrition risk. We are
    working with the States and the medical community to standardize
    enforcement of WIC nutritional risk criteria. WIC statute allows only
    individuals at nutritional risk to participate in the program. Finally,
    we know WIC has some problems with unscrupulous vendors, the same
    stores trying to cheat the Food Stamp Program. We will be issuing
    regulations to improve vendor management and reduce overcharging. Our
    efforts to improve WIC management will be coordinated with the
    Administration's government wide error reduction initiative.
                           integrated pest management
        The fiscal year 1999 budget requests increased funding in support
    of the Department's commitment to encourage the adoption of Integrated
    Pest Management (IPM) on 75 percent of the Nation's crop land by the
    year 2000.
        Question. Where do we stand in meeting this goal? When did this
    initiative begin and what percent of the Nation's crop land was under
    IPM at that time? What percent was under IPM at the end of fiscal year
    1997? What percent is projected to be under IPM practices at the end of
    fiscal years 1998 and 1999?
        Answer. Consensus has emerged that IPM systems should be measured
    along a continuum, ranging from no to high levels of IPM adoption. The
    Department's 1994 report, Adoption of Integrated Pest Management in the
    United States, measured adoption along a continuum, and this approach
    was refined by Consumers Union in its 1996 report, Pest Management at
    the Crossroads. These analyses estimated that 70 percent of crop
    acreage is managed using IPM systems. However, according to the
    Consumers Union estimates, 38 percent of these systems were at the low
    end of the IPM continuum. Our goal is to develop and help growers
    implement IPM strategies that permit them to move from the low end of
    the continuum to the high end of the continuum, moving incrementally
    toward biologically based IPM systems.
        The overall percentage of U.S. crop acres under IPM in 1997
    remained at the 70 percent level, and will likely remain constant in
    1998. However, we remain convinced that the increased investments
    proposed in the President's budget request for fiscal year 1999 will
    permit us to reach the 75 percent adoption goal by 1999 or 2000. More
    importantly, we believe that these investments will accelerate the
    adoption of IPM systems at the medium and high end of the continuum. We
    believe that increasing adoption of pest management systems at the high
    end of the IPM continuum will benefit all Americans by increasing
    profitability, protecting water quality and farm worker safety, and
    enhancing the wholesome quality of our Nation's food supply. We believe
    that an accelerated effort is warranted to develop and help growers
    implement pest management strategies that will help them reduce
    reliance on high-risk pesticides and enhance the sustainability of
    their operations.
        Question. Please provide a summary of the total USDA
    appropriations, by agency and account, invested in the Integrated Pest
    Management Initiative in each of fiscal years 1993 through 1998 and
    included in the fiscal year 1999 budget request.
        Answer. Three agencies provide direct support for the Integrated
    Pest Management Initiative (IPM): the Agricultural Research Service
    (ARS), the Cooperative State Research, Education, and Extension Service
    (CSREES), and the Economic Research Service (ERS). Funding amounts from
    fiscal year 1993 to fiscal year 1999 are as follows:

                                          INTEGRATED PEST MANAGEMENT INITIATIVE
                                                  [Dollars in millions]
    ----------------------------------------------------------------------------------------------------------------
                                                                                                 1998        1999
                                     1993        1994        1995        1996        1997      estimate     budget
    ----------------------------------------------------------------------------------------------------------------
    ARS Area-wide IPM Research..      $3.100      $3.800      $3.801      $3.772      $5.915      $5.944      $6.444
    CSREES:
        Research and Education
         Activities:
            IPM Research Grants.       4.457       3.034       2.731       2.731       2.731       2.731       8.000
            Pest Management       ..........  ..........  ..........       1.623       1.623       1.623       4.200
             Alternatives.......
            Expert IPM Decision   ..........  ..........  ..........       0.177       0.177       0.177       0.260
             Support............
        Extension Activities:          8.200       8.459      10.947      10.783      10.783      10.783      15.000
         IPM Application........
    ERS IPM Research............       0.200       0.200       0.500       0.500       0.500       0.500       0.500
                                 -----------------------------------------------------------------------------------
          Total, IPM Initiative.      15.957      15.493      17.979      19.586      21.729      21.758      34.404
    ----------------------------------------------------------------------------------------------------------------

                           integrated pest management
        Question. Please prioritize the fiscal year 1999 proposed funding
    increase for integrated pest management (IPM) and IPM-related
    activities.
        Answer. The increases proposed for IPM and related activities
    reflect USDA's goal of helping U.S. agriculture implement IPM practices
    on 75 percent of the nation's crop acreage by the year 2000, and to
    help producers respond to the challenges they will face as the result
    of Food Quality Protection Act (FQPA) implementation. Each research and
    extension program that supports IPM activities is coordinated to
    support major IPM goals. To further the development of a coordinated
    and integrated effort, USDA has created a new Office of Pest Management
    and Policy (OPMP) to serve as the focal point within the Department for
    pest management and pesticide regulatory issues.
        Proposed IPM and IPM-related activities in the fiscal year 1999
    Budget focus on this integrated and coordinated approach are summarized
    below. All of these would be considered high priority within the
    Department's 1999 budget.
        IPM Initiative.--Activities proposed under this multi-faceted
    initiative are built around producer-identified needs for applied
    research and education projects using pest control technologies that
    are ready for large-area trials and adoption. These regional or area-
    wide projects will be supported by proposed increases of approximately
    $10 million for CSREES and ARS.
        The initiative also include a proposed increase of $2.7 million for
    research on alternatives to pesticides that may be lost to producers as
    EPA proceeds to implement FQPA and on a decision support system that
    will help identify crop-pest combinations where alternative controls
    are most critical.
        Pesticide Use Data Collection and Analysis.--Net increases of $2.7
    million are proposed for pesticide use and food consumption data. USDA
    is the sole or primary source for this data. Information on actual use
    and consumption patterns is needed to conduct more accurate risk
    assessments. These programs include the Continuing Survey of Food
    Intakes by Individuals (CSFII) carried out by ARS, the Pesticide Data
    Program under AMS, and pesticide use survey and analysis conducted by
    ERS and NASS, respectively.
        Pesticide Registration, Clearance, Assessment, and Training.--Net
    increases of $4.8 million are proposed for programs to support the
    registration process with information and analyses on the costs and
    benefits of current and alternative pest management strategies at the
    local, regional, and national scales; programs to gather data on
    pesticide residues for new and safer minor-use products, and for
    applicator training to build confidence in the system that relies on
    well informed pesticide applicators. Accurate data and analysis are
    essential to help policy-makers understand the implications of pest-
    control decisions.
        Question. For fiscal year 1998, 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 advisory committees, panels, commissions
    and task forces funded in each of fiscal years 1997 and 1998, 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. Final decisions have not been made with regard
    to funding for each advisory committee in fiscal year 1998. We will
    submit further cost estimates by committee when they become final.
        [The information follows:]

                            USDA Advisory Committees

            Policy area and committee title                      1997 actual
    Food, Nutrition and Consumer Services: National Advisory
        Council on Maternal, Infant and Fetal Nutrition.....................
                        ==============================================================
                        ____________________________________________________
    Food Safety:
        National Advisory Committee on Meat and Poultry Inspection   $26,060
        National Advisory Committee on Microbiological Criteria
          for Foods...............................................    22,213
                        --------------------------------------------------------------
                        ____________________________________________________

          Total, Food Safety......................................    48,273
                        ==============================================================
                        ____________________________________________________
    Research, Education and Economics:
        Forestry Research Advisory Council........................     5,337
        National Agricultural Research, Extension, Education, and
          Economics Advisory Board................................   299,149
        Strategic Planning Task Force on Research Facilities......    99,200
        USDA/Hispanic Association of Colleges and Universi..................
        USDA/American Indian Higher Education Consortium....................
                        --------------------------------------------------------------
                        ____________________________________________________

          Subtotal, CSREES........................................   403,686
                        ==============================================================
                        ____________________________________________________
    National Nutrition Monitoring Advisory Council................    17,420
    National Genetics Resources Advisory Council..................     4,140
    Dietary Guidelines Advisory Committee.........................     5,376
                        --------------------------------------------------------------
                        ____________________________________________________

          Subtotal, ARS...........................................    26,936
                        ==============================================================
                        ____________________________________________________
    Census Advisory Committee on Agriculture Statistics...........    37,900
                        ==============================================================
                        ____________________________________________________
          Total, REE..............................................   468,522
                        ==============================================================
                        ____________________________________________________
    Marketing and Regulatory Programs:
        Advisory Committee on Foreign Animal and Poultry Diseases.    20,385
        General Conference Committee of the National Poultry
          Improvement Plan........................................     7,511
        National Animal Damage Control Advisory Committee.........    17,928
        USDA/1890 Task Force......................................    12,000
                        --------------------------------------------------------------
                        ____________________________________________________

          Subtotal, APHIS.........................................    57,824
                        ==============================================================
                        ____________________________________________________
    National Organic Standards Board........................................
                        --------------------------------------------------------------
                        ____________________________________________________

          Subtotal, AMS.....................................................
                        ==============================================================
                        ____________________________________________________
    Federal Grain Inspection Advisory Committee...................    17,472
                        ==============================================================
                        ____________________________________________________
        Total, MRP................................................    75,296
                        ==============================================================
                        ____________________________________________________
    Farm and Foreign Agricultural Services:
        Agricultural Policy Advisory Committee for Trade..........    14,119
        Ag. Tech. Adv. Comm. for Trade in:
            Animals and Animal Products...........................    14,110
            Fruits and Vegetables.................................    14,110
            Grains, Feed and Oilseeds.............................    14,110
            Sweeteners............................................    14,110
            Tobacco, Cotton and Peanuts...........................    14,110
        Technical Advisory Committee for Edward R. Madigan
          Agricultural Export Excellence Award Board..............    14,110
                        --------------------------------------------------------------
                        ____________________________________________________

            Subtotal, FAS.........................................    98,779
                        ==============================================================
                        ____________________________________________________
        Advisory Committee on Beginning Farmers and Ranche..................
        Emerging Markets Advisory Committee.................................
                        --------------------------------------------------------------
                        ____________________________________________________

          Subtotal, FSA.....................................................
                        ==============================================================
                        ____________________________________________________
          Total, FFAS.............................................    98,779
                        ==============================================================
                        ____________________________________________________
    Natural Resources and Environment:
        Task Force on Agricultural Air Quality Research...........    40,707
        National Commission on Small Farms........................    77,245
                        --------------------------------------------------------------
                        ____________________________________________________

          Total, NRE..............................................   117,952
                        ==============================================================
                        ____________________________________________________
    Office of the Chief Economist: Commission on 21st Century
        Production Agriculture..............................................
                        ==============================================================
                        ____________________________________________________
          Total, Advisory Committee Limitation....................   808,822

        Question. Why is the Department proposing to eliminate this
    limitation for fiscal year 1999?
        Answer. The Department has proposed that this limitation be lifted
    in order to provide greater flexibility in managing advisory committees
    to support the efficient operation of USDA programs.
        Question. Please provide a list of the advisory committee, panel,
    commissions, and task forces, by agency, included in the fiscal year
    1999 budget request, and the amount assumed for each.
        Answer. The advisory committees, panels, commissions and task
    forces proposed for fiscal year 1999 are similar to those already
    funded and includes at least one new committee, the Secretary's Small
    Business Advisory Committee. Final decisions have not been made
    regarding the proposed funding for each advisory committee. I will
    provide the cost estimates by committee when they become final.
                        office of the inspector general
        Question. What amount has been deposited in the Department of
    Justice and/or Treasury Department Assets Forfeiture Fund in each of
    fiscal years 1996, 1997, and 1998 as a result of investigation in which
    the USDA Office of Inspector General (OIG) participates?
        Answer. The Department of Justice and Treasury do not inform us of
    how much has been actually deposited in their funds as a result of our
    investigative actions. We do know that over $11 million in assets has
    been seized for the funds as a result of our actions since receipt of
    our authority--over $7 million for the Treasury Fund and approximately
    $3.5 million for the Justice Fund.
        Question. Why isn't a memorandum of understanding between the OIG
    and the U.S. Department of Justice and/or Treasury in place to allow
    USDA to receive an equitable share of these resources?
        Answer. The memorandum of understanding between the Office of the
    Inspector General and the U.S. Department of Treasury has been
    finalized and is currently in the process of being signed.
        Question. The fiscal year 1999 budget requests and increase of
    $21.7 million for a law enforcement initiative to allow the Office of
    Inspector General to crack down on fraud and waste in Food Stamps and
    other USDA programs. Would receiving payments from forfeited assets
    reduce the need for increased appropriations for these activities? If
    so, by how much?
        Answer. OIG is authorized to receive proceeds from asset
    forfeitures as an additional tool in carrying out our law enforcement
    mission. Payments received from forfeiture assets would not reduce the
    need for the increased appropriations as detailed in the initiative
    because the laws on the use of forfeiture funds limit their use and
    specifically prohibit them from being used for personnel compensation
    which is about 80 percent of our agency's costs.
        Question. The fiscal year 1999 budget requests increased funding
    for the Office of Inspector General to crack down on fraud and abuse in
    USDA programs, particularly the Food Stamp and nutrition programs. Is a
    funding increase also proposed for the Food and Nutrition Service
    compliance activities? If not, why?
        Answer. A funding increase of $150,000 is being proposed for the
    Food and Nutrition Service to enable the compliance branch to conduct
    ``sweeps'' in 8 States.
                                  brucellosis
        Question. The Department's fiscal year 1999 explanatory notes
    indicate that APHIS anticipated that all 50 States will reach
    brucellosis Class ``Free'' Status by the end of 1998. Will bison
    carrying brucellosis and wandering beyond the Yellowstone National Park
    boundaries affect the achievement of this class ``free'' status?
        Answer. As long as the surrounding states comply with the
    conditions of the Interim Bison Management Plan (which requires States
    and the National Park Service to prevent the movement of bison from
    Yellowstone National Park and Brucellosis Management Areas) and
    maintain active brucellosis surveillance programs, the Yellowstone
    bison should not affect the achievement of Class ``Free'' status in all
    50 states.
                        information technology services
        Question. We understand USDA continues to have in place its
    moratorium on significant information technology investments that was
    established back in November 1996 with a waiver process to make
    acquisitions. Also restrictions under this moratorium have been
    tightened to allow for IT investments to be made only for Year 2000
    projects and emergency needs.
        With only about half of fiscal year 1998 remaining, what impact
    will the moratorium have on USDA's IRM expenditure plans this fiscal
    year?
        Answer. According to the Chief Information officer the moratorium
    has caused agencies to redirect their fiscal year 1998 expenditures
    from non-mission-critical systems towards Year 2000 compliance. The
    moratorium may not affect the total IRM expenditures for USDA because
    of this redirection towards Year 2000 programs and the continued need
    for operations and services for existing systems.
        Question. As of this hearing, how many waivers were requested under
    the moratorium for fiscal year 1997 and fiscal year 1998, and what was
    the total dollar amount of waivers approved each fiscal year?
        Answer. Agencies can and do submit waiver requests which cover
    expenditures in more than one fiscal year because the waivers are
    submitted for multiple year projects. Since the moratorium began in
    November 1996, 127 waivers were requested in fiscal year 1997 for
    approximately $283.7 million and approximately $210.5 million was
    approved for fiscal years 1997, 1998 and 1999 expenditures. We have
    received 36 waivers during fiscal year 1998 for $143.6 million and
    approved approximately $133 million for fiscal years 1998 and 1999
    expenditures.
        Question. In light of the IT moratorium, what major investments
    have been pushed back to fiscal year 1999 and beyond?
        Answer. Because of the moratorium, agencies have made the decision
    to come forward only with those investments which meet the emergency or
    Year 2000 criteria for approval. The Office of the Chief Information
    Officer cannot categorically state which investments have been deferred
    because of the moratorium.
        Question. We are hearing that USDA may have spent more than $200
    million in fiscal year 1997 with plans to spend about $250 million in
    fiscal year 1998. If the numbers are anywhere near this, the confidence
    we have in the moratorium may be eroded.
        If USDA continues to spend hundreds of millions on IT investments
    even while under a strict moratorium on such investments, how effective
    in your opinion has the moratorium been? Please elaborate on your
    answer.
        Answer. While USDA has continued to make some investments while
    under the IT moratorium, those investments have been scrutinized
    carefully by the Office of the Chief Information Officer to ensure that
    they met the requirements of the moratorium. Any investments made were
    to support mission-critical programs. Since the moratorium has become
    more stringent, IT investments are made only for emergency situations
    or to support USDA's Year 2000 program. The CIO assures me that the
    moratorium has been effective in ensuring that our expenditures for IT
    were limited to those that are absolutely necessary to carry out USDA
    programs.
        USDA has had its moratorium on IT purchases in place since November
    1996. Originally this moratorium applied to all IT acquisitions over
    $250,000, with exceptions for renewals to existing contracts and
    support services contracts for existing systems to become Year 2000
    compliant. However, waivers were being granted. We understand that more
    recently that the threshold was lowered to all IT acquisitions over
    $25,000, and that starting at the end of fiscal year 1997, waivers were
    only being granted for emergencies and those directly related to
    ensuring Year 2000 compliance.
        Question. What was the total number of moratorium waiver requests
    submitted in fiscal year 1997 and what was the total dollar amount of
    these?
        Answer. During fiscal year 1997 there were 127 waivers requesting
    approximately $283.7 million.
        Question. What was the total amount dollars and number of waivers
    approved in fiscal year 1997?
        Answer. During fiscal year 1997, 113 waivers requesting
    expenditures of approximately $210.5 million were approved for fiscal
    years 1997, 1998 and 1999.
        Question. With tighter restrictions put in place for fiscal year
    1998, what has been the total number of waivers requested, in terms of
    numbers and dollars, in fiscal year 1998 to date?
        Answer. Since October 1, 1997, we have received 36 waiver requests
    totaling $143.6 million.
        Question. Also, what has been the total number of waivers approved,
    in terms of numbers and dollars, in fiscal year 1998 broken out by
    those granted to meet emergencies, those directly related to ensuring
    Year 2000 compliance and others?
        Answer. Ten waivers have been approved in fiscal year 1998 for
    emergencies, totalling $6.7 million in fiscal year 1998 funding and
    $1.4 million in fiscal year 1999 funding.
        Eighteen waivers have been approved for Year 2000 compliance,
    totalling $122.4 million for fiscal year 1998 funding and $2.9 million
    in fiscal year 1999 funding. The waivers for year 2000 compliance
    include incremental costs for making systems compliant, as well as
    costs for upgrading systems, for which a portion of those costs can be
    attributable to year 2000 compliance.
        Since no other grounds for approval of waivers exist, all waivers
    granted fall into the above categories.
        Question. In light of the waivers granted for Year 2000 compliance,
    how do these waivers compare to what the agencies estimate they will
    need to spend to fix systems and make them year 2000 compliant?
        Answer. USDA agencies estimate that the incremental cost for Year
    2000 repairs for fiscal year 1998 will be $58 million. This total is
    less than the amount of waivers approved for Year 2000-related work
    because the Forest Service Project 615 initiative has been granted a
    waiver for Year 2000 compliance in fiscal year 1998, but only a portion
    of those costs can be attributed solely to year 2000 compliance.
        Question. What are the Department's overall planned expenditures
    for information technology in fiscal year 1997, fiscal year 1998, and
    fiscal year 1999? Please provide specific expenditures, by agency and
    account. What are the Department's actual expenditures in each of
    fiscal years 1997 and 1998 by agency and account? What planned
    expenditures were not made in each of fiscal year 1997 and 1998 as a
    result of the moratorium?
        Answer. In February 1996, based on the 1997 proposed President's
    Budget, USDA estimated that it would spend $1.253 billion in
    information technology during fiscal year 1997. The February 1998
    report indicated that during fiscal year 1997, $1.080 billion was
    actually spent on IT. We believe that this reduction is in large
    measure due to the impact of the moratorium.
        In February 1997, USDA estimated that it would spend $1.239 billion
    in information technology during fiscal year 1998. The February 1998
    report indicates that USDA plans to spend $1.211 billion during fiscal
    year 1998. Our experience indicates that this estimate will further
    decline after the fiscal year is complete and actual expenditures are
    reported. We believe that this reflects the effectiveness of the
    moratorium in reducing USDA expenditures for IT.
        The Chief Information Officer has issued a call letter to the
    agencies, asking them to update last year's report ``USDA Agency
    Information Technology Expenditures by Budget Account''. I expect to be
    able to provide this information to the Committee in early April.
        Question. Identify what each agency plans to spend in total during
    fiscal year 1998 and fiscal year 1999, and of that what it plans to
    spend under the following information technology spending categories;
    (1) equipment purchases and leases, (2) software purchases and leases,
    (3) supplies, (4) personnel costs, (5) commercial support services, (6)
    other services (i.e. primarily commercial telephone and data service),
    and (7) Intra-Governmental Services?
        Answer. I will ask the Chief Information Officer to provide the
    information for the record.
        [The information follows:]
        The following information is from the Department's OMB Circular A-
    11 report. This report includes actual expenditures for fiscal year
    1997, and estimated expenditures for fiscal year 1998 and fiscal year
    1999. The estimated expenditures are subject to review and approval
    according to requirements of the moratorium.
        Question. Provide a list of major technology initiatives underway
    or planned at the Department. In doing so, provide what has been spent
    to date on the initiative, what will be spent on the initiative in
    fiscal year 1998 and fiscal year 1999, and the total estimated life-
    cycle costs of the initiative.
        Answer. The following table outlines our major technology
    initiatives. Specific spending and life-cycle costs will be provided to
    the Committee by early April.
        Integrated Systems Acquisitions Project (ISAP).--ISAP will
    establish a strategic framework for implementing the next generation of
    information systems in the Animal and Plant Health Inspection Service
    (APHIS). In the fall of 1995, a contract for computer products and
    services was awarded. APHIS has begun a five-year phased transition to
    the new environment of software, hardware, telecommunications and
    support services. Before starting formal implementation, APHIS is
    sponsoring transition activities to prepare for the new architecture.
    Total obligations from fiscal year 1997 through fiscal year 1999 are
    estimated to be $26 million.
        Project 615.--Through hardware and software acquisition, Project
    615 will refresh the Forest Service's (FS) office automation technology
    and provide that agency with geographical information systems (GIS)
    technology. This will give FS the infrastructure to change its
    management of forests and rangelands from a single timber focus to a
    multiple ecosystem focus. Through Project 615's series of contracts, FS
    will establish an open systems environment. The full application phase
    began in fiscal year 1997, and by the end of fiscal year 2000 all FS
    employees are expected to be on line with the new technologies. Total
    obligations from fiscal years 1997 through 1999 should reach an
    estimated $400 million.
        Food Stamp Program Integrated Information System (FSPIIS).--In the
    Food and Consumer Service (FCS), the FSPIIS is a comprehensive,
    integrated, on-line, menu-driven information system to support
    administration of the Food Stamp Program. Through GSA's Federal
    Information System Support Program and the Small Business
    Administration's 8(a) Program, the FCS is acquiring software
    development and maintenance for the system. FSPIIS extensions and
    interfaces are being implemented to support Electronic Benefits
    Transfer (EBT) and Electronic Data Interchange (EDI). Business Process
    Reengineering (BPR) methodologies were employed to determine requisite
    business functions during fiscal year 1994. These business functions
    are currently supported by EDI and EBT. From the BPR came also an
    initiative to consolidate food stamp forms, which should dramatically
    reduce State and project area reporting burdens, in terms of both the
    number of reporting points--sites--and events. Total obligations from
    fiscal year 1997 though fiscal year 1999 should equal about $17
    million.
        Service Center Implementation.--Under the leadership of the Service
    Center Implementation Team, initiatives are underway to consolidate
    county offices into local USDA service centers equipped with
    communications and computer-related technology to save costs, improve
    program delivery, and provide one-stop service to customers. This is a
    joint effort by the Farm Service Agency, Natural Resources Conservation
    Service and Rural Development. The implementation will support
    integrated voice and data communications infrastructures, reengineered
    business processes, data sharing within current agency systems, and a
    common computing environment to serve all agencies operating in any
    given service center. The communications systems currently being
    installed will cost approximately $100 million. The reengineering
    efforts are underway and will continue next year. The estimate of the
    cost for the first phase of the common computing environment at the
    field level to be approximately $30 million in fiscal year 1998 and $70
    million in fiscal year 1999. Approximately $10 million will be required
    for pilot and demonstration sites in fiscal years 1998 and 1999.
        Field Automation and Information Management (FAIM).--The Food
    Safety and Inspection Service's FAIM initiative is a project to
    automate improved business processed for the agency and to provide an
    agency-wide information management and sharing network. Total
    obligations from fiscal year 1996 through fiscal year 1999 should equal
    about $45 million.
        Dedicated Loan Origination and Servicing System (DLOS).--In
    amending the Housing Act of 1949, Congress in 1988 mandated that the
    then Farmers Home Administration escrow taxes and insurance. To comply,
    the Rural Housing Service has purchased a commercial mortgage loan
    origination and servicing system known as the Dedicated Loan
    Origination and Servicing System. It has an estimated total obligation
    from fiscal years 1996 through 1999 of $20 million.
        The Foundation Financial Information System (FFIS) is a major
    initiative sponsored by the Office of the Chief Financial Officer to
    replace USDA's core accounting system. FFIS implementation is underway.
    FFIS is designed to help us meet a strategic departmental objective:
    implementing a single, integrated financial management information
    systems in USDA, in compliance with OMB guidance and USDA financial
    standards. We are looking at costs, planned schedules, performance and
    management to ensure that FFIS is successfully completed. We will
    provide the Committee cost information as we complete this review.
        This Committee has been trying to get the Department to develop an
    information systems architecture for the last several years and do so
    prior to making major investments. We understand that early last year
    the Department developed the initial version of such an architecture,
    but one that needed much additional work.
                                    ccc adp
        Question. Section 161 of the FAIR Act of 1996 amended the Commodity
    Credit Corporation (CCC) Charter Act to significantly limit the use of
    CCC funds. 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) was limited to $170 million in fiscal year 1996, and $275
    million for the six-year period including fiscal years 1997 through
    2002. What was the total amount of CCC funds used in fiscal year 1997
    for ADP?
        Answer. Fiscal year 1997 CCC ADP obligations were $36,146,007,
    leaving a balance of $238,853,993 from the authorized cap of $275
    million.
        Question. What is the total amount of CCC funds USDA plans to spend
    in fiscal year 1998 and fiscal year 1999 for ADP?
        Answer. Fiscal year 1998 and fiscal year 1999 CCC ADP budget
    obligations in the President's fiscal year 1999 budget are estimated to
    be $106,549,000 and $76,401,000, respectively.
        Question. What ADP initiatives will be supported in fiscal year
    1998 and fiscal year 1999 with the CCC funds?
        Answer. During fiscal year 1998 one initiative partially funded by
    CCC is the USDA Service Center Initiative. fiscal year 1998 funds will
    be used to complete Phase I of the LAN/WAN/Voice project. Phase I,
    carried over from fiscal year 1997, will provide integrated phone and
    local and wide area data communications for the State and county
    offices. Phase II LAN/WAN/Voice activities funded in fiscal year 1998
    include e-mail, satellite dishes for distance learning and circuit
    upgrade equipment for the Service Centers. CCC funds for the Common
    Computing Environment (CCE) pilot demonstration sites, hardware and
    software, digital orthophotography, and Business Processes
    Reengineering/Improvement projects, training, and studies are also
    included in the fiscal year 1998 budget. NRCS and RD will also be using
    their funds to support the CCE.
        Several initiatives are funded in both fiscal year 1998 and fiscal
    year 1999. Contractor support is needed for application development and
    programming, including Year 2000 modifications, in support of continued
    FSA State and county office program delivery. Funds are also included
    for the continuing implementation of FSA's portion of the FFAS
    integrated financial management system, CORE, which will feed the
    Department's Foundation Financial Information System for preparation of
    consolidated financial statements and reports. Hardware and software
    maintenance, upgrades, replacement and operational support for FSA
    legacy systems remain a need.
        Assuming successful pilot installations in fiscal year 1998, CCC
    funds are included with funds from other Service Center agencies, in
    late fiscal year 1998 and fiscal year 1999 to procure, deploy, and
    install the initial components of the nationwide implementation of CCE,
    including employee training to use the new equipment and software.
    Procurement priorities of actual CCE components will be consistent with
    business requirements resulting from reengineered business processes
    and supportive of administrative convergence.
        Question. What has the Department done since last year to build its
    information systems architecture into a tool that USDA could use to
    plan Information Technology(IT) investments and ensure that any new
    systems meet the Department's business and information needs of the
    21st century?
        Answer. The USDA Information Systems Technology Architecture was
    reviewed by a contractor under the OCIO's Independent Verification and
    Validation (IV&V) Program. While the IV&V findings were generally
    positive regarding USDA's first effort, there were several
    recommendations that USDA will incorporate into the implementation and
    management of the architecture. OCIO developed a high-level project
    plan which currently is being expanded with detailed tasks and
    milestones.
        Last Year, USDA received a grade of ``D'' from the House Government
    Reform and Oversight Subcommittee on Government Management, Information
    and Technology for its efforts to address the Year 2000 problem and
    bring systems into compliance.
        Question. What steps has the Department taken to improve its grade
    and ensure that it will be ready with its information systems to move
    into the next millennium?
        Answer. I have taken strong management action to effectively
    respond to the challenges of year 2000 remediation. During the past
    year, USDA has established a Year 2000 Program Office, under the Chief
    Information Officer, with Senior Executive Service leadership to manage
    the Year 2000 issues Department-wide. The Chief Information Officer
    (CIO), Under and Assistant Secretaries have been given the
    responsibility for ensuring that USDA's mission-critical systems
    nationwide are Year 2000 compliant by March 1999. I directed each
    Agency Administrator to appoint a Year 2000 Senior Executive Sponsor
    who reports directly to the Administrator and establish Year 2000
    project teams. Year 2000 is a critical element in the performance
    standards of the Senior Executive Sponsor in order to establish
    accountability
        Additionally, USDA has issued a procurement moratorium requiring
    CIO approval of any IT procurement over $25,000; under this moratorium,
    purchases can only be approved on an emergency basis or when the
    acquisition is directly related to Year 2000 remediation. The CIO has
    sole signatory authority under the moratorium, which will remain in
    place throughout fiscal year 1998 and fiscal year 1999 to assure that
    the Year 2000 is the Department's information technology priority.
        Question. What is the status of the Department's efforts in
    readying the systems to be Year 2000 compliant?
        Answer. USDA continues to make steady progress in the remediation
    of mission critical systems. Currently, 41 percent of USDA's 1,319
    mission critical systems are Year 2000 compliant and we anticipate that
    the remaining mission critical systems, which will be required for use
    in the Year 2000, will be compliant by no later than March 1999. All
    agencies have reassessed their systems to ensure compliance with the
    new deadlines, and some agencies have redirected or reprogrammed
    resources to accelerate completion of the remediation effort.
        Question. How much does USDA plan to spend, by component agency,
    this fiscal year and in fiscal year 1999 to fix the Year 2000 problems
    at USDA?
        Answer. USDA plans to spend $58 million this fiscal year and $27
    million in fiscal year 1999 to fix the Year 2000 problem.
        I will provide the agency information for the record.
        [The information follows:]

                               [Cost in thousands]
    ------------------------------------------------------------------------
                                                          Fiscal year--
                        Agency                     -------------------------
                                                        1998         1999
    ------------------------------------------------------------------------
    Foreign Agricultural Service..................         $170         $170
    Farm Service Agency--KC.......................        6,190        1,580
    Farm Service Agency--HQ.......................          200          200
    Risk Management Agency........................          380          380
                                                   -------------------------
          Farm and Foreign Agricultural Services..        6,940        2,330
                                                   =========================
    Food and Nutrition Service....................        2,200          670
                                                   -------------------------
          Food, Nutrition and Consumer Services...        2,200          670
                                                   =========================
    Food Safety and Inspection Service............          400          200
                                                   -------------------------
          Food Safety.............................          400          200
                                                   =========================
    Agricultural Marketing Service................        1,500          790
    Animal and Plant Health Inspection Service....        7,407        3,962
    Grain Inspection, Packers and Stockyards              1,100          300
     Administration...............................
                                                   -------------------------
          Marketing and Regulatory Programs.......       10,007        5,052
                                                   =========================
    Forest Service................................       11,700        3,500
    Natural Resources Conservation Service........        7,849        8,611
                                                   -------------------------
          Natural Resources and Environment.......       19,549       12,111
                                                   =========================
    Agricultural Research Service.................        1,521        1,171
    Cooperative State Research, Education and       ...........  ...........
     Extension Service............................
    Economic Research Service.....................          260          260
    National Agricultural Statistics Service......          120           60
                                                   -------------------------
          Research, Education and Economics.......        1,901        1,491
                                                   =========================
    Rural Development.............................        1,950        1,000
                                                   =========================
    Support Programs: Departmental Administration           540          500
     \1\..........................................
                                                   =========================
    Offices:
        National Appeals Division.................  ...........  ...........
        Office of the Chief Financial Officer--NFC        8,980        1,000
        Office of the Chief Information Officer--         5,942        2,490
         NITC.....................................
        Office of Communications..................           50          200
        Office of the Chief Economist.............            3            4
        Office of the Inspector General...........  ...........  ...........
        Office of Budget and Program Analysis.....  ...........  ...........
        Office of the General Counsel.............  ...........  ...........
                                                   -------------------------
          Subtotal................................       14,975        3,694
                                                   =========================
          Totals..................................       58,462       27,048
    ------------------------------------------------------------------------
    \1\ Includes: Administrative Law Judges, Board of Contract Appeals,
      Civil Rights, Human Resources, Office of the Judicial Officer,
      Operations.

        Question. Who is charged with the overall responsibility and
    accountability at USDA for ensuring that the Department's mission
    critical information systems are Year 2000 compliant and what are the
    Department's Year 2000 milestones.
        Answer. The Chief Information Officer and the Year 2000 Program
    Executive have the overall responsibility for the planning, oversight,
    and evaluation of USDA's effort to achieve Year 2000 compliance. The
    Under and Assistant Secretaries and Agency Heads have been empowered
    with the programmatic, budgetary, managerial, and technical
    responsibility for ensuring that USDA's mission-critical systems
    nationwide are Year 2000 compliant by March 1999 in their respective
    areas.
        Milestones for completion of the various phases of remediation have
    been established based on guidance from the General Accounting Office
    and the Office of Management and Budget. September 1998 is the
    milestone for completion of the renovation phase for repaired systems;
    January 1999 is the milestone for completion of validation for all
    mission critical systems; and, March 1999 is the milestone for
    completion of the implementation phase for all mission critical
    systems.
        Question. What assurances can you give this Committee that the
    Department will fix its mission-critical information system Year 2000-
    related problems in sufficient time for adequate testing and validation
    to occur, and that the necessary steps can be taken in sufficient time
    so that USDA's operations and customers are not adversely affected?
        Answer. As I mentioned previously, responsibilities for Year 2000
    compliance have been firmly designated at multiple levels within USDA.
    Plans have been developed to achieve compliance by March 1999. In
    addition, the Office of the Chief Information Officer is establishing a
    verification and validation process to bring independent third party
    review of selected critical systems in terms of Year 2000 compliance.
        A USDA-wide mainframe testing environment is being established at
    the National Information Technology Center in Kansas City. The test
    environment is expected to be fully operational in July 1998. An
    additional mainframe test environment has been established and is
    currently operational at the National Finance Center (NFC) in New
    Orleans. It will be used to test NFC based applications.
        Question. Obviously, one of the Department's biggest efforts in the
    IT area is the Service Center Procurement effort.
        A. How much has the Department obligated each fiscal year since
    fiscal year 1995 for this effort? Please show it by funding source for
    each fiscal year.
        B. How much is the Department requesting in fiscal year 1999 for
    the Service Center IT procurement by funding source and how much in
    additional funding will it cost to fully fund this effort?
        Answer. The Department's investment in achieving a shared
    information system for the USDA Service Center agencies includes:
    Business Process Reengineering (BPR), which defines the business
    requirements for enabling technology; telecommunication infrastucture,
    better known as the Local area network/Wide area network/Voice (LAN/
    WAN/Voice) Project; Base data acquisition, digital ortho photography
    and soils digitization; and a capital investment in hardware and
    software, the Common Computing Environment (CCE). The total investment
    in each of these areas for fiscal year 1996 through fiscal year 1999 is
    shown in the table that follows.
        Most of the costs for these initiatives are being funded from base
    level agency resources. However, an increase of $30 million is
    requested in fiscal year 1999 under the salaries and expense account of
    the Farm Service Agency. Based on the BPR Business Case, the
    Department's Executive Information Technology Investment Review Board
    (EITIRB) approved a $350 million investment for the Service Center CCE
    be added to the IT investment portfolio of the Department. The $110
    million investment in fiscal year 1998 and 1999 includes approximately
    $100 million for the CCE ``procurement''. Approximately $250 million
    will be needed between fiscal year 2000 and fiscal year 2001 to
    complete the acquisition of the CCE equipment and software for the
    Service Centers. The funding sources for future years have not been
    determined at this time.
        [The information follows:]

                                      USDA SERVICE CENTER SHARED INFORMATION SYSTEM
    ----------------------------------------------------------------------------------------------------------------
                                                                                     Fiscal year--
                                                                 ---------------------------------------------------
                              Activity                                                          1998         1999
                                                                  1996 actual  1997 actual    planned      proposed
    ----------------------------------------------------------------------------------------------------------------
    I. Business Process Reengineering (BPR):
        Unallocated.............................................  ...........  ...........  ...........      $10,800
        CCC.....................................................  ...........       $6,542       $4,900  ...........
        FSA.....................................................  ...........          468          950  ...........
        NRCS....................................................  ...........        1,500        2,897        3,000
        RD......................................................  ...........          118        1,150  ...........
        OSEC....................................................         $800  ...........  ...........  ...........
                                                                 ---------------------------------------------------
          Subtotal..............................................          800        8,628        9,897       13,800
                                                                 ===================================================
    II. LAN/WAN/VOICE (L/W/V):
        Unallocated.............................................  ...........  ...........  ...........        6,637
        CCC.....................................................       68,500  ...........       20,257        2,275
        FSA.....................................................        1,800          743          269           88
        NRCS....................................................  ...........        8,530        2,300  ...........
        RD......................................................        2,400        1,400          541  ...........
                                                                 ---------------------------------------------------
          Subtotal..............................................       72,700       10,673   \1\ 23,367        9,000
                                                                 ===================================================
    III. BASE DATA ACQ:
        CCC.....................................................       22,000  ...........        6,000  ...........
        NRCS....................................................        8,000       17,500       13,750       15,050
                                                                 ---------------------------------------------------
          Subtotal..............................................       30,000       17,500       19,750       15,050
                                                                 ===================================================
    IV. Common Computing Environment (CCE):
        CCC.....................................................        4,200  ...........       20,500       15,000
        FSA.....................................................  ...........  ...........          500       30,000
        NRCS....................................................  ...........  ...........       17,200       16,250
        RD......................................................  ...........  ...........        4,100        7,000
                                                                 ---------------------------------------------------
          Subtotal..............................................    \2\ 4,200  ...........   \2\ 42,300       68,250
                                                                 ===================================================
    Total:
        Unallocated.............................................  ...........  ...........  ...........       17,437
        CCC.....................................................       94,700        6,542       51,657       17,275
        FSA.....................................................        1,800        1,211        1,719       30,088
        NRCS....................................................        8,000       27,530       36,147       34,300
        RD......................................................        2,400        1,518        5,791        7,000
        OSEC....................................................          800  ...........  ...........  ...........
                                                                 ---------------------------------------------------
          Grand total...........................................      107,700       36,801       95,314      106,100
    ----------------------------------------------------------------------------------------------------------------
    \1\ The $9 million in fiscal year 1999 include $4 million to complete the installation phase by December 1998.
      The remaining $5 million are to cover maintenance costs.
    \2\ Of these amounts, $4.2 million in fiscal year 1997, $9.3 million in fiscal year 1998, and $1.25 million in
      fiscal year 1999 are for pre-acquisition studies, evaluations, and pilot testing.

        Question. We understand that the Department has turned to
    contractors to perform oversight responsibilities for IT projects, the
    Independent Verification and Validation (IV&V) process. Given the
    change in philosophy to contract out for oversight of IT projects using
    the IV&V process:
        A. What savings have been achieved for the Department in terms of
    reduced staff since contractors now have some of the workload?
        B. What other quantifiable benefits have resulted from these
    IV&V's?
        C. What has been spent to date and is obligated for conducting
    IV&V's, and what projects have been reviewed to date?
        Answer. Please let me make an important clarification. Oversight
    responsibilities for IT projects remain in the Department, specifically
    in the Office of the Chief Information Officer, and are not contracted
    out. The purpose of our Independent Verification and Validation program
    is to conduct un-biased reviews and analyses of IT plans, management
    approaches, technical alternatives, requirements and cost-benefit
    studies. We feel very strongly that these independent reviews,
    conducted before we make multi-million dollar investments in IT, will
    assist us in identifying strengths and weaknesses, alternatives or
    requirements which we did not consider, or alternative courses of
    actions which may help us to maximize benefits and minimize risks.
        The IV&V program is designed to help us acquire, on a short-term
    basis, expertise which is not readily available internally. Typical
    task length is 45-90 days. We look at the breadth of both the
    government and private sector experience when we select an IV&V
    contractor.
        A table identifying costs and benefits of the IV&V Projects will be
    submitted for the record.
        [The information follows:]
                                                                     Dollars
            IV&V project/benefits                                  obligated
    Service Center Implementation--LAN/WAN/Voice Initial Review
        (fiscal year 1997). Completed. Identified problem areas
        and suggested resolutions which, when applied, allowed
        USDA to lift the nation-wide suspension on installations..   $50,000
    Service Center Implementation--LAN/WAN/Voice Follow-On Review
        (fiscal year 1997). Completed. Evaluated USDA's
        implementation of suggestions from initial review.
        Verified that new approaches are work-
        ing.......................................................    10,000
    Service Center Implementation--Review of Year 2000 Plans
        (fiscal year 1997). Completed. Evaluation of service
        center agency Y2K plans, based on contractor-developed
        criteria, consistent with GAO guidance. Conducted in
        conjunction with USDA Y2K program office..................    45,000
    Service Center Implementation (fiscal year 1998). Completed.
        Evaluation of Service Center implementation plans to
        identify and rank candidate components for future IV&V
        studies...................................................    27,000
    Service Center Implementation--Common Computing Environment
        (fiscal year 1998). Completed. Verified and validated
        cost/benefit analysis and technical alternatives. Provided
        additional insights, based on experience, which will be
        useful in conducting laboratory and pilot tests...........   115,000
    USDA IT Architecture (fiscal year 1998). Completed. Contractor
        validated USDA's current baseline against industry
        standards and found no major problems; provided
        recommended future actions, based on an OMB-approved
        methodology...............................................   220,000
    USDA Foundation Financial Information System (fiscal year
        1998). Currently underway to: evaluate project plans,
        schedules and projected costs; evaluate USDA requirements
        versus software capabilities; review strategies and plans
        for future implementations and upgrades...................   150,000

        Three years ago this Committee noted the growth in geographical
    information systems (GIS) technologies and their application in the
    private sector. As a result, the Committee encouraged the Secretary to
    pursue the possibility of a multi-agency, multi-disciplinary approach
    to better involve federal, state, and local governments in developing
    uniform GIS applications. We understand that USDA has several agencies
    involved in developing geographical information systems (GIS) and
    associated projects such as digital orthophotography and data
    digitization.
        Question. Please provide a list of USDA agencies engaged in GIS
    projects, a description of these projects, and total estimated life-
    cycle costs for each project.
        Answer. The agencies involved in GIS development are: Forest
    Service, Natural Resources Conservation Service, Farm Service Agency
    and Rural Development.
        Question. What have each of these agencies spent over the last 5
    individual years on GIS technologies and related expenditures?
        Answer. Spending for GIS-related hardware, software, and geospatial
    data is integrated into the A-11 reports submitted by each agency
    without specific breakout.
        Question. What does USDA plan to spend in fiscal years 1998 and
    1999 on GIS systems?
        Answer. The Chief Information Officer will provide you with
    information on expenditures and life-cycle costs by early April.
        Question. What progress has USDA made to establish a multi-agency,
    multi-disciplinary approach to develop uniform GIS applications?
        Answer. USDA is working with the Open GIS Consortium (OGC), which
    represents most of the major information technology companies. We have
    representation on the Board of Directors as well as management and
    technical committees and help guide industry in making decisions which
    foster interoperability and enable the development of common GIS
    applications. Recently the OGC issued a standard for representing point
    and line geographic features and they have demonstrated the ability for
    competing vendors to access and use each others geospatial data, over
    the internet, without having to go through a time consuming and
    expensive download and conversion process. We are working with industry
    to develop other standards for geographic features and GIS technology
    that will foster interoperability.
        As industry completes and adopts these standards, various agencies
    and disciplines will be able to develop more uniform applications which
    make use of each other's information without having to recreate or
    convert that information.
        Question. What steps has USDA taken to ensure that activities
    related to developing GIS are not duplicated across government agencies
    and are systematically accomplished?
        Answer. The Federal Geographic Data Committee (FGDC) continues to
    be the primary committee which ensures that GIS activities are
    coordinated among government agencies. USDA is an active participant at
    the Steering Committee level as well as the many subcommittee and
    working group level. USDA also has an Agriculture Geographic Data
    Committee which meets periodically to coordinate GIS activities within
    the Department.
        The three Service Center Agencies--Farm Service Agency (FSA),
    Natural Resources Conservation Service (NRCS), and Rural Development--
    have formed a partnership to develop and implement a uniform GIS
    solution for Service Center offices. This involves a common set of
    shared geospatial data layers, common hardware and GIS software, and
    joint training.
        The Forest Service and NRCS periodically meet to coordinate their
    efforts in GIS and geospatial data development and data sharing. A
    number of projects are underway to development geospatial data and GIS
    applications in a uniform manner to avoid duplication of efforts.
                                   management
        Question. In several places within the budget, the term
    administrative convergence is mentioned and that the Department is
    coordinating the functions of the different field service agencies to
    provide a more seamless and efficient delivery system. We see that this
    is being done only for the Service Center agencies, i.e., the Farm
    Service Agency, Natural Resource Conservation Service and Rural
    Development, but nevertheless USDA reports that by 2002, the proposal
    would result in a 22 percent reduction in administrative staffing from
    1997. Savings by 2002 would equal $127 million/per year.
        How many administrative staff did the USDA Service Center agencies
    have in 1997 broken out by headquarters, state, and field office level,
    and what did this staff cost?
        Answer. I would be glad to provide that information for the record.
        [The information follows:]

                                                       STAFF YEARS
    ----------------------------------------------------------------------------------------------------------------
                                                                                   Technical
                 Mission area               Headquarters    Finance    Regional     Center/       States     Total
                                                          Office \1\    Office   Institute \2\
    ----------------------------------------------------------------------------------------------------------------
    NRCS..................................          118   ..........         91          171          613        993
    FSA...................................          393          940  .........           88          338      1,759
    RD....................................          224          472  .........  .............        404      1,100
                                           -------------------------------------------------------------------------
          Total...........................          735        1,412         91          171        1,347      3,852
    ----------------------------------------------------------------------------------------------------------------
    \1\ The column headed Finance Office includes the St. Louis operations of Rural Development and the Kansas
      Operations of the Farm Service Agency.
    \2\ The column headed Technical Center/Institute includes the Aerial Photography unit of the Farm Service Agency
      in Salt Lake City.

        The estimated savings of $127 million annually represents only the
    savings resulting from the reduction of 2,314 staff years between 1993
    and the year 2002, assuming an average staff year cost of $55,000. It
    does not include the savings to be realized through the elimination of
    duplicate systems, business process re-engineering and better
    coordination of activities. Nor does it include the cost acquiring and
    installing the common computing environment, any relocation of
    personnel or other costs associated with consolidation. Assuming an
    average staff year cost of $55,000, the fiscal year 1997 cost of the
    3,852 administrative positions in the three mission areas is a little
    over $200 million.
        Question. What is the total number of administrative staff for USDA
    broken out by headquarters, state, and field office levels?
        Answer. The following table contains the information.

                            USDA Administrative Staff

                                                                        1997
            Location                                                estimate
    Headquarters...................................................... 4,298
    Regional.......................................................... 4,353
    State............................................................. 1,457
    Field Offices..................................................... 4,600
                            -----------------------------------------------------------------
                            ________________________________________________
          Total.......................................................14,708

        Question. With the significant amount of savings estimated for the
    Service Center agencies alone, what would the amount of savings be if
    all USDA agencies were included in the administrative convergence
    initiative? Does the Department have any current plans for expanding
    the administrative convergence effort across the Department?
        Answer. The administrative convergence initiative would be
    difficult to apply to other agencies that are not operating out of the
    USDA Service Centers. At this time we do not have plans to expand this
    effort across the Department. However, I would like to note that
    administrative units for each mission area were combined as part of the
    USDA reorganization a few years ago.
               modernization of administrative processes program
        For years now, USDA has funded the Modernization of Administrative
    Processes (MAP) program, but now we see that USDA is no longer funding
    this program.
        Question. What was spent in total on this program since its
    inception?
        Answer. From fiscal year 1993 through fiscal year 1997, the MAP
    Program spent $13 million. For fiscal year 1998, $4.2 million have been
    planned which will bring the total MAP expenditures to $17.2 million.
        Question. What were the results of this program?
        Answer. Prior to it termination, the program had seven active
    projects to improve USDA's administrative functions: (1) Purchase Card/
    Convenience Check, (2) Procurement System Modernization, (3) Human
    Resources Management (personnel system) Modernization study, (4) Time
    and Attendance, (5) Telecommunication Services, (6) Information
    Resources Management Analysis, and (7) Civil Rights Complaints
    Processes to include both Program and Equal Employment Opportunity
    processes.
        The Purchase Card project (an automated system for tracking,
    reconciling, and paying government credit card purchases up to $2,500)
    has begun implementation USDA-wide and is planned to be completed by
    March 1999. Both the Purchase Card/Convenience Check and the
    Procurement System Modernization projects have been combined. Cost
    avoidance is expected to exceed $29 million annually when fully
    implemented. Pilot testing of the Telecommunication Services project
    (to automate and consolidate USDA's telecommunications needs to allow
    central billing, reconciling, and equipment inventory management) began
    in February 1998. This project has been expanded to include a baseline
    telecommunications inventory in support of Year 2000. This project is
    expected to complete its evaluation by July 1998. The IRM Analysis
    project (to analyze USDA's IRM program regarding those IRM business
    processes that support the Department's technology program) was
    completed September 1998. It will serve as the basis for future
    modernization projects. The Human Resources Management Modernization
    study was completed September 30, 1997, and provided recommendations
    for 10 different modernization projects. The Time and Attendance
    project was identified as a top modernization project. Currently,
    commercial-off-the-shelf software packages are being pilot tested to
    determine their application to USDA's time and attendance requirements.
    A final report on the results will be issued May 1998. A potential cost
    avoidance of $39 million is expected. The Civil Rights program and EEO
    complaint processes' redesign were completed September 1998 as part of
    the Civil Rights Implementation Team efforts. Currently, automated
    tracking systems are being developed to support these Civil Rights
    processes.
        Question. Why did USDA terminate this program?
        Answer. While it is true that USDA terminated the MAP program
    Office in Departmental Administration, the MAP projects were not
    terminated. All of the active modernization were transferred to the
    respective offices within Departmental Administration and to USDA's
    Office of the Chief Information Officer. These ongoing modernization
    projects are still funded by the Department's Working Capital Fund.
                                     ______

                     Questions Submitted by Senator Gorton
                               regional research
        Question. It is apparent from this budget that the President and
    USDA have not made regional research a priority. Using Washington state
    as an example, how can you explain the need to cut essential research
    for the nation's leading apple, hops, dry peas and lentils and second
    leading potato, grape and asparagus producers in the United States?
        Answer. As a part of the Administration's efforts to balance the
    budget and direct spending to higher priority areas, projects earmarked
    for specific institutions were proposed for elimination. Research
    funding distributed by formula under the Hatch Act to Washington State
    University could be used to continue aspects of these projects if they
    are deemed to be of a high priority at State or local levels.
    Additionally, researchers could apply for funding under the National
    Research Initiative competitive research grants program or obtain
    funding from State and local governments and/or private sources, such
    as industry, to continue these projects.
        Question. Last year USDA and the President cut regional research,
    much like we have witnessed in this budget. Why, after Congress
    reinstated all of the regional-based research our agriculture
    communities require, were these projects again eliminated?
        Answer. The elimination of projects earmarked for specific
    institutions is consistent with the Administration's efforts to balance
    the budget and direct spending to higher priority areas and its policy
    of awarding research, education, and extension projects through a
    competitive, merit-review process. It is possible that funding
    distributed under the Hatch Act, or funding from the National Research
    Initiative competitive research grants program, State and local
    governments and/or private sources, such as industry, could be used to
    continue aspects of these projects if they are deemed to be of high
    priority at State or local levels.
                              ars location closure
        Question. Another specific question for the State of Washington--
    why was the Prosser Research Station zeroed out for the second year in
    a row?
        Answer. The President's budget requires the reallocation of
    existing resources to finance new, high priority research needs. A
    number of projects carried out in ARS research stations at Prosser,
    Washington; Mandan, North Dakota; Orono, Maine and Brawley, California,
    were identified as less critical. As a result, a cost-effective
    decision was made to terminate and redirect resources to new research
    initiatives and recommend closure of these research stations.
                                     ______

                      Questions Submitted by Senator Burns
                       u.s. agricultural exports for 1998
        Question. Now that I have launched into my sermon of what I
    consider to be the evils of this Administration's agricultural trade
    policy, I would appreciate it, Mr. Secretary, if you would provide the
    Committee with an outline of what you foresee in the export of American
    products for the coming year.
        Answer. The current fiscal 1998 forecast for U.S. agricultural
    exports is $58.5 billion, up $1.2 billion from 1997 and second only to
    the 1996 record of $59.8 billion. Compared with 1997, the only major
    products expected to show a year-over-year drop in export value are
    soybeans and meal. U.S. export volumes for soybeans and products should
    rise due to strong foreign demand; however, prices are down sharply
    reflecting a strong recovery in domestic and foreign oilseed stocks.
        A large increase in sales to Latin America is forecast. Little
    change is expected for exports to Europe, Canada, the Middle East, and
    the Newly Independent States of the former Soviet Union. The forecast
    for Asia reflects slower export growth to Japan and reduced prospects
    for U.S. exports due to the financial crisis. The adverse impact of the
    Asian crisis on U.S. agricultural exports in 1998 was conservatively
    estimated at $500 million in December. We will be releasing a revised
    export forecast for 1998 on February 23, which should include a more
    thorough assessment of the effects of the Asian financial crisis on
    this year's export performance.
                           export enhancement program
        Question. Would you please outline what you see as the standards by
    which you would consider using Export Enhancement Program (EEP) funds
    for the coming year?
        Answer. There is no single standard for deciding when to use EEP.
    Congress has given guidance that it should be used both for trade
    policy reasons, such as responding to EU subsidies, and for market
    development. We will use EEP when we believe it's the appropriate tool
    to meet those objectives. With the recent developments in Asia, credit
    guarantees under the GSM-102 program seem to be the most useful tool to
    protect U.S. export markets. We are aware of EU subsidy actions, and we
    are watching them closely. But, we don't think the situation warrants
    use of EEP at this time.
                       foreign market development program
        Question. Would you provide the Committee with the exact amount
    that has been allocated in this budget for the Foreign Market
    Development Fund? I would like it broken down in terms of the amount
    appropriated for this coming year and for any dollars considered to be
    carry over from previous fiscal years.
        Answer. The budget includes $22.0 million in new appropriated funds
    for the Foreign Market Development Cooperator Program in fiscal 1999.
    It is currently estimated that an additional $6.7 million of carryover
    funds also will be available to support Cooperator marketing activities
    in 1999. Thus, the total USDA contribution to support the program is
    currently estimated at $28.7 million. While the level of new
    appropriated funding requested in the budget is somewhat lower than in
    previous years, the budget assumes a higher level of cost-share
    contributions from Cooperator organizations which will help to offset
    the reduced Federal contribution.
                            asian financial reforms
        Question. Taking into account the fact that many of the Asian
    countries which have recently experienced economic chaos will or have
    received funds from this country and your Department in particular. And
    considering that these same countries have a number of barriers in
    place against the importation of American agricultural products, could
    you give the Committee some idea of the talks that are proceeding
    between this Government and the governments of those countries which we
    have recently given funding to in order to stabilize their currencies
    and economies?
        Answer. We are in frequent communication with many of the countries
    that have received IMF assistance in terms of assessing their credit
    needs and as part of on-going bilateral discussions. We do not want to
    underestimate the fact that the Asian countries that have received the
    IMF assistance are also important U.S. agricultural export markets. To
    obtain IMF assistance, recipient countries agreed to improve market
    access and adopt more transparent trading regimes, steps which are also
    beneficial to U.S. agricultural exports.
        For example, effective February 1, Indonesia reduced agricultural
    tariffs on over 500 agricultural items to five percent and on April 1,
    BULOG's monopoly on Indonesian wheat imports ends. Regarding South
    Korea, the good news is that a condition of the IMF assistance package
    is that Korea adopt a more open and transparent trade policy. Korea
    notified the WTO of revision to its Food Additive Code which should
    bring Korea into more conformance with international codes. In
    addition, we understand that Thailand has also reduced tariffs on
    certain agricultural items.
                               wildlife services
        Question. Again this year Mr. Secretary, the budget proposes a
    redirection in funding for the Wildlife Services Agency, the former
    Animal Damage Control. For the past three years I have worked in the
    Interior Appropriations bill to get additional funds for the agency
    from the Fish and Wildlife Service. It is my feeling that if they are
    the reason the wolves have come into the area, then they need to pay
    additional dollars for control. Are you aware that in 1994 the Fish and
    Wildlife Service provided $100,000 for predation reports related to the
    wolves in the Yellowstone National Park in Idaho? Four years later and
    10 times as many wolves in the area, Fish and Wildlife Service is
    continuing to provide that same level of funding.
        Answer. Yes, I am aware of the funding situation. Cooperation
    between the Department of Interior's Fish and Wildlife Service (FWS)
    and APHIS' program for Wildlife Services (WS) in dealing with gray wolf
    recovery has been good. An interagency agreement between WS and the FWS
    calls for each agency to contribute $100,000 per year to support WS'
    Wolf Management Specialist and program efforts to deal with wolf
    predation on livestock.
        Question. Could you explain the reasoning behind the reduction in
    the budget for Wildlife Services?
        Answer. The 50/50 cost sharing proposal is made in an effort to
    encourage cooperators to contribute a fair share of funding toward
    cooperative Wildlife Services activities in each State. This proposal
    is made in consideration of States in which cooperator contributions
    are equal to or greater than Federal contributions, as this approach
    greatly enhances the value of Federal funds invested. By encouraging a
    minimum 50 percent cooperator contribution level, the Agency can
    accomplish a more equitable distribution of Federal funds, can
    accomplish the same level of program activity with less Federal
    funding, and can consider future needs and new cooperative agreement
    proposals on a more programmatic and equal basis.
        Question. Do you see where the proposed change in the joint
    budgetary venture will have any affect on the important wildlife damage
    control program?
        Answer. This proposal is made in anticipation of cooperators
    increasing their contributions to a minimum 50 percent cost sharing
    level. When this is accomplished, total cooperative funding levels and
    therefore cooperative program activities, would not be affected by this
    proposal. If, however, cooperative funding levels do not increase as
    needed to increase the 50 percent minimum, Federal contributions would
    be reduced to a 50 percent maximum contribution level. This action
    would affect a variety of cooperative program activities in 33 states,
    based on fiscal year 1996 Federal/cooperative contribution data.
        Question. Are you aware Mr. Secretary, that the 1931 Act which
    provides you with the Authority for the Wildlife Services Agency, has
    set a ratio for these programs in the States? (If he is not aware of
    this, how can he proceed with this proposal for a 50/50 split?)
        Answer. No, I am not aware of such restrictions. The 1931 Act
    authorizes control and related experiments and investigations regarding
    predatory and other wild animals, and provides that the Secretary of
    Agriculture may cooperate with States, individuals, public and private
    agencies, organizations, and institutions, but does not include
    specific details or ratios regarding this cooperation.
                              forest service roads
        Question. Mr. Secretary earlier this year when you announced the
    moratorium on road construction in roadless areas in our National
    Forests, your web page announced that there would be a series of public
    hearings on this in the west. Yet just today I was informed that you
    have done away with these public meetings. Do you consider it sound
    public policy to propose a dramatic change of this nature, with only a
    thirty day comment period and with no public meetings involved in the
    public process?
        Answer. As a result of early public and Congressional comment on
    the proposed interim rule establishing an 18 month moratorium on road
    construction in certain roadless areas and on the Department's advance
    notice of proposed rulemaking on road management, the Department has
    decided to extend the public comment period on the proposed road
    moratorium for an additional 30 days. There are also plans to hold at
    least 25 public forums across the country.
                                land acquisition
        Question. Your department, namely the Forest Service, has been
    discussing the possibility of purchasing a private property and a
    conservation easement north of Yellowstone National Park. In fact, 3
    million has been included in the supplemental LWCF account for this
    property. (6.5 million within the Forest Service and 6.5 million within
    BLM) Last month, the White House Council on Environmental Quality
    hosted a meeting with livestock producers and animal health authorities
    from various states to discuss this issue and how it relates to the
    management of the brucellosis infected Yellowstone National Park Bison
    herd. At the meeting, federal authorities stated this land acquisition
    would be a major part of the solution to the bison situation. How does
    this land acquisition address eradication of the disease, something
    your department has advocated for decades?
        Answer. Acquisition of portions of the Royal Teton Ranch is only
    one part of the solution of the bison management problem. Land
    acquisition does not specifically address eradication of brucellosis.
    Support for acquisition of the ranch goes far beyond benefits to bison
    management. The focus of this project is to protect key winter ranges
    and migration corridors for several species of wildlife that move
    across the Yellowstone National Park boundary. These lands provide
    habitat for bighorn sheep, mule deer, elk, antelope, grizzly bear,
    mountain lion and bison.
        Question. Your agency's discussion about the land north of
    Yellowstone National Park do not simply deal with an acquisition of
    fee-title. The proposed package includes purchase of land, exchange of
    lands and an conservation easement for wildlife. The details of these
    are not clearly defined. I have two questions:
        How is the Gallatin National Forest going to pay for the increased
    amount of responsibilities of the new land, especially in light of
    Region One's current budget constraints?
        Answer. I understand that there will be additional costs associated
    with processing the land purchase and exchange cases. The Forest
    Service will pay for these costs through the current land acquisition
    management request. Future management costs are difficult to estimate.
    It is the agency's sense that the consolidated land ownership patterns
    will result in cost savings and the additional acreage will not have a
    major impact on the funding needs of the Gallatin National Forest.
        Question. And: How do you plan on including the Montana
    Congressional Delegation and the Governor in these discussions?
        Answer. The Department has been working with State agencies, other
    Federal agencies, the landowner and others to define the property to be
    acquired. It is my understanding that State officials clearly
    understand the proposal. We are certainly willing to meet with the
    Montana delegation to discuss details of the acquisition.
                                  brucellosis
        Question. It is my understanding that APHIS agreed to move a trap
    for bison management in the West Yellowstone area (specially on Horse
    Butte). This would require a financial commitment for the relocation
    and operation of the trap. Please provide the Committee and update on
    this trap relocation efforts and the financial commitment management
    around this facility?
        Answer. The State of Montana and the Forest Service (FS) have
    selected a site for relocating the trap to the West Yellowstone area.
    In December 1997, the State of Montana received a draft permit for
    setting up and operating the trap. To date, the draft permit has not
    been signed by the State. The State of Montana has several concerns
    with the permit. Conditions of the permit include the requirement of a
    2 week-long survey on eagle nests in the area and restrictions on the
    trap's usage to certain days and hours of operation. The permit also
    requires the trap operations to cease in mid-April. Once the permit is
    signed, APHIS expects operations to commence within 3 weeks. Two weeks
    will be needed to conduct the survey on area eagle nests and 1 week
    will be needed to relocate the trap.
        So far this winter, the demand for a trap in this area has not been
    great. The low level of demand is due to the mild winter and the
    absence of bison in the area. To date, only six bison have been located
    in this area and removed.
        The cost of relocating the trap is estimated at about $11,000.
    APHIS will most likely contract this work. APHIS also expects to
    contract for trap maintenance and snow removal. It is expected that the
    State of Montana will have operational control over the facility with
    Forest Service providing site security and APHIS providing personnel.
    APHIS may decide to contract personnel coverage with the State. The
    cost of operating the trap is difficult to predict and would depend on
    a number of factors including the weather conditions in a given winter,
    the number of bison in the area, and the number of staff-hours needed
    to operate the trap. In a mild winter, operating costs at the trap
    could be close to $100,000 (assuming the work is contracted to the
    State) and in a more severe winter, costs could total up to $150,000.
        Question. As you know, restrictions or threat of restrictions by
    other State animal health authorities is becoming increasingly more
    important in terms of brucellosis. The National Eradication Program
    created not only a Federal position of eradication and management of
    the disease, but also encouraged State animal health authorities
    involvement. In fact, Montana has very specific State statutes on herds
    which are exposed to brucellosis. What role is your department taking
    in educating States about activities which relate to disease exposed
    herds (bison and elk) within the Greater Yellowstone?
        Answer. To educate the states, APHIS has contracted with the
    Livestock Conservation Institute to issue newsletters to the states
    regarding the status of the National Eradication Program and activities
    within the Greater Yellowstone Area (GYA). In addition, APHIS recently
    sent a letter to all state veterinarians to inform them of the status
    of activities in the GYA.
        Question. I am aware of the actions being taken to manage
    brucellosis disease within the Greater Yellowstone Area. However,
    please provide to the Committee a specific list of actions the federal
    agencies are taking to eradicate brucellosis within Yellowstone
    National Park and Teton National Park.
        Answer. APHIS continues to work with and assist the National Park
    Service and the State of Montana with the implementation of the Interim
    Bison Management Plan and the development of a long-term bison
    management plan. APHIS participates on the Greater Yellowstone
    Interagency Brucellosis Committee and assists with preparing the
    Environmental Impact Statement (EIS) on brucellosis in the Park. The
    EIS is expected to be finalized in the third or fourth quarter of
    fiscal year 1998.
        In addition, APHIS provides personnel to assist with liaison
    activities, planning, bison capture, testing and sampling, and research
    activities. Several ongoing research projects are being funded in
    fiscal year 1998 including projects to evaluate the transmission of
    brucellosis in bison within Yellowstone National Park and study the
    safety and efficacy of the RB51 vaccine on bison.
        Question. In 1997, Secretary of the Interior Bruce Babbit
    commissioned a report by the National Academy of Science regarding
    brucellosis. What comments has the Department of Agriculture made about
    this document and did your department provide any comments during the
    public comment period by the National Academy of Science? Please
    provide those to the comment.
        Answer. No comments have been provided by the Department of
    Agriculture on the National Academy of Science report regarding
    brucellosis in the GYA.
                                     ______

                     Questions Submitted by Senator Stevens
                               wildfire programs
        The Millers Reach Fire caused more private property damage than any
    previous rural fire on record in Alaska. 161 families were totally
    burned out of their primary homes. Over 260 families were forced to
    seek some form of temporary or permanent assistance to make it through
    the winter. When I visited fire fighters on the scene, I was told that
    at least one volunteer fire fighting unit close to the source of the
    fire was unable to roll out due to mechanical problems and concern
    voiced by the State over their level of training.
        America's rural volunteer firefighters provide some $36.8 billion
    annually in estimated benefit to taxpayers. However the
    Administration's budget for this worthwhile program is the same as last
    year's level of only $2 million. Of that Alaska received only $40,000
    to cover roughly one-fifth of the nation's land mass.
        Question. Will your agency want to ensure that the Volunteer Fire
    Assistance program is equipped and capable of training volunteer fire
    departments so that they are able to contain fires in rural areas
    before the fires get out of control?
        Answer. In addition to the $2 million Volunteer Fire Assistance
    Program, which provides technical and financial assistance directly to
    local organizations, the budget provides $21.5 million to State
    forestry departments for their wildfire programs. This includes an
    annual average of $115 million worth of Federal Excess Personal
    Property loaned to the States. Finally, the Forest Service and the
    Interior agencies devote substantial fire protection and suppression
    resources to the Federal lands in the State of Alaska.
                                bear creek fees
        Recently the Juneau Empire ran a story about your intention to
    raise fees associated with visiting Bear Creek, in Alaska, to $50 per
    person.
        Question. Is there a Record of Decision on either an Environmental
    Assessment of an Environmental Impact Statement to implement these fees
    at Bear Creek?
        Answer. I presume that this is a site in the Recreation Fee
    Demonstration Program which was authorized by the 1996 Interior
    Appropriation. I support the program as a means of providing funding
    for the maintenance and reconstruction needs of the recreation program.
    As you know the backlog in this area is much greater than we, or the
    Congress, have been able to fund. User fees provide a welcome
    supplement to annual appropriations. I am not familiar with the
    specific situation at the location you are concerned about and have
    asked the Forest Service to provide additional information.
        [The information follows:]
        By Bear Creek, we presume that the question refers to the Pack
    Creek Bear Viewing Recreation Fee Demonstration Area. An Environmental
    Assessment of the Pack Creek Bear Viewing Area was completed in 1989
    which, among other management changes, initiated a reservation fee of
    $10 per permit. This fee was imposed to discourage people from
    obtaining permits and then not using them. Pack Creek has a very
    limited capacity of only 24 people per day. Thus, ``no-shows'' quickly
    limit the number of people who can actually visit this extremely
    popular area.
        In 1996, with the advent of the Recreation Fee Demonstration
    Program, both the Forest Service and the Alaska Department of Fish and
    Game (which co-manages the area since they manage the adjacent lands)
    scoped the topic of a joint use fee with the public. Most State funds
    for managing the area had been withdrawn by the Legislature, and Forest
    Service funding was continuing to decrease. The scoping evaluated
    several different price structures and cost recovery possibilities
    through implementation of a use fee. Under the demonstration fee
    authority, we have adopted a fee of $50 per person per day for the peak
    viewing season with a lower rate in the off prime, or ``shoulder''
    seasons of April and May. The agencies elected to phase in fee
    increases to the $50 level if initial visitor responses were favorable.
    The agencies signed a cost-share agreement in which the net receipts
    are split 50/50 after the cost of the reservation system is deducted.
    Visitors receive a permit that clearly identifies the two agencies and
    are told the funds go to both agencies for management of the site when
    they make their reservation.
        In 1997, the first year in which the interagency fee was
    implemented at Pack Creek, the fee was $20 per person per day in the
    shoulder season and $36 per person per day in the peak season. Seniors
    and juniors receive a discount. The customer response cards showed very
    strong support for the fee and management of the area. Some customers
    expressed willingness to pay more due to their high satisfaction with
    their visit. Despite the new fee, site use went up 11 percent overall
    from 1996, with increases of 7 percent and 22 percent in the peak and
    shoulder seasons, respectively.
        The current fee structure will remain in place in 1998 and is still
    below the target recovery rate of 70 percent. Current fees recover
    about 42 percent of the costs to manage the area. Positive customer
    service card responses indicated to both agencies that an increase to
    $50 per person per day for only the peak season was reasonable. Fees
    for the shoulder season will remain at $20 per person per day and
    senior and junior discounts will continue as before. The $50 fee will
    not take place until 1999 and will have been phased in over three
    years. Advance notice has been given our outfitter/guide permittees so
    that they will have ample time to incorporate the revised fees into
    their business plans. It appears that the $50 fee for the peak season
    is set at a level that provides reasonable returns to both agencies and
    it also appears to have solid support from the public.
        Question. The fees are raised 500 percent--from $10 to $50--Have
    you raised fees a similar percentage in ALL National Forests?
        Answer. Again, I am not familiar with the specific charges at each
    of the demonstration fee sites. I have asked the Forest Service to
    provide the information.
        [The information follows:]
        Nationally the Recreation Fee Demonstration Program is testing a
    wide variety of fees at a limited number of selected sites across the
    country. In fiscal year 1997, there were 40 projects charging fees.
    They ranged from single campgrounds to multi-State area trailhead
    parking fees. The Demonstration program is not an Agency-wide fee
    system at this time. It is testing an authority which expires on
    September 30, 1999 under current law. These fees are being tested on a
    very small fraction of the total National Forest System. In most cases,
    the fees being charged are new fees at locations or facilities which
    were previously free. Since these projects increased from no fee at all
    to something, the percentage increase cannot be calculated. Fees are
    being determined at the project level using methods such as fair market
    value analysis, surveys of potential users, and cost recovery.
        Fee demonstration prices vary widely from unique project to unique
    project. Most developed site projects and dispersed area parking fees
    include annual passes in the $20 to $30 range. Annual passes at a
    highly developed project in Arizona are $90. If the public is willing
    to pay an outfitter and guide company $1,700 for a one-week Heritage
    Expedition trip through Hells Canyon in Idaho, a modest Forest Service
    recreation fee would hardly be noticed.
        Pack Creek is a unique experience with substantial costs associated
    with protecting both the people and the bears. The fees are a test and
    public comments are being gathered to provide Congress with the
    information necessary to evaluate the Recreation Fee Demonstration
    Program.
                            rural utilities programs
        Question. Alaska's rural communities suffer from wide spread
    unemployment coupled with deplorable sanitation and water supply, and
    expensive diesel generated power issues. Recently key members of your
    staff visited Alaska to assess conditions first hand.
        Please state for the record what is being done by your Department
    to help address Alaska's rural utilities and power generation problems?
        Answer. I am aware of the sanitary conditions you spoke of and I
    understand that we are financing a significant number of projects in
    Alaska's rural communities and there are applications and plans
    underway for additional financing. I understand the recent visit of my
    staff was associated with oil spills related to fuel storage. I believe
    that we are going to be able to assist in correcting these problems
    through our community facilities program. I am told by my staff that
    discussions are underway to determine the most appropriate means of
    financing the effort in about 15 villages.
        I understand that we are also currently reviewing applications
    totalling about $30 million for electric cooperatives in Alaska.
                                     ______

                     Questions Submitted by Senator Bennett
                                  rural credit
        Question. In your personal opinion and based on your research, how
    critical is the need for enhanced credit for rural non-agricultural
    activities?
        Answer. Access to credit is vital to growth and development, and
    opportunities to provide greater access to credit for rural areas need
    to be explored. Several studies, including the rural credit study which
    the Department completed last year in response to a requirement of the
    1996 Farm Bill, have concluded that rural financial markets are work
    reasonably well. However, these studies also note that there are gaps
    in the market, particularly for isolated rural areas. There are, as
    well, problems that many rural borrowers have in qualifying for credit.
    This is why the Department needs to maintain a strong role in helping
    rural borrowers obtain credit. For example, the Department's Business
    and Industry loan guarantee program offers rural borrowers access to
    credit by allowing private lenders to make loans they would otherwise
    be unwilling or unable to make because of the amount of perceived risk
    or lending limitations. The Department also provides technical
    assistance and outreach. In addition, it provides credit at rates and
    terms that can be met by applicants who lack the repayment ability for
    commercial loans. Where there are opportunities to make more credit
    available to rural areas, either by improving the Department's programs
    or through other means, I believe we should give serious consideration
    to at least exploring those opportunities.
        Question. Do you agree that adequate credit for non-agricultural
    projects in rural localities is critical for the economic health of
    these areas?
        Answer. It is absolutely a critical component of the economic
    health of rural areas.
        Question. Do you and the United States Department of Agriculture
    support the three-year pilot proposal being considered by Senator
    Bennett to expand the authority of the Farm Credit System and Farmer
    Mac by allowing them to buy business and industry type loans from banks
    in rural areas?
        Answer. We have not developed a position on the proposal, but I
    think it is certainly something worth exploring.
                                     ______

                      Questions Submitted by Senator Craig
                           redirection of ars funding
        As you know from the years we served together in the House of
    Representatives, I have long been a supporter of agricultural research.
    To your credit, since you took the helm at USDA, ARS has expanded its
    mission and continues to produce the highest quality research in the
    field. Producers in my state, and their suppliers, have grown dependent
    upon the work being done by ARS scientists to develop new crop
    varieties and pest resistance. This work is conducted around the
    country, including four ARS stations in Idaho. I was pleased to lean
    that the President's budget request includes a $32 million increase for
    ARS--pleased until I saw where the money was to be spent.
        The President's budget request cuts important funding for ARS
    research in a wide range of crops, including: soybeans, potatoes, rice,
    cotton, small fruits, and sugar, among others. In place of these
    important research activities, ARS dollars are being siphoned off to
    fund environmental projects such as the Presidential Environmental
    Initiative for Global Change, the Presidential Initiative on South
    Florida Ecosystem Restoration, and programs in watershed health and
    environmental quality.
        Question. How can this administration justify cutting important
    crop research--research directly responsible to the challenges facing
    America's farmers and producers--to fund ``feel good'' environmental
    programs? Are there not better sources of funding for these programs
    than ARS, such as EPA?
        Answer. Environmental issues such as global change, watershed
    health, and environmental quality are directly relevant to crop
    production and are recognized by commodity groups as important concerns
    for the USDA research agenda. Because ARS does not have enough funds to
    address all the necessary required research, it became necessary to
    assign priority, and to redirect funds from projects which are less
    urgent. The projects proposed for closure are not limited to production
    agriculture, but also include certain environmental research projects
    that are less critical. ARS' strategic plan, gives a high priority to
    production agriculture. Part of the funds obtained through project
    closures would be redirected to environmental research that is directly
    relevant to crop production. ARS does not have direct influence on the
    budget and program of EPA. Although many EPA programs do concern
    agriculture indirectly and involve ARS research to varying degrees,
    much of the high priority environmental research ARS needs to undertake
    is not currently being pursued by EPA.
                             food safety initiative
        The President's request for ARS also includes $8 million in support
    of the Presidential Initiative for Food Safety.
        Question. Will the money be spent on new ARS facilities dedicated
    to food safety?
        Answer. The $8 million for ARS in support of the Presidential
    Initiative for Food Safety will not be spent on new ARS facilities
    dedicated to food safety.
        Question. How does USDA propose to incorporate this new work with
    the ongoing efforts being conducted at research universities across the
    nation?
        Answer. ARS food safety research is coordinated with and
    complements that of ongoing efforts being conducted at research
    universities across the Nation.
        ARS works closely with CSREES to explore how the two agencies can
    effectively coordinate the food safety research agenda, identify
    opportunities for collaborative research between Federal agency
    scientists and university scientists, and to identify unique research
    facilities and expertise of each set of performers.
        The longer term nature of Federal funding complements that of the
    university research programs. The multi-year sustained programs of the
    Federal laboratories support research initiatives that establish the
    basis for the continued biological understanding of pathogens and the
    technological advances necessary to develop the means to assure food
    safety and meet the expectations of the American consumer. The combined
    efforts of both Federal Government and academia are necessary because
    food safety research must solve the problems resulting from a plethora
    of technological practices, an array of animal and plant species and
    varieties, a range of climatic and regional differences, and a vast
    array of food products and consumer practices.
        Question. Has USDA considered the option of matching these ARS
    funds with CSREES monies to establish a series of national food safety
    research centers?
        Answer. Because ARS already has facilities for conducting the
    necessary food safety research, and the critical mass of scientific
    expertise and structure to lead the necessary food safety research
    programs, ARS has not considered the option of matching these ARS funds
    with CSREES monies to establish a series of national food safety
    research centers.
                               wildlife services
        Question. The President's request would decrease APHIS funding for
    wildlife services operations by more than $3.4 million or 17 percent.
    The Department's budgetary justification explains that this cut would
    bring the Federal/State cost sharing into ``equilibrium'' with each
    contributing 50 percent. I am reminded that in 1992 the funding was
    divided between the Federal and State governments at 75 percent Federal
    and 25 percent State, and 65 percent Federal and 35 percent State in
    1997. I am disturbed by this trend and would like to know if any
    specific target cost share ratio is mentioned in the program's organic
    legislation, the Animal Damage Control Act of 1931. If not, would the
    Secretary explain how the Department reached the 50 percent figure?
        Answer. The 1931 Act authorizes control and related experiments and
    investigations regarding predatory and other wild animals, and provides
    that the Secretary of Agriculture may cooperate with States,
    individuals, public and private agencies, organizations, and
    institutions, but does not include specific details or ratios regarding
    this cooperation.
        The 50/50 cost sharing proposal is made in an effort to encourage
    cooperators to contribute a fair share of funding toward cooperative
    Wildlife Services activities in each State. It is more in line with
    cost sharing programs like brucellosis, boll weevil, and fruit fly
    eradication. This proposal is also made in consideration of States in
    which cooperator contributions are equal to or greater than Federal
    contributions, as this approach greatly enhances the value of Federal
    funds invested. By encouraging a minimum 50 percent cooperator
    contribution level, the Agency can accomplish a more equitable
    distribution of Federal funds, can accomplish the same level of program
    activity with less Federal funding, and can consider future needs and
    new cooperative agreement proposals on a more programmatic and equal
    basis. The specific activities and the degree to which activities would
    be affected, is dependent upon changes in funding levels in each
    affected state.
        Question. Has the Department conducted any study into the impact
    this change would have in existing Wildlife Services operations?
        Answer. This action could affect a variety of cooperative program
    activities in 33 States based on fiscal year 1996 Federal/cooperative
    contribution data. The specific activities and the degree to which
    activities would be affected is dependent upon increased cost-share
    funding levels in each affected state.
                 nutrient analysis in child nutrition programs
        Question. As you know, authority for the bulk of child nutrition
    programs expires this year and each will need to be reauthorized. In
    light of this, and the Department's and Congress' strong past
    commitment to these programs, do you not agree that we should take
    steps to eliminate the requirement for the use of weighted averages
    when conducting nutrient analysis?
        Answer. The School Lunch Act requires that schools serve lunches
    and breakfasts that are consistent with the goals of the Dietary
    Guidelines. However, how schools achieve this goal, and how we measure
    their success, is an somewhat technical matter. I understand that Under
    Secretary Watkins has waived the requirement to use weighted averages
    when conducting nutrient analysis through July 2000 while she reviews
    this issue.
        Question. Does the Department support this fundamental change and
    can you commit to removing the use of weighted averages from future
    Departmental policies?
        Answer. I prefer not to make any commitments at the present time
    until after I have seen the results of the Department's review of this
    issue.
                                     ______

                     Questions Submitted by Senator Bumpers
                                farm safety net
        The 1996 Farm bill made substantial changes in farm programs and
    altered the government's role in the farm sector. Over the past couple
    of years, times have been good for farmers. Markets, for the most part
    have been strong. On top of that, taxpayers have been paying out
    billions of dollars in Freedom to Farm payments that farmers would not
    have earned under previous programs because assistance, then, was tied
    to the market.
        Farm net income hit a record high of $60 billion in 1996. Estimates
    for the year just ended have already fallen by $5 billion from the year
    before. As the fixed Freedom to Farm payments glide to extinction and
    commodity prices regain their historical pattern of unreliability, I
    fear what may be on the horizon.
        Question. The USDA Budget Summary and your remarks make several
    references to the need to improve the farm ``safety net''. Would you
    provide your thoughts on the short and long term stability of the farm
    economy?
        Answer. Some perceive that the 1996 Farm Act will lead to increased
    volatility in grain markets. It is generally argued that increased
    planting flexibility, fixed payments, and the elimination of acreage
    reduction programs and the Farmer-Owned Reserve will contribute to more
    volatility in grain prices (and planted acreage). In the short term,
    absent a stocks policy, there is the potential for greater volatility.
    However, in the medium to longer term, increased planting flexibility
    afforded by the 1996 Farm Act provides the opportunity for producers to
    respond to market imbalances more quickly and in a more timely fashion
    than was possible under previous laws. Commodity loans, credit
    assistance, crop insurance and other elements of the farm safety net
    can help producers respond and adjust to these changes.
        Question. What level of risk will farmers hold if the ``safety
    net'' items you propose are not enacted?
        Answer. All of the proposals we have made involve some degree of
    risk reduction in several areas of the farming enterprise. Loan
    extensions would help reduce price risk in marketing, insurance
    proposals reduce yield and revenue risk, and loan proposals help in the
    area of asset acquisition during years of crop disaster and/or
    abnormally low market prices.
        Question. Are some commodities, farm groups, or regions of the
    country at higher risk?
        Answer. Areas of the country that have limited options for
    producing alternative crops when prices are low for a particular crop
    may face greater risks than regions in which alternatives are greater.
    Producers who can select among several crops have the opportunity to
    profit from favorable market conditions in several markets. A producer
    who has only one cropping alternative has less opportunity to avoid
    low-priced markets. For these producers, availability of risk reduction
    tools is essential.
        Crops which are subject to higher risk may include those for which
    markets are very thin. For traditional producers of these crops,
    profitable market conditions may suddenly attract a significant
    temporary increase in acreage and a corresponding reduction in price,
    leaving those producers with lower than expected revenues during years
    in which the initial expected price is high. These producers are also
    in need of risk reduction tools, especially if cropping alternatives
    are limited.
        Question. Of the ``safety net'' items you propose, which do you
    feel to be the most important and why?
        Answer. Several proposals have been made to strengthen the safety
    net for farmers. Maintenance of an effective safety net to help our
    farmers and ranchers better manage risk has been a major priority for
    the past two years. Last year, we proposed some modest improvements in
    the safety net which were not acted upon by the Congress. These
    included provisions to permit extension of the terms of marketing
    assistance loans during periods of extraordinary market disruption, and
    the expansion of revenue insurance. These proposals deserve full
    consideration by the Congress.
        Important proposals in this year's budget include full funding of
    crop insurance with a shift in sales commissions for agents from
    discretionary to mandatory spending. This would consolidate all program
    spending into a single account and eliminate the possibility of the
    program being restricted by a limited appropriation of discretionary
    funds. This change will make the program more reliable for those
    producers who depend on crop insurance as a tool to manage risk.
        Another important proposal in the current budget is in the area of
    farm loan eligibility. Currently, once a farmer receives debt
    forgiveness, he/she is ineligible for future loans except annual
    operating loans in cases where the debt forgiveness was in the form of
    a write-down. This is a stricter standard than private lenders use.
    It's wrong, and I will send Congress emergency legislation as soon as
    possible to address the problem. This change would help some of the
    producers most in need of our assistance.
                diversity in production/industry infrastructure
        Question. Another feature of the 1996 Farm Bill was the planting
    flexibility it provided. It was recently reported that in your own
    state of Kansas, cotton production has expanded by a fourfold increase.
    Do you see a radical change in crop planting patterns?
        Answer. U.S. plantings of the principal crops in 1996 increased to
    the highest level since the mid-1980's--up about 16 million acres from
    1995--and stayed at that level in 1997. The increase in plantings for
    1996 primarily occurred for corn, wheat, sorghum and soybeans. Cotton,
    oats, and sunflower acreage declined. Plantings of principal crops in
    1997 remained at 1996 levels. Producers adjusted the mix of crops on
    their farms, but, on average, did not expand acreage as they did in
    1996.
        The biggest acreage shifts in 1997 was the 6.7-million-acre
    increase in soybean planted acreage. Soybean producers never had any
    acreage controls associated with their crop, but to the extent that
    acreage limitations for other crops limited the expansion of soybean
    acreage, the 1996 farm law could have been partially responsible for
    the acreage increase. Very strong oilseed prices, modifications of farm
    rotations to include more soybeans, favorable planting conditions for
    soybeans, and problems getting other crops planted also led to this
    soybean acreage surge. Record acreage of soybeans in the Lake States,
    Corn Belt and Northern Plains displaced corn and wheat plantings in
    this region.
        Plantings of sorghum declined in 1997 because the crop was not
    replanted after failed acres of other crops. Cotton acreage declined
    for the second consecutive year because a cool, wet spring limited
    plantings and more favorable net return prospects for several competing
    crops. Cotton acreage fell throughout the country, except for a small
    increase in the Southeast, as a recent buildup in the cotton
    infrastructure of the region has supported acreage there and some area
    planted to corn in 1996 returned to cotton.
        Winter wheat acreage dropped to the lowest level since 1978. Most
    States that expanded their wheat acreage in 1996 in response to rising
    prices scaled back wheat plantings the following year. Also limiting
    winter wheat plantings were late soybean and sorghum harvesting in
    1996, disease concerns in the eastern Corn Belt, and dry weather in
    other regions of the country. Farmers planted the second highest spring
    wheat crop in modern times following the 1996 60-year high.
        These changes in cropping patterns over the last two years are
    probably the result of commodity prices, weather conditions, and new
    legislation. While the new legislation expanded flexibility from prior
    laws, changes in plantings such as those described here likely could
    have occurred under the more limited planting flexibility provisions of
    the 1990 law.
        Question. Since, for example, cotton production requires cotton
    gins and other fixed facilities to further process the raw commodity,
    what are the economic implications in rural areas for increased
    diversification?
        Answer. Increased economic diversification in rural areas is
    generally beneficial for rural economies. In a global economy, where
    rural communities are subject to the effects of large scale economic
    forces beyond local control, survival may depend on having a wider
    range of economic options. This is true within the agricultural sector
    as well as in the general economy. Using the example of cotton, if
    global events result in reduced cotton prices for an extended period,
    producers are in a better position to survive if they have cropping
    alternatives to provide income. The local economy is more stable if
    alternative income sources are available.
        This does not mean all are better off in an increasingly diverse
    local economy. Excess processing capacity may develop in an area if
    crop production shifts occur in response to price changes. If these
    changes become permanent, investment in fixed facilities such as cotton
    gins would need to be re-evaluated. Investment risk may be higher for
    some processors, but on balance, rural communities are healthier if
    economic choices are available.
        Question. Are changes in farmer planting decisions likely to have a
    lasting effect on supporting services and erosion of the existing
    agricultural industry infrastructure?
        Answer. Farmers' planting decisions can affect supporting services
    if the services are tied to a specific crop. If decisions become
    permanent, this can cause an erosion of existing agricultural industry
    infrastructure along with expansion of new infrastructure to support
    alternative crops. However, acreage shifts tend to occur in response to
    price changes from year to year, and in agriculture it is unusual for
    prices to remain high or low for too long, so infrastructure often is
    not greatly affected. Two examples from the last two years are wheat
    and soybeans. Farm level wheat prices climbed to over $5.75 per bushel
    in the spring of 1995, and acreage increased by around 6 million acres
    in 1996. The resulting lower prices helped to reduce plantings by 4.5
    million acres in 1997, and winter wheat seedings this fall were the
    lowest since 1973.
        High soybean prices persisted through most of 1996 and 1997 and
    lead to the large increases in soybean acreage. Plantings in 1998 are
    expected to reach record levels. However, prices are forecast to return
    to below $5.50 for 1998/99, a price level that will likely have a
    significant effect on plantings in 1999.
        The new farm law, while giving farmers much greater latitude to
    shift to alternative crops, also provides the means to allow producers
    to respond quickly when prices signal a market imbalance, so it is
    unlikely that the new law will lead to a permanent shifting from
    traditional cropping patterns.
                      dismantling of farm program delivery
        Question. In light of the changes inherent in the 1996 Farm Bill,
    there has been an ongoing debate about the future of USDA's county-
    based delivery system. Every year, we see the number of Farm Service
    Agency staff positions fall and with them, obviously, the level of
    service to our farmers. Fears have been expressed that the 1996 Farm
    Bill and the related decline in USDA's delivery system contain a hidden
    agenda to make certain that once the system is seriously impaired,
    future farm programs won't even be possible. How many staff positions
    at the county level will be eliminated in fiscal year 1998 and how many
    do you plan to reduce in fiscal year 1999?
        Answer. In fiscal year 1998 there has been an estimated reduction
    in non-Federal county office staffing of 564 staff years through
    buyouts, RIF's, voluntary early outs and attrition. Proposed staffing
    reductions for fiscal year 1999 would reduce county office staffing by
    another 855 staff years.
        Question. Will your projected reduction in fiscal year 1999 change
    if the assumed user fees for FSA and NRCS are not adopted, and if so to
    what level?
        Answer. Yes, if proposed user fees are not enacted in fiscal year
    1999, the estimated total FSA non-Federal county staffing reduction
    would be 1,078--an increase of 223 staff years from the 855 estimated
    staff year reduction in the proposed budget. If direct appropriations
    were substituted in lieu of user fees to fund the 223 non-Federal
    county office staff years, then the reduction would remain at 855
    FTE's. For NRCS, the staff year reductions in the absence of the
    budgeted user fee revenues would be in the range of 175 to 200 staff
    years.
        Question. How much difficulty are you experiencing in managing
    staff reductions because some county offices contain both federal and
    non-federal positions?
        Answer. FSA currently has in operation two different personnel
    systems for employees in county offices. One system covers employees
    with Federal civil service status and the other system covers non-
    Federal positions. Due to the difference in systems, there are a few
    obstacles that the agency faces in managing reductions. Non-Federal FSA
    employees cannot compete for FSA Federal vacancies on an equal footing
    with Federal employees. Non-Federal employees who are in RIF status are
    not entitled to assistance and priority placement under the Career
    Transition Assistance Program. At this time, FSA is required by law to
    establish separate supervisory reporting procedures for non-Federal and
    Federal employees located in the same county office. These differences
    combined with the varying levels of staffing reductions needed between
    Federal and non-Federal FTE's have created new types of personnel
    problems. As you know, I favor converting non-Federal county employees,
    with their career tenure, to Federal civil service status.
        Question. Do you think all county positions should be federalized
    and why?
        Answer. Yes, I favor converting FSA non-Federal county committee
    employees, with their career tenure, to Federal civil service status.
    Conversion of FSA non-Federal employees to Federal civil service status
    would eliminate the difficulties FSA currently has in operating two
    different personnel systems for employees in county offices. These
    difficulties include the fact that non-Federal FSA employees cannot
    compete for FSA Federal vacancies on an equal footing with Federal
    employees, non-Federal employees who are RIF'ed are not entitled to
    assistance and priority placement under the Career Transition
    Assistance Program, and FSA is required by law to establish separate
    supervisory reporting lines for non-Federal and Federal employees
    located in the same county office. I also favor conversion of these
    employees because I believe the accountability of these employees in
    the areas of civil rights and access to credit is not as direct as if
    they were Federal employees. We are working on that legislation.
        Question. You have stated that you will not close any county
    offices until you have consulted with Congress, but doesn't the ongoing
    decline in county-level personnel affect the continued viability of
    certain county offices and therefore determine the closing of offices
    on a de facto basis?
        Answer. The substantial decline in county office employment does
    affect the capacity or ability of certain county offices to remain
    open. As these situations become more apparent, a normal option for FSA
    is to combine two or more headquarters' offices into a shared
    management operation where one office remains the headquarters office
    while the other county office or offices become full or part time
    suboffices. FSA will continue to close and consolidate county offices
    only with consultation of local FSA county committees, the Secretary,
    and Congressional delegations. We will consider any closure decisions
    in light of cost effectiveness and quality of service to the producer.
        Question. To what extent do you think we can continue the decline
    of USDA services at the county level until we have reached a point of
    no return?
        Answer. The Department has entered into a contract with an outside
    consulting firm to conduct a study of the farm and rural program
    delivery system of the county based agencies, FSA, NRCS, and RD, to be
    completed by September 1,1998. The study will clearly identify the
    purposes agency operations are intended to achieve, provide an
    independent assessment of agency workload estimates, consider the
    prospective impact of administrative convergence on county office
    operations, identify criteria for determining the highest value use of
    office staff, evaluate office operations efficiencies gained so far,
    and assemble a profile of the USDA customer base as defined by
    eligibility for program benefits. Finally, the study will identify
    alternative decision systems or organizational structures for matching
    USDA resources with customer needs and preferences. We will see what
    steps we can take, if any, to improve the efficiency of our program
    delivery system. That may involve further staffing reductions, but not
    beyond the point of providing producer service.
                  water resource conservation in east arkansas
        For the past several years, this subcommittee has provided special
    funds for work on ground water resource issues in Eastern Arkansas. In
    the fiscal year 1999 budget proposal for the Corps of Engineers, $11.5
    million and $2.5 million is provided for the Grand Prairie and Bayou
    Meto projects respectively. These two items are contained in the
    budget, I believe, in large part because of my personal appeal to the
    President and because of his knowledge of the dire crisis we are soon
    to face in the lower Mississippi River basin due to failing ground
    water supplies. These projects are sizable, which explains the need for
    the Corps of Engineers to participate. These is also a component for
    these projects which must rest with USDA. The funding we have provided
    to date moves us in that direction, but there is much more to do.
        Question. Will you work with the Corps of Engineers to determine an
    adequate, shared level of participation regarding this project?
        Answer. Yes, sir we will.
        Question. Will you commit USDA resources to help insure that your
    Department will play a proper role in protecting these water resources?
        Answer. USDA has been devoting considerable resources in this area
    over the past ten years. In addition, USDA recently established the
    South Central Water Management Center located in Little Rock, Arkansas
    as a National Water Management Center which demonstrates our commitment
    to protecting our water resources.
        Question. Following consultation with the Corps, will you report
    back to this committee on appropriate levels of funding needed by USDA
    to work appropriately and timely with the Corps of Engineers?
        Answer. Yes, when the information becomes available, we will report
    back to you. USDA has been working closely with the Corps on several
    studies over the past several years. We understand that the plans were
    recently completed for the Grand Prairie and Bayou Meto which will
    assist in identifying the work to be done and the resources needed to
    implement.
                                  civil rights
        You and your staff appear to be receiving high marks in the area of
    civil rights. I notice that the budget request for fiscal year 1999
    contains a number of items among various agencies designed to bolster
    your civil rights activities.
        Question. What is the current backlog of civil rights cases and
    complaints?
        Answer. There are currently 1,426 active employee complaints, and
    889 active program complaints.
        Question. How old are those pending cases?
        Answer. Many of the backlog cases date back to the early 1990's
    because USDA disbanded the program complaints unit and there was no
    specific unit in existence with the responsibility to resolve these
    cases. We estimate that the median program complaint has been in the
    system for 710 days.
        Question. What is the statute of limitations for civil rights cases
    regarding client and personnel complaints?
        Answer. The statute of limitations is 2 years from the date of
    incident for cases under the Equal Credit Opportunity Act. Additional
    time can be allowed on a case by case basis if instructed by civil
    court action.
        Question. Have any civil rights complaints been processed if the
    statute of limitations had expired, and if so, what standards are used
    to make the determination to proceed?
        Answer. None have been processed since the Department of Justice
    made the decision.
        Question. Are new complaints being filed at a more or less rapid
    rate than those of several years ago?
        Answer. The annual number of cases varies from year to year. The
    average was about 350 cases from 1992 through 1994, and the 1995 and
    1996 filings were 171 and 237 respectively. 447 cases were filed in
    1997, which is the highest total in recent years.
        Question. Is the rate of frivolous claims changing from previous
    levels, and if so, please explain?
        Answer. USDA accepts and processes program complaints when it is
    determined that there is sufficient information and jurisdictional
    basis to process them. There is no evidence to suggest the new
    complaints to be any different from the older ones.
        Question. Does the Office of Civil Rights have the authority to
    award program dollars related to a civil rights claim without the
    concurrence of the program agency or the Office of General Council?
        Answer. Under the delegation of authority from the Secretary to the
    Assistant Secretary for Administration, the Office of Civil Rights has
    the authority to award any remedy a court could enter when
    discrimination has been found, including monetary damages. Agency
    concurrence is not required as the authority comes from the Secretary.
    However, OGC reviews all decisions of the Office of Civil Rights for
    legal sufficiency and must concur in legal authority and factual basis
    before an award of damages is given.
        Question. Are the civil rights complaints that are filed with the
    national office being referred to the appropriate state or county
    offices for resolution in a timely manner?
        Answer. When a program complaint is filed with and accepted by the
    Office of Civil Rights, a notification letter requesting an agency
    response is concurrently sent to the civil rights staff of the alleged
    agency, which is in turn responsible for referring the case to the
    appropriate state or county offices.
        Question. Are there any pending civil rights claims in the national
    office of which the appropriate state agency head is not aware? If so,
    why?
        Answer. To the best of my knowledge, no pending civil rights claims
    are in the national office that the appropriate state agency head is
    not aware of.
        Question. How much coordination occurs between the Office of
    General Council and the Office of Civil Rights?
        Answer. The Office of Civil Rights and OGC coordinate daily on
    matters regarding resolution of discrimination complaints. OGC reviews
    files and proposed decisions, participates in negotiation discussions,
    and gives feedback to the Office of Civil Rights. The Office of Civil
    Rights makes the determinations. OGC makes sure the determinations are
    in accordance with the law.
        Question. Would you please provide an update of these activities at
    the end of June?
        Answer. We will provide an update of these activities to you at the
    end of June.
                        ars/research/state partnerships
        The budget request for fiscal year 1999 deletes all funding for ARS
    programs that was not included in the fiscal year 1998 budget request.
    I am concerned about the signal this might be sending research
    communities in our states who had anticipated a continuing partnership
    with USDA's research agency. For example, the University of Arkansas
    donated the land upon which the ARS Rice Germplasm laboratory was built
    and I know the University has plans of working with ARS on various
    research projects. In other cases, ARS scientists are commonly assigned
    to positions on the campuses of land-grant colleges.
        Question. Do you think it is appropriate for ARS to continue its
    association with land grant research activities?
        Answer. ARS values its long-standing collaboration with the land
    grant research system and believes that American agriculture is best
    served through this well-developed partnership. The two systems
    complement each other and, through various coordination and review
    mechanisms, minimize duplication. The missions of the two systems
    reinforce their distinctions i.e., ARS has a national mission,
    characterized by long-term, high risk research, while the land grant
    institutions generally focus on State and regional problems. This
    combined overall effort has demonstrated great effectiveness. Examples
    are the area-wide pest management programs and the national water
    quality research initiatives. These ARS-led efforts have been highly
    successful because of ARS' ability to draw upon both Federal and State
    research resources and personnel.
        Question. Do you agree that deleting funds that otherwise would
    have been added to the ARS base, which would have been the common
    practice, damage the expectations of the state research communities
    that ARS will continue to stand as a reliable partner?
        Answer. Decisions to redirect ARS budget resources to higher
    priority areas can have negative effects on some ARS-State research
    cooperative arrangements. We try to minimize any disruptive effects on
    our university partners by providing advance notice of our plans and,
    when there are opportunities to do so, use the funds that will be
    redirected to higher priority work to enter into new ARS-university
    cooperative research projects.
        Question. Since the fiscal year 1999 request includes an increase
    for plant germplasm research, why were the funds for the rice germplasm
    lab deleted?
        Answer. All fiscal year 1998 fund increases that were not proposed
    in the President's budget are proposed for redirection in fiscal year
    1999. If these reductions are approved, the funds will contribute to
    the increase proposed for ARS plant genome research, a program that
    will benefit crop production, including rice.
                          trade/asian financial crisis
        Reports of the financial condition in Asia suggest trouble for U.S.
    exports to that region, including shipments of meat and poultry.
    Additionally, it is reported that some of our trade competitors claim
    that U.S. methods to hold onto Asian markets are unfair and use of the
    WTO has been threatened.
        Question. What actions have you taken and expect to take to
    stabilize our position in Asian markets?
        Answer. As serious as the Asian crisis' estimated trade impacts
    are, we must remember that they are projections, not a foregone
    conclusion. We are developing a comprehensive strategy for responding
    to the crisis to reduce its impacts on U.S. exporters and producers.
    USDA has already announced the first component of this strategy--a
    sharp increase in the availability of GSM-102 export credit guarantees
    to those countries most in need, namely South Korea and Southeast Asia.
    This will help ease the liquidity constraint that is at the heart of
    this crisis.
        In addition, we are considering the possibility of offering
    concessional credits, under Title I of Public Law 480, to Indonesia to
    help them meet their food import needs. USDA has also been supportive
    of efforts by the IMF to promote structural reforms in these countries
    which we believe will ultimately strengthen their economies and make
    them better customers for U.S. agricultural products.
        Question. What commodities are most at risk?
        Answer. In fiscal 1998, two thirds of the export loss is projected
    to be in high-value products, led by horticultural products, red meats/
    poultry, and processed foods. These are the most price and income
    sensitive U.S. agricultural exports and will be affected first. In
    fiscal 1999, losses are expected to grow substantially in bulk
    commodities, such as grains and oilseeds, as Asian economies slow and
    competitors benefit from a stronger U.S. dollar.
        Question. What is the U.S. response to threats that our practices
    in regard to Asia violate international trade laws?
        Answer. We understand there has been some criticism of the CCC
    export credit guarantees made available for South Korea and Indonesia
    during the financial crunch. Frankly, we are surprised by this
    criticism as the urgent need for trade financing in Asia to support
    reform efforts and return the region to growth and stability is well
    understood. Our GSM-102 credit guarantee programs in the region are
    intended to provide adequate access to financing for imports of food
    and other critically important agricultural products--not to ``grab''
    markets.
        Further, there has been a long history of the use of GSM-102
    program in the region. Our export credit guarantees support commercial
    bank financing at commercial interest rates. There are no subsidies
    involved. The credit guarantees available to South Korea represent
    about 25 percent of total U.S. agricultural exports to that market,
    while the guarantees extended to Indonesia represent about one-half of
    total U.S. agricultural exports.
                        trade/poultry/eu chlorine issue
        On October 28, 1997, Senator Cochran and I wrote you on the subject
    of poultry exports to the EU. In that letter we expressed concern that
    the EU was excluding our products due to the U.S. industry practice of
    using chlorine as an accepted anti-microbial treatment. We were further
    concerned by reports that some EU member nations were accepting product
    from our competitors who did use chlorine and, even more blatantly,
    that some EU nations used it themselves. Your response of December 22
    reported that no resolution on the chlorine issue had been reached, but
    that you were proceeding with a number of options, including
    establishment of a scientific study with the EU on the use of anti-
    microbial treatments.
        Question. What is the status of the EU ``Equivalency Agreement'' on
    veterinary practices?
        Answer. The EU Agriculture Council is scheduled to vote on the
    U.S.-EU Veterinary Equivalency Agreement on March 16. We are expecting
    a positive outcome.
        Question. What is the status of working with the EU on the chlorine
    issue?
        Answer. In the Veterinary Equivalency Agreement, the EU committed
    to undertake a scientific study on the use of anti-microbial
    treatments, including chlorine. The experts, which include a person
    from the United States, have begun their research, and we expect this
    study to be completed by mid-1998. If the results are positive, the
    Commission has agreed to submit legislation to Member States, reversing
    EU policy.
        Question. When do you see U.S. poultry exports resuming normal
    access to the EU?
        Answer. In the Veterinary Equivalency Agreement, we were successful
    in negotiating improved conditions for trade for poultry, although in
    the near future this will only benefit poultry producers who do not use
    anti-microbial treatments. Several U.S. establishments are in a
    position to meet the new conditions and could begin exporting poultry
    as soon as the Agreement is implemented. In addition, we are confident
    that the EU study will show that the use of anti-microbial treatments
    is an effective and safe method of lowering the bacteria counts for
    poultry.
        Question. How is the poultry export problem with the EU comparing
    to other livestock product access?
        Answer. The Agreement will open new opportunities for red meat
    exports and preserve most pre-existing trade in products such as
    petfood, dairy products, fishery products, and egg products. In
    addition, the United States may be able to recoup some of its lost
    trade in poultry despite the differences in the U.S. and EU positions
    on the use of anti-microbial treatments. The Agreement eliminates many
    of the onerous requirements that the poultry as well as other
    industries would have to meet to export to the EU. Without this
    Agreement, U.S. exports of certain products could be blocked from the
    EU market unless U.S. industries invested in costly adjustments to
    their facilities to comply with each EU internal market requirement.
                              trade/step 2 cotton
        Question. Language was contained in Section 728 of the conference
    report to accompany the fiscal year 1998 appropriations bill that
    allowed for adjustments to the Step 2 Cotton certificate program to
    help ease an unforeseen problem regarding import quotas for cotton. The
    Step 2 procedure was enacted in the 1996 Farm Bill and capped at $701
    million over the life of the Farm Bill. Now that the problem is
    resolved, we note in the budget submission a proposal to reduce the
    amount available for the Step 2 procedure by $100 million in offsets
    for other administration priorities in the fiscal year 1999. Explain
    why this action would not be harmful to U.S. cotton producers given the
    volatility of foreign markets, especially in Asia?
        Answer. It is quite possible that the proposed spending level of
    $140 million will not be appreciably below the amount that would
    otherwise have been spent in fiscal year 1999 without this cap.
        We simply do not know how much money would have been required for
    payments under the upland cotton marketing certificate program without
    the cap. Based on the pricing estimates assumed in the budget projected
    marketing certificate expenditures would be about $250 million for
    fiscal year 1999.
        However, history would be another guide in estimating the need for
    funding in this program. Over the life of the marketing certificate
    program, beginning in fiscal year 1992, the Commodity Credit
    Corporation has spent about $750 million on these payments. That
    averages about $125 million per year.
        Thus, the proposed spending level of $140 million may or may not
    prove to be enough. If it is enough, i.e., if U.S. prices turn out to
    be not as far out of line with the rest of the world's cotton prices as
    we had assumed, then there will be absolutely no harm to farmers from
    the proposed reduction in authorized spending. If the original estimate
    of $250 million was closer to being right, then the program will be
    able to only partially address the non-competitive position in which we
    will find ourselves.
        Should the latter prove to be the case, any harm to farmers will
    still be minimal. The effectiveness of these payments in stimulating
    export sales is quite low. A working assumption used by our USDA cotton
    estimates committee is that a 1-percent change in the cotton price will
    cause a change in cotton exports of about 1 percent. The certificate
    payments so far this year may have brought about a reduction in cotton
    export prices of between 0.7 and 1.5 percent. That would translate into
    an increase in exports of between 50,000 and 100,000 bales, out of the
    6.9 million bales we are expecting to export. That impact is not very
    significant for farmers.
        For 1999, the impact might be a reduction in exports of 100,000 to
    150,000 bales if the proposed reduction is adopted, as compared to
    exports without the spending cap. Farmers are not held harmless, but
    the impact is small.
        Question. Although the Step 2 payments are not, per se, part of the
    so-called ``Freedom to Farm'' payments, (after all, Step 2 payments are
    tied to market conditions, not a simple give-away) do you not believe
    that many cotton farmers will not see this action as a breach of what
    little ``farm safety net'' was left in the 1996 Farm Bill?
        Answer. The spending cap on upland cotton marketing certificates
    could have a slight impact on exports of cotton. However, the impact is
    likely to be small. The savings from the spending cap are likely to be
    applied to other programs of the Department which can benefit cotton
    farmers, including crop insurance and conservation cost-share programs.
    It is not a certainty at all that the rearrangement of spending
    priorities will result in a net loss to cotton farmers.
                               trade/cuba markets
        Following Pope John Paul's trip to Cuba, there has been discussion
    about liberalizing trade with that nation. Prior to the trade sanctions
    with Cuba, U.S. agriculture was a big winner. If trade were reopened,
    rice trade, especially, with Cuba would present U.S. producers with
    wonderful opportunities. This would especially be true for producers in
    the mid-South with ready transportation down the inland waterways and
    across the Gulf of Mexico.
        Question. What is your outlook for opening trade with Cuba?
        Answer. We encourage the leadership in Cuba to provide to its
    citizens the political, economic, and social freedoms they deserve.
    Once these rights are restored to the Cuban people, we will embrace the
    opportunity to renew trade.
        Question. Because of the importance Cuban trade holds for
    agriculture, are you taking a personal role in any discussions
    regarding trade liberalization?
        Answer. U.S. agricultural exports are of great importance to the
    U.S. agricultural economy and our farmers and ranchers. We want to
    increase our exports where ever possible but, in the case of Cuba, I
    have not entered into any negotiations regarding trade liberalization.
                               user fee proposals
        The budget proposes $624 million in new user fees. Clearly, this is
    problematic for many reasons. The authorization committee may not
    approve them, if we tried to enact them the House Ways and Means
    Committee might Blue Slip our bill, and without them, we start out $624
    million in the hole. User fee proposals are no stranger to this
    subcommittee, but their rate of acceptance is not high. User fees need
    to be carefully crafted to ensure that, if appropriate at all, they are
    borne by the groups best and most properly suited to absorb them.
        Question. Do you believe the meat and poultry companies will absorb
    these costs?
        Answer. We do not estimate that the industry will absorb all of the
    cost of the user fees for meat, poultry, and egg products inspection.
        Question. Do you believe the fees will be passed on to the
    consumers when companies are more likely to try and keep retail prices
    down below their competition?
        Answer. We estimate that most of the fees will passed on to
    consumers in the form of higher retail prices. The overall impact on
    retail prices would be less than one cent per pound.
        Question. How do you justify the FSIS fees ($573 million) which
    will most likely be borne by livestock producers at this time of low
    prices, poor markets, and other problems facing small farmers?
        Answer. We do not estimate that the impact of the user fees will be
    passed down to producers in the form of lower prices paid. We estimate
    that most of the fees will passed on to consumers in the form of higher
    retail prices. The overall impact on retail prices would be less than
    one cent per pound.
        Question. Has an analysis been performed regarding the other
    proposed user fees to determine the impact the fees will have on the
    groups most likely to bear the cost of the fees? If not, why? If so,
    what did it reveal?
        Answer. When the Administration's user fee proposal is transmitted
    to Congress, we will provide you with our analysis of the proposal's
    economic impact.
                    food assistance surveys and evaluations
        Question. The conference agreement for the fiscal year 1998
    appropriations bill contained a House provision that transferred the
    survey and evaluation function of the Food and Consumer Service to the
    Economic Research Service. The fiscal year 1999 proposal moves them
    back.
        Please explain the rationale for moving them back?
        Answer. The Administration believes that the surveys and evaluation
    function for the Food Assistance Programs should remain with the Food
    and Nutrition Service (FNS), the agency that administers these
    programs. These surveys and evaluations are most effective when
    conducted in conjunction with food assistance program operations.
        Question. What problem, if any, have you encountered with them at
    ERS?
        Answer. I have the highest regard and respect for the Economic
    Research Service and its people. As I stated in my response to a
    written question from Senator Cochran, ERS has done an admirable job in
    administrating and conducting the fiscal year 1998 research and
    evaluation program for the food assistance programs.
        Question. Why is it reasonable for ERS to conduct research for some
    USDA activities and not others?
        Answer. ERS' mission is to conduct research to support USDA's
    programs, including the Nation's food assistance and nutrition
    programs. Historically, ERS has conducted an applied research program
    on food assistance and nutrition issues. The agency has published
    numerous research findings that have helped policy officials understand
    the impacts of these programs on participants and the economy. Despite
    ERS' long history of collaborating with universities on important
    research issues, it has not had the opportunity to administer a large
    scale extramural research program.
                       delta regional commission proposal
        Question. The USDA budget submission contains a request for an
    additional $20 million for Empowerment Zones and Enterprise Communities
    (EZ/EC) assistance. At the same time, the President's budget request
    for the Appalachian Regional Commission (ARC) includes $26 million for
    expansion into the Lower Mississippi River Delta as a new arm of the
    ARC to be known as the Delta Regional Commission (DRC).
        Has the proposal to create the DRC been shared with you? If not,
    will you review it? Upon review of this proposal, will you submit to
    this subcommittee your views if the proposal would duplicate USDA
    programs or if it simply would be better administered by USDA?
        Answer. I have not had the opportunity to review the proposal, but
    I will do so.
                             advisory committee cap
        The fiscal year 1998 appropriations act contains a provision that
    limits all advisory and related committees of USDA to $1 million.
        Question. What functions have been provided using this sum?
        Answer. I will provide for the record a listing of those advisory
    committees, panels, commissions and task forces that we plan to fund
    within the $1 million limitation.
        [The information follows:]
                            usda advisory committees
    Food, Nutrition and Consumer Services:
    National Advisory Council on Maternal, Infant and Fetal Nutrition
    Food Safety:
    National Advisory Committee on Meat and Poultry Inspection
    National Advisory Committee on Microbiological Criteria for Foods
    Research, Education and Economics:
    Forestry Research Advisory Council
    National Agricultural Research, Extension, Education, and Economics
        Advisory Board
    Strategic Planning Task Force on Research Facilities
    USDA/Hispanic Association of Colleges and Universities
    USDA/American Indian Higher Education Consortium
    National Nutrition Monitoring Advisory Council
    National Genetics Resources Advisory Council
    Dietary Guidelines Advisory Committee
    Census Advisory Committee on Agriculture Statistics
    Marketing and Regulatory Programs:
    Advisory Committee on Foreign Animal and Poultry Diseases
    General Conference Committee of the National Poultry Improvement Plan
    National Animal Damage Control Advisory Committee
    USDA/1890 Task Force
    National Organic Standards Board
    Federal Grain Inspection Advisory Committee
    Farm and Foreign Agricultural Services:
    Agricultural Policy Advisory Committee for Trade
    Ag. Tech. Adv. Comm. for Trade in:
            Animals and Animal Products
            Fruits and Vegetables
            Grains, Feed and Oilseeds
            Sweeteners
            Tobacco, Cotton and Peanuts
    Technical Advisory Committee for Edward R. Madigan Agricultural Export
        Excellence Award Board
    Emerging Markets Advisory Committee
    Advisory Committee on Beginning Farmers and Ranchers
    Natural Resources and Environment:
    Task Force on Agricultural Air Quality Research
    National Commission on Small Farms
    Office of the Chief Economist:
    Commission on 21st Century Production Agriculture

        Question. What problems has it posed for the Department?
        Answer. Advisory committees and panels provide the Department with
    the means to involve the public in our decisionmaking processes by
    providing reports and recommendations. The cap limits the flexibility
    we have in USDA to establish and operate committees that assist in the
    effective and efficient operation of USDA programs. Because of the
    limitation, most of the committees have been forced to reduce
    activities, for example, hold fewer meetings or delay reports. In
    addition, the limitation makes it difficult to deal with new issues
    like the Secretary's National Commission on Small Farms and the
    Commission on 21st Century Production Agriculture while still providing
    adequate support for ongoing activities.
        Question. What are some of the additional activities you would have
    performed without this limitation?
        Answer. The cap has caused delay in the establishment of some
    committees such as the Commission on 21st Century Agriculture
    Production and the proposed Secretary's Small Business Advisory
    Committee. As I indicated previously, many committees have
    significantly reduced meetings and delayed reports in an effort to live
    within the cap. The flexibility to use additional resources as
    necessary would enable the committees to provide additional input to
    the Department's decisionmaking process.
                               organic standards
        Question. For several years, I have heard much dissatisfaction with
    the delays in publishing proposed rules for National Organic Standards.
    Now, these rules have been published but public acceptance seems
    questionable due to inclusion of irradiation, human sludge, and other
    components of production and processing that may or may not be
    appropriate elements of an organic standard. I understand you have
    responded by providing an extension for comments?
        Answer. Yes. The comment period for the National Organic Standard
    Program was extended 45 days from March 16, 1998, to April 30, 1998.
        Question. Did this reaction surprise you?
        Answer. No. Organic standards have been of great interest to a wide
    audience that feels strongly about the issues addressed in the proposed
    rule.
        Question. When do you think it is feasible to expect publication of
    a final rule?
        Answer. We are working diligently to analyze the comments, which
    are about 4,000 at this time, and will release a final rule by January,
    1999.
                         hatch/smith-lever flexibility
        Question. The budget request makes reference to a provision that
    would allow shifting of funds between the Hatch and Smith-Lever
    accounts. Was this approach shared with the land-grant colleges and
    extension system prior to announcement of the budget? If so, what was
    the reaction? In view of all the overall reduction in formula funds, do
    you think that this proposal will simply worsen the scramble for
    limited funds by these constituencies?
        Answer. In the Administration's concept paper detailing
    recommendations related to reauthorization of the research title of the
    Farm Bill, and specifically in testimony presented July 22, 1997,
    before the Subcommittee on Forestry, Resource Conservation, and
    Research of the Committee on Agriculture of the U.S. House of
    Representatives, we addressed this issue. The Administration proposed
    to amend the Smith-Lever extension formula program and redirect up to
    10 percent of total research and extension formula funds to any
    research or extension purpose, with an approved plan of work. The goal
    of this amendment is to provide Federal funding to states in a more
    flexible manner so states can meet high priority needs and to permit
    states to better leverage their resources. Our proposal would increase
    this flexibility of states (at their discretion, not direction of the
    Federal agency) to redirect funds between these formula programs to 25
    percent by 2002.
        Aspects of this concept have been discussed by individual
    universities for several years, and by the broader community in the
    context of studies such as that completed by the National Research
    Council in 1996 on ``Colleges of Agriculture at the Land Grant
    Universities.'' Reactions to the Concept have been mixed both within
    and among institutions.
        The Administration believes increased flexibility to the
    institutions would help in managing proposed reduction in the formula
    programs.
                  loss of ag chemicals/pesticide data program
        A few years ago, I spoke in this hearing room about my concerns of
    a train wreck on the horizon when we lose use of many agricultural
    chemicals with no worthwhile replacements. Every year, I hear from
    producer groups asking for special emergency registrations of
    pesticides to protect their crops from some new or debilitating
    infestation. Now, the new Food Quality Protection Act places more
    substances under review.
        Question. What is USDA doing to help overcome the potential crisis
    when production grinds to a halt for lack of useful pesticides or
    fertilizers?
        Answer. To prevent the potential loss of important crop protection
    pesticides, we are working closely with EPA to ensure that they have
    the data necessary for developing accurate risk equations needed for
    the reregistration pesticides under the Food Quality Protection Act
    (FQPA). In addition, multi-Agency USDA programs, such as IR-4,
    Integrated Pest Management, Pest Management Alternatives Program, and
    the National Agricultural Pesticide Impact Assessment Program, provide
    vital registration information on existing active ingredients, new
    products including new and safer pest management technologies. By the
    use of these data, registrants and the EPA are providing safer pest
    management alternatives to producers and consumers through science-
    based decisions.
        Question. To what extent does the Pesticide Data Program remain
    important in helping keep products on the market?
        Answer. The Pesticide Data Program (PDP) is a critical component of
    the recently enacted Food Quality Protection Act (FQPA), which directed
    the Secretary of Agriculture to provide improved data collection of
    pesticide residues. The FQPA further expanded the use of risk
    assessments by eliminating the ``Delaney'' clause that required zero
    risk to consumers from carcinogens associated with pesticides. The
    elimination of this provision enables the registration of pesticides
    where the actual levels of residue would present ``no reasonable harm''
    to consumers from carcinogens. Consequently, EPA will be able to use
    the PDP data, on actual residue levels, for a greater variety of
    pesticides important to American agriculture.
        For 1999, the budget includes additional funding to maintain
    statistically valid sampling and to establish a rapid response
    capability to service EPA data needs. With the implementation of FQPA
    there is an increased demand for providing the EPA pesticide residue
    data for minor-use pesticides on rapid basis. EPA will need the data to
    conduct dietary risk assessment reviews for over 9,000 tolerances over
    the next 10 years as required by FQPA. Without the data, EPA will be
    required to make conservative assumptions about pesticide levels that
    could result in overestimation of risk and loss of registrations for
    economically important pesticides. The increased funds will permit
    increased sampling of specific commodities at a faster rate.
                         global warming/rice producers
        Question. Rice producers in my state are being informed that the
    Global Warming Treaty may impair their operations due to the reported
    ``contribution'' of greenhouse gases released by decaying rice stubble
    in flooded rice fields. Are you aware of such claims?
        Answer. We are aware of certain research documenting that rice
    fields are a source of the greenhouse gas methane generated by
    decomposition of plant materials in wet or flooded soils.
        Question. If there is any validity to this ``contribution'' to
    Global Warming, will USDA enter into the discussion in support of
    American farmers?
        Answer. Yes, in fact USDA has been involved in both the scientific
    study of agricultural sources of greenhouse gas emissions and the
    negotiations of the United Nations Framework Convention on Climate
    Change. Research conducted by the Agricultural Research Service
    suggests that methane emissions from rice fields is reduced by limiting
    the period of time when the fields are flooded, without affecting rice
    yields. USDA employees participate in an interagency team headed by the
    Department of State which determines the U.S. positions on climate
    change negotiations, and USDA was represented on the U.S. delegation to
    the Third Conference of Parties to the Framework Convention in Kyoto,
    Japan. USDA is currently intensifying its involvement in these issues
    by strengthening its Global Change Program Office, which will insure
    that American farmers and ranchers are represented in those
    discussions. The President's budget for fiscal year 1999 proposes a
    funding increase of $10 million for climate change activities, and $3
    million of that total is targeted towards development of new technology
    for mitigation of climate change impacts on agriculture, including
    reduction of greenhouse gas emissions from agricultural lands.
                        crop insurance sales commissions
        Question. During consideration of the fiscal year 1998
    appropriations bill, there was discussion of the proper level to
    provide as reimbursement to insurance companies to pay for sales
    commissions. The authorized amount was in excess of $200 million and
    you argued for a level closer to $150 million. In the end, the
    conferees agreed on a level in the $180 millions. You note that the
    past year has provided gains for the insurance industry.
        If the sales commission funding is not transferred to mandatory
    accounts, what level will you think appropriate for fiscal year 1999?
        Answer. If no change is made in current law which requires that
    sales commissions be funded as discretionary spending, $208 million
    would need to be appropriated for that purpose for 1999. But, I
    strongly recommend that Congress enact the legislation which the
    Administration will submit in the very near future to change the law to
    shift this expense to the mandatory account and make certain other
    changes in the program.
                               underwriting gains
        Question. Do you think the higher than normal insurance gains
    should affect the amount we make available?
        Answer. I believe that insurance gains, which reflect the level of
    risk taken by private companies, should be treated separately from
    administrative and operating expenses which reflect costs incurred for
    delivering the program.
                                  boll weevil
        Question. A couple of years ago, we developed a loan program to
    help farmers move more rapidly into the boll weevil eradication
    program. This program was necessary because of the delay in
    appropriating a level of APHIS grant funds that states low on the list
    were being kept at a marketing disadvantage under states with lower
    costs due to complete eradication. It was never our intention that the
    loan program would replace the grant program. Rather, the loan program
    was designed to accelerate the entire eradication process. How do you
    justify allowing some states the lower cost of eradication by use of a
    grants program when neighboring states will have to rely on loans?
        Answer. We agree that the FSA loan program is critical to
    accelerating the entire boll weevil eradication process, because it
    allows growers to spread the significant start-up costs over several
    years, resulting in more affordable annual contributions to their
    programs. We have taken the opportunity to look for cost effective ways
    to manage program operations. For example, we have recently
    discontinued cost-sharing in virtually all areas in which the weevil
    has been eradicated to make available so much funding as possible for
    active eradication zones. Grower organizations in all states with
    active eradication program had been receiving an equitable cost-share
    percentage. However, as the momentum for expansion has increased, the
    amount of acreage involved has also increased dramatically resulting in
    each area receiving a smaller percentage of Federal grant funds than in
    prior years. Grant funds simply are not available in the amounts needed
    to accelerate the program. In fact the loan program makes more total
    funds available for program expansion than have been under the
    traditional appropriations and grants approach. Because of the
    tremendous benefits cotton growers can gain from boll weevil
    eradication, we believe that they will choose to take advantage of the
    loan program.
                               loan subsidy costs
        Question. You state that savings will be achieved in loan programs
    due to declining interest rates. However, due to reforms that lock in
    program levels over a fixed number of years, it appears that loan
    subsidy cost is actually increasing. For example, the water and sewer
    loan program in fiscal year 1998 required a subsidy of only $67 million
    to achieve a program level of $691 million. For fiscal year 1999, a
    program level of $764 million will require $126 million in subsidy,
    nearly twice that of last year.
        How do you explain your statement of lower costs for loan programs
    with the example of higher subsidy costs?
        Answer. Perhaps I should clarify my statement. What I said was that
    due to decreasing interest rates resulting from the economic expansion,
    the budget authority required to administer these programs is 40
    percent less costly than it was in 1993. Your observation regarding the
    higher subsidy costs for fiscal year 1999 is correct, but that stems
    from a provision enacted in the Balanced Budget Act of 1997. This
    provision attempted to fix the problem of widely fluctuating program
    levels caused by differences in interest rates assumed in the economic
    assumptions and the actual interest rates in effect at the beginning of
    the fiscal year. This fix also locked in the budget year interest rate
    in the out years which means that the out-year interest rates will not
    be decreasing as they have previously. Since most loan programs have
    low disbursements in the initial year and higher disbursements in the
    out-years, the effect is to increase the subsidy cost. Conversely, in
    an era of increasing interest rates, the subsidy cost will be lower.
                               animal welfare act
        Question. What is the Administration's position on legislation
    (H.R. 594, the Pet Safety Protection Act) proposed by Rep. Canady (R-
    FL) and Rep. Brown (D-CA)?
        Answer. The Administration is continuing to review this bill and
    has not finalized a position at this time.
        Question. What effect would enactment of H.R. 594 have on
    agricultural, medical, and related research?
        Answer. The bill would allow research dogs and cats to come only
    from licensed breeders, publicly owned and operated pounds and
    shelters, individual donors who have bred or raised the animals or who
    have owned them for at least 1 year prior to donation, or other
    research facilities. The bill would eliminate ``random-source'' dog and
    cat dealing--an activity in which only 32 dealers nationwide are
    involved at this time.
        Question. To what extent would enactment of H.R. 594 curtail the
    occurrence of fraud, theft, and mistreatment of animals?
        Answer. We are very pleased that over the last few years, we have
    succeeded in revoking the licenses of the most non-compliant Class B
    dealers, and we have dramatically improved compliance by the remaining
    32 Class B dealers by inspecting their operations quarterly and tracing
    selected animals back to their original sources. In fact, in fiscal
    year 1997, Animal Care officials were able to complete 95.5 percent of
    their tracebacks of animals sold into research--up from approximately
    40 percent in fiscal year 1993. We firmly believe that our efforts have
    significantly reduced the potential for USDA licensees to steal or
    otherwise fraudulently obtain animals. Presumably, disallowing random-
    source dealing altogether would reduce that potential even further.
        Of course, we must note that the bill would not affect the wide
    variety of other situations not covered by the AWA in which fraud,
    theft, and mistreatment of animals can occur. Examples would include
    theft of privately owned hunting or security dogs or abuse or neglect
    of animals by individual pet owners.
        Question. Would eliminating USDA regulation of Class B ``random
    source'' dealers under the Animal Welfare Act, the objective of H.R.
    594, result in savings, and if so, by what amount?
        Answer. Not necessarily. It is important to note that a number of
    Class B dealers have signalled intent to convert to Class A (breeder)
    operations or have already done so, so if Class B dealers were to be
    eliminated, some of these savings would be offset by costs to regulate
    these same individuals as Class A dealers. In addition, H.R. 594 would
    require pounds and shelters to be licensed and comply with
    recordkeeping and certification requirements, which would further
    offset any savings achieved by eliminating Class B dealers.
                                     ______

                      Questions Submitted by Senator Byrd
                                   water 2000
        Question. Please provide me with a status report on the U.S.
    Department of Agriculture's (USDA) progress in achieving the goals of
    Water 2000 in West Virginia in 1997.
        Answer. In fiscal year 1997, 13 water projects were financed by RUS
    in West Virginia. These 13 water systems served 11,600 people. Out of
    the 11,600 people served, 5,600 received clean water for the first
    time. The other 6,000 people had their water systems improved so they
    could continue to provide clean water.
        Question. What progress does the agency expect to make on the goals
    of Water 2000 in 1998?
        Answer. In fiscal year 1998, we estimate that 8,500 more rural
    people in West Virginia will receive clean water through RUS financed
    water systems.
        Question. What progress does the agency expect to make toward the
    goals of Water 2000 with respect to the President's fiscal year 1999
    budget request?
        Answer. In fiscal year 1999, we estimate that an additional 9,319
    rural people in West Virginia will receive clean water through RUS
    financed water systems.
              national center for cool and cold water aquaculture
        Question. Please provide me with a status report on progress on the
    National Center for Cool and Cold Water Aquaculture.
        Answer. The following describes progress on the National Center for
    Cool and Cold Water Aquaculture (NCCCWA):
      --The mission of the NCCCWA is to enhance aquaculture production of
            cool and coldwater finfish. The NCCCWA's priority research
            program areas will include genetics and breeding, fish health,
            nutrition, and production systems. Work will focus on trout and
            other salmonids. Other potential species include hybrid striped
            bass and other cool and cold water species.
      --The NCCCWA will combine its scientific expertise with that of the
            Freshwater Institute and the Leetown Science Center (LSC) of
            the Biological Resources Division of the U.S. Geological
            Survey, and with the marketing, genetics, and other scientific
            expertise of West Virginia University (WVU), in a collaborative
            and comprehensive program that should contribute greatly to the
            economic potential of West Virginia and of the Nation.
      --ARS and LSC enacted an Interagency Memorandum of Understanding MOU)
            on September 30, 1996, to facilitate cooperation between NCCCWA
            and the LSC. LSC and ARS are presently developing accessory
            agreements for the MOU to provide more detail on cooperation in
            research and sharing of facilities and resources. LSC has
            agreed to provide space and facilities for ARS scientists to
            conduct aquaculture research the NCCCWA construction is
            underway.
      --Extreme drought conditions in 1997 resulted in significantly
            reduced spring water supplies and stream flow in the vicinity
            of LSC. The drought condition called into question whether
            natural water resources would always be sufficient to provide
            for the future needs of both the Fish Health Laboratory (FHL)
            and NCCCWA without impacting local residents. Consequently, the
            present plan is for the NCCCWA design to include the capability
            to recirculate, with appropriate treatment, up to 50 percent of
            the water supplied to the building. This capability will also
            provide for greater control over water quality for research
            purposes and will obviate the need to develop Bell and Link
            Springs. Preliminary projections are that the capital costs of
            the recirculation capability will be essentially equivalent to
            the cost savings resulting from not developing the Bell and
            Link Springs. Operating cost projections are presently being
            formulated. LSC and ARS have also agreed to develop a
            comprehensive, joint water management plan.
      --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 and $6 million in fiscal year 1998 for
            construction of the NCCCWA. Total estimated construction costs
            are $12 million. Annual operating costs are estimated at $4
            million.
      --The design for the NCCCWA is currently being developed. A site plan
            has been prepared. Conceptual designs have been prepared for
            the laboratory/office building and the tank/aquaria building.
            Aesthetics will be an important component of the design to
            ensure that the facility blends well with the surrounding
            environments. Final drafts of the Program of Requirements and
            the Investigative Report have been completed.
      --On October 20, 1997, ARS purchased a 217-acre farm adjacent to the
            Leetown site to provide for additional watershed protection.
            The purchase price was $600,000.
      --The fiscal year 1998 Congressional appropriation of $250,000 for
            the NCCCWA's first program funding will be used to recruit a
            highly-qualified scientist to serve as Research Leader; to
            begin carrying out a cooperative research program with FHL; and
            to oversee final design and construction of the facility.
               appalachian soil and water conservation laboratory
        Question. With the completion of the five-year mission plan for the
    Appalachian Soil and Water Conservation Laboratory, please provide me
    with a list of research programs that will be undertaken in the future.
        Answer. The proposed research programs to be undertaken in the next
    five years are:
        (1) Management of hilly grassland in Appalachia for sustainable
    production;
        (2) Renovation and improvement of underutilized, abandoned or
    disturbed hill lands with browsing livestock;
        (3) Agroforestry systems for the Appalachian region; and
        (4) Improving forage legumes for Appalachian grasslands.
        Question. Please provide the funding level required for each
    program.
        Answer. To fully develop these programs and operate the Laboratory
    at full capacity would require the addition of four to five scientists
    for an estimated total of $1.2 to $1.5 million.
                     appalachian fruit research laboratory
        Question. With the completion of the five-year mission plan for the
    Appalachian Fruit Research Laboratory, please provide me with a list of
    research programs that will be undertaken in the future.
        Answer. The mission of the Appalachian Fruit Research Laboratory is
    to develop the science, technology and genetic base needed to enhance
    productivity and fruit quality, minimize adverse effects on the
    environment and solve critical problems of temperate fruit production,
    protection, harvesting and marketing in the Eastern U.S.
        In response to this mission, the current program is focused on the
    development of (1) knowledge of the critical molecular processes in
    fruit development and ripening; (2) genetic materials with improved
    pest resistance, cold hardiness and fruit quality; (3) integrated
    cultural and pest management systems that reduce pesticide/herbicide
    use and increase production efficiency; (4) harvesting, handling and
    postharvest disease controls that increase shelf life and market value.
        Question. Please provide the funding level required for each
    program.
        Answer. To fully develop these programs and operate the Laboratory
    at full capacity would require an additional four to five scientists
    for an estimated total of $1.2 to $1.5 million.
                   potomac headwaters land treatment project
        Question. Please provide me with a report on the Potomac Headwaters
    Land Treatment Project. What is the status of the funding for this
    project?
        Answer. In fiscal year 1997, $2,416,300 funded 116 contracts. In
    fiscal year 1998, $3,130,000 went to this project which will fund
    approximately 150 additional contracts.
        Question. What is the participation rate of eligible farmers in the
    program?
        Answer. The participation rate has been greater than anticipated
    when the project was originally planned. There are approximately 340
    poultry producers in the watershed. Currently 255 have requested
    assistance.
                              staffing reductions
        Question. I understand that the proposed Farm Service Agency (FSA)
    fiscal year 1999 budget will result in an additional reduction of 1,000
    FSA jobs. What effect will these reductions have on the FSA's mission?
        Answer. The proposed fiscal year 1999 non-Federal county office
    staffing level of 9,980, a decrease of 855 staff years from fiscal year
    1998, will challenge us to perform the ongoing operations and program
    activities for the 1996 Act with an adequate level of customer service.
    However, in proposing these reductions, difficult choices had to be
    made in balancing the budget for fiscal year 1999.
        These staff reductions may hinder program delivery and service to
    producers in locations already minimally staffed as a result of
    previous agency downsizing. Assistance to sister agencies, conservation
    associations and others may also have to be reduced.
        In order to effectively manage the resources remaining in the field
    offices, FSA may be required to achieve some office closures or
    consolidation beyond those previously planned. However, I've asked that
    actions to close and consolidate any additional county offices be made
    only with consultation of local FSA county committees, my office, and
    Congressional delegations. The Department has entered into a contract
    with an outside consulting firm to conduct a study of the county-based
    agencies, and we expect to be able to use the results of the contractor
    study in guiding our actions to achieve any required office closures
    through a solid independent workload analysis of the county-based
    agencies.
        Question. What effect will these reductions have on the FSA's
    mission in West Virginia?
        Answer. Historically, the methodology for allocating personnel
    reductions among States has been based primarily on current and
    projected workload by State. Until the proposed budget is agreed upon
    and specific reductions are determined for a State, it will be
    difficult to furnish specific impacts for a particular State. However,
    it is likely that an approximate 855 non-Federal county office employee
    reduction will result in new shared-management arrangements and/or
    closures of some offices. As I mentioned, the Department has entered
    into a contract with an outside consulting firm. The study is to be
    completed by September 1,1998, and may provide insight on how any
    future staffing reductions might be distributed.
        Question. What actions is the FSA taking to accommodate individuals
    wishing to remain in the FSA's employment, or to otherwise soften the
    individual disruptions caused by the reduction in force?
        Answer. For Federal employees, FSA extends full career transition
    assistance under the Career Transition Assistance Program. This
    includes priority placement rights, provision of job information and
    counseling on resume preparation, administrative time for using career
    transition resource services and facilities, and official time for
    interviews.
        For non-Federal employees, FSA extends re-employment priority
    rights to all RIF'ed employees for two years. This affords RIF'ed
    employees with re-employment priority for any comparable vacancy in the
    State in which they were employed.
        FSA is aggressively pursuing ways to soften the impact of FTE cuts.
    FSA will continue to use buyouts and early outs wherever possible to
    minimize the number of involuntary separations. FSA is also retraining
    employees to learn new skills to assume any vacant positions in the
    Agency.
                                     ______

                      Questions Submitted by Senator Leahy
                         emergency conservation program
        Question. The Northeast is still trying to recover from the worst
    ice storm this century. Although the Farm Service Agency, Natural
    Resources Conservation Service and the Forest Service have been working
    with farmers, woodlot owners, maple producers and apple orchards, I am
    concerned that the Department's ability to help Vemonters rebuild from
    this atypical disaster is limited. Although there was over $8 million
    in damage on Vermont farms, Farm Service Agency programs have only
    requested $1.5 million from the Emergency Conservation Program because
    the majority of the damage does not fit within the constraints of ECP.
    Will the Department be flexible in using USDA programs to assist
    Vermonters and others recover from the storm?
        Answer. Our disaster program authorities provide us with
    significant flexibility in providing assistance to producers with
    losses due to natural disasters. We are working with producers affected
    by severe weather conditions in the Northeast and elsewhere and will
    propose any necessary changes in authorities and funding levels as
    expeditiously as possible.
        Question. What programs, other than ECP, can be used to help the
    region rebuild and diversify their economy over the next 5 or 10 years?
        Answer. FSA lending programs, particularly the emergency loan
    program, can play a critically important role in helping producers
    recover from losses resulting from natural disasters. Many other
    programs, including initiatives of the Fund for Rural Development and
    other rural development loan and grant programs, can help rural areas
    support and strengthen diversified economies.
                           unobligated disaster funds
        Question. Does the Department have unobligated funds from previous
    disasters that may be reprogrammed to address ice storm damage?
        Answer. We are unable to determine at this time the extent of
    additional funding we may need for emergency assistance in the
    Northeast and elsewhere. We are reviewing current funding obligations
    to determine whether any funds remain available. But it is clear that
    unobligated balances in our emergency programs are extremely limited.
                    environmental quality incentives program
        Question. The Department requested an additional $100 million in
    fiscal year 1999 for the Environmental Quality Incentives Program. How
    does the Department intend to distribute this additional funding among
    cost share payments, incentive payments and technical assistance?
        Answer. The additional funds will be used to provide increased
    assistance to meet the President's Clean Water Initiative and to
    increase assistance to limited resource and Native American farmers and
    ranchers as recommended by the USDA Civil Rights Action Team. A
    prescribed distribution to education and financial assistance has not
    yet been determined, but 10 percent is anticipated at this time for
    technical assistance.
        Question. How will the Department prioritize this funding amongst
    states and watersheds?
        Answer. While a process for prioritizing funding has not been
    finalized, we will consider the recommendations of NRCS State
    Conservationists, in consultation with their respective State Technical
    Committees, NRCS Regional Conservationists, and recommendations
    received from other governmental and non-governmental entities with
    interest and expertise in water quality and natural resource concerns.
        Question. With this increase can we anticipate an increase in
    funding for states with long waiting lists of farmers who want to adopt
    conservation practices or for states that have devoted significant
    state resources to match the federal program?
        Answer. It is likely that States with significant natural resource
    and environmental problems with a recognized demand for program
    assistance will receive increased funding. Leveraging of State or other
    funds has been a consideration when allocating funds and will continue
    to be so that we maximize environmental benefits per program dollar
    expended.
                     resource conservation and development
        Question. The fiscal year 1998 Agriculture appropriation bill
    included an $18 million increase for the Resource Conservation and
    Development Program. How was this funding distributed across the RC&D
    councils and what criteria were used?
        Answer. In fiscal year 1998, Congress appropriated $34,377,000 to
    the Resource Conservation and Development Program, an increase of $5
    million. As outlined in the operating plan submitted to the Congress on
    December 18, 1997, $2.5 million will fund up to 25 newly authorized
    RC&D areas, and $1.45 million will provide additional funding for the
    existing 290 RC&D areas. The remaining $1.05 million will establish a
    Challenge Grant Fund for one year for authorized areas.
                            conservation farm option
        Question. It is my understanding that the Department is finalizing
    the proposed rule for the Conservation Farm Option (CFO) program. When
    will it be published?
        Answer. The CFO proposed rule should be published by late March,
    1998.
        Question. Given the protracted development of the rulemaking, there
    is some concern that full use of the authorized funding levels for the
    program will not be made. Has the Department projected the demand for
    the program and how will the program be implemented once the rulemaking
    process is completed?
        Answer. Yes, the Department has projected the demand for the
    program. Once the proposed rule is published, a call for proposed pilot
    project areas will be conducted. Selection of the actual pilot areas
    will follow. As soon as the final rule is published, eligible
    participants within the selected pilot areas may apply for program
    benefits.
        Question. What are the six regions where the pilot program will be
    implemented and how will the states be selected for participation?
        Answer. The six regions are the six NRCS regions which cover the
    entire United States. A call for proposed pilot project areas will be
    conducted nationwide. Generally, pilot project areas within states will
    be proposed for selection in the CFO. Selection of pilot project areas
    will be made by the Chief, NRCS.
                          farmland protection program
        Question. The Farmland Protection Program (FPP) reached its
    authorized ceiling of $35 million in fiscal year 1998. Since 1997, how
    many requests for FPP funding has NRCS received?
        Answer. NRCS has not received any formal requests for FPP since
    fiscal year 1997, as requests for proposals to participate in the
    program will not be made until March 1998.
        Question. How does this compare with the number of requests you
    have funded and what is the projected need for the program?
        Answer. It is anticipated that new requests will far exceed the
    number of requests made in fiscal year 1997 as the funding available
    will be $18 million for fiscal year 1998, as compared to $2 million
    last year. The projected future funding need for the Farmland
    Protection Program far exceeds the program's current funding level.
    This is estimated at approximately $100 million per year.
        Question. Has the Department identified other programs that may be
    able to address this remaining need?
        Answer. The FPP is unique in that NRCS works with Tribal, State and
    local entities to leverage program funding and thus maximize the
    Federal funds available. Therefore farmland protection programs in the
    different states will continue to do limited work with individuals in
    this area of conservation. The department has not identified any other
    additional federal funds from other programs to address the remaining
    FPP needs.
                clean water and watershed restoration initiative
        Question. The Clean Water and Watersheds Restoration Initiative
    includes assistance for 1,000 rural watersheds. How will these be
    selected for assistance?
        Answer. Although the guidelines for selecting the 1000 rural
    watersheds hasn't been completed, the foundation for addressing our
    nations water quality issues is through a locally-led process. A key
    component in the selection process will naturally include the condition
    of water quality in the watershed. It is expected the $20 million NRCS
    budget proposal will address 350 watersheds.
                            conservation operations
        Under the Conservation Operations budget, NRCS includes $20 million
    for incentive payments to those States that are successful in
    increasing the level of non-Federal contributions to the conservation
    effort. In Vermont, the state agriculture department has funded a
    program to match federal funds in order to increase the cost-share
    payment to farmers and attract farm operations that otherwise would not
    be able to participate in the program. In fiscal year 1999, the
    Governor has requested $750,000 for this program, almost three-quarters
    of the federal funding level in Vermont.
        Question. Is this the type of success NRCS will be looking for
    distribution of the additional $20 million?
        Answer. The budget proposal of $20 million will be internally
    allocated to NRCS state offices based on an as yet to be determined
    threshold of contributions from state and local entities for such
    activities as GIS and soil survey digitization. These funds are not
    intended to be used as grants to state and local entities.
        Certainly, the Vermont program is an outstanding example of the
    initiative that states can take to leverage federal funds. The support
    that the Governor of Vermont and the State Legislature are providing to
    conservation is exemplary. State efforts such as this result in an
    increase in conservation on the land and improvement in the
    environment. Multiplying the Vermont experience across the country will
    have a significant impact on our environment. Definitely, states that
    have successful programs in place should be rewarded while at the same
    time other states should be provided an incentive to initiate suitable
    leveraging efforts. NRCS will include both of these factors in an
    equitable system to distribute the $20 million.
        Question. The Conservation Operations budget also gives special
    consideration to those States that expand their use of geographic
    information systems and purchase additional digital orthophotography.
    In 1995, the Vermont Center for Geographic Information was presented
    with an award to ``maintain, support and integrate decision support
    systems for agricultural, rural development, and natural resources
    initiatives * * *'' (USDA letter signed by Wardell Townsend, October
    34, 1995) Although the Vermont Center worked with USDA over the next
    year to actually receive the award, no funding has ever been forwarded
    to Vermont. Although I find it very troubling that USDA would award a
    grant and then not follow through on the promise, I am pleased to see
    that the Department recognizes the importance of these projects in the
    fiscal year 1999 budget.
        Will the Department consider funding the Vermont project under the
    Conservation Operations budget in fiscal year 1999? If not, how will
    the Department fulfill its obligation to the Vermont Center for
    Geographic Information?
        Answer. I am aware of the Vermont concerns. We are exploring the
    opportunity of making the Vermont project a USDA Business process re-
    engineering project as part of the Service Center Implementation Team
    activities.
                                   option 1-b
        Question. The Department's preferred option for milk marketing
    order reform is the so-called ``Option 1-B.'' But your proposal notes
    that this option would put dairy farmers out of business. Therefore you
    have proposed some so-called transition payments to ease the pain as
    you phase in Option 1-B. Your proposal states that, with the exception
    of the upper mid-west, dairy farmers would face reduced income under
    Option 1-B. Even farmers in the upper mid-west would be better off
    under Option 1-A in terms of income. The economists for Agri-Mark dairy
    believe that Option 1-B will cost dairy farmers over $360 million per
    year in net income. Vermont's Commissioner of Agriculture believes that
    Option 1-B will mean that half of Vermont's farmers go out of business.
    Without local, fresh supplies of milk consumer prices could skyrocket
    with each snow storm in the Midwest. Would you reexamine your preferred
    position to take into account the recommendations of the National
    Commission on Small Farms, which I will officially offer as a comment
    to this marketing order proposal?
        Answer. One of the main purposes of issuing a proposed rule is to
    receive public input on the proposals contained in the rule. All
    comments submitted to the Department will be reviewed and considered.
    Based on this review, the Department will then issue a final rule. The
    National Commission on Small Farms report has been identified as a
    proposed rule comment and will be considered when developing the final
    rule.
        Question. Would you look at Agri-Mark's analysis and provide me
    with a detailed explanation of how, if at all, USDA's analysis would
    differ. I recognize this request, and my next request, cannot be done
    overnight and I would simply request that this be done soon.
        Answer. We have requested input from the public on the proposed
    rule. Once Agri-Mark's comments are submitted to the Department, they
    will be given full consideration. Because of ex parte restrictions, I
    will not be able to give you a detailed explanation of how Agri-Mark's
    analysis may differ from USDA's analysis. I can assure you though that
    when received, full consideration will be given to Agri-Mark's
    analysis.
        Question. Would you reexamine your preferred marketing order
    position (1-B) to take into account the recommendations of the National
    Commission on Small Farms which I will officially offer as a comment to
    this marketing order proposal?
        Answer. One of the main purposes of issuing a proposed rule is to
    receive public input on the proposals contained in the rule. All
    comments submitted to the Department will be reviewed and considered.
    Based on this review, the Department will then issue a final rule. The
    National Commission on Small Farms report has been identified as a
    proposed rule comment and will be considered when developing the final
    rule.
        Question. I would like you to examine how many small farms might go
    out of business under Option 1-B, as compared to Option 1-A. I am aware
    some dairy farmers will go out of business regardless, but I would like
    to know how many more would go out of business under Option 1-B, as
    compared to 1-A, and what circumstances would affect that issue.
        Answer. It is difficult to predict the impact on farm numbers under
    either Option 1-B or Option 1-A. However, the proposed rule does
    request input from the public regarding the impact of this proposal on
    small businesses. We will examine the full impact of any action
    addressed in the proposed rule.
        Question. I recognize that there are limits to being able to
    predict such outcomes and that other factors, such as interest rate
    levels, can have a significant impact. Please identify other factors
    which you think would play a role in this matter.
        I believe it is imperative that greater focus be placed on keeping
    small, local dairy farmers in business.
        Answer. Other factors, such as interest rates, have an impact on
    our ability to predict outcomes from any proposed action. However, the
    proposed rule does request input from the public regarding the impact
    of this proposal on small businesses and regarding the price level and
    phase-in programs. Any additional information we receive will be fully
    considered in our evaluation of the impacts of the proposed rule.
                             fund for rural america
        Question. I was fortunate enough to have played a part in
    authorizing the 1996 Farm Bill--a bill that broke new ground in
    providing assistance to our rural communities. A case in point is the
    Fund for Rural America, which was established in the bill. The Fund
    directs $300 million over three years to help solve the problems facing
    rural areas. Due to a technical error, the $100 million that was
    intended for use in 1998 will not be available unless a correction to
    the law is made. Secretary Glickman, what steps are being taken to
    ensure there is no gap in the Fund for Rural America for 1998?
        Answer. The Department shares your concern about the 1-year hiatus
    in Fund for Rural America funding. We asked for a language correction
    and the issue is embedded in discussions about the Farm Bill Research
    Title. However, should the correction no be made, we plan to minimize
    any break by spending 1999 monies early in the fiscal year. For
    example, we currently plan to make the final first round Center Grant
    awards in October, 1998, with additional project grants through the end
    of the calendar year.
        Question. If funding is not provided in 1998, how will that affect
    projects that receive ``Center'' grants or other multi-year awards out
    of the 1997 funding cycle?
        Answer. The projects receiving funding out of the 1997 funding
    cycle would not be affected by the hiatus in 1998. This is because the
    projects in question were fully funded for the life of the project at
    the time of award. Therefore, they have funds to continue the
    activities despite the delay in 1998 funding. However, the break will
    delay award of center grants from summer to fall. The scheduling
    adjustments we are making will limit the impact of no 1998 funding to a
    4-6 month lag rather than a full year lag.
        Question. When will the announcement on 1997 awards be made?
        Answer. All 1997 awards were completed March 24, 1998.
    Congressional offices were notified immediately prior to award in case
    Members wanted to contact constituents directly. A complete list of the
    awardees will be released along with press information and individual
    project summaries in late March or early April.
      supplemental nutrition program for women, infants and children (wic)
        Question. Your budget indicates that WIC is ``fully funded.''
    However, WIC directors believe that not all eligible applicants in all
    states will be able to be served by WIC. Please explain the status of
    the WIC funding request in terms of being able to serve all eligible
    applicants within a reasonable degree of certainty. I recognize USDA
    has to make projections so that absolute certainty would be difficult
    to determine.
        Answer. Our full funding projection model starts with Bureau of
    Census estimates of income-eligible infants and children and uses
    Department of Health and Human Services data useful in estimating those
    at nutritional risk. We estimate income eligible pregnant women, and
    then apply nutritional risk factors to each group, and finally make
    certain projections as to the proportion of those eligible who will
    actually seek WIC benefits. We are confident that our 1999 funding
    request is adequate to serve 7.5 million participants a month. As that
    has been our target for several years, during which time the economy
    has improved markedly, we are confident that it is a reasonable
    estimate of full participation.
                                     ______

                     Questions Submitted by Senator Dorgan
                  rural economic area partnership (reap) zone
        In 1993 President Clinton made a commitment to establish a high-
    level interagency working group on Community Development and Economic
    Empowerment which would specifically address the need to send more
    Federal economic development resources to rural areas with serious out-
    migration problems.
        Question. Please describe USDA's participation in the interagency
    working group development as part of this Presidential commitment.
        Answer. The Department of Agriculture is one of 22 Departments and
    Agencies that are a part of the Community Empowerment Board which
    provides overall coordination for implementation the Empowerment Zone/
    Enterprise Commodity Initiative.
        Question. What specific steps has USDA taken to fulfill the
    President's commitment to reinvigorate economics in rural areas
    affected by out-migration?
        Answer. USDA and the Small Business Administration help pull
    together a One-Stop Capital Shop to serve the Rural Economic Area
    Partnership (REAP) Zones of North Dakota as well as all of North Dakota
    (one of only five nationwide). In addition, Rural Development
    assistance to participating North Dakota REAP counties has risen
    sharply. The 14 county area encompassed within the two REAP zones
    averaged $1.68 million a year in Rural Development funding dollars (not
    including single family housing) during 1991-94. For 1996 and 1997 the
    annual average of Rural Development assistance to the REAP counties is
    approximately $12.5 million annually.
        Question. Please describe the activities USDA will engage in fiscal
    year 1998 to advance this policy priority.
        Answer. USDA's Rural Development mission area is committed to
    helping improve the economy and quality of life in all of rural
    America, including areas where out-migration and job loss has torn
    asunder the fabric of the rural economy. Our financial programs in 1998
    will continue to support essential public facilities and services as
    water and sewer systems, housing, health clinics, emergency service
    facilities and electric and telephone service. We will promote economic
    development by supporting loans to businesses through banks and
    community-managed lending pools. We will offer technical assistance and
    information to help agricultural and other cooperatives get started and
    improve the effectiveness of their member services. And we will provide
    technical assistance to help communities undertake community
    empowerment programs, such as the REAP demonstration areas in North
    Dakota.
        Question. Due to the obvious application of USDA's rural
    development mission area programs relating to this initiative, please
    describe your willingness to take a lead role in helping the
    interagency working group develop practical, real proposals and actions
    that will transform the President's commitment into real opportunity in
    rural areas.
        Answer. USDA has always been willing and enthusiastic to take a
    lead role in developing practical and real proposals to support rural
    development.
                             ars facility closures
        Question. The Appropriations Committee made it clear in Public Law
    105-83 that it did not concur with the Department's proposed closure of
    ARS facilities and, further, that the strategic planning process in the
    Federal Agriculture Improvement and Reform Act relating to all USDA
    research facilities be completed before any further closures are
    contemplated. Now the Department, in the fiscal year 1999 budget, has
    again proposed closures. What is the rationale for the closure in light
    of the direction already clearly delineated in the fiscal year 1998
    funding bill?
        Answer. The fiscal year 1999 Federal budget submitted by the
    President recommends a number of new initiatives to address changing
    priorities facing agriculture and the American consumer. Food safety,
    global climate, nutritional requirements, emerging infectious diseases
    in a global community, genome maps of critical agricultural products
    etc. represent critical challenges that must be addressed as we move
    into the next century. The constraints of Federal spending remain in
    place. The Administration and the Congress continue to target Federal
    spending and revenue savings in all budget deliberations.
        The research budget proposed for ARS reflects an increase of $32
    million over the current year. However, the Department is focusing on
    many priority agricultural issues that must be addressed now by our
    research scientists. This requires that ARS terminate ongoing projects
    and reallocate these resources to the new or expanded initiatives as
    recommended by the President. In this effort a number of projects
    carried out at Prosser, Washington; Orono, Maine; Brawley, California
    and Mandan, North Dakota were identified as less critical. Given these
    programmatic decisions, management considerations lead to
    recommendations to terminate and redirect resources to new research
    initiatives and close the mention research stations. We believe there
    is adequate information for Congress to act on these relatively
    straight forward recommendations at this time without formal input from
    the Strategic Planning Task Force.
                          centralized servicing center
        Many North Dakotans have registered serious complaints about
    service at the St. Louis Rural Development Centralized Servicing
    Center, including that financial records were muddled and files
    misplaced.
        Question. In the case of the Rural Housing centralized service, can
    you articulate how centralization in this case has been beneficial to
    the customer?
        Answer. The Centralized Servicing Center (CSC) is providing state-
    of-the-art servicing comparable with any other system available to
    homeowners across the nation. Our system is unique because of the
    Congressionally mandated ``supervised credit'' that must be available
    to our borrowers to preserve home ownership though economic or other
    hardships individuals and families may experience. For this reason, we
    have had to modify the private sector serving software we purchased to
    ensure these servicing options were handled in a consistent and
    efficient manner. These servicing features include: 7 day a week, 24
    hours voice response for detailed information on loans; nationwide
    consistency for servicing, including payment assistance, moratorium,
    reamortization and other services; centralized cash management
    providing fiduciary control; a monthly statement sent to each borrower;
    escrow of taxes and insurance; and expanded (7:00 am-6:00 pm) customer
    service representatives to handle more complex issues for our
    borrowers.
        Beginning in October of 1997, RHS centralized over 700,000 loans
    from 1,200 offices nationwide to one facility in St. Louis. We
    currently have approximately 800 field offices. This was a massive
    undertaking. We have experienced some difficulties with backlogs in our
    mailroom which has delayed payment assistance and other services. This
    problem has been rectified and our response time has improved
    dramatically. Additionally, we have and are continuing to modify our
    software and other support systems to handle additional concerns and
    provide the best customer service to our borrowers.
        Question. How many staff have been added to the Center, and how
    does this number compare with the number of personnel that previously
    handled housing program inquiries in the field offices?
        Answer. Prior to the Centralized Servicing Center (CSC), there were
    approximately 3,300 staff years performing single-family loan
    origination and servicing in the field. As a result of a move to
    centralize the loan servicing process, 900 staff years in the field
    were deployed for other critical Rural Development activities, 600
    staff years were transferred to the CSC, 600 staff years were
    eliminated, 600 staff years still remain in the field to conduct loan
    origination and 600 staff years remain in the field to conduct post CSC
    acceleration and liquidation including management and disposal of
    inventory properties.

                              Subcommittee Recess

        Senator Cochran. We do not have any more requests for
    recognition from other Senators, so this concludes today's
    hearing. We appreciate very much your cooperation with our
    subcommittee.
        Our next hearing will be on Tuesday, February 24, at 10
    a.m. in this room, room SD-138, of the Dirksen Senate Office
    Building. We will hear then from departmental witnesses with
    respect to the Department's research, education, and economics
    programs.
        Until then, the subcommittee stands in recess.
        [Whereupon, at 12:13 p.m., Tuesday, February 10, the
    subcommittee was recessed, to reconvene at 10:04 a.m., Tuesday,
    February 24.]

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 1999

                                  ----------

                           TUESDAY, FEBRUARY 24, 1998

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 10:04 a.m., in room SD-192, Dirksen
    Senate Office Building, Hon. Thad Cochran (chairman) presiding.
        Present: Senators Cochran, Gorton, Burns, and Bumpers.

                           DEPARTMENT OF AGRICULTURE

    STATEMENT OF I. MILEY GONZALEZ, UNDER SECRETARY,
                RESEARCH, EDUCATION, AND ECONOMICS
    ACCOMPANIED BY:
            EILEEN KENNEDY, ACTING DEPUTY UNDER SECRETARY, RESEARCH,
                EDUCATION, AND ECONOMICS
            DENNIS KAPLAN, BUDGET OFFICE

                    National Agricultural Statistics Service

    STATEMENT OF DONALD BAY, ADMINISTRATOR

                         Agricultural Research Service

    STATEMENT OF FLOYD P. HORN, ADMINISTRATOR

                           Economic Research Service

    STATEMENT OF SUSAN OFFUTT, ADMINISTRATOR

          Cooperative State Research, Education, and Extension Service

    STATEMENT OF BOB ROBINSON, ADMINISTRATOR

                                Opening Remarks

        Senator Cochran. The subcommittee will please come to
    order.
        This morning our subcommittee continues its hearings to
    review the budget request submitted by the President to fund
    the Department of Agriculture and related agencies. This
    morning we are pleased to have an opportunity to review the
    budget request of the Agricultural Research Service; the
    Cooperative State Research, Education, and Extension Service;
    the Economic Research Service; and the National Agricultural
    Statistics Service.
        Miley Gonzalez, who is Under Secretary of Research,
    Education, and Economics, is with us and is accompanied by
    Eileen Kennedy, Donald Bay, Floyd Horn, Susan Offutt, and Bob
    Robinson. Dennis Kaplan is here representing the Budget Office
    for the Department. We welcome you and we thank you for your
    cooperation with our subcommittee.
        This is probably one of the most important areas for
    agriculture that the Department administers. If we do not
    maintain our capacity to improve productivity on our farms; if
    we do not maintain access to research, which is what extension
    provides through its programs for farmers and agriculture,
    landowners, then we are not going to be able to compete in the
    global marketplace. We are not going to be able to maintain the
    high quality of our foodstuffs for American consumers at
    reasonable prices.
        So for all of these reasons, the funds that are provided
    for these programs are essential if we are to continue to enjoy
    the benefits of our agricultural economy. It provides a lot of
    jobs, of course. It means a lot in many other ways to us.
        That is one reason why I am personally disturbed that the
    budget request this year is $63 million below last year's
    funding level. I am disturbed by that, concerned by it, and,
    frankly, amazed that the President would submit a budget that
    underfunds these programs to that extent. I hope our hearing
    this morning will shed some light on why the budget is
    submitted in that way.
        There are some very important programs for which funding is
    proposed to be cut. The sum of $26 million is cut in Hatch Act
    and Smith-Lever formula funds. These go directly to our State
    universities and colleges that are involved in research. A
    reduction of $41 million in special grants, and a number of
    other proposed funding decreases and terminations are included
    in this budget submission.
        We are going to look very carefully at it, and I am sure
    that this subcommittee is going to make some changes in the
    President's budget request in this area. But you can help us
    understand where those changes should be considered and why the
    budget is submitted in this form.
        Before going to our panel of witnesses, I recognize the
    distinguished ranking member of this subcommittee, my good
    friend from Arkansas, Senator Bumpers.

                     PREPARED STATEMENT OF SENATOR BUMPERS

        Senator Bumpers. Mr. Chairman, thank you very much. In the
    interest of time, I will waive the reading of my opening
    statement and insert it in the record.
        My statement would very much echo what you have just said.
    I am mightily concerned about a number of issues in this
    budget. We will get into those during the question and answer
    session.
        [The statement follows:]
                     Prepared Statement of Senator Bumpers
        I am pleased to welcome Secretary Gonzalez before this
    subcommittee. This is your first visit before this panel we look
    forward to your comments. I also want to welcome the other agency
    heads. And, it is always good to see Mr. Kaplan whose long-time
    assistance to this subcommittee has been invaluable.
        In spite of these words of welcome, I must admit that my sentiments
    with the overall budget submission in the research mission area are a
    little less generous. I have stated publicly, on many occasions, that I
    feel we are not committing enough resources to agricultural research.
    Compared to the money we spend on research on how to make things
    explode better and bigger, our dedication in meeting the demands of an
    ever growing, ever hungry world pale. Over the course of American
    history, the American farmer has done more to improve the quality of
    life through an improved quality and abundance of food than any other
    sector of the economy. But increased production is necessary to keep up
    with an ever growing population. In addition, our growing population is
    also responsible for urban sprawl converting more and more farm acreage
    into housing developments, greater demands on our water and wildlife
    resources, and higher expectations for food safety. In short, the
    American farmer is expected to do more with less and only agricultural
    research can make that happen.
        The budget proposal for agencies included under the heading of
    Research, Education, and Economics reflects a request of $1.826
    billion. This is a net decrease of $47 million, or 2.5 percent, below
    the fiscal year 1998 level. I recognize that the budget proposal
    implies an overall increase for research and development by about $7
    million with the reductions in other areas such as facilities. However,
    we must consider the budget proposal in total and remember that the
    mission of USDA's research, education, and economics agencies is tied
    to the basic premise I have just outlined that we must make American
    agriculture do more with less. Whether the funding is for agricultural
    competitive, formula, or facility programs, the programs are designed
    to work together with an overarching purpose of keeping the American
    farmer and, by extension, the American consumer at least one step ahead
    of the increasing demands and challenges ever snapping at our heels.
    Unfortunately, this budget submission asks us to continue providing the
    American farmer less, to the tune of about $47 million.
        I also feel compelled, again, to point out that our problems with
    this budget are not limited to what it does not include, but also
    because of what it does include. The budget request from USDA contains
    hundreds of millions of dollars in assumed user fees. I realize that
    those fees are not directly tied to the agencies before us today, but
    those assumptions will have an impact on our ability to meet the
    demands of our research efforts. The importance of what we do here is
    too great for playing budget parlor games. We have a responsibility to
    protect the U.S. agricultural research base. We are serious about it
    and we know that if we don't step forward, no one else will. There is
    simply too much at stake.
        I also want to offer a few comments on the apparently continuing
    battle between the Congress and USDA on setting the research agenda.
    For as many years as I can remember, the budget request to this
    subcommittee would always zero out most, if not all, of the CSREES
    Special Grants. Now, the struggle seems to have been elevated and we
    find that the programs Congress elected to fund through the
    Agricultural Research Service, too, have been zeroed out. It appears
    that in addition to in-house research, USDA is willing only to fund
    research through competitive grants, which means USDA wants to fund
    research only to those institutions and researchers that USDA feels is
    important. It seems a little odd that if USDA funds priority research
    it is called being competitive and if Congress funds priority research,
    it is called pork barrel spending.
        I realize that USDA makes use of peer review and other scientific
    community-based groups to set funding priorities and to determine which
    projects will get attention and which will not. However, it seems that
    USDA accepts the premise that only they have access to research
    stakeholders who have any sense of research priorities. With all due
    respect to my many friends in the research community, let me point out
    that scientists tend to spend much of their time looking through
    microscopes. Sometimes, it is important to have a more global view of
    research priorities which can be lost in the often discipline-specific
    world of science. I suspect that if you ask an agronomist where the
    research priorities are, he would likely suggest in the field of
    agronomy. If you ask the same question of a specialist in animal
    science, you would get a different answer.
        Obviously, there are many specific areas of agricultural research
    that are very important to me. They may or may not be identical to
    priorities of Senator Cochran or other members of the subcommittee.
    However, the process we undertake here is to come together in an
    agreement that allows us all to form a consensus of research
    priorities. It would be welcome for USDA to join us in that process
    rather that suggest only they hold the keys to research.
        As I mentioned, there are many specific areas of research in which
    I hold great interest. I will not go into all of them now. Instead, I
    look forward to the comments of our guests and the opportunity to ask
    them questions later during this hearing.

                            Introduction of Witness

        Senator Cochran. Mr. Gonzalez, we have copies of your
    statement and others' statements. We appreciate having those
    and they will be printed in the record in full. Please proceed
    with any remarks you consider helpful to the subcommittee.

                        Fiscal Year 1999 Budget Request

        Dr. Gonzalez. Thank you, Mr. Chairman. It is a pleasure to
    be here with you this morning to talk about the fiscal year
    1999 budget request that we have submitted for research,
    education, economics, our mission area at USDA, and to
    recognize the team of folks that work with me in this
    particular mission area. I just would like to begin by
    underscoring some of the important points that you made.
        We are very much engaged in this conversation in terms of
    the importance that we consider this mission area to have at
    USDA because of the continuing changing environment out there
    in agriculture production and all the systems that support
    that. So we are pleased to be here to work with you, and look
    forward to continuing the discussion in terms of where we are
    going with our budget.
        I would also say that, as you indicated, we think that this
    is one of the most important mission areas within USDA and
    within the Federal agencies, specifically because of the type
    of approach that we will take to supporting our agricultural
    production systems.
        I have been here for just a short time and I wanted to take
    a few minutes to talk a little bit about my impressions with
    regard to the mission area and the USDA budget. We have begun
    the dialog in discussion with a number of our partners
    internally to again highlight the importance of what we believe
    is this particular mission area with regard to research,
    education, economics, and extension.
        As you may know, I have a background in agriculture, both
    from the production standpoint as well as an educator in
    agricultural education and extension for a number of years. So
    this particular mission area, as I considered coming to serve
    in this capacity, was of particular importance to me, knowing
    that the things that we do at REE and within USDA really
    provide the basis and foundation for much of the things that
    will happen, not only in our current circumstances, but also as
    we look forward to identifying the kind of scientific knowledge
    and extension programs that will fortify agriculture in the
    future.
        The combination of fundamental and applied research and
    statistics, coupled with the higher education and extension
    programs that we have, I believe yield a powerful partnership
    that serves agriculture well and will continue to do that. Our
    research must continue to be cutting edge that will benefit all
    of our citizens. We plan to communicate these objectives that
    we have as a part of our strategic plan to everyone, not only
    those that are already involved in the food and fiber system,
    but all of our clients.
        We have an opportunity to draw on the distinct differences
    that we have within our four agencies and also on those
    similarities as we look forward to supporting the work of the
    other agencies within USDA and certainly as we work across
    Federal Departments to support the work that is done in other
    areas.
        REE-funded physical and biological research provides the
    scientific foundation for a vast array of advances that are
    being made in agriculture and related industries. We are
    committed to strengthening those linkages between the basic and
    applied research that also serve the broader Governmentwide
    research agenda.
        REE brings to this larger agenda excellent cutting edge
    research that complements similar excellence found elsewhere,
    in Government, at colleges and universities, and in the private
    sector.
        Mr. Chairman, we welcome the opportunity to work with you
    and with the administration to promote these linkages through
    funding of research directed at broader priorities and
    initiatives. Let me emphasize that the budget that we have for
    our agencies was created through an ongoing conversation with
    many of our stakeholders, both in and out of Government. We
    have made an effort, all of us at this table, to go out and
    visit with a number of our constituents in the research
    community, the producer and commodity groups, the members of
    associations that are focused on environmental, food safety,
    and nutrition concerns, to gain a better understanding of their
    needs.
        We are committed to listening and to the extent possible
    being responsive to the concerns and recommendations voiced by
    our stakeholders. I believe that we have met our responsibility
    to formulate a budget that is responsive to those concerns and
    interests to the extent possible.
        The REE mission area has had to deal with some important
    issues and concerns regarding the high priority areas that we
    have addressed in this budget request. The REE budget request
    for fiscal year 1999 is $1.826 billion, a net decrease of $47
    million, or 2.5 percent from the fiscal year 1998 budget.
    Within this total, the allocation for research and development
    actually increases by $7 million, or about 1 percent.
        The REE agency budgets were developed in the context of the
    administration's commitment to achieving a balanced budget for
    fiscal year 1999 and within that context and taking into
    consideration the almost infinite number of worthy goals and
    problems REE could address, I believe the budget in total
    funding and specific initiatives represents a sound and
    balanced portfolio of public investment.
        We have had to make difficult decisions to reduce and
    redirect resources or terminate valuable projects in order to
    fund others of higher priority within those established goals.
        I think it is important to reiterate that the return on
    public investment in agriculture research and development is
    very high. The decline in the percentage of disposable personal
    income that we spend on food, sustained over many decades, is
    due in large part to the increases in agricultural productivity
    resulting from investments in research and development.
        Between 1948 and 1994, productivity in U.S. agriculture
    grew at an annual rate of 1.9 percent, as compared to 1.1
    percent for nonfarm businesses and 1.3 percent for
    manufacturing.

                 High-Priority Initiatives for Fiscal Year 1999

        Mr. Chairman and members, I would like to focus on four of
    the high-priority initiatives that we have identified in this
    budget proposal: food genome, food safety, pest management, and
    civil rights. These initiatives are all closely aligned with
    the general goals of our strategic plan and contribute to the
    achievement of several of those goals.

                             Food Genome Initiative

        Among the major challenges the Nation will face in the 21st
    century are the need for increased high-quality food
    production, a cleaner environment, and renewable chemical and
    energy resources. The President's food genome initiative, a
    Governmentwide initiative in which USDA is playing a major
    role, will help achieve a safe and abundant food supply, meet
    the needs of a growing population worldwide, and ensure global
    competitiveness of the U.S. agricultural industries in a more
    environmentally sensitive manner.
        The food genome strategy will vastly expand our knowledge
    of genomes of species of importance to the food and
    agricultural sector. REE is carrying out considerable genetic
    research, but it does not nearly meet the need. Therefore, as
    part of the President's initiative REE is requesting $40
    million for food genome research, an increase of $19 million
    over the estimated $21 million for fiscal year 1998.

                             Food Safety Initiative

        Food safety is another of the initiatives that is of
    importance to us in this particular budget. The administration
    has taken major strides to improve our current food safety
    systems. The recent implementation of HACCP is radically
    changing our meat and poultry inspection systems, which reside
    in another of our mission areas. The research proposed in the
    fiscal year 1999 budget will bring us farther in generating new
    knowledge to identify cost-effective technologies for
    prevention and detection of existing and newly emerging
    pathogens.
        The fiscal year 1999 budget includes a total of $26 million
    in increased funding across ARS, CSREES, and ERS. The majority
    of the funds will focus on developing improved pathogen
    prevention and detection methods and other bioscience research
    in both ARS and CSREES. ERS requests funds to better assess the
    costs of foodborne illness and to apply economic analysis in
    the development of more cost-effective control methods.

                           Pest Management Initiative

        The third initiative is pest management. Producers tell us
    that they need the research community to develop the science
    and technologies that will allow them to control pests in an
    environmentally responsible manner and to meet increasingly
    stringent food safety standards while remaining economically
    viable.
        Last October, in response to these concerns, the Department
    established the Office of Pest Management Policy within ARS.
    The fiscal year 1999 pest management initiative encompasses
    USDA's multiyear integrated pest management initiative that
    relates directly to the Department's national goal for the
    adoption of IPM practices on 75 percent of U.S. cropland by the
    year 2000. The initiative includes increases to support
    enhanced research in biocontrol alternatives to pesticides and
    new control technologies, as well as transfer of the new
    technologies to producers. This is a very important and
    critical element in this process.

                            Civil rights Initiative

        The last initiative that I would like to address this
    morning is civil rights. In December 1996, Secretary Glickman
    launched a major initiative to address the wide range of civil
    rights problems and concerns within the Department. The fiscal
    year 1999 REE budget for the agencies represents a serious
    response to these concerns that were raised by the Secretary,
    the USDA Civil Rights Action Team, as well as the National
    Commission on Small Farms.
        The budget also reflects a recognition that the best future
    for agriculture is one that benefits from a diverse and
    talented scientific and technological work force. We have
    additional details about this particular initiative in our
    budget proposals.
        These are the highlights of the four initiatives that span
    the agencies within REE. Fuller discussion of agency components
    of these initiatives can be found in the agencies' explanatory
    notes.

                    Fiscal Year 1999 Proposed Funding Levels

        The Agricultural Research Service fiscal year 1999 budget
    request of $813 million is slightly lower than the $824 million
    for fiscal year 1998. Embedded in that decrease is a net
    increase of $32 million in research. Funding for the national
    research initiative under CSREES' budget request has increased
    by $33 million, to a total of $130 million, an increase of 34
    percent. We realize, of course, that within that budget we also
    have a decrease of $9 million to a level of $850 million for
    the total agency budget.

                                   ERS Budget

        The Economic Research Service budget decreases from $72
    million to $56 million in fiscal year 1999. ERS conducts
    research and analysis on the efficiency, efficacy, and equity
    aspects of issues related to agriculture, food safety,
    nutrition, and the environment and rural development.

                                  NASS Budget

        NASS' budget declines by $11 million due to the cyclical
    nature of the required census of agriculture funding.
        In summary, I want to reiterate that, in the context of a
    balanced budget, the REE budgets reflect a continued strong
    commitment to investment in agricultural research, statistics,
    education, and extension. If U.S. agriculture is to continue to
    be dynamic and provide leadership in a very competitive global
    economy and if the American public is to continue to enjoy the
    high quality, safe, and nutritious products of agriculture that
    you spoke about a few minutes ago, then our national commitment
    to increasing the investment in research, education, extension,
    must continue.
        We want to work closely with you and with the
    administration as we continue to increase our investment in
    that area, and we look for opportunities to share thoughts and
    discussion with you following today's hearings. We would, at
    this point, welcome any discussion and questions that you might
    have for the REE team.
        Thank you, Mr. Chairman.

                              Prepared Statements

        Senator Cochran. Thank you very much, Dr. Gonzalez.
        Is it your wish that any of the other members of your panel
    make a statement at this point? My thought is we do have copies
    of statements.
        Dr. Gonzalez. We do have and they have been submitted for
    the record. I think what we would be ready to do is answer and
    discuss any of the questions that you might have.
        [The statements follow:]
                  Prepared Statement of Dr. I. Miley Gonzalez
        Mr. Chairman, Members of the Committee, I am pleased to appear
    before you to discuss the fiscal year 1999 budgets for the Research,
    Education, and Economics (REE) mission area agencies. I am accompanied
    by Acting Deputy Under Secretary, Dr. Eileen Kennedy, and the
    Administrators of the four mission area agencies: Dr. Floyd Horn,
    Administrator of the Agricultural Research Service (ARS); Dr. Bob
    Robinson, Administrator of the Cooperative State Research, Education,
    and Extension Service (CSREES); Dr. Susan Offutt, Administrator of the
    Economic Research Service (ERS); and Mr. Donald Bay, Administrator of
    the National Agricultural Statistics Service (NASS). Each Administrator
    has submitted written testimony for the record.
        This is the first opportunity I have had to appear before this
    subcommittee since being confirmed as Under Secretary last July. Before
    we focus on the budget, I would like members of the Subcommittee to
    know that your advice is welcomed. We look forward to working with you
    to enhance and strengthen the already strong programs of the Research,
    Education, and Economics mission area of USDA. I would like to take
    just a moment to share with you my impressions of the mission area
    programs and where I think they lead us as we consider the REE budget
    for fiscal year 1999. I have a background rooted in Agriculture, as a
    producer and an educator. Since assuming the responsibilities as Under
    Secretary I have come to believe that Research, Education and Economics
    is the most critical Federal mission in agriculture because the
    continued success of agriculture in the world is dependent on
    knowledge. The combination of fundamental and applied research and
    statistics coupled with higher education and extension yields a
    powerful partnership that serves agriculture well.
        The public demands that agriculture provide an affordable,
    nutritious, and safe food supply, and in doing so, conserve natural
    resources and assure social and economic progress in rural areas. I am
    committed to the REE mission area meeting these goals. Our research
    must continue to be the cutting edge for the benefit of all Americans.
    We plan to communicate these objectives to all Americans and not just
    those in the food and fiber sector.
        The creation of the REE mission area in 1994 brought together the
    research, education, statistics, analysis and social sciences and
    captured the synergies across those functions and disciplines. We can
    see the fruits of the mission area structure in such diverse program
    areas as food safety and Integrated Pest Management (IPM).
        Drawing on their distinct and complementary capacities, the REE
    agencies play critical roles in supporting the work of the agencies of
    other USDA mission areas. REE funded physical and biological research
    provides the scientific foundation for a vast array of advances being
    made in agriculture and related industries. For example, in 1997 ARS
    research resulted in 59 new varieties and 89 new germplasm lines of
    agricultural and horticultural crops released for use by farmers,
    ranchers, and home gardeners. REE's statistical and analytical programs
    enhance understanding of markets and market conditions. Working with
    USDA's Rural Development mission area, last year ERS prepared a report
    on rural credit which concluded that, in general, rural financial
    markets work reasonably well in serving the needs of rural America.
    NASS recently assumed responsibility for conducting the Census of
    Agriculture that will provide valuable information about farm
    operations and the local economies of which they are a part. REE's
    education and extension programs work to strengthen the capacity of
    institutions serving minorities. CSREES awarded more than $1.4 million
    in grants to 13 Hispanic-Serving Institutions in 1997 to carry out
    programs needed to educate students capable of enhancing the nation's
    food and agricultural scientific and professional work force.
        REE is committed to strengthening the linkages between the basic
    and applied agriculture research REE conducts and supports and the
    broader government-wide and national research agenda. REE brings to
    this larger agenda excellent cutting-edge research that complements
    similar excellence found elsewhere in government, at colleges and
    universities, and in the private sector. We welcome the opportunity to
    work with Congress and the Administration to promote these linkages
    through funding of research directed at broader priorities and
    initiatives.
        The President's Food Genome Initiative, for which we are providing
    leadership, proposes just such a collaborative effort involving
    multiple Federal agencies and researchers in the academic community and
    the private sector. Such collaborations I believe, must and will,
    become the model that the research community adopts to address
    pressing, complex issues. Such approaches are effective and efficient
    and create partnerships in which all participants contribute to a
    common goal.
        Working together, the REE agencies are finding that implementation
    of the Government Performance and Results Act of 1993 is providing a
    valuable process for enhancing the effectiveness of our programs. Last
    fall you received our strategic plans. REE and agency plans were
    generally well received, getting particularly high marks for their
    outcome-orientation. Last spring when we began work on the budget under
    discussion, the mission area used the five general goals common to our
    strategic plans to structure our discussion of proposed adjustments and
    increases. The process facilitated our looking across the agencies to
    see how the parts fit together and how they could be more effectively
    coordinated, while maximizing the unique contributions of each agency.
        More recently, developing performance plans helped us
    systematically consider and describe, in the context of the strategic
    plans, what we were committed to accomplishing in fiscal year 1999.
    Within a short time you will receive the departmental performance plan
    with the four agency performance plans. I believe you will find these
    plans valuable in reviewing our current program and assessing our
    proposed budget from the outcome-oriented perspective of the five goals
    of our strategic plans--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. We welcome your suggestions for making
    future plans more useful.
        I want to emphasize that the agency budgets were created through
    on-going conversations with our many stakeholders in and out of
    government. Over the course of the year, all of us at this table and
    many others from REE have met with people from the research community,
    producer and commodity group representatives, and members of
    associations focused on environmental, food safety, and nutrition
    concerns, to gain an understanding of their needs and recommendations
    as they relate to national needs and our programs. The National
    Agricultural Research, Education, Extension, and Economics Advisory
    Board, with its very diverse membership, also has provided valuable
    recommendations on the REE strategic plan and a draft performance plan,
    both of which have implications for the shape and content of these
    budgets.
        We are committed to listening and, to the extent possible, being
    responsive to the concerns and recommendations voiced by our
    stakeholders. Clearly, funding constraints do not allow us to be as
    responsive to individual stakeholders as they or we might like. In
    general, I believe that we have met our responsibility to formulate a
    budget that is responsive to the concerns and interests of our diverse
    stakeholders. As importantly, it is a clear expression of our judgment
    of where the needs for Federal budget resources are the greatest.
                         ree's fiscal year 1999 budget
        I would like to turn now to the fiscal year 1999 budget for the
    agencies of the Research, Education, and Economics mission area. First,
    I will discuss overall budget issues and then focus on several
    important initiatives that address high priority issues and problems.
        The REE budget request for fiscal year 1999 is $1.826 billion, a
    net decrease of $47 million or 2.5 percent from fiscal year 1998.
    Within this total, the allocation for research and development actually
    increases by $7 million or about 1 percent. The REE agency budgets were
    developed in the context of the Administration's commitment to
    achieving a balanced budget in fiscal year 1999. Within that context
    and taking into consideration the almost infinite number of worthy
    goals and problems REE could address, I believe the budget, in total
    funding and specific initiatives, represents a sound and balanced
    portfolio of public investments. In developing the budget, we have had
    to make difficult decisions to reduce and redirect resources or
    terminate valuable projects in order to fund others of higher priority
    within the established goals.
        I believe it is important to reiterate that the return on public
    investment in agricultural research and development is very high. The
    decline in the percentage of disposable personal income we spend on
    food, sustained over many decades, is due in large part to increases in
    agricultural productivity, resulting from investments in research and
    development. Between 1948 and 1994 productivity in U. S. agriculture
    grew at an annual rate of 1.9 percent compared to 1.1 percent for non-
    farm businesses and 1.3 percent for manufacturing. Investments in
    research have also resulted in new understanding of the linkages
    between agriculture production and environmental conditions leading to
    new environmentally friendly production practices and technologies.
    Similarly, new discoveries about the ecology of human pathogens has led
    to an improved capacity to prevent and detect food-borne contaminants
    and to support the development of Hazard Analysis and Critical Control
    Point (HACCP) regulations. New understanding of both the nutrient
    content of foods and the nutritional needs of people has been central
    to our developing healthy dietary guidelines.
                        ree fiscal year 1999 initiatives
        I would like to focus on four high priority initiatives proposed in
    the REE agency budgets--the Food Genome, Food Safety, Pest Management
    and Civil Rights Initiatives. These initiatives are all closely aligned
    with the general goals of our strategic plans and contribute to the
    achievement of several goals.
        Among the major challenges the nation will face in the 21st century
    are the need for increased high quality food production, a cleaner
    environment, and renewable chemical and energy resources. The
    President's Food Genome Initiative, a government-wide initiative in
    which USDA plays a major leadership role, will help achieve a safe and
    abundant food supply, meet the needs of a growing population worldwide
    and ensure the global competition of the U.S. agricultural industries
    in a more environmentally sensitive manner.
        The Food Genome Strategy will vastly expand our knowledge of
    genomes of species of importance to the food and agricultural sector.
    The research will focus on efforts to understand gene structure and
    function which is expected to have considerable payoff in crop species
    ranging from rice to corn and animal species ranging from cattle to
    swine to poultry. Early efforts in the USDA food genomics work will
    concentrate on identification of economically important traits that
    increase yield, quality and disease resistance in plants, minimize the
    need for pesticides, and protect the environment.
        The REE mission area has chaired the Interagency Working Group on
    Plant Genomics involving the Office of Science and Technology Policy,
    the Department of Health and Human Services, the Department of Energy
    and the National Science Foundation. In this role, REE brought together
    commodity group representatives and leading scientists to solicit their
    views. REE is in the final stage of developing a concept paper on
    USDA's role in Food Genomics that will provide a blueprint for future
    research. The paper will build on the genome research program already
    conducted under ARS and CSREES and will describe how the REE program
    will complement the food genome program within the National Science
    Foundation.
        REE is carrying out considerable genetic research but it does not
    nearly meet the need. Therefore, as part of the President's initiative
    REE is requesting $40 million for food genome research, an increase of
    $19 million over an estimated $21 million in the fiscal year 1998
    budget. The request would increase ARS's research program by $3.0
    million to a total of $14 million. CSREES's would increase $16 million,
    with $6 million added to the current $10 million in the National
    Research Initiative and an additional $10 million in a new competitive
    Food Genome Research Program under proposed legislation.
        Food safety is the second initiative I would like to address. Even
    though the U. S. food supply is one of the safest in the world,
    millions of citizens become ill each year due to foodborne pathogens.
    In addition, there is growing concern associated with the consumption
    of foods containing known or potentially harmful levels of natural
    toxins, such as aflatoxins.
        The Administration has taken major strides to improve our current
    food safety systems. The recent implementation of HACCP is radically
    changing our meat and poultry inspection system. Research proposed in
    the fiscal year 1999 budget will bring us further in generating new
    knowledge to identify cost-effective technologies for prevention and
    detection of existing and newly emerging pathogens.
        As part of the President's Food Safety Initiative, REE is currently
    co-chairing a National Science and Technology Council working group to
    develop a comprehensive and coordinated government-wide food safety
    research agenda. This coordinated research agenda, to be completed in
    May, should prove valuable in facilitating greater coordination across
    the research agencies and guiding the formulation of the fiscal year
    2000 budget.
        The REE component of the Food Safety Initiative in the fiscal year
    1999 budget includes a total of $26 million in increased funding across
    ARS, CSREES, and ERS. The majority of the funds will focus on
    developing improved pathogen prevention and detection methods and other
    bioscience research in ARS and CSREES. ERS requests funds to better
    assess the cost of foodborne illness and to apply economic analysis in
    the development of more cost effective control methods. CSREES would
    also receive funding to expand education efforts for those involved in
    the food production system from farm to table.
        The third initiative I would like to discuss is pest management.
    Effective pest management is an ever present and challenging facet of
    agriculture production. Increasing public value placed on environmental
    quality and growing public concern about food safety, only heighten the
    challenge of effective pest control. Producers tell us they need the
    research community to develop the science and technologies that will
    allow them to control pests in an environmentally responsible manner
    that also meets increasingly stringent food safety standards and is
    economically viable. That message is as clear this year as in the past.
    Enactment of the Food Quality Protection Act of 1996 (FQPA) adds to the
    need for research to develop biological controls and other technologies
    and production practices that effectively control pests while
    minimizing environmental stress and food contamination.
        Last October, in response to this need, the Department established
    the Office of Pest Management Policy in ARS. This office will provide a
    coordinated Departmental approach to minor crops pesticide use,
    including coordinating USDA's response to EPA's data needs as it
    implements FQPA. Several of the programs with requested increases in
    the ARS and CSREES budgets would be coordinated by this office that is
    focusing principally on FQPA related issues.
        Another component of the fiscal year 1999 pest management
    initiative is USDA's multi-year Integrated Pest Management initiative
    that relates directly to the Department's national goal for the
    adoption of IPM practices on 75 percent of U.S. cropland by the year
    2000. The initiative includes increases to support enhanced research on
    biocontrol alternatives to pesticides and new control technologies, as
    well as to transfer the new technologies to producers. While
    considerable progress has been made in reaching the IPM goal, the gap
    between the discoveries made by the scientific community and the
    transfer of those discoveries and associated technologies to the
    producer is significant. Both the ARS and the CSREES budgets include
    funding requests to work with producers to test new technologies and
    practices and facilitate their adoption. These increases are critical
    to our harvesting the fruits of our investment in research to enhance
    environmental quality and food safety through producer adoption of IPM
    technologies and practices.
        The last initiative I would like to address is civil rights. In
    December 1996 Secretary Glickman launched a major initiative to address
    a wide range of civil rights problems and concerns in the Department.
    The fiscal year 1999 REE agency budgets represent a serious response to
    these concerns raised by the Secretary, the USDA Civil Rights Action
    Team (CRAT), as well as the National Commission on Small Farms. The
    budget also reflects a recognition that the best future for agriculture
    is one that benefits from a diverse and talented scientific and
    technological work force. With this principle in mind, the CSREES
    budget includes increased funding for the 1890 and 1994 Land Grant
    colleges and universities that primarily serve minority populations. If
    agriculture is to attract those students, it must provide them the best
    opportunities to gain the knowledge and experience they need at the
    university or college they attend.
        The ERS, NASS and CSREES budgets also include requests for
    increases that would support new activities that are responsive to the
    information and technology needs of historically underserved
    populations. The ERS's budget includes a request for funds to analyze
    the information needs, particularly market information needs, of small
    farms, many of which are disproportionately minority owned.
    Complementing this ERS increase, CSREES will initiate an integrated
    research, extension, and education competitive grants program for new
    technology development and transfer to small farms. Proposed
    legislation is being submitted for this new integrated program. The
    NASS budget includes funds to collect data on pesticide use in nursery
    and greenhouse crops, where farmworker exposure is potentially high.
    These budget requests, most of which are part of the Department's Civil
    Rights Initiative, reflect a heightened awareness of our obligation to
    design and implement programs that are responsive to the needs of all
    our customers, including those historically underserved.
        These are the highlights of four initiatives that span the agencies
    within REE. Fuller discussion of agency components of these initiatives
    can be found in the agencies' Explanatory Notes.
                      ree agency fiscal year 1999 budgets
        I would like to turn briefly to the budgets of the four REE
    agencies. The Agricultural Research Service (ARS) fiscal year 1999
    budget request of $813 million is slightly lower than the $824 million
    in fiscal year 1998. Embedded in that decrease is a net increase of $32
    million in research, facilitated by a decrease of $43 million in
    buildings and facilities improvement funds. The budget also includes
    redirection of approximately $35 million in current programs to fund
    new high priority program initiatives. 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 developmental research carried out in
    many public and private institutions. Drawing on its own and other
    fundamental research, ARS also conducts research to solve specific
    problems of national and regional importance and to meet the research
    needs of other USDA agencies.
        The ARS fiscal year 1999 budget includes increases as part of the
    President's Human Nutrition Research Initiative. With every passing
    day, we learn more about the critical role of nutrition in promoting
    health and the number of diet-related diseases that could be mitigated
    with good nutrition. It is hard to overestimate the potential payoff to
    individuals in improved well-being and to the nation in enhanced
    economic productivity if all Americans were to adopt healthy diets. Due
    in part to this understanding, questions of nutritional outcomes are
    increasingly being integrated in all the ARS research programs. The
    increases in fiscal year 1999 funding support both fundamental research
    on the relationship of nutrition to development and enhanced data on
    nutrient content of foods and dietary patterns. The ARS budget also
    includes increases for climate change and Pfiesteria, as part of the
    President's Climate Change Technology and Clean Water and Watershed
    Initiatives.
        The fiscal year 1999 budget proposes $36 million for the ARS
    building and facilities program, a decrease of $43 million from the
    fiscal year 1998 level. As the Subcommittee knows, the Strategic
    Planning Task Force on Research Facilities mandated in the 1996 Farm
    Bill has been established and has met several times. The Task Force is
    progressing in its work, which will be completed by May 1999 when it
    issues a report of its findings. In the meantime, we believe we must
    provide support for several projects with critical and immediate needs.
        The ARS budget includes a total of $17.7 million in funding for
    three of its Regional Research Centers located at Peoria, Philadelphia,
    and New Orleans. All three centers are major research facilities built
    in the 1930's and need major infrastructure replacement and
    modernization. Another $9.1 million is requested for animal disease
    centers located at Plum Island, New York, and Ames, Iowa. Current
    biosafety and biocontainment standards and regulatory issues relating
    to environmental quality and energy conservation, are among many
    concerns that indicate both facilities are in very serious need of
    modernization. All of these planned renovations, as well as those for
    the Beltsville Research Center, the National Agricultural Library, and
    Grain Marketing Research Laboratory in Manhattan Kansas, are the
    product of careful planning over several years. The increase of $4
    million for construction of the Melaleuca Research and Quarantine
    Facility at Ft. Lauderdale, Florida, reflects the Administration's
    continuing commitment to restoration of the Everglades ecosystem and
    was designated by the Administration's South Florida Ecosystem Task
    Force as a top priority.
        The Cooperative State Research, Education, and Extension Service's
    (CSREES) budget decreases by $9 million to $850 million in fiscal year
    1999. Funding for the National Research Initiative (NRI), the
    Department's hallmark competitive research grants program, is increased
    by $33 million to $130 million, an increase of 34 percent. The
    Administration continues to believe the competitive research grant
    programs, such as the NRI, provide the most effective mechanism for
    eliciting and supporting the most meritorious science focused on high
    priority research issues and conducted within the vast research
    community across the country. The increases in the NRI will emphasize
    expanded research in food genomics as part of the Administration's Food
    Genome Initiative, food safety in support of the President's
    Interagency Food Safety Initiative, and environmental quality. Focusing
    the NRI increases on these three areas of investigation indicates the
    importance the Administration places on these research programs. In
    providing critical funding to the research, education, and extension
    programs of the Land Grant Universities and other universities and
    organizations across the country, CSREES continues to play a central
    role in helping generate new knowledge and technology and in
    facilitating the transfer of that knowledge and technology to those who
    ultimately use it.
        Consistent with the President's commitment to improving our
    children's well-being, the fiscal year 1999 budget includes an increase
    in CSREES's Children, Youth and Families At Risk (CYFAR) program.
    Designed to empower youth, parents, and community leaders to take
    responsibility for their own lives and that of their communities, the
    additional funding will restore CYFAR to its fiscal year 1995 level.
        The Economic Research Service's budget decreases from $72 million
    to $56 million in fiscal year 1999. 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. The decreased funding level
    reflects the return of the food program studies to the Food and
    Nutrition Service. The fiscal year 1999 proposed budget supports new or
    enhanced research of $1.5 million on the impact of electric utility
    deregulation on rural areas, market information needs of small farms
    (as part of the Civil Rights Initiative), and food safety (as a part of
    the President's Interagency Food Safety Initiative.)
        The National Agricultural Statistics Service (NASS) budget declines
    by $11 million due to the cyclical nature of required census of
    agriculture funding. With authorization to conduct the census passed
    into law, NASS is currently conducting the 1997 Census. Fiscal year
    1998 is the peak funding year for this cycle of the census of
    agriculture, accounting for the decrease in the proposed fiscal year
    1999 NASS budget. All data are collected in this fiscal year. As of
    late January, NASS had received approximately 1.2 million completed
    forms. The NASS budget includes proposals for three surveys, including
    a new aquaculture census that for the first time will provide national
    and state level data on aquaculture production.
        The new, more market-oriented agriculture policy in the 1996 Farm
    Bill makes NASS's statistical data program more essential than ever.
    NASS's 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 global market. Annually, NASS prepares 400 reports
    on more than 120 crops and 45 livestock items.
                                    summary
        In summary, I want to reiterate that, in the context of a balanced
    budget, the REE budgets reflect a continued strong commitment to
    investment in agricultural research, statistics, education, and
    extension. If U.S. agriculture is to continue to be dynamic and provide
    leadership in a very competitive global economy, and the American
    public is to continue to enjoy the high quality, safe and nutritious
    products of agriculture, then our national commitment to increasing the
    investment in research, education, and extension must continue. 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 Donald M. Bay
        Mr. Chairman and members of the Committee, I appreciate the
    opportunity to submit a statement for this Committee's consideration of
    the fiscal year 1999 budget request for the National Agricultural
    Statistics Service (NASS). This agency was created in 1862 to provide
    factual information about the Nation's food and agricultural industry.
    Beginning in fiscal year 1997, NASS also has responsibility for the
    census of agriculture which was formerly conducted by the Bureau of the
    Census in the Department of Commerce.
        Since the first crop reports were issued 135 years ago, tremendous
    change has taken place within the agricultural industry. However, each
    new season brings renewed interest in what will happen. What will
    farmers plant given the growing list of crops? How will weather affect
    crop yields? What changes are occurring in the livestock, poultry, and
    aquaculture industries? The need for relevant, accurate, timely, and
    impartial statistical information on United States agriculture has
    grown during this information age as NASS is constantly faced with
    demands for more data. The transfer of the census of agriculture
    certainly enhances the quality and quantity of agricultural statistics
    available, as well as further strengthens NASS's State-Federal
    partnership.
        This State-Federal cooperative program began 80 years ago and has
    successfully consolidated both staff and resources, thus eliminating
    duplication while meeting both State and Federal data needs through a
    single agency. This unique partnership also makes it possible to
    establish and maintain national standards to produce consistency in
    surveys conducted throughout the United States, while at the same time
    meeting the special needs of each individual State and county. Serving
    local agricultural data needs through NASS's 45 field offices which
    cover all 50 States further strengthens NASS's support of the five
    goals and outcomes stated in the Research, Education, and Economics
    (REE) mission area strategic plan.
        The Nation's food and fiber industry employs one out of every six
    employees in the United States. The basic food and fiber statistical
    information provided by NASS supports all facets of the industry from
    producers through handlers, processors, wholesalers, retailers, and
    ultimately, food prices for consumers. Voids in relevant, timely,
    accurate data contribute to wasteful inefficiencies throughout the
    entire production and marketing system.
        NASS estimates provide important information in support of the
    export of agricultural commodities. NASS estimates also contribute to
    providing fair markets where buyers and sellers alike have access to
    the same official statistics. This prevents markets from overly
    reacting to ``inside'' information which might unfairly influence
    market price for the gain of an individual market participant.
        With the passage of the Federal Agriculture Improvement and Reform
    Act of 1996, a question might be asked as to how this legislation
    affects the NASS program. The first crop report was issued in 1842 in
    response to the need for producers and processors to know the expected
    supply of basic food commodities so that markets could properly reflect
    the true situation throughout the country. Today, with the end of most
    government price intervention mechanisms, commodity prices are even
    more heavily influenced by market information which NASS supplies. For
    that reason, the demand for agricultural statistics is increasing as
    producers make production decisions based solely on market information.
    Empirical evidence indicates that an increase in information improves
    the efficiency of commodity markets. Information on the competitiveness
    of our Nation's agricultural industry will become increasingly
    important as producers rely more on the world market for their income.
        NASS's agricultural statistics are used throughout the agricultural
    sector to evaluate supplies and determine competitive prices for world
    marketing of U.S. commodities, which directly supports Goal 1 of the
    REE Strategic Plan: Through research and education, empower the
    agricultural system with knowledge that will improve domestic
    production, processing, and marketing to successfully compete in the
    global market.
        Through new technology, the products produced in the United States
    are changing rapidly, which also means that the agricultural statistics
    program must be dynamic and able to respond to the demand for coverage
    of newly emerging products. For example, genetic engineering technology
    will be producing thousands of new varieties such as BT corn and
    cotton, and Roundup ready soybeans. Data users are already requesting
    information which would accurately measure the impact of these new
    varieties.
        Not only are NASS statistical reports important to assess the
    current supply and demand of agricultural commodities, but they are
    also extremely valuable to farm organizations, commodity groups, and
    public officials who analyze agricultural policy, foreign trade,
    construction, and environmental programs, research, rural development,
    and many other activities. NASS numbers are scrutinized very closely by
    producers, agribusinesses, industry analysts, economists, investors, as
    well as government policy makers. As a result of this analysis, major
    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 as periodic printed
    reports, as well as on the Internet. They are also available annually
    in USDA's Agricultural Statistics, and major data series are available
    in the Statistical Abstract of the United States.
        Beginning in fiscal year 1997, NASS received funding to conduct the
    census of agriculture every 5 years, On February 2, 1997, 68 of the 79
    Bureau of the Census employees working on the census of agriculture
    program officially transferred to NASS. This makes it possible to truly
    consolidate the existing NASS survey activities with the census of
    agriculture. The transfer of the responsibility for the census of
    agriculture to USDA streamlines Federal agricultural data collection
    activities and is expected to improve the efficiency, timeliness, and
    quality of data provided. The enactment of Public Law 105-113, the
    Census of Agriculture Act of 1997, has now officially transferred the
    authority for the census to USDA.
        Statistical research is conducted to improve methods and techniques
    used in collecting and processing agricultural data. This research is
    directed toward providing higher quality census and survey data with
    less burden to respondents, producing more accurate and timely
    estimates to data users, and increasing the efficiency of the entire
    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 new 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. Considerable new
    research will be directed at improving the next census of agriculture
    to be conducted in 2003.
        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 on a cost-reimbursable
    basis.
    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 crops, livestock, prices, and other agricultural activities each
    year. Periodic surveys are conducted during the growing season to
    measure the impact weather, pests, and other factors have on crop
    production. Frequent surveys are also needed for 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; farm real
    estate values and land rental rates; prices paid by farmers for inputs
    and services; cold storage supplies; agricultural labor and wage rates;
    agricultural chemical usage; crop production cultural practices; and
    other data related to the agricultural economy.
        The census of agriculture provides national, State, and county data
    for the United States on the agricultural economy every 5 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 helps
    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 local detailed data provided by the census of
    agriculture which facilitates locality-based policy and business
    decisions supports Goal 5 of the REE mission area Strategic Plan:
    Empower people and communities, through research-based information and
    education, to address the economic and social problems facing our
    youth, families, and communities.
        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 different 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 situation with apples.
    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 productivity and 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. NASS's pesticide use
    survey program supports both Goals 2 and 4 of the REE Strategic Plan
    which relate to ensuring an adequate food and fiber supply and the
    promotion of food safety, and enhancing the quality of the environment.
        NASS conducts a number of special surveys as well as 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 135 special surveys in fiscal year 1997 covering
    a wide range of issues such as farm injury, nursery and horticulture,
    farm finance, fruits and nuts, vegetables, and cropping practices.
        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. This past year, NASS provided assistance to Argentina,
    Bulgaria, China, Colombia, Dominican Republic, Ethiopia, Kazakhstan,
    Mexico, Morocco, Nicaragua, Poland, Rumania, Russia, South Africa, and
    Ukraine.
        NASS annually seeks input on improvements and priorities from the
    public through: displays at major commodity meetings, 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 customers and
    stakeholders.
                             fiscal year 1999 plans
        The fiscal year 1999 budget request is for $107,190,000. This is a
    net decrease of $11,130,222 from the fiscal year 1998 current estimate.
        The census of agriculture budget request for $23,741,000 includes a
    net decrease of $12,586,000. This amount reflects a reduction of
    $13,328,000 due to the cyclical nature of the census. The $23,741,000
    includes the aquaculture census, the Agricultural Economics and Land
    Ownership Survey, census pay costs, and the census share of increased
    CSRS retirement costs. Fiscal year 1999 is the fifth and final year of
    the census of agriculture cycle. Activities in this year include final
    review of the census data, preparation of results for publication, and
    conduct of the horticultural specialties and irrigation special follow-
    on studies.
        For fiscal year 1999, NASS has requested a 1-year increase of
    $500,000 and 2 staff-years to conduct an aquaculture census. This would
    provide, for the first time, detailed State and national data about
    aquaculture production. Aquaculture is a fast emerging domestic
    industry responding to the expanding demand for seafood. The
    aquaculture census would collect data on type of production systems,
    type of products sold, species being raised such as food fish, shell
    fish, bait fish, oysters, clams, salmon, catfish, trout, fish eggs,
    fingerlings, and ornamental fish.
        An increase of $100,000 and 1 staff-year is requested for 1999 to
    do the preparatory work needed to conduct the Agricultural Economics
    and Land Ownership Survey. This special survey was begun following the
    1959 Census of Agriculture and has been repeated at about 10-year
    intervals. It provides the only State-level comprehensive data on
    agricultural land ownership, financing, and inputs by both farm
    operators and landlords. The fiscal year 1999 funding would provide for
    field testing an integrated program that eliminates duplication with
    the joint NASS/Economic Research Service's annual economic survey.
        An increase of $1,400,000 and 10 staff-years is requested to
    conduct a pesticide use survey of the horticulture and greenhouse
    industries. NASS has successfully implemented comprehensive pesticide-
    use surveys that cover the major field crops, fruits, and vegetables
    grown in the United States. However, such data are lacking for the fast
    growing nursery and greenhouse industry. This industry, like the fruit
    and vegetable industry, employs a large number of hired workers.
    Therefore, it is especially important that this growing industry be
    included in the comprehensive reports on pesticide use as required
    under Section 1491 of the 1990 Farm Bill. Collection of these pesticide
    use statistics also supports a recommendation included in USDA's Civil
    Rights Action Team Report that addresses the needs of farm workers.
        An increase of $1,435,000 for pay costs and $390,300 for retirement
    costs is requested.
        NASS is realizing a decrease of $1,463,000 and 17 staff-years as a
    result of efficiencies in the agricultural estimates and research
    programs gained in assuming responsibility for the census of
    agriculture. This reduction reflects efficiencies which will be
    realized in the agricultural estimates program as a result of the
    census of agriculture. Efficiencies will be realized in the NASS annual
    estimates program in the areas of list frame development and
    maintenance, data collection, and data dissemination activities.
        This concludes my statement, Mr. Chairman, and I will be happy to
    respond to any questions.
                                     ______

                    Prepared Statement of Dr. Floyd P. Horn
        Mr. Chairman and Members of the Subcommittee, I appreciate this
    opportunity to present the Agricultural Research Service's budget
    recommendations for fiscal year 1999. I would like to state at the
    outset that I am very pleased with the research proposals in this
    budget and the research initiatives recommended by the Administration.
    They are directed at some of this Nation's most serious problems
    involving food safety, human health, agricultural productivity, and the
    environment.
        In fact, because of their importance to the Nation, the
    Administration has endorsed several of ARS' proposed research thrusts
    as ``Presidential Initiatives,'' in food safety, human nutrition, and
    environmental health.
        I would now like to turn to our budget recommendations for fiscal
    year 1999.
                       fiscal year 1999 budget estimates
        The ARS fiscal year 1999 budget recommends a research funding level
    of $776,828,000. This represents an increase of $32,037,000 over the
    fiscal year 1998 appropriations level. The fiscal year 1999 budget
    reflects funding increases for several new and expanded research
    initiatives as well as resources to finance critical operating costs.
    It also includes terminations of a number of selected research projects
    totaling $35 million to provide resources to finance the new research
    which is necessary to address the Nation's changing agricultural needs.
                     new and expanded research initiatives
        The budget proposes $51,220,000 for new and expanded research
    initiatives to meet critical health and safety, nutrition, economic and
    environmental issues as follows:
        Food Safety.--On January 25, 1997, the President announced a
    National Food Safety Initiative. As part of a multi-agency food safety
    program ARS is recommending an increase of $13,970,000 for pre- and
    post-harvest food safety. Food safety is a major concern of American
    consumers and remains a top priority of ARS. The Department is
    committed to ensuring the safety of our food supply.
        The proposed increases in pre-harvest food safety will be used to
    develop new disinfection methods for improved sanitation of animal
    production facilities and waste handling systems. The recommended
    increases will also be used to develop new technology which will reduce
    the growth of pathogens on livestock and poultry during transport.
        Post-harvest operations of slaughtering and processing can be a
    source of pathogen contamination of meat and poultry products.
    Similarly, pathogen contamination can occur during the processing of
    fruits and vegetables. In the area of post-harvest food safety, ARS is
    recommending additional research to develop: new handling systems and
    pathogen decontamination technologies for use in conjunction with
    packaging, storing, and processing fresh fruits and vegetables;
    chemical and physical agents to control pathogens (such as Salmonella
    and E. coli 0157:H7) in fresh produce; alternatives to heat-based
    preservation technologies that will preserve the fresh qualities of
    fruits and vegetables.
        Human Nutrition.--For the second year increases are proposed for a
    Human Nutrition Initiative. What and how much people eat affects how
    they grow, develop, and age. Dietary intake is linked to risks for
    development of a variety of common, chronic diseases that are disabling
    and life threatening. For diseases linked strongly to diet, the cost of
    medical treatment and care exceeds $200 billion per year.
        ARS is recommending an increase of $10,500,000 in human nutrition
    research. As part of the Initiative on Human Nutrition, the proposed
    increases will be used toward developing the means for promoting
    optimum health and well-being. Specifically, research will be conducted
    on the effects of diet on the immune system; the dietary patterns of
    human performance; and the role of nutrition throughout the life cycle
    (e.g., the relationship between diet and bone growth and cognitive and
    neurological development; the nutritional requirements that are needed
    to delay the onset of diseases associated with aging; and the factors
    that lead to obesity in children). The proposed increases will also be
    used to update the National Nutrient Databank, a database of the
    nutrient content of foods. Congress provided $5 million in 1998 for the
    Continuing Survey of Food Intakes by Infants and Children (CSFII). The
    budget proposes to redirect $3.5 million of this 1998 CSFII funding to
    other fundamental diet, nutrition, and nutrition-related disease
    research. In addition, $1.5 million would be used to expand the CSFII
    to increase the sampling size necessary to include population groups
    requiring special attention as EPA implements the Food Quality
    Protection Act of 1996.
        Environmental Quality and Natural Resources.--The preservation of
    the Nation's natural resources has become increasingly critical.
    Because of its importance, ARS is recommending a total increase of
    $17,250,000 which supports several areas of research emphases.
        Of the total recommended increase, $7,000,000 is targeted toward
    the President's Climate Change Technology Initiative. ARS's role in the
    initiative is directed at agricultural greenhouse gas emissions and the
    use of biomass for energy. The proposed increases will be used to
    identify and mitigate sources of greenhouse gas emissions, and to
    further develop plant feedstocks for biofuels.
        In addition, $3,500,000 is proposed for research which will provide
    new information on pest biology, the impacts of pest control strategies
    on crop and animal production systems, and pest control technologies
    which provide additional safety and effectiveness while providing
    increased protection to the natural environment. The technologies which
    will be developed will provide the basic pest control components for
    implementing effective and sustainable Integrated Pest Management (IPM)
    programs. Part of this proposed increase will be used to establish the
    Office of Pest Management Policy which will serve as USDA's focal point
    for pesticide issues.
        ARS is recommending $2,000,000 of additional funding to augment
    existing resources to accelerate efforts to find alternative solutions
    to methyl bromide. Grower groups will work with ARS to develop the
    priorities for a competitively awarded program focused on crops or uses
    most threatened by the loss of methyl bromide.
        ARS is also recommending an increase of $2,000,000 for research on
    waste management problems associated with large animal production
    systems. The proposed increases will be used to address manure
    management, and animal well-being and behavior in confined animal
    production systems.
        An increase of $2,000,000 is proposed for research on Pfiesteria as
    part of the President's Clean Water and Watershed Restoration
    Initiative. The recent outbreaks of Pfiesteria in the Chesapeake Bay
    tributaries have focused public attention on the potential role of
    agriculture in the degradation of these waters. The proposed funding
    will be used to develop new management practices to reduce the movement
    of nutrients and pathogens to surface and ground waters, and new
    methods for handling, storage, and field application of manure.
    Technologies will also be developed to detect and identify Pfiesteria,
    and to determine whether fish or shellfish affected with Pfiesteria are
    safe for human consumption, rendering, or other processing for use in
    livestock and poultry feed.
        Finally, ARS is recommending an increase of $750,000 for research
    in support of the South Florida Ecosystem Restoration. ARS is
    requesting funds to accelerate research to resolve the ecological,
    hydrological, and agricultural constraints on sustainable production in
    South Florida, and to develop biological control agents that control
    Melaleuca and other exotic or invasive plant species in the Everglades
    National Park.
        Emerging Infectious Diseases.--During the past ten years, emerging
    and reemerging infectious diseases and exotic pests have become a major
    health concern. The globalization of trade, increased international
    travel, changing weather patterns, uncontrolled population growth of
    cities, highly intensive agriculture, and changes in farm practices are
    responsible. Once introduced, exotic (non-native) organisms can explode
    into epidemic proportions due to the absence of natural control agents
    and lack of resistance by host animals.
        ARS is recommending an increase of $6,000,000 for this important
    research. Of this proposed increase, $3,700,000 will be used to develop
    diagnostic tests, novel genetic vaccines, and immune strategies to
    prevent outbreaks and the spread of exotic animal diseases (e.g.,
    Johne's disease, Babesiosis, Vesicular Stomatitis, Bovine Spongiform
    Encephalopathy, Porcine Reproductive Respiratory Syndrome, Avian
    Influenza, and Anaplasmosis. Research will also be conducted on the
    development of technologies to protect livestock and humans against
    zoonotic diseases (e.g., tuberculosis, brucellosis, toxoplasmosis,
    trichinosis, and cryptosporidiosis).
        The remaining $2,300,000 will be directed at preventing the
    introduction of emerging plant diseases and pests. Invasive, noxious,
    and weedy plants are a serious problem in the U.S. that annually cause
    billions of dollars in damages to the agricultural, recreational, and
    tourist industries. Research will be conducted to develop new
    strategies to combat wheat scab, karnal bunt, salt cedar, and sorghum
    ergot. In addition, the means to rear large numbers of new insect
    biological control agents will be developed. Remote sensing technology
    will also be developed to identify new or expanding weed infestations.
        Food Genome Research.--ARS is recommending an increase of
    $3,500,000 in support of the Food Genome Initiative and the
    preservation of genetic resources which are necessary to ensure that an
    adequate supply of food and fiber will be available at a reasonable
    cost in the future. The investigations will focus on agriculturally-
    important crops and livestock and their associated microbes.
    Specifically, the proposed increases will be used to map genomes of
    agriculturally important plants, animals, and microbes to advance
    breeding programs. Research in this area will contribute to food
    production efficiencies and ensure the continued availability of
    genetically diverse collections of plant and animal germplasm.
        Essentially, all the crops and livestock raised and used for food,
    fiber, ornamentals, and industrial feed stocks originated outside the
    United States, so the system of renewable resource production is highly
    dependent on germplasm introduced from other countries, some of which
    is endangered. Once lost, the germplasm cannot be fully reconstructed,
    so that sources of productive capacity and efficiency, and resistance
    to pests, pathogens, and environmental stress may be lost forever. A
    major and growing problem is the loss or ``narrowness'' of the gene
    pools of crop and livestock species.
        ARS is also requesting the restoration of $913,000 for Evaluation
    Studies. These investigations provide a basis for policy and funding
    decisions in support of the mission area's research, education and
    economics programs.
        ARS is also recommending $14,498,000 to finance the anticipated
    Federal pay raises and Civil Service Retirement System costs. These
    funds are critical to the ongoing operations of the Agency.
                              project terminations
        The fiscal year 1999 Budget recommends $34,594,000 of reductions in
    base programs, consisting of fiscal year 1998 proposed project
    terminations restored in the 1998 Act, as well as Congressionally-added
    projects. The ongoing projects that have been identified for
    termination have been deemed less critical to continue in light of
    higher priority research needs and limited resources. The savings
    achieved will be redirected to finance the agricultural research
    initiatives recommended in the President's budget.
                            building and facilities
        The modernization and replacement of ARS' major research centers
    and laboratories remains one of the Agency's highest priorities.
    Continuing with the renovation and replacement of the Agency's research
    facilities is critical if ARS is going to fulfill its mission and carry
    out its programs.
        In fiscal year 1999, ARS recommends under its Building and
    Facilities account a total of $35,900,000 for the following projects:
        Beltsville Agricultural Research Center, Beltsville, Maryland.--
    Established in 1910, the Center is widely recognized as one of the
    largest agricultural research facilities in the world. The Center
    carries out programs in natural resources and environmental sciences,
    plant and animal productivity, post-harvest research, and human
    nutrition. ARS is requesting $2,500,000 to continue the modernization
    of the Center's facilities which began in 1988. Specifically, the funds
    would be used for the design and construction of a new poultry
    production facility as well as finance a number of miscellaneous small
    projects.
        National Agricultural Library, Beltsville, Maryland.--Built in
    1968, NAL is the largest agricultural library in the world and one of
    four national libraries. NAL houses a collection of more than 2.2
    million volumes in 50 different languages. In 1991, a comprehensive
    facility condition study of NAL was conducted. Numerous mechanical,
    electrical, and architectural deficiencies were identified. In fiscal
    year 1999, ARS is requesting $1,200,000 to begin construction of the
    first phase of the air handling unit replacement.
        National Animal Disease Center, Ames, Iowa.--The Center is the
    primary USDA facility for conducting research on animal diseases that
    are of economic importance to U.S. agriculture. Constructed in 1961,
    the facilities are antiquated and in need of modernization. ARS is
    requesting $5,600,000 to initiate rehabilitation of the 80 buildings
    and supporting infrastructure of the Center. In fiscal year 1999, the
    funds would be used for design and construction plans for repair
    projects, including the repair of the contaminated waste collection
    piping system and treatment plant for infectious agents.
        ARS Regional Research Centers, Peoria, Illinois; Philadelphia,
    Pennsylvania; and New Orleans, Louisiana.--The regional research
    centers were constructed in the late 1930's. All major building
    systems--heating, ventilation, air conditioning, electrical, roofs, and
    infrastructures (i.e., paving, steam and water lines, and waste
    treatment disposal systems)--have either reached or passed their useful
    life expectancy. ARS is requesting $8,400,000 for its Center in Peoria.
    The funds will be used to continue the modernization program.
    Similarly, ARS is requesting $3,300,000 and $6,000,000 for
    modernization programs at the Philadelphia and New Orleans Regional
    Research Centers, respectively.
        Grain Marketing and Production Research Center, Manhattan,
    Kansas.--The Center conducts research on a broad range of technical
    problems in domestic and international marketing, handling, and storage
    of grains. In 1990, a facility condition study identified numerous
    deficiencies in all of the Center's buildings. ARS is requesting in
    fiscal year 1999, $1,400,000 to continue with the renovation program.
        Plum Island Animal Disease Center, Greenport, New York.--Plum
    Island conducts state-of-the-art research on foreign animal diseases
    which are an ongoing threat to the U.S. It is the only facility in the
    Nation authorized by Congress to carry out such research. In 1989, ARS
    developed a long range plan for the repair and maintenance of the
    Center's 23 buildings and supporting infrastructure. In fiscal year
    1999, ARS is requesting $3,500,000 to continue with the phased plan to
    renovate and modernize the Center.
        Melaleuca Research and Quarantine Facility, Ft. Lauderdale,
    Florida.--The exotic weed tree Melaleuca, introduced in the 1930's, now
    covers tens of thousands of acres of South Florida's fragile wetlands.
    Melaleuca can be controlled with the aid of biological control agents
    from Australia. ARS is proposing $4,000,000 for the construction of a
    Melaleuca research and quarantine facility in support of this research.
    Construction of this facility has been designated by the
    Administration's South Florida Ecosystem Restoration Task Force as one
    of its highest priorities to ensure the restoration of the Everglades
    National Park.
                                closing remarks
        ARS' challenge is to bring the most advanced research and
    technologies to bear on some of this Nation's most recent and difficult
    problems, in food safety and health, human nutrition, agricultural
    productivity and the environment. In a larger sense, its challenge is
    to continue solving problems for agriculture, its producers and
    consumers, and meet the food and fiber requirements of a growing
    population in a way that is safer, more efficient, and more nutritious.
        ARS has completed a 2\1/2\ year long process of developing a new
    Strategic Plan that embodies the spirit and letter of the Government
    Performance and Results Act of 1993. The new plan focuses on the
    outcomes of the Agency's research activities, organized around the five
    broad goals identified in the Strategic Plan of the Research,
    Education, and Economics mission area. The new strategic plan went into
    effect on October 1, 1997, and the Agency developed its first Annual
    Performance Plan, as required by GPRA. The Annual Performance Plan
    describes what ARS will accomplish in fiscal year 1998 and fiscal year
    1999 in measurable terms that will demonstrate progress towards
    reaching the Agency's goals.
        Mr. Chairman, this concludes my prepared remarks. I will be happy
    to answer any questions you may have.
                                     ______

                     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 1999 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
        ERS's appropriation for 1998 of $71.6 million consists of the 1997
    appropriation level ($53.1 million) and an increase of $18.5 million to
    evaluate food stamp, child nutrition, and WIC programs. ERS continues
    implementation of its streamlining strategy and plans to maintain staff
    in 1998 at its current level of 554 full-time equivalents. ERS
    continues to make full use of early-out and buy-out authorities. Since
    October 1993, the ERS staff has been reduced by 241 full-time
    equivalents, including reductions in 1998 through 19 buyouts. In the
    future, ERS must manage its staff levels to maintain its non-salary
    program of agricultural data purchases and cooperative university
    research necessary to support its analytical program.
        The agency's request for 1999 is $55.8 million, a net decrease of
    $15.8 million over 1998. The decrease consists of five parts: a $1.3
    million increase for pay raises and contributions to the CSRS
    retirement fund; a $0.9 million increase for estimating the benefits of
    food safety; a $0.3 million increase to meet the analytical information
    needs of small farmers, niche marketers, other casualties of an
    industrializing agricultural sector; a $0.2 million increase to assess
    the potential impacts of electric utility deregulation; and an $18.5
    million decrease for evaluations of food stamp, child nutrition, and
    WIC programs. When he signed the Agriculture Appropriations bill, the
    President stated that, ``I am concerned about the provision of this
    bill that alters the administration and funding for research on
    nutrition programs serving the poor and disadvantaged. The research
    needs of these important programs should continue to be addressed in
    the context of the programs' administration.'' This budget follows
    through on these concerns and restores funding for WIC, Food Stamps,
    and Child Nutrition research to the Food and Nutrition Service.
        Food Safety.--ERS proposes an interagency research effort to
    strengthen our understanding of the costs of foodborne illness and the
    benefits and costs of programs and policies to improve the safety of
    the Nation's food supply. This initiative is designed in accordance
    with the President's Food Safety Initiative, and is based on activities
    underway as part of this initiative.
        National Estimates of Foodborne Illness and their Economic Costs
    from Sentinel Site Survey Data.--The initiative includes funding for
    eight regional data collection efforts. We will work with staff of the
    Centers for Disease Control and Prevention to develop new estimates of
    the national incidence of foodborne disease, the distribution of
    illness among subpopulations, and morbidity and mortality rates for
    specific illnesses. We will use these new data to refine our estimates
    of the costs of illness from specific foodborne diseases, to narrow the
    confidence intervals for specific cost-of-illness measures, and to
    evaluate the distribution of these costs among subpopulations.
        Risk/Benefit Assessment of Pathogen Control Options.--The
    initiative also includes funding for expanded risk assessment. To
    perform benefit/cost analysis of control options for improving food
    safety, economists need data from other scientific disciplines. The
    best way to further this multidisciplinary exchange is to set up a
    formal collaboration among groups of scientists. Economists from ERS
    will work with scientists from other USDA agencies, FDA, CDC and
    academia to bring a systems view to their analyses of options for
    pathogen control from farm to table. The goal is to provide economic
    analysis of pathogen control options to determine which controls are
    most cost-beneficial. Application of risk modeling to food safety is a
    new field. Risk assessment models (such as fault-tree analysis and
    probabilistic-scenario analysis) could be used to identify where
    pathogens gain entry into the food chain and where control efforts
    would be most cost-effective. By incorporating the results of risk
    assessment in our economic analysis of pathogen control options, we
    will further enhance our understanding of the economic consequences of
    specific food safety policies (such as HACCP, safe handling labels, and
    consumer education).
        Completion of activities outlined in this initiative will yield
    improved economic assessment of policies and programs designed to
    improve the safety of the Nation's food supply. This will result in
    improved economic performance of the food sector, as the costs of
    achieving food safety goals and the attendant economic burden on
    farmers, processors, distributors, and retailers are minimized. This
    will also result in increased cost savings to consumers and the general
    economy as the research results are used to maximize the public health
    benefits of public and private efforts to improve food safety.
        Information Needs of Small Farmers.--ERS proposes to organize and
    lead an interagency research activity to comprehensively assess the
    USDA's role in providing analytically based information on agricultural
    markets to small, limited-resource, and socially disadvantaged farmers,
    in the context of an interagency market information program.
    Specifically, the study will determine: (a) whether and how the
    agricultural market information needs of domestic producers and
    marketers vary by scale of operation, organizational structure, or
    demographics; (b) whether, given this new knowledge, it appears that
    USDA market information programs provide information that meets some
    subgroups' needs better or worse than others, and if any revealed
    differentiation in service is warranted; (c) the extent to which
    private sector analytical and information services do or can serve
    various subgroups' needs for market information; and (d) whether and,
    if so, in what manner ERS and other USDA agricultural market
    information programs require reform or modification to accommodate the
    new public sector role in a modern agricultural economy. Subsequently,
    plans would be designed and implemented to reform and/or modify these
    programs in the manner suggested by the assessment.
        In 1996 and 1997, ERS conducted a general assessment of the market
    for agricultural market information. While this study examined the use
    and value of information across several broad categories of public and
    private sector clientele, resources have not been available to conduct
    sampling to assess how utility and value might vary within groups as a
    function of size, economic class, or other features. Additional
    resources are a necessary prerequisite for any assessment aimed at
    segmenting the information client population to assure public service
    to unique and potentially underserved subgroups (e.g., small or
    disadvantaged farms, direct marketing firms, independent firms in
    otherwise highly coordinated industries, etc.).
        The proposed effort will be planned by ERS, with input from an
    advisory group representing CSREES, WAOB, OCE, AMS, FSA, and FAS. ERS
    will perform the market research needed to assess the performance of
    its own and USDA's agricultural market information programs, with focus
    on the nature of the information generated and its utility to clients
    of different sorts, sizes, economic classes, and demographic
    characteristics. Following market data collection, analysis, and
    interpretation, the full set of agencies producing agricultural market
    information will need to be involved directly in the implementation of
    resultant recommendations.
        By providing a sound understanding of how commodity market
    information needs vary among different sizes and types of agricultural
    producers and marketers, the study will assure that USDA's commodity
    market information programs are nondiscriminatory with respect to
    producers' and marketers' scales of operation, income brackets, races
    or ethnicities, and geographic locations (for locations characterized
    by small or disadvantaged enterprises). It will prevent small, niche,
    limited-resource and socially disadvantaged clients from ``falling
    through the cracks'' as commodity market information programs respond
    to the changing structure of American agriculture. It will thus allow
    these producers and marketers to be competitive by assuring them easy
    access to scale-appropriate, market-empowering information, regardless
    of their disassociation with large, integrated, or vertically
    coordinated markets where information is otherwise more readily
    available or affordable. This, in turn, assures a more robustly
    competitive sector overall. Without the study, attempts to accomplish
    these results would have to rely on anecdotes and supposition. With it,
    USDA will be armed with the knowledge required to ensure information-
    related competitiveness for small and disadvantaged, along with large
    and advantaged, market participants, as the American agricultural
    sector continues its divergent path towards a small number of large,
    highly commercial operations, and a large number of small and diverse
    operations.
        Electric Utility Deregulation.--ERS proposes an interagency
    research activity with USDA's Rural Utilities Service (RUS) and the
    Department of Energy to expand REE's capacity to assess the potential
    impacts of electric utility deregulation on USDA's rural utility loan
    programs, the competitive position of rural businesses and communities,
    the viability of alternative power generation systems, and the well-
    being of rural customers.
        ERS has considerable expertise and data available on rural
    industries, households, and communities, and has experience developing
    economic models and policy analysis on a wide range of issues. However,
    ERS currently lacks expertise and information on the electric utility
    industry sufficient to model deregulation's effects on rural utility
    customers in various regions of the country. With an expanded program,
    ERS and its cooperators will be able to assess the potential impacts of
    deregulation on USDA's rural utility loan programs, the competitiveness
    of rural businesses and communities, and rural households.
        The products of this research will enable RUS to better evaluate
    the likely effects of electric utility deregulation on the financial
    health of rural electric cooperatives, and, as a result, the
    prospective quality of the RUS loan and loan guarantee portfolio. The
    products of this research also will provide USDA with important
    information about the prospective effects of electric utility
    deregulation on farmer electric costs, electric costs for consumers in
    rural America, and on rural economic development. This information will
    be available to support the work of RUS and USDA as they participate in
    developing Administration policy on electric deregulation.
                     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 four
    divisions and an Office of Energy. 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 contributions to mission area goals
        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. ERS will continue to 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 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. This research helps government
    officials design more efficient and cost-effective approaches to
    promote food safety. Specifically, the ERS research program provides
    detailed and up-to-date appraisals of the benefits of safer food, such
    as reducing medical costs and costs of productivity losses from
    foodborne illnesses caused by microbial pathogens. In addition, ERS has
    undertaken new research on the costs to industry and consumers of
    alternative food safety policies, including assessment of the
    distribution of costs across the food industry and across demographic
    groups.
        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 systematically examines 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 studies 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 considers 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 energy and environment area, the ERS Office of
    Energy provides departmental leadership, oversight, coordination, and
    evaluation for energy and energy-related policies and programs
    affecting agriculture and rural America.
        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. ERS 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, including the fairly widespread rebound in
    population growth in non-metropolitan counties. The relevant analyses
    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.
                                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 Dr. B.H. Robinson
        Mr. Chairman and Members of the Committee, I appreciate the
    opportunity to present the proposed fiscal year 1999 budget for the
    Cooperative State Research, Education, and Extension Service (CSREES),
    one of four agencies in the Research, Education, and Economics (REE)
    mission area of USDA.
        CSREES provides leadership for and cultivates partnerships in
    research and education among USDA, the land-grant university system,
    and other research and education institutions.
        CSREES advances and integrates agricultural research and education
    through our partnership with the land-grant universities. In this
    partnership, 75 universities work in close cooperation with CSREES,
    employing more than 9,500 scientists, 9,600 extension educators, and
    engaging nearly 3 million volunteers supporting activities in the 50
    states (3,150 counties), the District of Columbia, and six territories
    (Puerto Rico, the Virgin Islands, Guam, American Samoa, the Northern
    Marianas, and Micronesia). The scientific and education resource base
    of the 1890 Historically Black and the 1862 land-grant universities is
    expanded through the participation of scientists and educators from the
    29 Native American land-grant institutions, and from non-land-grant
    institutions and the private sector.
        The programs supported by CSREES and carried out through our
    university partners play a central role in meeting what I believe to be
    two fundamental challenges facing agriculture today. The first
    challenge is to achieve long-term sustainability in agricultural
    production while simultaneously maintaining competitiveness and
    profitability, minimizing negative environmental effects, and
    developing and improving strong communities. The second challenge is to
    respond to broad public concerns for a safe, nutritious, and accessible
    food supply.
        To meet these challenges, our programs reflect the five Strategic
    Goals to which the REE mission area is committed: (1) an agricultural
    production 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 are the framework for the CSREES Strategic
    Plan, the fiscal year 1999 GPRA performance plan and, of course, the
    fiscal year 1999 President's budget request for CSREES.
        I would like to present several examples of outstanding research,
    education, and extension accomplishments resulting from support
    provided through our programs as they relate to the five REE/CSREES
    Strategic Goals. I believe that these ``success stories'' clearly show
    that the activities conducted by the land-grant university system and
    other partner institutions significantly contribute to the ability of
    U.S. agriculture to maintain its worldclass competitive edge. The
    Committee may be interested to know that CSREES and its university
    partners are collaborating on the development of a World Wide Web site
    that contains impact statements to showcase how programs supported by
    the USDA/land-grant university partnership benefit U.S. agricultural
    research and education; this site is available for public access at
    http://www.reeusda.gov/success/impact.htm. Although many activities
    conducted by our partners contribute to multiple goals, the following
    examples are aligned under the Strategic Goals to which they make the
    most significant contribution:
    Goal 1: An Agricultural Production System that is Highly Competitive in
            the Global Economy
        In cattle, 30-40 percent of pregnancies are lost during the first
    40 days of gestation. Research supported by the National Research
    Initiative and conducted at the University of Missouri and Texas A&M
    University has identified a protein, interferon-tau, which is produced
    by the developing embryo prior to implantation and acts as a
    biochemical signal to the mother's uterus to establish pregnancy in
    cattle and sheep. This protein, when given to nonpregnant cattle or
    sheep, extended the length of their reproductive cycle. Current studies
    are focusing on the potential use of the protein as a fertility drug to
    minimize early embryonic losses associated with insufficient production
    of the protein.
    Goal 2: A Safe and Secure Food and Fiber System
        Funding provided under the Smith-Lever 3(d) Food Quality and Safety
    program was used to develop and sponsor two National HACCP (Hazard
    Analysis and Critical Control Point) Education Conferences on ``Forming
    Partnerships from Farm to Table.'' The conferences were designed to
    build and enhance partnerships among government, academia, industry,
    and consumers, and brought together state core teams who received
    training and education enabling them to develop and implement state
    planning strategies for HACCP training. Conference planning and
    coordination was a cooperative effort between Texas A&M University,
    Virginia Polytechnic Institute and State University, and Kansas State
    University.
    Goal 3: Healthy, Well-Nourished Population
        The nutritional status of participants in a program supported by
    Smith-Lever 3(d) Expanded Food and Nutrition Education Program (EFNEP)
    has improved due to intensive nutrition education instruction from the
    University of Massachusetts Extension Nutrition Educators. A behavior
    survey of more than 2,500 EFNEP participants indicated that behavior
    changes included: a 57 percent increase in recommended fruit
    consumption, a 34 percent increase in vegetable consumption, and 47
    percent increase in the consumption of foods to meet the Recommended
    Daily Allowance for vitamin C. Improved nutrition practices resulting
    from this Massachusetts program included preparing foods without salt,
    reading nutrition labels for fat and sodium content, and ensuring that
    children eat breakfast.
    Goal 4: Greater Harmony Between Agriculture and the Environment
        An early project awarded under the USDA Food and Agricultural
    Sciences National Needs Graduate Fellowships program to North Carolina
    State University resulted in five exceptional graduate students'
    completing Doctoral degrees. The accomplishments of this project have
    been realized as these students are now employed in positions
    significantly impacting the food and agricultural sciences. These
    students are President of a soil and water engineering consulting
    company in Kentucky; Associate Professor at Texas A&M University, an
    Extension Specialist in Agricultural Engineering; President of a
    consulting company in Washington that deals with the impact of forestry
    programs on water quality and soil erosion; Chief Engineer for a State
    district in Florida; and Soil/Water Engineer for a consulting firm in
    California.
    Goal 5: Enhanced Economic Opportunity and Quality of Life Among
            Americans
        The Blackfeet Reservation comprises 1.2 million acres of rangeland
    in northwestern Montana. The location of the reservation limits the
    feasibility of alternative agricultural enterprises. The reservation
    has the range resources to greatly expand the number of individually-
    owned cattle heads, and human resources to expand the number of
    ranchers. In the first 5 years of the program, with funding from the
    Smith-Lever 3(d) Extension Indian Reservation Program, Montana
    Cooperative Extension Service agents have assisted 38 young producers
    in acquiring over $220,000 in youth agriculture loans, in the purchase
    of 385 head of cattle, and in the formation of business plans, as well
    as livestock production. These livestock should increase aggregate
    tribal income by at least $20,000 per year while herds are being
    expanded. Assuming eventual net incomes of $30,000 per year, these
    ranchers represent an increase in the aggregate tribal income of over
    $1 million per year. Such income will contribute to improved quality of
    life for the ranchers and for their immediate and extended families.
    Income stability and improved quality of life will provide an example
    for family members and others. A cadre of successful private operations
    will foster increases in such enterprises. Successful marketing
    strategies will develop cooperative efforts.
        Continuing its implementation of GPRA, CSREES is working with our
    State partners to develop annual performance plans with stated goals
    and targets; implement programs and projects designed to achieve or
    work toward achievement of goals; collect and assemble data at the
    State, regional, and National level; and integrate this information to
    assess accomplishments and extend the planning process.
        CSREES is entering its fourth year after the merger of two former
    agencies, the Cooperative State Research Service and the Extension
    Service, and we continue to be successful in enhancing critical
    linkages between research and extension. Our land-grant university and
    other partners conduct fundamental and applied research to gain the
    knowledge needed to address problems in the development and
    sustainability of agriculture and forestry and in the overall quality
    of life of our citizens. Programs conducted by the Cooperative
    Extension System use this research-based guidance as the basis for
    practical decisionmaking by producers, individuals, families, and
    communities.
        The Administration is proposing that a new authority be established
    for an Integrated Research, Extension, and Education Competitive Grants
    Program. In fiscal year 1999, we are requesting $4 million for a Small
    Farms Initiative under the Integrated Research, Extension, and
    Education Competitive Grants Program. The Small Farms Initiative will
    benefit socially disadvantaged groups through the integration of
    research and education by supporting: (1) targeted research, outreach,
    and technology transfer/adoption to meet the needs of this diverse
    clientele; (2) needs assessments; (3) improved access to information
    for and delivery of programs to small farms; and (4) development of a
    small farms information system.
        The Administration has also proposed new legislation for a Food
    Genome Initiative, to be funded in fiscal year 1999 at a level of $10
    million. The Initiative will be coordinated with NRI grants and ARS
    research activities. This Initiative represents a targeted investment
    in the National Food Genome Strategy, which has two major components.
    In the first component, the Plant Genome Initiative, USDA would be the
    lead Federal agency, working with the National Science Foundation and
    the Department of Energy, to focus on crop species of major,
    agriculturally important plants. In the second component of the
    National Food Genome Strategy, the Animal Genome Initiative, scientists
    would be able to take advantage of ongoing work at the National
    Institutes of Health on the Human Genome Initiative to improve our
    understanding of animal genes, their genetic capabilities, and their
    genetic structures. These efforts will permit development of new
    genetic technologies for improvement in yield, composition, and quality
    of the domestic agricultural output.
                        fiscal year 1999 budget request
        The budget submitted to Congress by the President requests
    $849,840,000 for the Cooperative State Research, Education, and
    Extension Service. This request is a decrease of $9.1 million or
    approximately 1 percent, from the current appropriation, and comprises
    specific program increases and decreases. Highlights of the proposed
    increases in the fiscal year 1999 CSREES Budget are:
                                  food safety
        An increase of $3 million is proposed in fiscal year 1999 for the
    second year of the Food Safety Special Research Grants Program which
    supports the President's National Food Safety Initiative. We thank the
    Congress for providing $2 million to initiate the program in fiscal
    year 1998. In 1999, research supported under this program will target
    select populations, such as children, the elderly, immunocompromised,
    or those suffering from chronic disease, who may be more vulnerable to
    foodborne illness and will address both biological and behavioral
    science issues, including food handling and safety practices,
    purchasing and storage patterns among populations, and factors
    increasing risk of food-borne illness. These efforts will underpin the
    education activities supported by the Food Safety Education Program
    under the Smith-Lever 3(d) funding mechanism for which we are proposing
    an increase of $5 million. Funding provided for the Food Safety
    Education Program will enable CSREES, in cooperation with ARS and other
    Federal agencies, to increase producer, processor, and consumer
    awareness, understanding, and information regarding food safety.
                                  pest control
        The CSREES fiscal year 1999 budget proposes an increase of $15.5
    million for our research and extension-related pest control programs in
    contribution to USDA's Integrated Pest Management (IPM) Initiative, a
    multiagency effort to develop strategies to bring 75 percent of the
    nation's cropland under integrated pest management practices by the
    year 2000. Increases are proposed for the following programs: Pest
    Management Alternatives; Expert IPM Decision Support System; research
    and extension Integrated Pest Management; IR-4 Minor Crop Pest
    Management; Pesticide Applicator Training; and extension Pesticide
    Impact Assessment. The ability of the Nation's agricultural production
    system to keep pace with domestic and global demand for food and fiber
    depends on access to safe, profitable, and reliable pest management
    systems. Farmers and pest managers have fewer chemical control options
    available to them than they did at the beginning of the decade, and
    this trend is likely to continue at an accelerated rate. In addition,
    the Food Quality Protection Act will have significant impact on pest
    management systems in the United States over the next decade. ``Minor
    use'' crops (high value crops grown on relatively few acres) will be
    particularly hard hit. It is essential that farmers and pest managers
    be provided with new pest management tools and better information to
    remain competitive in today's global marketplace and assure consumers
    access to a wide range of safe, affordable food. To meet this challenge
    effectively and efficiently, the CSREES pest-related programs will be
    coordinated with the activities of the USDA Office of Pest Management
    Policy along with other IPM-related activities undertaken by the
    Department.
                            sustainable agriculture
        An increase of $2 million is proposed for the research and
    education component of the Sustainable Agriculture Research and
    Education (SARE) Program. This increase will allow expansion of the
    knowledge base related to more sustainable practices. Many of the
    projects supported by SARE emphasize helping farmers and ranchers save
    money through grazing system improvements that also protect our natural
    resources. Fiscal year 1998 marks the ten-year anniversary of Federal
    funding for the SARE research, education, and extension program. In the
    past decade, SARE has funded approximately 1,200 projects, most of
    which were led by university researchers working in concert with
    farmers, ranchers, and extension educators. In honor of the ten-year
    anniversary of SARE, a conference entitled, ``Building on a Decade of
    Sustainable Agriculture Research and Education,'' will be held March
    5--7 in Austin, Texas. The conference will bring together researchers,
    farmers and ranchers, agricultural extension agents and other
    educators, sustainable agriculture advocates, and other partners for
    informative sessions on sustainable agriculture and tours of farm and
    community, projects that are helping to bring about a more sustainable
    food system in central Texas. I believe that this conference is a
    fitting tribute to the impact the SARE program has had on U.S.
    agriculture.
                          national research initiative
        The budget proposes to fund the NRI at $130 million, an increase of
    $32.8 million. The NRI is the USDA's largest competitive grants program
    that provides a critical investment for the future of American
    agriculture. We appreciate the Congress providing additional funding
    for the NRI in 1998. Agricultural research is needed to assure a
    sustained and bountiful harvest of agricultural products. It is also
    needed to meet the ever-changing preferences and demands of consumers,
    domestic and global, and to keep up with increases in both the
    population and economic status of people.
        The NRI invests in those areas of research with the greatest
    potential for expanding the knowledge base needed to address issues
    that will face the agricultural and forestry enterprise. The NRI
    supports a broad spectrum of mission-linked agricultural research that
    results in practical outcomes.
        The increase in the NRI will therefore focus on these key areas:
    food genome research, food safety, and environmental quality. Increased
    food genome research is needed to improve plant and animal species to
    increase yields, reduce inputs such as fertilizers, pesticides and
    antibiotics, decrease production costs, and improve quality and safety.
    Also of particular concern to the American public is the safety of the
    food supply. The NRI responds to this need by expanding the science
    base for the Hazard Analysis and Critical Control Point (HACCP)
    approach to meat and poultry inspection to reduce food-borne illness
    due to microbial pathogens. The health of the environment also is a
    major concern to Americans. Research supported by the NRI leads to
    improved production practices and contributes to improved water
    quality, better soil quality and fertility, and sustained ecosystem
    health.
             research, education, and economics information system
        An increase of $1.2 million is proposed for REEIS to work on the
    system design and launch development of the REEIS prototype. This also
    will entail the enhancement of several current databases to make them
    more useful to REEIS users. An information needs assessment will be
    conducted in order to align REEIS products and services with
    information requirements of the agencies and their partners.
        The Research, Education, and Economics Information System--REEIS--
    will be a valuable mechanism for helping the REE agencies meet the
    accountability standards mandated by GPRA and for enabling us to
    provide better delivery of comprehensive research, education,
    extension, and economics information to USDA, REE agencies, and our
    partners. The first REEIS National Steering Committee meeting was held
    in June 1997, and I am very pleased with the progress that resulted
    from that meeting. As a result of the Committee recommendations, an
    information audit of existing REE databases is being conducted. The
    first phase of the audit produced an on-line catalog of the major
    databases and provided specifications, through interviews with database
    managers, to conduct an assessment of additional databases or
    information which should be included. The second phase of the audit
    will build the data dictionary and provide specifications for a
    controlled vocabulary to facilitate coordinated user access to REEIS
    databases. Initial implementation activities are expected to be
    essentially completed by the end of the year 2000.
        The second National Steering Committee meeting is scheduled for the
    week of February 23. Members of the National Steering Committee, the
    REE mission agencies and State partner institutions have been provided
    copies of the specifications for the needs assessment and controlled
    vocabulary. The Committee will review and approve progress to date and
    formulate the action plan and strategies for future tasks such as
    specifications for the REEIS system design and collection of
    accountability data.
                          usda civil rights initiative
        A proposed increase of $9.3 million is included to address
    recommendations made in the USDA Civil Rights Action Team (CRAT) report
    of February 1997 to strengthen USDA's research and educational
    assistance to the socially disadvantaged and to address the needs of
    farmworkers. Increases are proposed for: (1) the Extension Indian
    Reservation Program to expand the presence of extension agents on
    Indian Reservations; (2) the 1890 Facilities Program to improve the
    quality of research, extension, and teaching facilities on the campuses
    of 1890 Institutions so that they are more comparable to facilities
    generally found on the campuses of 1862 land-grant universities; and
    (3) the Extension Services at 1994 Institutions to bring needed
    educational programs normally addressed under the broad mandate of the
    Cooperative Extension System to people served by Native American
    institutions. The Administration also is proposing that: (1) funding
    levels for the Hispanic Serving Institutions higher education program
    and the 1890 institutions research and extension formula programs be
    maintained at the fiscal year 1998 levels; and (2) as discussed
    earlier, a Small Farms Initiative be implemented under new legislation
    to be established through the reauthorization of the research title of
    the Farm Bill for an Integrated Research, Education, and Extension
    Competitive Grants Program. The Small Farms Initiative will support
    multi-functional research and education activities to address the
    resource constraints of small farms.
                     children, youth, and families at risk
        The budget proposes that funding for the Children, Youth, and
    Families at Risk (CYFAR) program under Smith-Lever 3(d) be increased by
    $446,000 to restore it to the 1995 level. This program is one of
    several National Initiatives of the Cooperative Extension System which
    represent the System's commitment to respond to important problems of
    broad national concern. CYFAR funds are distributed to each State and
    awarded competitively. Every State has identified youth at risk as a
    priority, and most of the efforts focus on community collaborations,
    initiating school age child care programs, and strengthening science
    and technology programs. Projects supported by CYFAR are empowering
    youth, parents, and community leaders to take responsibility for their
    own lives to reduce environmental risk factors.
                                 water quality
        An increase of $296,000 is proposed to restore funding under the
    Water Quality research program to the level provided in fiscal years
    1995-1997. In 1996 new projects were initiated as Agricultural Systems
    for Environmental Quality to focus on watershed-scale agriculture
    production systems that reduce pollution of soil and water while
    maintaining productivity and profitability. This increase will address
    these and other water quality issues, such as hypoxia oxygen depleted
    waters--and Pfiesteria, a problem recently reported in some tributaries
    of the Chesapeake Bay, and specific water-borne diseases such as
    Cryptosporidium, which continue to be of a high priority at local,
    regional, and National levels.
            binational agricultural research and development (bard)
        The United States-Israel Binational Agricultural Research and
    Development Fund was established in 1977, but low interest rates and an
    increase in the cost of research have impeded the ability of BARD to
    adequately meet the needs of each country's producers and consumers.
    The Administration is proposing a $1.5 million increase for BARD to
    continue support of research of mutual interest between the U.S. and
    Israeli agricultural research communities. These funds will supplement
    the interest derived from existing BARD endowment funds and will be
    matched by funding from the Israeli government.
                         global change/uv-b monitoring
        An increase of $567,000 is proposed for the Global Change/UV-B
    Monitoring Program to restore funding to the fiscal year 1997 level.
    This program supports the USDA UV-B (ultraviolet-B) Monitoring Program,
    a component of the U.S. Interagency UV-B Monitoring Network Plan of the
    United States Global Change Research Program. This increase will be
    used to bring the network closer to complete operational status for
    obtaining ground level UV-B radiation applicable to locations of
    importance to agriculture, forestry, and natural resources.
    Sustained Funding Support:
        The Animal Health and Disease Research formula program is proposed
    for funding at the 1998 appropriation level, as are most of those
    Special Research Grants that concentrate on problems of national and
    broad regional interest beyond the scope and resources of the formula-
    based programs, including Critical Issues, Minor Use Animal Drugs,
    National Biological Impact Assessment, Rural Development Centers, and
    Pesticide Impact Assessment.
        In continuation of the Department's commitment to helping limited
    resource farmers and other socially disadvantaged populations, funding
    is maintained at the 1998 levels for extension formula distribution to
    the 1890 Institutions, the Evans-Allen research formula program, the
    1890 Capacity Building Grants Program, the Hispanic-Serving
    Institutions Education Grants Program, the Tribal Colleges Education
    Equity Grants Program, and the Tribal Colleges Endowment Fund.
        Our fiscal year 1999 Higher Education Programs portfolio is also
    maintained at the 1998 funding level of $26.1 million. The portfolio
    includes the aforementioned Capacity Building Grants, Hispanic-Serving
    Institutions Education Grants, and Tribal Colleges Education Equity
    Grants Programs and the Tribal Colleges Endowment Fund, along with the
    Institution Challenge Grants Program, the Graduate Fellowship Grants
    Program, and the Multicultural Scholars Program.
        Funding is also maintained at the 1998 levels for Smith-Lever 3(d)
    programs for Water Quality, Rural Development, and Sustainable
    Agriculture, as is funding for the Renewable Resources Extension Act
    Program.
    Decreases and Eliminations:
        In support of the Administration's goals to reduce the Federal
    deficit and focus its resources on high priority national issues, the
    fiscal year 1999 CSREES Budget proposes decreased funding for several
    programs.
        The Administration strongly supports a mixed portfolio of formula-
    based and competitive funding but we find that a different approach is
    needed, in this era of limited resources, for addressing high priority
    National issues while simultaneously balancing the budget. We have
    proposed decreases for several of the formula programs in the 1999
    budget to generate resources needed to address issues of broad public
    concern that cut across State lines or other boundaries. Formula
    decreases include $15.062 million for the Hatch Act research funds;
    $615,000 for the McIntire-Stennis cooperative forestry research funds;
    and $10.740 million for the Smith-Lever 3(b) and (c) extension funds.
    States have maximum flexibility to fund specific programs through
    formula funds, thus the proposed decreases should have the least impact
    in those areas States identify as high priority. The flexibility of the
    States in the use of the Hatch Act and Smith-Lever 3(b) and (c) formula
    funds will be enhanced if the Administration's recommendation that the
    States be given authority to use a percentage of these funds for either
    research or extension activities is implemented in the reauthorization
    of the research title of the Farm Bill.
        Decreased funding or the elimination of funding is proposed for
    several other programs. These programs could be supported by the States
    through the reallocation of formula funds, or by State, local
    government, and/or private sources if they are deemed to be high
    priority at the State or local level. Decreases totaling $2.5 million
    are proposed for the Aquaculture Centers Program and the Expanded Food
    and Nutrition Education Program (EFNEP). The Supplemental and
    Alternative Crops; Critical Agricultural Materials; Rural Health and
    Safety; Farm Safety; and Agricultural Telecommunications programs are
    proposed for elimination, saving $7.6 million.
        CSREES has also proposed that State-specific or other earmarked
    Special Research Grants totaling $43.867 million; earmarked research
    Federal Administration projects totaling $8.866 million; and earmarked
    extension Special Projects under Direct Federal Administration totaling
    $6.113 million be eliminated because they are not high priority and
    National in scope. Alternate funding from formula programs, State and
    local government, and private sources could be used to continue these
    efforts if they are considered high priorities at the State or local
    levels.
        In conclusion, the President's fiscal year 1999 Budget Request for
    CSREES reflects the commitment of the Administration to further
    strengthen the problem-solving capacity of Federally-supported
    agricultural research, extension, and higher education programs. I
    appreciate the support of the Committee and look forward to working
    with you and your staff during the upcoming budget process.
                                     ______

                             Biographical Sketches
                               i. miley gonzalez
        I. Miley Gonzalez was nominated by President Clinton as the Under
    Secretary of Agriculture for Research, Education, and Economics on July
    9, 1997. He was confirmed for that position by the U.S. Senate on July
    31, and sworn in on August 5.
        Gonzalez provides oversight of the research, education and
    economics programs at USDA. He manages the Agricultural Research
    Service, the Cooperative State Research, Education, and Extension
    Service, the Economic Research Service, and the National Agricultural
    Statistics Service.
        Before his appointment as Under Secretary, Gonzalez served on the
    National Agricultural Research, Extension, Education, and Economics
    Advisory Board--a 30-member group authorized by the 1996 Federal
    Agricultural Improvement and Reform (FAIR) Act to advise the Secretary
    and land-grant colleges and universities on agricultural research,
    extension, education, and economics policy and priorities. As the Under
    Secretary, Gonzalez is an ex-officio member of the group which will
    provide consultation on other FAIR Act legislation, including the Fund
    for Rural America.
        Before joining USDA, Gonzalez served as associate dean and director
    for academic programs in the College of Agriculture and Home Economics
    at New Mexico State University (NMSU). From 1994-96, he was assistant
    dean and deputy director of the Cooperative Extension Service. Prior to
    that he served as professor and head of the Department of Agricultural
    and Extension Education at NMSU for three years.
        Gonzalez worked on the Hispanic Association of Colleges and
    Universities/USDA leadership team, representing NMSU.
        Before joining the faculty at NMSU, Gonzalez was an assistant
    director of International Agriculture Programs in the College of
    Agriculture at Iowa State University from 1988-91. In the early 1980's,
    Gonzalez served as a state 4-H specialist at Pennsylvania State
    University and participated in extension program activities.
        His administrative experience began in 1976 at the University of
    Arizona as assistant director in the Office of Resident Instruction in
    the College of Agriculture. He has private sector experience in
    marketing, management, and production agriculture in both the U.S. and
    Mexico and worked on a cattle ranch in Venezuela. Gonzalez started his
    professional career as a high school vocational agriculture teacher in
    1970 and taught at Parker High School on the Colorado River Indian
    Reservation in Parker, AZ.
        He has taught numerous undergraduate and graduate courses including
    guest lectures in Spanish. His teaching has focused on problem-solving
    techniques, program planning and evaluation, curriculum development,
    and beginning teacher and extension agent training.
        Gonzalez has served on numerous evaluation and task force teams at
    the local, national, and international levels. His research and
    scholarly activities have focused on the areas of international
    development, extension education, adult and non-formal education,
    technology transfer, and leadership development and training.
        He has received numerous awards and honors from various
    professional groups, teachers, institutions and many other
    organizations such as 4-H and the FFA. He earned the American Farmer
    Degree in FFA and has received the Distinguished Service Award from the
    American Association of Agricultural Education for both domestic and
    international work in the western region.
        He was born in Ysleta, TX, on July 30, 1946, grew up on a small
    farm and livestock operation in San Simon, AZ, and managed farming and
    marketing operations in northern Mexico. Gonzalez attended the
    University of Arizona where he received both a B.S. and M.S. in
    agricultural education from the University of Arizona and a Ph.D. in
    agricultural and extension education from Pennsylvania State
    University.
                                     ______

                                 eileen kennedy
        WASHINGTON, Nov. 7, 1997--Agriculture Secretary Dan Glickman today
    announced the appointment of Dr. Eileen Kennedy as Acting Deputy Under
    Secretary for Research, Education, and Economics, effective November
    10.
        ``Eileen Kennedy has provided sound policy advice, analysis, and
    research on USDA's food assistance and nutrition programs,'' said
    Glickman. ``Her ability to work with diverse groups to develop research
    driven dietary guidance will serve USDA well in her new role. Her keen
    insight and extensive background in research and education will prove
    invaluable as USDA sets research and education priorities that are
    responsive to the needs of the American people.''
        Kennedy will work with the Under Secretary for Research, Education,
    and Economics, I. Miley Gonzalez, to provide oversight of the research,
    education, and economics mission. She will help to manage the
    Agricultural Research Service, the Cooperative State Research,
    Education, and Extension Service, the Economic Research Service, and
    the National Agricultural Statistics Service.
        Prior to her appointment, Kennedy served as the Executive Director
    of the USDA Center for Nutrition Policy and Promotion. She managed the
    Center and provided technical direction for policy research and applied
    nutrition for USDA's nutrition programs.
        Before joining USDA in 1994, Kennedy was a visiting professor at
    Tufts University, School of Nutrition. From 1981 to 1994, Kennedy
    worked for the International Food Policy Research Institute here as a
    senior research fellow. She also worked as a visiting professorial
    lecturer at Johns Hopkins School of Advanced International Studies from
    1987 to 1990.
        Dr. Kennedy is currently a member of the United Nations Advisory
    Group on Nutrition as well as a member of the Institute of Medicine's
    Board on International Health.
        She received her B.A. degree from Hunter College in New York, NY,
    and her two M.S. degrees, one in Foods and Nutrition from Pennsylvania
    State University and one in Nutrition from Harvard. Kennedy received
    her Doctor of Science degree from Harvard University.

           Implementation of ARS' Fiscal Year 1998 Program Increases

        Senator Cochran. That is perfectly satisfactory with us.
        Let me ask the first question and then I am going to yield
    to my colleagues for any questions that they have. Looking at
    the budget request specifically for ARS--Dr. Horn has submitted
    a statement discussing that aspect of the budget request--but
    it confuses us to this extent: that the funding levels for ARS
    activities are proposed to be increased from the fiscal year
    1998 level, mostly for the purpose of adding staff,
    professional research scientists, at ARS facilities throughout
    the Nation, but you are proposing to execute increased staffing
    levels and at the same time requesting that all of those
    increases provided for the current fiscal year, what the budget
    calls ``congressional add-ons,'' be eliminated? Some of these
    reflect, for example, suggestions that this committee received
    as to staffing that was needed in order to fully undertake the
    work that was being done at some of these facilities.
        I am specifically aware of the warm water aquaculture
    research that is being done in Mississippi and in Arkansas, and
    we added a couple of research scientist staff positions there.
    How are you recruiting and filling those positions at the same
    time you are proposing to take the money out of the program
    and, therefore, having to cut those same staff positions?
        What is the reality of the situation with regard to that?
        Dr. Gonzalez. Mr. Chairman, if I may, and I will ask Dr.
    Horn to share also with some of the detail. Within the broader
    context of the budgeting process, we looked at those areas of
    funding of very important and high-priority areas and went
    through a discussion to take a look at the shifting of
    resources. As a result, as you look at that budget, you will
    find some places where there is a definite increase and other
    places where we have had a shifting of resources.
        But specifically to your question, I think that as we look
    at the site specific parts of this agricultural research agenda
    that we certainly have some areas where we have continued to
    move funding to enhance the work that is being done there and
    taken a look at how those things fit within this sort of
    limited, if you will, research budget that we are having to
    work with.
        I will turn to Dr. Horn and ask him to provide any of the
    detail for this particular question.
        Dr. Horn. I have been very concerned about the decline in
    the number of ARS scientists for some time, and in fact as an
    agency we are trying to turn that decline around. There were
    3,400 scientists when I came to ARS 27 years ago and now we are
    under 1,900.
        We went through exactly this same process a year ago when
    we had some projects and some locations proposed for closure,
    and we held back in our recruiting process and the ultimate
    result, of course, was restoration of many of the projects and
    of all of the four locations that were proposed for closure.
    But in that process our number of FTE slots for scientists
    actually did decrease by about 100.
        So we learned a lesson there and we are proceeding to a
    point this year in a different way. We have about 140 vacant
    scientist positions in the agency. Seventy of those are
    holdovers from prior funds or the result of attrition. Seventy
    of those are from the new money that came to us in fiscal year
    1998. We are pursuing the recruiting process full bore on all
    positions, and we are doing so in the realization that it is
    going to be midsummer before many of these will be to the point
    where we can interview or commit, and by that time we expect to
    have some additional information on what really will become of
    this budget.
        As you have mentioned, you may impose changes in this
    committee and the House may do the same. So our intention is to
    continue to recruit, look for the best and the brightest, but
    the day will come actually when we have to either say to them,
    you have to understand that the funds may not be there for that
    position next year, but we will find you a job in ARS, or we
    have to stop recruiting.
        So our intention is to keep recruiting.

                Status of Fiscal Year 1998 Implementation Plans

        Senator Cochran. One thing we will do for the record, if
    you can help us with this, is submit a listing of all of those
    research facilities and the additional funding that was
    provided in the appropriations bill for this current fiscal
    year and ask for a status report on the execution of the
    funding increases provided for fiscal year 1998 for ARS for
    those purposes.
        We have a list that includes, it looks like, about 30
    different facilities across the Nation that are in this same
    shape, not just the ones in Mississippi and Arkansas. But you
    know, the reason I point these out is that last year the
    testimony was very clear that aquaculture is one of the fastest
    growing activities in agriculture today in our country, and we
    need to find out about diseases and other challenges that are
    presented to the aquaculture industry in not only the South,
    but other parts of the country as well.
        We had a West Virginia aquaculture center, for example,
    that was funded. That is another area where we are wondering
    how you are filling those positions that were funded last year,
    when now you are asking that those funds be terminated and
    canceled in this year's budget.
        It is an important area. I think you recognize that, Dr.
    Horn and Dr. Gonzalez, in your comments before the committee. I
    know in Dr. Horn's case, from testimony he presented last year.
    And I think this year's testimony also confirms that this is an
    important area for inquiry.
        Can you confirm that?

                              Aquaculture Research

        Dr. Horn. Yes; it is absolutely true. I believe we are
    still importing about 70 percent of our shrimp, for example,
    and a lot of our freshwater fish activities not only promote
    rural economic development, but it is a new industry and a
    burgeoning industry and a very rapidly growing industry. So it
    is extremely important to us.
        Senator Cochran. Thank you.
        Senator Bumpers.
        Senator Bumpers. Thank you, Mr. Chairman.
        Dr. Horn, this is something you are not required to know
    the answer to. Do you know what rice yields are in this country
    compared to, say, 3 years ago?
        Dr. Horn. I am glad I am not required to know that.
    [Laughter.]
        Senator Bumpers. Does anybody on the panel know?
        Dr. Horn. Given 3 years ago, I suspect they are more or
    less level and perhaps even a bit lower compared to 10 or 12
    years ago, due to our research accomplishments.
        Senator Bumpers. I think you are absolutely right. I wanted
    to hear somebody who monitors those figures. I am not going to
    make the same speech here this morning I have made 100 times
    about the importance of research on agriculture in this country
    and how we are going to feed ourselves in the future.
        But I get the impression, with some minor exceptions, a lot
    of our yields of food products are pretty static. I think in
    1965 we had a static production of corn for the first time in
    60 years. Those things ought to be alarming, not only to the
    research community, but to those of us who are funding
    research.
        Now, this brings me to my next question, and that is
    following up on what the chairman has just asked you about
    agriculture. Mississippi and Arkansas both have state-of-the-
    art agriculture research labs and in last year, 1997, we
    directed in the 1998 budget that--we just put a direction in
    there that in 1999 you would increase, for example, the funding
    for the rice germplasm center, which is really vital to
    increasing rice yields. We put a provision in there that it
    would be increased, I believe $700,000 in 1999, and $400,000--I
    am not sure what we put in for the Mississippi aquaculture lab,
    but we put an increase of $500,000 for the aquaculture lab in
    Stuttgart in my home State.
        They are not in here. My next question is, was this
    submitted to OMB for inclusion in the President's budget, these
    increases that Congress directed last year? I want to be sure
    we are on the same wavelength. Do you know what I am talking
    about?
        Dr. Horn. By the agency?
        Senator Bumpers. Yes.
        Dr. Horn. Yes; we requested those.
        Senator Bumpers. You did request those increases?
        Dr. Horn. Yes; we did.
        Senator Bumpers. And you got a negative response, I take
    it? I mean, they just did not put it in the President's budget
    request. Of course, you knew in advance what their reaction was
    to this, I assume.

                                 Rice Research

        My point, Mr. Chairman and members of the panel, is that
    here we have these state-of-the-art research facilities that
    cannot function at the proper level, simply because we lack
    scientists. And we needed that $700,000 in the rice germplasm
    center. The rice germplasm center is the only facility I know
    in this country that really has the ability to increase rice
    yields.
        When I was first elected Governor of my State, I think
    yields were averaging less than 100 bushels per acre. Today the
    average is probably like 150, but 200 to 220 bushels an acre is
    not uncommon. That is all due to research.
        I do not know how far you can go, but all I am saying is--
    and I have said 1,000 times--of all the research money we spend
    in this country, the Pentagon obviously gets the most of it,
    the National Institutes of Health is second and that is
    entirely proper. I am not going to deliver my sermonette on the
    Pentagon. But when I think about it, we are putting I think
    $1.8 billion--is that a fair statement--in agricultural
    research in this country, it's outstanding to be alarming.
        Dr. Gonzalez, do you want to comment on that?
        Dr. Gonzalez. Yes; thank you. Mr. Chairman and Senator, I
    think that has been part of our discussion internally as well,
    the fact that when you compare the share of research moneys for
    agriculture, including the extension and education component
    that is critical to that continuum, that we are not in the same
    ballpark.
        It is certainly a discussion that we have begun to talk
    about with our agencies and across the mission areas within
    USDA, and I think to engage other parts of the research
    community so they understand the relationship and the linkage
    that we have between agricultural research and some of the
    things that they do.
        You pointed out NIH; on the NSF side as well. And again, it
    is not a matter of getting engaged in a match, if you will, of
    those dollars, but that we communicate to all folks that we do
    have that opportunity to highlight the success of agricultural
    research and how it fits within the broader research agenda.
        When we talk about the food genome area, for example, you
    were talking about rice. I think there is a component in that
    initiative that will also allow us to address some of those
    questions that you were specifically addressing a moment ago.

                             Facilities Task Force

        Senator Bumpers. Dr. Horn, let me ask you another question.
    The Department has been working on a report by the Strategic
    Planning Task Force on Research Facilities, and they were to
    determine--they were to prioritize, and I hate that word, but
    they were to prioritize Federal research directives. Now, this
    report is not finished. One of the principal things it was
    supposed to do was to determine which facilities should be
    closed, is that correct? Is that a fair statement?
        Dr. Horn. Not exactly, Senator Bumpers.
        Senator Bumpers. What was the principal purpose of that
    task force?
        Dr. Horn. It was to evaluate all of the Federal and State
    facilities and, in fact, some private laboratories to take a
    look at what we have and what we are going to need to have. So
    it was to deal with more than just closures. It was to deal
    with highlighting as well what is needed into the future.
        Senator Bumpers. But that study has not been completed, has
    it?
        Dr. Horn. No; as a matter of fact, they met yesterday.

                       Proposed Closure of ARS Facilities

        Senator Bumpers. Why is the Department recommending closure
    of certain facilities before that study is completed?
        Dr. Gonzalez. If I may, and I do not know that I know the
    exact answer. But certainly the committee is meeting now. This
    is their fourth meeting, and they are looking at, as Dr. Horn
    described, the research capacity both from the standpoint of
    facilities and the programmatic side. We will have an interim
    report by about the middle of June in terms of what we have
    done at this point to take a look at both the Federal
    facilities, as well as those that are out there in the
    university system.
        The idea is that we will not finish that report, we will
    not have all of those data, until 1999. But within those
    constraints in the budget discussion there were some things
    that were already on the board that we were looking at in terms
    of how to manage the sites and programs that had been
    identified for closure prior to this budget session. Those
    considerations were part of this ongoing discussion. There may
    or may not be some other facilities that they are looking at
    that might also fit into a list like that.
        But I think part of my discussion with the committee and
    with others has been that we are not only looking at the
    possibility of closure, but also that we are looking at the
    capacity that we have. We have an investment in a variety of
    places, depending on the agricultural research that is going
    on, that is site specific. So we really have to come back with
    some serious answers to these questions that are being raised.
        Senator Bumpers. This committee obviously is going to
    review your recommendations and look at it very closely,
    because my own personal opinion is it is premature for ARS to
    be making these decisions right now. I know that the budget
    constraints are terrible. Senator Cochran and I have had
    private conversations about what a monumental task this
    subcommittee has in trying to get this budget--this is the
    toughest year I have ever seen on budgeting.

                           Alternative Pest Controls

        Mr. Chairman, I have one final question and I will submit
    my other questions for the record. And I would like to direct
    this question to you, Dr. Robinson. And that is, what kind of
    progress are you making on alternative pest controls and what
    kind of progress, if any, is the private sector or the public
    sector making in making pesticides and herbicides more benign?
        We have an environmental disaster on our hands, and we are
    trying to produce more crops at the same time we are trying to
    use less pesticide and herbicide. It is a monumental chore, but
    I would just like an update on that.
        Dr. Robinson. I wish I could give you quantitative
    information across the board. Perhaps I can do it in three
    ways. We have, as you know, as part of the overall budget
    request--and it is the same kind of request we have had in
    previous years--a request to increase fairly significantly our
    pesticide management, research, and education program. Those
    also go in sort of a hand-and-glove manner with many of our
    sustainable agriculture programs.
        One of the points, a quantitative point, that has been
    addressed in a lot of positions before was to reach 75 percent
    of agriculture applying IPM practices, which often would
    involve the alternative pesticide applications that you speak
    of, by the year 2000. Current information suggests that we are
    probably somewhere in the neighborhood of 65 to 70 percent. So
    75 percent by the year 2000 is not out of the question.
        The problem with that, that kind of answer, though, is it
    does not go deep enough. There are a lot of definitional issues
    with regard to what is and is not the application of an IPM
    practice or an alternative pesticide or production practice. So
    we like to think of that both in terms of the depth of that
    change in agriculture as well as just a percentage count of who
    is adopting some kind of practice.
        We think that the programs that we have in terms of the
    alternative pesticide research programs that are producing--and
    it is a slow process--alternatives and in working with EPA in
    providing them information in terms of what alternatives are
    available or if there are no alternatives, is a useful kind of
    collaborative effort as they begin to make their decisions. And
    the educational program that we have in extension to move that
    research to the farm and the farmer as quick as possible is
    going to move in the direction of improving both the depth as
    well as the quantitative count of IPM practices on farms by the
    year 2000.
        That is not going to resolve all the issues, as you well
    know. So it is a program that is going to continue to have to
    struggle with the issues between interfacing production
    agriculture and competitiveness with the environment.
        Senator Bumpers. Let me just say that, you know, in the
    Department--and not just Agriculture, but everybody--every time
    Senator Cochran or Senator Burns or I get a little project for
    our State it is considered pork.
        Senator Burns. In agriculture that ain't bad.
        Senator Bumpers. If ARS comes up with it, it is high-class
    research. But I think about a small project I got for the
    University of Arkansas back in the eighties to do alternative
    pest control research, and they were doing high-class research
    when I went there 3 years later. And we funded it every year
    for a while.
        They have been on their own for some time, I do not know
    how many years. They have been on their own now for 2 years. We
    are funding it. There may be a little private money from some
    of the chemical companies or somebody going into it. But they
    are doing top-class research and they are on their own.
        Now, I cannot think of a better success story than that. I
    make that point just to show that the people sitting on this
    side of the table oftentimes have pretty good ideas, too. I
    always voted against Senator Proxmire's amendment that
    everything had to be let on a competitive basis. That meant
    everything went to Harvard and MIT and you name it and the
    University of Arkansas got nothing.
        If Senator Cochran and I were not here protecting our
    States, we would not get anything, I can tell you. But we do
    good research, and that is the reason we have that rice
    germplasm center down there, which is really critical to the
    future of the rice industry.
        Well, that is enough.
        Senator Cochran. Senator, those were excellent questions
    and we appreciate very much your asking them.
        Senator Burns.
        Senator Burns. Thank you, Mr. Chairman, and thanks to the
    folks for coming up here this morning.
        When I look over this budget and the request for funds down
    there, I was a little dismayed in some areas. And I am glad to
    hear that at least the Department on the individual places that
    we think is very important they were requested from OMB. I
    would assume Miles City and Sydney and those things were in
    there.

                             Production Agriculture

        With all the demands that are being placed on our producers
    today from environmental, taxes, high cost of operation, it
    would seem to me that the thrust of this part of USDA should be
    pointed toward production agriculture. I cannot believe that we
    have only got 1,900 scientists working in the USDA and ARS
    doing research today.
        Dr. Horn--or I will ask Dr. Gonzalez: How many of those
    1,900 are actively involved in production agriculture?
        Dr. Gonzalez. Mr. Chairman and Senator, maybe I will ask
    Dr. Horn to respond to that because of the specificity of that
    number. But before he does that, if I may, kind of going back
    to the question that the Senator asked a minute ago, I think
    those are the exact kinds of questions that we've begun to ask.
        I talked yesterday to the CARET delegates that are here.
        Senator Burns. To the who?
        Dr. Gonzalez. The Council for Agricultural Research,
    Extension, and Teaching [CARET], that are part of that
    university community. A great many producers and commodity
    group representatives are in that group.
        One of the things I said to them is that we are, again,
    readdressing, if you will, the agenda in terms of the
    importance of that producer community and to look at----
        Senator Burns. It is the only community. As far as this
    room is concerned, it is the only part. Everything else lives
    off of it. Everything else lives off of it. You take it out of
    business and none of us is working.
        We can use pretty words, but it just does not make a lot of
    sense.
        Dr. Horn.
        Dr. Horn. I do not think we have anyone that is not working
    on a problem at ARS. We really do try to tell all of our
    scientists to understand why they are doing what they are
    doing, and it is a relatively applied program.
        But the answer to your question specifically, about 70
    percent of the scientists are involved in production
    agriculture. Others are involved in more fundamental programs
    that should lead to application and should help producers. But
    it is about 70 percent.
        Senator Burns. If you line that up against any other
    segment of the American economy, you have 1,000 scientists out
    there trying to deal with something that every one of us in
    this town does three times a day, and that is eat, most of us.
    I eat more than that, obviously, but nonetheless.
        I just think that our initial thrust--I am just wondering,
    when OMB sent it back down was there anybody that raised their
    eyebrow and said, what in the world are we doing and what are
    our priorities? And is there anybody going back down there that
    says, this is unacceptable, this is unacceptable to go at this,
    this thing? It is like the aquaculture that they are concerned
    about in Arkansas, and I am concerned about that, too. I am
    concerned about rice yields. Our wheat has been going down a
    long time.
        But yet we do not see anything, anything to address that. I
    would say, we cannot do research on western ranges or
    Mississippi aquaculture or Arkansas rice in Maryland. We cannot
    do it, we just cannot do it. And these two Senators to my right
    here have just absolutely fought tooth and toenail to put the
    research on the ground where it is supposed to be.
        And then you come back and you cut extension. You can have
    all the knowledge in the world, but we have no way to transfer
    that technology, none. So it all goes hand in hand.
        Forget about rural development. It may be a feel-good
    methodology to take care of something in the neighborhood, but
    if you have no production that is where your great development
    is, folks. That is what pays the bills. And if you do not think
    we do not have a problem, you just go around and explain to
    producers in this country why Wheaties is $3.75 a pound in the
    grocery store and we cannot get $3 for a 60-pound bushel of
    wheat. And then you wonder why we got hurt and why we get awful
    sensitive about our producers that are on the land.
        And by the way, if you took your researchers out there and
    tried to run a farm, ranch, or an aquaculture, I will tell you
    what: They would go broke in 15 minutes, and then we are all
    out of jobs.
        A little ASCS guy is sitting in the ASCS office one time,
    he was crying. The guy says: What's the matter? And he said: My
    farmer died. Well, they are dying.
        It just seems like that our thrust, that somebody in this
    Department, the Department of Agriculture, has got to go down
    to OMB and say: This is outrageous and completely unacceptable
    to a community that is supposed to be advocating something for
    production agriculture, because the demands--everybody wants to
    pass laws on agriculture, you got to do this, that, and the
    other.
        You cannot spray, you cannot even take care of your weeds.
    You know how hard it is to find weed money? And noxious weeds
    runs, spotted nap runs all the way from the highest mountain in
    Arkansas to the flats of Arkansas. And by gosh, we cannot get a
    little old measly pile of money to develop something for
    noxious weeds.
        But you go to one of these Grey Poupon parties around here
    and white wine, you know, them little finger parties, and you
    start talking about weeds and you are standing there talking to
    yourself pretty quick.
        So we need some advocates down there, folks. We need
    somebody that is willing to fight, and I do not see that
    happening right now and I am concerned about it.
        So I do not have any questions. We are going to look at
    this. I am going to work with the chairman. He is concerned
    about it. I am concerned about it, and I am going to work very,
    very hard in putting those dollars where they will do the most
    good, and that is research and production agriculture and the
    extension work it takes to get that technology on the farm.
    That is where I come from.
        I do not have any of them fancy letters behind my name. It
    says ``NDBA'' behind mine: No degree, but boss anyway.
        I am going to work very, very hard at that. Thank you for
    coming today.

                                  Trade Flows

        Senator Cochran. Thank you, Senator.
        Before I ask another question about the research budget, I
    was noticing in the Economic Research Service statement there
    is a comment about how the Economic Research Service intends to
    spend more time to break down the components of trade flows,
    understanding the relationships to international investment and
    the strategic behavior of U.S. firms, and investigate the
    implications for U.S. consumers of a globalized food
    marketplace.
        After reading that, it occurs to me that one of the most
    challenging aspects of agriculture today is trying to
    understand the implications of international economic
    conditions. For example in Asia, the Far East, the Pacific Rim,
    we are seeing a lot of turbulence in markets there and currency
    values are plummeting in places like Indonesia and elsewhere.
    Korea is undergoing massive change and dramatic change in its
    economic structure there and the banking system.
        We sell a tremendous amount, not only of raw agricultural
    commodities, but value-added products, in those parts of the
    world, and it is a growth area for us. We have seen China
    suspend imports of cotton.
        Is the Economic Research Service actively engaged in trying
    to analyze what is going on there and interpret that for the
    benefit of American agriculture? If so, tell us what your
    findings are?
        Dr. Gonzalez. Go ahead, Susan, Dr. Offutt.
        Dr. Offutt. Yes; we are. As you noted, the nature of change
    in economies around the world is as important to U.S.
    agriculture as anything that happens domestically because of
    our dependence on exports. Specifically, we recognize the
    importance of the Asian region to further growth in U.S.
    exports. With respect to China, ERS has in place a bilateral
    technical assistance agreement that will allow us to better
    understand Chinese agricultural markets as they themselves
    better understand them--in collaboration with the National
    Agricultural Statistics Service as well. We have also begun
    work on trying to understand the implications of accession to
    the World Trade Organization of China, which under some
    conditions would actually improve the functioning of the world
    marketplace. China might be less likely to be disruptive, for
    example, stopping imports without warning. So we certainly are
    concerned about the capacity of China because it is clearly the
    largest country on Earth, and as it enters the world trading
    system it will change the way our exports are dealt with in
    markets.
        More specifically and more recently on the Asian crisis,
    most of the testimony that the Secretary and Under Secretary
    Gus Schumacher have given before the Congress is based on the
    analysis that ERS has done reflecting our understanding of
    changes in demand in the Asian markets, both with respect to
    reductions in income that come about when those economies
    falter as well as changes in currency values that affect our
    competitiveness in a market vis-a-vis, for example, the
    Australians, which is a particularly important relationship in
    Asia.
        We feel it is certainly an important component of our
    program to look beyond what happens next week or the week
    after, because the forces that shape the prosperity of United
    States agriculture are being determined in China and Indonesia
    and Malaysia today.
        Senator Cochran. Thank you very much.

                     Reductions in CSREES Research Programs

        I notice in the Cooperative State Research, Education, and
    Extension Service accounts, what we see in this budget is a
    proposal to terminate most special research grants that are
    funded for the current fiscal year and, for the first time that
    I can remember, to reduce formula funds--the Hatch Act Smith-
    Lever, McIntire-Stennis cooperative forestry research, and
    others.
        What I would like to know is, have you assessed the
    implications of what the practical results of all of this would
    be in terms of benefits for production agriculture, for
    forestry, or for the research that is now supported by these
    special research grants? What are the practical consequences?
        What if we just approved that and shocked the heck out of
    you, the President, and the people who are responsible for
    submitting this ridiculous proposal to the Congress? What if we
    just shocked you and said, OK. Would you bear the
    responsibility for it? Would you go out and explain to people
    what this means in practical terms?
        What does it mean? Tell us if you can?
        Dr. Gonzalez. Mr. Chairman, we have begun that discussion.
    In the recent 2 or 3 weeks we have been discussing this with
    the university community. We have tried to put this in terms of
    the fact that we are looking at making sure, as we continue
    this discussion with regard to formula funding and competitive
    grants processes, that we balance the portfolio without harming
    that base structure that we established over a long period of
    time--the investment that we made in the university community
    to be able to be competitive.
        I think that is part of this discussion. And I appreciate
    your question, because it is important that we talk about what
    those implications will be and what the impact will be out
    there at the local level, which, getting back to the Senator's
    question a minute ago, is just fundamental to the total
    process.

                              Postaward Management

        Senator Cochran. One thing that disturbs me, for example,
    is I do not think you have any analysis on which to base
    decisions to stop funding special research grants. I do not
    think you conduct, for example, a study, a post-grant study to
    evaluate the results of that research; do you? I do not think
    there is a process in place in CSREES to do that. Is that
    right, Dr. Robinson?
        Dr. Gonzalez. Dr. Robinson.
        Dr. Robinson. Thank you, Mr. Chairman. We do have a
    process, but it is a bit ad hoc and it is not as developed as
    it needs to be. And that is true of special research grants and
    some of the other grants.
        We have spoken within the mission area about the need to
    strengthen what we would call postaward management, the ability
    to evaluate projects once awarded, whether it involves special
    research grants or improving our postaward management process
    with the NRI grants or other activities, to ensure that those
    projects are addressing and, in fact, are producing the results
    that Congress and the administration had in mind.
        Senator Cochran. You know, I would not have any argument if
    there was a proposal in here to set aside some amount of the
    funding in this budget to do just that, because we all know
    there are special grants in here that have been funded year in
    and year out for 20 years--I am just picking out a number--and
    we probably do not know what the practical results have been
    from that research. The grant gets funded every year because it
    is requested by somebody who is vouching for the program.
        But as far as the Department is concerned, they do not
    really have any of the facts. They do not really have any of
    the detailed facts to make a judgment about whether this is
    valuable research, addressing a need and producing results and
    should be continued or not.
        So why do we not try to maybe, in this appropriations bill,
    spell out that this is going to be an initiative that we think
    ought to be undertaken so we can make a determination, but not
    just right now, this year, in this bill, say all of these
    special grants are presumptively ineffective or not producing
    the results for which they were earlier intended or expected
    and should not be funded?
        That to me would be a much more logical and thoughtful way
    to proceed, rather than to take the administration's request
    and just do away with all of these projects. I do not think
    that is wise or thoughtful. I think it is irresponsible to do
    that.
        What is your reaction to that, Dr. Robinson?
        Dr. Robinson. Well, I certainly cannot object to the
    statement you laid on the table. Postaward management is an
    area the agency needs to develop to the same standard as our
    preaward processes.
        My sense is the special research grants that are included
    in the administration's budget versus those that are
    eliminated, are supported because there is fairly firm evidence
    that they are addressing national problems or issues and they
    are doing it in a way that we are seeing progress.
        A few have emerged by virtue of the strength of the
    projects and definitely address either national or broad
    regional issues. Even then, we do not have the kind of
    postaward management assessment that you laid out that would be
    most beneficial as we look, not just to next year, but what is
    happening to this series of projects.

                           Mc Intire-Stennis Program

        Senator Cochran. I appreciate that very much. As we proceed
    to markup after our hearings, I hope that we can establish a
    dialog as to how best we address that in this bill, so that we
    do not make the mistake of eliminating special grants that we
    think are providing real benefits to American agriculture and
    American citizens and are justified.
        Let me ask you this. I do not know who wants to answer it,
    but what specific research is carried out, just for the benefit
    of the record, under the McIntire-Stennis research program?
        Dr. Gonzalez. Dr. Robinson.
        Dr. Robinson. The program carried out under McIntire-
    Stennis is through colleges of forestry or forestry and natural
    resources in each of the States. It is a formula-based fund
    allocation to support in a cooperative way the partnership
    between the State and the Federal Government on forestry
    research at certified State institutions. This research
    complements the research done by the Forest Service through its
    many regional labs.
        It addresses the needs of forestry, be they farm lot
    forestry production or broader scale forestry production,
    within the States or regions of this country.
        Senator Cochran. Let me ask you one other question for the
    record, so we will have this information. I do not suggest that
    you have this right now to submit, but please provide the
    committee a description of each project funded through the
    McIntire-Stennis program, what forestry research is being
    supported by ARS and the CSREES, and the level of funding for
    each project, and who is conducting the research? That would be
    good for us to understand.
        Dr. Robinson. We will get that information to you, sir.
        [The information follows:]

             McIntire-Stennis Cooperative Forestry Research Program

        In fiscal years 1997 and 1998, $27,735,000 was appropriated
    each year to support the McIntire-Stennis Cooperative Forestry
    Program. Funds assist the States in carrying out a program of
    forestry research at State forestry schools, and in developing
    a trained pool of forest scientists capable of conducting
    needed forestry research. Forestry research funded through the
    McIntire-Stennis Program focuses on the following nine
    categories: (1) Reforestation and management of land for the
    production of crops of timer and other related products of the
    forest; (2) management of forest and related watershed lands to
    improve conditions of water flow and to protect resources
    against flood and erosion; (3) management of forest and related
    rangeland for production of forage and domestic livestock and
    game and improvement of food and habitat for wildlife; (4)
    management of forest lands for outdoor recreation; (5)
    protection of forest lands for outdoor recreation; (6)
    protection of forest resources against fire, insects, diseases,
    or other destructive agents; (7) utilization of wood and other
    forest products; (8) development of sound policies for the
    management of forest lands and the harvesting and marketing of
    forest products; and (9) such other studies as may be necessary
    to obtain the fullest and most effective use of forest
    resources.
        A report detailing the projects supported by McIntire-
    Stennis funds has been provided to the Committee.

                               Aquaculture Census

        Senator Cochran. In the National Agricultural Statistics
    Service proposal, there is a request for an increase of
    $500,000 and two staff-years to conduct an aquaculture census
    that would provide for the first time detailed State and
    national data about aquaculture production. It would be helpful
    to us if you could explain--I do not know who is going to
    answer. Mr. Bay?
        Dr. Gonzalez. Mr. Chairman, I will ask Mr. Bay to respond.
        Senator Cochran. Mr. Bay, explain the importance of this
    census and who would use the data? What is this for? Is this a
    one-time cost or is this going to be an annual census of sorts?
        Mr. Bay. Senator, this would be a one-time cost or it would
    be a cost every 5 or 10 years depending on what the industry
    felt like they needed. It would follow the census of
    agriculture, where we pick up very limited information on the
    aquaculture industry, and it would make it possible for us to
    provide a lot more detail and cover a lot more species that are
    not covered by the census of agriculture or the current
    agricultural statistics program that we have for catfish and
    trout.

                             Agricultural Research

        Senator Cochran. The President in his State of the Union
    talked about emphasis on agriculture, making investments in--I
    am talking about research generally--proposing increases in
    National Institutes of Health research, a lot of emphasis on
    that in the speech, talking about the National Science
    Foundation and its programs. We see in the budget request a lot
    of increases for National Science Foundation programs.
        I do not have any objections to any of those. Those are
    very important areas of concern. But there is almost short
    shrift and no emphasis on the importance of agriculture
    research, which is one of our basic needs in our society and
    one of the most important economic activities in our society,
    providing surplus in trade. The record is unquestionably
    impressive in terms of the benefits that flow from agriculture
    research.
        So it is my hope that we will not lose sight of the
    importance of it, that it does not get lost in the shuffle,
    which is what my impression is. Here we see a budget request
    cutting substantially the funding for research programs done by
    the Department of Agriculture, and I do not think this
    committee is going to just sit back and say, OK, if that is the
    way you want it, Mr. President, we will go along with that. I
    think we are going to say: No, not so fast; we need to look at
    this very carefully.
        That is my attitude. I think there are ways that we can
    continue to reap benefits from agriculture research and we
    ought to put the emphasis there and not let it get lost in the
    shuffle.

                              Submitted Questions

        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:]
                       Research, Education, and Economics
                     Questions Submitted by Senator Cochran
                             food safety initiative
        Question. An increase of $26 million is requested for fiscal year
    1999 across ARS, CSREES, and ERS for the Food Safety Initiative. How
    much has each of the research, education, and economics mission
    agencies invested in food safety research and related activities in
    each of fiscal years 1997 and 1998?
        Answer.

                                               REE FOOD SAFETY INITIATIVE
                                                 [Dollars in thousands]
    ----------------------------------------------------------------------------------------------------------------
                                                                              Fiscal year--
                                                                 ---------------------------------------   Increase
                                                                      1997         1998         1999
    ----------------------------------------------------------------------------------------------------------------
    Agricultural Research Service...............................      $49,647      $54,849      $68,819      $13,970
    Economic Research Service...................................          485          485        1,391          906
    Cooperative State Research, Education, and Extension Service        6,234        8,765       19,765       11,000
     \1\........................................................
                                                                 ---------------------------------------------------
          Total REE.............................................       56,366       64,099       89,975       25,876
    ----------------------------------------------------------------------------------------------------------------
    \1\ Funds include the National Research Initiative, the Food Safety Special Research Grant Program, and
      Extension Smith-Lever 3(d) Food Safety. In addition approximately $6 million is provided annually through
      formula programs and other special research grants for related food safety research.

        Question. How is this research being coordinated among the
    agencies?
        Answer. An interagency working group (IWG) under the National
    Science and Technology Council was formed in December 1997 to develop a
    food safety research agenda. The group is co-chaired by the Deputy
    Under Secretary for Research, Education and Economics within USDA and
    the Science Advisor to the Secretary of HHS. Agencies within the
    Federal Government involved with food safety research participate in
    this IWG; this includes, ARS, CSREES, ERS, FSIS, FNS, and Office of the
    Chief Economist in USDA; FDA, CDC, NIH in HHS; and EPA. The IWG has
    developed a framework for assessing food safety research which looks at
    all the links from farm to table. Currently an inventory of food safety
    research across all the agencies is being conducted. This inventory
    will lead to an identification of any gaps in the research agenda and
    will also serve to ensure that there is no duplication of effort in
    research that is currently being conducted on food safety. The IWG
    expects to complete the research agenda this summer.
        Question. How has duplication of effort been avoided?
        Answer. This is the second year of the Food Safety Initiative. The
    REE agencies have worked closely with the other agencies, including
    FSIS, FDA, and CDC, in the development and implementation of the
    initiative. The current activity to develop an integrated food safety
    research agenda is one aspect of this overall effort to coordinate
    agency activities. This coordination effort has led to a government-
    wide program in which the food safety agencies each make distinct and
    complementary contributions to the overall initiative objectives.
        Question. What have been the results of these investments to date?
        Answer. USDA has a long history of serving the research needs of
    FSIS, APHIS, FDA, and other agencies responsible for food safety, as
    well as more broadly producers, food processors and the public. The
    recent release of new techniques that use benign microbes to control or
    eliminate Salmonella in poultry promises to help limit the risk of this
    serious food poisoning in humans, is just one recent example of how
    USDA investment in research is contributing to the safety of the U.S.
    food supply. Some other examples from fiscal year 1996 and 1997
    include:
      --a monoclonal antibody was developed by ARS to identify unacceptably
            high levels of glycoalkaloids in potatoes (and tomatoes and
            eggplants if needed) which can be toxic to humans. This
            technology can and will be commercialize in a test kit form;
      --development by ARS of a specific avian immune cytokines which
            protects chickens against salmonella serotypes;
      --research on E. coli 0157:H7 in production settings has shown that
            incidence of shedding of this organism is lower in feedlot beef
            animals than in adult cattle in cow-calf heads. Sources of
            contamination included often contaminated surface water
            supplies. Providing clean uncontaminated water to the animals
            would reduce the incidence of E. coli shedding. Related
            research on Intimin, an outer membrane protein of E. coli
            0157:H7, demonstrated the important role that membrane plays in
            infecting newborn calves. This knowledge may lead to ways to
            prevent E. coli colonization;
      --a Salmonella Risk Assessment Model for Poultry has been released
            and is currently being evaluated by processors. The software
            program assesses changes in microbiological safety through
            processing, storage, distribution, and final meal preparation;
      --through cooperative HACCP research with FSIS, APHIS, and the
            National Pork Producer's Council, technologies have been
            developed that will allow for the production of pigs that are
            free of Trichinella spiralis. Periodic monitoring with an ARS
            developed blood test will certify that the pigs are Trichinae
            free;
      --ongoing CSREES supported research with steam pasteurization of
            carcasses has proved that this process can consistently meet
            the pathogen reduction requirements for E. coli control, which
            is to be used as an index for process control. Results on
            Salmonella control also demonstrate that steam pasteurization
            can achieve the pathogen control standards required by USDA;
      --several Pathogen Modeling Programs developed by ARS are widely used
            by microbiologists in industry, regulatory agencies, and
            educational institutions to estimate the growth or survival of
            pathogens during specified processes without expensive
            laboratory testing;
      --researchers supported by CSREES found that trisodium phosphate is
            an effective antimicrobial rinse of catfish fillets. They also
            found that atmosphere steam treatment of whole catfish reduced
            surface microbial numbers and resulted in the possibility of
            extending refrigerated shelf life without adversely affecting
            acceptance;
      --discovery that certain strains of Aspergillus flavus (that do not
            produce aflatoxins) out compete aflatoxin producing strains
            thus limiting contamination. Tests using biological control
            techniques reduced aflatoxin levels in corn and peanut products
            by 90 percent; and
      --a number of rapid immunoassay tests have been developed by ARS to
            measure drug and chemical residues in red meat and poultry.
        These examples are just a few of the discoveries resulting from
    USDA's research investments that are contributing directly to making
    U.S. agricultural products safe.
                             food genome initiative
        Question. The fiscal year 1999 budget requests a total of $40
    million in USDA funding for fiscal year 1999 for a food genome research
    initiative. Dr. Gonzalez, you indicated that the President's Food
    Genome Initiative is a collaborative effort involving multiple Federal
    agencies and researchers in the academic and private sector, and that
    you are in the final stage of developing a concept paper on the USDA's
    role in Food Genomics. Which other federal agencies are involved in
    this effort? Can you briefly distinguish the role of USDA and each of
    the other federal agencies involved in this effort? What is the total
    level of fiscal year 1999 funding proposed for this initiative, by
    federal agency?
        Answer. The Interagency Working Group on Plant Genomics (IWG)
    included representatives from USDA, HHS, NSF, Department of Energy,
    OSTP, and OMB. The chair of the IWG was the Chief Scientist, CSREES/
    USDA. The IWG issued its report in January, 1998. A copy of the report
    is provided for the record.
        [Clerk's note.--The IWG report does not appear in the hearing
    record but has been submitted to the committee.]
        REE now has a draft Blueprint for Action for the USDA Food Genome
    Research which lays out the essential core activities for food genome
    research. The USDA Food Genome Initiative will focus on mapping,
    sequencing, identifying, and understanding the function and control of
    genes responsible for economically important traits in agricultural
    plants, animals and associated microbes. In addition to coordinated
    efforts in genomic research within USDA's National Research Initiative
    in the Cooperative State Research, Education, and Extension Service,
    Agricultural Research Service, and the Economic Research Service, the
    Initiative will be coordinated fully with other Federal agencies that
    are pursuing genome activities, principally through the Interagency
    Working Group of the National Science and Technology Council. Thus, the
    Initiative will build upon and be coordinated with ongoing genomic
    research in model organisms such as the Human Genome Program at the
    National Institutes of Health and the Department of Energy (DOE); the
    Arabidopsis Genome Research Program at the USDA, the National Science
    Foundation (NSF) and Department of Energy; the NSF Plant Genome
    Initiative; the DOE Microbial Genome Program; and the Advanced
    Technology Program of the U. S. National Institute of Standards and
    Technology. Coordinated efforts will reduce potential duplication and
    provide for efficiency in moving towards long-term goals.

                         FOOD GENOME INITIATIVE FUNDING
                              [Dollars in millions]
    ------------------------------------------------------------------------
                                                   Fiscal year--
                                      --------------------------------------
                  Agency                                1999         1999
                                           1998     President's    proposed
                                        estimated      budget      increase
    ------------------------------------------------------------------------
    Department of Agriculture........           25           40           15
    Agriculture Research Service.....           11           14            3
    Cooperative State Research,                 14           26           12
     Education, and Extension........
    National Science Foundation......           60           60  ...........
    Department of Energy.............         0.15         0.15  ...........
                                      --------------------------------------
          Total......................           85          100           15
    ------------------------------------------------------------------------

        Question. Would you please describe the importance of the Food
    Genome Initiative, including fiscal year 1999 and future years
    objectives and costs.
        Answer. The foundation of future gains in agricultural research
    will be driven in large part by research conducted under our food
    genome initiative. The knowledge gained from this research in genomics
    will permit the United States to develop new technologies for
    improvements in the yields of major crops, pest and disease resistance,
    enhanced quality of agricultural products, and new agricultural
    products. The overall thrust of the USDA research is better
    understanding of the structure of the entire DNA composition of the
    genome of economically important crops and livestock and identification
    of how this structure relates to functional properties of these animals
    and crops.
        The draft concept paper describes the following objectives under
    the Food Genome Objective:
      --Understand the structural features of the entire DNA make-up of a
            genome;
      --isolate and discover the biological function of expressed genes;
      --identify the role of identified genes in the outward appearance and
            performance of economically important plants and animals;
      --construct bioinformation systems that integrate data across
            species; and
      --create new products important to U.S. agriculture using genome
            technologies.
        The concept paper proposes funding for the Food Genome Program at
    $40 million in fiscal year 1999, increasing to $70 million in fiscal
    year 2000, and $100 million in fiscal year 2001 and subsequent years.
        Question. Is food genome research the initial phase of a longer-
    term federal genome research program? What is the blueprint for future
    research in the area of genomics and what level of federal investment
    will be required?
        Answer. The blueprint for research on food genomics is envisioned
    as a long term effort. The draft concept paper identifies priorities
    and budget requirements for the first three years. The longer term
    strategy will be modified based on accomplishments.
        The draft concept paper, now out for review and comment, provides a
    blueprint for a coordinated REE food genome program involving ARS,
    CSREES, and ERS. Specifically the paper describes the current intra-
    and extramural programs and their achievements, the overall objectives
    of the initiative, and planned activities directed at achieving those
    objectives. The proposed level of federal investment is $40 million in
    fiscal year 1999, $70 million in fiscal year 2000, and $100 million in
    fiscal year 2001 and subsequent years.
        Question. The Department's fiscal year 1999 request includes a $30
    million increase in the discretionary appropriations for this
    initiative and proposes legislation which involves an additional $10
    million. What legislative authority is required?
        Answer. The Administration proposes a new authority for a
    competitive research grants program specifically focused on supporting
    research conducted under the Food Genome Initiative.
        Question. Please describe the genome research program already
    conducted under ARS and CSREES. Please specify the level of funds now
    being committed to this research, where this research is being
    conducted, and what is being accomplished.
        Answer. USDA conducts plant and animal genomics research through
    well-developed intramural and extramural programs. These programs are
    designed to complement each other in partnership with State
    agricultural experiment stations, colleges, universities, other
    research institutions or organizations, Federal agencies and
    laboratories, private organizations, corporations, or individuals.
        The USDA's intramural plant and animal genomic research program has
    been conducted by the Agricultural Research Service (ARS) through their
    network of laboratories and strategic cooperative agreements with
    selected universities and private sector researchers. Substantial
    resources have been devoted to molecular genetic map development.
    Numerous genetic markers on the maps of cattle, swine, sheep, and
    poultry have been developed in ARS laboratories. The same is true for
    the genetic maps of a number of important crop species. The ARS has
    research projects aimed at the use of molecular genetic markers for the
    characterization of germplasm and for the selection of crop varieties
    with enhanced pest resistance and product quality. Other ARS programs
    are aimed at the isolation and manipulation of genes controlling
    disease resistance and stress tolerance in plant and animal species. An
    important result of USDA's genomic funding has been the development of
    extensive crop and animal genome databases now available on the World
    Wide Web hosted by the USDA National Agricultural Library.
        In fiscal year 1998, ARS' food genome research is funded at $11.5
    million as follows:

                              Plant Genome Research

            Location                                                 Funding
    Albany, California............................................  $217,100
    Ames, Iowa....................................................   218,100
    Beltsville, Maryland..........................................   161,800
    Columbia, Missouri............................................  $217,200
    Headquarters.................................................. 2,544,300
    Ithaca, New York..............................................   328,500
                        --------------------------------------------------------------
                        ____________________________________________________

          Total................................................... 3,687,000

                             Animal Genome Research

            Location                                                 Funding
    Athens, Georgia...............................................  $170,800
    Ames, Iowa....................................................   559,000
    Beltsville, Maryland.......................................... 2,777,400
    East Lansing, Michigan........................................   926,100
    Clay Center, Nebraska......................................... 3,377,800
                        --------------------------------------------------------------
                        ____________________________________________________

          Total................................................... 7,811,100

        The USDA's extramural program is managed by the Cooperative State
    Research, Education and Extension Service (CSREES) in partnership with
    the Land Grant university system and other organizations. Whenever
    possible, CSREES provides national leadership by coordinating and
    facilitating genome research activities across federal agencies and
    regional projects. Under the auspices of CSREES National Research
    Initiative (NRI), NRI grants are awarded to genomic projects on
    agriculturally important crops, forest trees, and animals.
        The NRI Plant Genome program places priority emphasis on cloning
    agriculturally important genes; developing new technologies for genome
    mapping, gene manipulation, gene isolation or gene transfer in plants;
    creation of new germplasm lines or varieties to solve problems of U.S.
    agriculture; and software development for databases and bioinformatics.
    CSREES, in a joint effort with NSF and DOE, is engaged in an
    international cooperative effort in mapping and sequencing the genome
    of the model plant, Arabidopsis thaliana. This program, which began in
    1996, was the first effort to provide a complete DNA sequence of a
    plant, similar to the effort being done by NIH to completely sequence
    the human genome and by DOE to sequence microbial genomes. CSREES has
    also taken the lead, along with other Federal Agencies, to begin
    coordinating U.S. activities with the international rice genome
    sequencing programs. Sequencing Arabidopsis and rice as model systems
    in plants provides broad coverage of the plant kingdom. Compared to
    other higher plants, the genome of Arabidopsis and rice are small,
    making whole genome sequencing of these two plants a readily achievable
    goal. Arabidopsis and rice can become reference or model genomes for
    two major classifications of plants, dicots and monocots, respectively.
    It is anticipated that the genomes of Arabidopsis and rice could be
    completed in the years 2000 and 2004, respectively, provided that
    sufficient funding is available through a USDA Food Genome Initiative.
    This research will be vital to facilitate international collaboration
    to ensure that data, materials, and technologies are readily available
    to U.S. scientists and the larger agricultural community including
    growers and producers.
        Priority emphasis of the NRI Animal Genetics and Genome Mapping has
    been placed upon genomic mapping and organization; gene identification
    and interactions; technology development, and economic or quantitative
    trait loci and marker assisted selection. CSREES provides leadership
    and coordination for a national, coordinated research program to map
    the genome of agriculturally important animal species through Regional
    Projects of the National Animal Genome Research Program. The program
    involves CSREES, ARS, State Agricultural Experiment Stations, and other
    universities. CSREES also provides leadership for several other
    Regional Projects, all with a national focus, that make major
    contributions to animal genomic research such as, Advanced Technologies
    for the Genetic Improvement of Poultry; Genetic Improvement of Cattle
    Using Molecular Markers; Positional and Functional Identification
    Economically Important Genes in the Pig; Integration of Quantitative
    Molecular Technologies for Genetic Improvement of Pigs; Genetic Basis
    for Resistance to Avian Disease; and Genetic Maps of Aquaculture
    Species.
        In fiscal year 1998, CSREES funding devoted to food genome research
    under the NRI is estimated to be $11.5 million for plant genome
    research and $2.9 million for animal genome research for a total of
    $14.4 million.
        There are many accomplishments in plant and animal genomics to
    date. They include: development of genomic maps in corn, soybean,
    cotton, wheat, barley, rice, sorghum, loblolly pine, conifers, poplar,
    cattle, swine, wheat, poultry, horses, catfish and many other plant and
    animal organisms for genetic improvement; Quantitative Trait Loci have
    been mapped that target genes of paramount importance to producers and
    growers to include tolerance to environmental stress, pest and disease
    resistance, milk production and fat deposition, and quality. The USDA
    is the world leader in developing technologies used in gene
    transformation systems, agricultural bioinformatics, and germplasm
    resources for improved genetic enhancement of both plants and animals.
                        office of pest management policy
        Question. How is this Office being funded for fiscal year 1998?
    What are the current funding and staffing levels for this Office?
        Answer. Funding for the Office of Pest Management Policy (OPMP) for
    fiscal year 1998 will come primarily from existing National Agriculture
    Pesticide Impact Assessment Program (NAPIAP) funding, including
    transfers of existing positions and staff. The funding level for NAPIAP
    in fiscal year 1998 is about $1 million. Of the $1 million, about
    $400,000 in NAPIAP funds will be used for salaries and other expenses
    of the OPMP for the five remaining months of the fiscal year. The staff
    of the office currently includes a director, a staff entomologist
    transferred from Environmental Protection Agency (EPA), and a staff
    plant pathologist transferred from Beltsville NAPIAP. Current plans
    call for a total of 10 staff positions, representing all agricultural
    sciences. The positions will be filled through recruiting and
    transfers.
        Question. Why did you determine there was need for a separate
    office to focus principally on Food Quality Protection Act-related
    issues? Please describe the role of this new office and list individual
    programs, by agency, that will be coordinated by this office.
        Answer. Although the Food Quality Protection Act of 1996 (FQPA)
    requires that the Department establish a ``minor use'' program, the
    role of the new office extends beyond minor use issues and is charged
    with integrating and coordinating existing USDA pesticide and pest
    management programs. The office is also responsible for improving
    communications with and strengthening the existing network of grower
    organizations and crop specialists at land grant institutions. FQPA has
    the potential to dramatically alter pest management systems for many
    crops. It is important that the Department provide EPA with high
    quality data on current pest management tools and practices to make
    better informed regulatory decisions. Furthermore, the Department must
    be responsive to the needs of the agricultural community in developing
    alternative pest management practices to meet critical needs that may
    develop as a result of EPA's regulatory process. In addition to its new
    responsibilities, OPMP will assume the headquarters functions of the
    NAPIAP program. The state Land Grant component of NAPIAP will remain in
    place and continue to serve as the primary pest management data
    gathering and analyses arm of the office.

    Existing programs include:
            Food Consumption Surveys--ARS
            NAPIAP--ARS; CSREES; ERS; and Forest Service
            Pest Management Alternatives Program (PMAP)--CSREES
            Areawide Integrated Pest Management--ARS
            Biological Control--ARS; CSREES; APHIS
            Pesticide Use Surveys and Analysis--NASS and ERS
            Pesticide Data Program--AMS
            Integrated Pest Management Research--ARS, ERS, and CSREES
            IR-4 Minor Crop Pest Management Program--CSREES and ARS
            Pesticide Applicator Training--CSREES
       usda responsibilities under the food quality protection act (fqpa)
        Question. You indicate that the Food Quality Protection Act of 1996
    adds to the need for effective pest management research. Please cite
    for the record the requirements of this Act which will require
    additional investments by the USDA research, education, and economics
    mission agencies and the additional funds proposed for fiscal year 1999
    and each future fiscal year to fulfill these requirements.
        Answer. The Secretary of Agriculture has been given many new and
    enhanced responsibilities as a result of the passage of the Food
    Quality Protection Act (FQPA). The Secretary's FQPA-related functions
    can be grouped into the following categories:
        (1) Explicit USDA functions under the provisions of FQPA.
        (2) Explicit USDA functions provided for in FQPA amendments to
    FIFRA.
        (3) Explicit USDA functions provided for in FQPA amendments to
    FFDCA.
        (4) Other current law USDA responsibilities that will be enhanced
    by FQPA.
                       explicit usda functions under fqpa
    Data Collection--Infants and Children
        (1) Consumption Patterns--The Secretary is directed to coordinate
    the development and implementation of survey procedures with respect to
    food consumption patterns of infants and children. Secretary must
    consult with EPA and HHS. (Section 301 (a) of FQPA)
        (2) Residue Data--The Secretary is directed to improve data
    collection of pesticide residues, to provide guidelines for the use of
    comparable analytical and standardized reporting methods, and to
    increase the sampling of foods most likely consumed by infants and
    children. (Section 301(c) of FQPA)
    Data Collection--Pesticide Use
        (1) Collection--The Secretary is directed to collect data on the
    use of pesticides on major crops and other dietarily significant crops
    through surveys of farmers or other sources. The Secretary must make
    the data available to EPA. (Section 302 of FQPA)
        (2) Coordination--The Secretary is directed to coordinate with EPA
    in the design of the surveys. (Section 302(c) of FQPA)
        (3) Study & Report--Within 1 year of enactment, the Secretary must
    carry out a study, in consultation with EPA, and report to Congress on
    the current status and potential for improvement of Federal agency
    collection of pesticide use information. The study must include an
    analysis of options available to increase the effectiveness of the
    collection, the costs and burdens placed on agricultural producers and
    other pesticide users, and the effectiveness in tracking risk reduction
    by those options. (Section 305 of FQPA)
    Integrated Pest Management
        The Secretary is directed to implement research, demonstration, and
    education programs to support adoption of IPM and to make information
    on IPM widely available to pesticide users. Federal agencies must use
    IPM techniques and promote IPM through procurement and regulatory
    policies, and other activities. (Section 303 of FQPA)
             ii. explicit functions under fqpa amendments to fifra
    Minor Use Crop Protection Incentives
        (1) Definition--FQPA creates several incentives for the
    registration of minor pesticide uses. The Secretary is responsible for
    determining whether a pesticide use will qualify as a minor use based
    upon the total acreage on which the pesticide is used. Alternatively,
    the Secretary will consult with EPA in determining whether a pesticide
    use will qualify as a minor use due to the lack of sufficient economic
    incentive to support its registration. (Section 2(ll)(1) & (2) of FIFRA
    as added by section 210(a) of FQPA)
        (2) Exclusive Use Period--The Secretary is required to consult with
    EPA in determining whether particular minor uses will qualify a
    pesticide for extension of the registration data exclusive use period.
    (Section 3(C)(1)(F)(ii) of FIFRA as amended by section 210(b) of FQPA)
    USDA Minor Use Program
        (1) USDA responsibilities related to minor uses:
        The Secretary is directed to assure the coordination of the
    responsibilities of USDA related to minor uses of pesticides including:
        (a) IR-4 Project (established to develop registration data for
    minor uses).
        (b) National Pesticide Resistance Monitoring Program (Established
    by section 1651 of the FACT Act.)
        (c) Support for IPM research.
        (d) Consultation with growers to develop minor use data.
        (e) Assistance for minor use registrations, tolerances, and
    reregistrations with EPA. (Section 32(a) of FIFRA as added by section
    210(i) of FQPA)
        (2) Minor Use Data Grants and Revolving Fund--The Secretary is
    directed to establish and operate a grant program to provide matching
    funds for the development of data to support minor use pesticides. Any
    data that is developed as a result will be jointly owned by USDA.
    (Section 32(b) of FIFRA as added by section 210(i) of FQPA)
    Identification of Public Health Pests
        The Secretary is directed to coordinate with the Administrator of
    EPA to identify pests of significant public health importance. (Section
    28(d) of FIFRA as added by section 236 of FQPA)
             iii. explicit functions under fqpa amendments to ffdca
    Dietary Surveys
        The Secretary is directed to conduct surveys to document dietary
    exposure to pesticides among infants and children in order to provide
    information for use by the Administrator in the establishment of
    pesticide residue tolerances. (Section 408(b)(2)(C) of FFDCA as amended
    by section 405 of FQPA)
    Actual Use Data
        The Secretary may collect and provide aggregate pesticide use data
    for consideration by the Administrator when assessing chronic dietary
    risk in establishing a pesticide residue tolerances. (Section
    408(b)(2)(F) of FFDCA as amended by section 405 of FQPA)
    Consumer Right to Know
        The Secretary is required to consult with EPA and HHS in the annual
    publication of information for public display by retail grocers
    relating to the risks and benefits of pesticide residues and
    recommendations to consumers for reducing dietary exposure. (Section
    408(o) of FFDCA as amended by section 405 of FQPA)
      iv. current law usda responsibilities that will be enhanced by fqpa
        Various provisions of current law, although not directly amended by
    FQPA, will continue to require the involvement of the Secretary of
    Agriculture. In several cases, the role of the Secretary may even be
    enhanced as a result:
    Establishment of Tolerances (Maximum Residue Levels)
        FQPA requires the consideration of various risk factors and data as
    part of the decision making process involved in issuing a tolerance
    under the new law. Much of the information and data on which these
    decisions will be based is to be collected by the Secretary. The data
    collected and provided by the Secretary will be extremely important to
    registrants and pesticide users seeking the establishment of tolerances
    for various pesticides. (Section 408 of FFDCA as amended by section 405
    of FQPA)
    Emergency Exemptions
        Section 18 of FIFRA authorizes EPA to exempt the use of certain
    pesticides from registration requirements in order to handle local
    emergency situations. The FQPA adds a new requirement that each such
    exempt pesticide use must have a tolerance in place under the FFDCA
    when the exemption is granted. As stated, the Secretary will provide an
    increasingly important function with respect to the approval of all
    tolerances, which will be most critical in the case of tolerances
    associated with Section 18 emergency exemptions to meet local needs
    that must be issued within a short period of time in order to be
    useful. (Section 18 of FIFRA; Section 408 of FFDCA as amended by
    section 405 of FQPA)
    Research Coordination
        Section 20 of FIFRA requires EPA to coordinate with the Secretary
    in conducting IPM research, which is to receive increased emphasis
    under FQPA.
        Regulations--Comments by USDA Sections 21 and 25 of FIFRA require
    EPA:
        (1) to notify and seek comments from the Secretary in advance of
    any rulemaking under FIFRA,
        (2) to share with the Secretary any proposed or final regulations
    in advance of their publication, and
        (3) to take into consideration and respond to any comments made by
    Secretary with respect to the regulations.
        These current requirements will apply to any regulations issued by
    EPA to implement the amendments made by FQPA to FIFRA.
    Identification of Pests
        Section 28 of FIFRA directs the Secretary to cooperate and
    coordinate with EPA in the identification of:
        (1) Pests that must be brought under control.
        (2) Available methods of pest control.
        (3) Minor pest control problems, including minor or localized
    problems in major crops.
        (4) Factors limiting the availability of specific pest control
    methods.
        The Secretary is also required to prepare an annual report to EPA
    containing the above information, indicating crucial pest control needs
    based on any shortage of control methods identified above, and
    describing research and extension efforts designed to address those
    needs. This function will be increasingly important as pest control
    products are lost due to the tougher standards established under FQPA.
    Conditional Amendments
        Section 3(c)(7) of FIFRA requires concurrence by the Secretary with
    any determination by EPA of the availability of effective alternative
    pesticides for the purposes of making a risk-benefit determination for
    a conditional registration of a pesticide use on a minor food or feed
    crop.
    Recordkeeping
        Section 1491 of the 1990 Farm Bill directed the Secretary to
    require certified applicators of restricted use pesticides to keep
    records of pesticide use, make the information available when
    necessary, compile a data base, and publish annual comprehensive
    reports in conjunction with EPA. The new data collection requirements
    in FQPA (see above) seem to build on this current law requirement by
    requiring the Secretary to collect data from farmers and other sources
    on the use of all pesticides. One difference, however, is that the new
    requirements do not contain the same safeguards and penalties to avoid
    misuse of the data collected.
        The fiscal year 1999 budget includes the following increases
    related to FQPA needs:

            Program                                                 Increase
    IPM Research Grant Program....................................$5,300,000
    Pest Management Alternatives.................................. 2,600,000
    Extension IPM Application..................................... 4,200,000
    Food Consumption Surveys...................................... 1,500,000
    Pesticide Use Surveys......................................... 1,400,000
    Pesticide Residue Data........................................ 4,200,000
    IR-4 Minor Use Program........................................ 1,700,000
    NAPIAP Programs............................................... 1,600,000
    Applicator Training Programs.................................. 1,500,000

        Budget needs beyond fiscal year 1999 will depend on EPA's schedule
    and regulatory policy decisions and will be addressed in future budget
    requests.
                        integrated pest management (ipm)
        Question. The fiscal year 1999 budget again requests increased
    funding for the Integrated Pest Management (IPM), which is the
    Administration's initiative to bring 75 percent of the nation's
    farmland under IPM practices by the year 2000. Can you give us a status
    report on what has been accomplished in that regard to date, what
    percent of the nation's crop acreage was under IPM practices when this
    initiative began and where we are now, and what the additional funds
    you are requesting for 1999 for this project will achieve?
        Answer. A consensus has emerged that IPM systems should be measured
    along a continuum, ranging from none to high levels of IPM adoption.
    The Department's 1994 report, Adoption of Integrated Pest Management in
    the United States, measured adoption along a continuum, and this
    approach was refined by Consumers Union in its 1996 report, Pest
    Management at the Crossroads. These analyses estimated that 70 percent
    of crop acreage is managed using IPM systems, however, 38 percent of
    these systems are at the low end of the IPM continuum. Our goal is to
    develop and help growers implement IPM strategies that permit them to
    move from the low end of the continuum to the high end of the
    continuum, moving incrementally toward biologically based IPM systems.
        The overall percentage of U.S. crop acres under IPM in 1997
    remained at the 70 percent level, and will likely remain constant in
    1998. However, we remain convinced that the increased investments
    proposed in the President's budget request for fiscal year 1998, and
    again proposed in fiscal year 1999, will permit us to reach the 75
    percent adoption goal by 1999 or 2000. More importantly, we believe
    that these investments will accelerate the adoption of IPM systems at
    the medium and high end of the continuum. We believe that increasing
    adoption of pest management systems at the high end of the IPM
    continuum will benefit all Americans by increasing profitability,
    protecting water quality and farm worker safety, and enhancing the
    wholesome quality of our Nation's food supply. We believe that an
    accelerated effort is warranted to develop and help growers implement
    pest management strategies that will help them reduce reliance on high
    risk pesticides and enhance the sustainability of their operations.
        Question. Please provide a list of the fiscal year 1999 IPM funding
    increases for the research, education, extension and economics agencies
    in order of priority.
        Answer. The increases proposed for IPM and related activities
    reflect USDA's goal of helping U.S. agriculture implement IPM practices
    on 75 percent of the nation's crop acreage by the year 2000, and to
    help producers respond to the challenges they will face as the result
    of Food Quality Protection Act (FQPA) implementation. Each research and
    extension program that supports IPM activities is coordinated to
    support major IPM goals. To further the development of a coordinated
    and integrated effort, USDA has created a new Office of Pest Management
    and Policy (OPMP) to serve as the focal point within the Department for
    pest management and pesticide regulatory issues.
        Proposed IPM and IPM-related activities in the fiscal year 1999
    budget focusing on this integrated and coordinated approach are
    summarized below. All of these would be considered high priority within
    the Department's 1999 budget.
        IPM Initiative.--Activities proposed under this multi-faceted
    initiative are built around producer-identified needs for applied
    research and education projects using pest control technologies that
    are ready for large area trials and adoption. These regional or area-
    wide projects will be supported by proposed increases of approximately
    $10 million for CSREES and ARS.
        The initiative also includes a proposed increase of $2.7 million
    for research on alternatives to pesticides that may be lost to
    producers as EPA proceeds to implement FQPA and on a decision support
    system that will help identify crop-pest combinations where alternative
    controls are most critical.
        Pesticide Use Data Collection and Analysis.--Net increases of $2.1
    million are proposed for pesticide use and food consumption data. USDA
    is the sole or primary source for this data. Information on actual use
    and consumption patterns is needed to conduct more accurate risk
    assessments. These programs include the Continuing Survey of Food
    Intake by Individuals (CSFII) carried out by ARS, the Pesticide Data
    Program under AMS, and pesticide use survey and analysis conducted by
    NASS and ERS, respectively.
        Pesticide Registration, Clearance, Assessment and Training.--Net
    increases of $4.8 million are proposed for programs to support the
    registration process with information and analyses on the costs and
    benefits of current and alternative pest management strategies at the
    local, regional, and national scales; programs to gather data on
    pesticide residues for new and safer minor-use products; to fund the
    new Office of Pest Management Policy; and for applicator training to
    build confidence in the system that relies on well informed pesticide
    applicators. Accurate data and analysis are essential to help policy-
    makers understand the implications of pest-control decisions.
                                     ______

                         Agricultural Research Service
                     Questions Submitted by Senator Cochran
                            buildings and facilities
        The President's fiscal year 1999 budget again proposes to close
    down the ARS Prosser, WA; Mandan, ND; Orono, ME; and Brawley, CA
    facilities. These are the same facilities proposed to be closed in the
    President's fiscal year 1998 budget and the Congress continued to fund.
        The Administration has indicated that research facilities are under
    review by the Strategic Planning Task Force on Research Facilities
    mandated by the 1996 farm bill and that the Task Force is scheduled to
    report in April of 1999.
        Question. Why prejudge the recommendations of that Task Force by
    proposing to close four ARS facilities in fiscal year 1999?
        Answer. The fiscal year 1999 Federal budget submitted by the
    President recommends a number of new initiatives to address changing
    priorities facing agriculture and the American consumer. The research
    budget proposed for ARS reflects an increase of $32 million over the
    current year. However, the Department is focusing on many priority
    agricultural issues that must be addressed now by our research
    scientists. This requires that ARS terminate ongoing projects and
    reallocate these resources to the new or expanded initiatives as
    recommended by the President. As a result, a cost-effective decision
    was made to terminate and redirect resources to new research
    initiatives and recommend closure of these research stations. These
    actions are essential to the President's recommendations and cannot be
    delayed for future decisions to be made by the Task Force.
        Question. How many people and scientists would be impacted by the
    closure of Prosser, WA; Mandan, ND; Orono, ME; and Brawley, CA
    facilities? What is the annual operating cost of each of these
    facilities?
        Answer. All permanent employees impacted by the proposed closures
    will be offered a position within the Agency. The number of impacted
    employees and the annual operating costs for these facilities will be
    provided for the record.
        [The information follows:]

    ------------------------------------------------------------------------
                                                    Other
               Facility              Scientists   employees   Operating cost
    ------------------------------------------------------------------------
    Prosser, WA...................            9           24      $2,435,000
    Mandan, ND....................            9           25       2,582,600
    Orono, ME.....................            3            7         808,500
    Brawley, CA...................  ...........            4         287,200
    ------------------------------------------------------------------------

        The fiscal year 1999 budget again requests $4 million in initial
    construction funding through ARS for a new Melaleuca Research and
    Quarantine Facility in Florida. Design and engineering work on this
    facility was funded and completed by the Corps of Engineers.
        Question. Why request funds for a new facility when the Strategic
    Planning Task Force is now reviewing the need for additional
    facilities?
        Answer. This facility is being built in support of biological
    control of the harmful introduced pest weeds, especially the Australian
    paperbark tree Melaleuca, which is devastating the Florida Everglades
    and causing major economic and environmental damage.
        The need for the facility is immediate, based on the large number
    of biological control agents for Melaleuca and other high-priority
    introduced weeds that ARS and our State cooperators are now processing
    through an old, small and technologically inadequate quarantine
    facility in North Florida. Should the construction of this facility be
    delayed, the goal of safely managing introduced weeds would be set
    back, and Melaleuca and the other introduced pests would continue to
    spread unchecked, resulting in increased economic and environmental
    damage to Florida.
        The new quarantine facility that ARS has proposed in south Florida
    is to be built in cooperation with the U.S. Army Corps of Engineers and
    the state of Florida. Although the primary and immediate use of the
    facility is to safety test and process exotic natural enemies of the
    paperbark tree Melaleuca, it will also be used for a number of other
    purposes. In fact, the portion of the facility that the Army Corps is
    interested in will address a number of aquatic and semi-aquatic weed
    issues that are important for several of the states in the southeastern
    U.S. (Alabama, Mississippi, Louisiana and Texas) and also the western
    states of California and Oregon. In addition, the state of Florida
    (specifically, the University of Florida Experiment Station at Ft.
    Pierce) is interested in the use of this facility to evaluate and
    process exotic beneficial agents and to study some pests under highly
    contained laboratory conditions. Thus, this facility is expected not
    only to help solve critical pest problems associated with Florida
    wetlands, but it is also expected to serve agricultural needs
    throughout the southeastern U.S. Examples of pest species that may be
    the focus of control studies at the new facility would include the
    brown citrus aphid, the silverleaf whitefly, thrips palmi, and the pink
    hibiscus mealybug. More specifically, the facility is expected to test
    and clear beneficial natural enemies of these pests for release into
    field sites throughout the U.S. Since many of these pests affect both
    field and greenhouse crops, the new technology developed at this new
    facility could be utilized in almost every state in the country.
        The ARS biological control of weeds program is a partner in the
    Everglades Initiative, the National Strategy for Invasive Plant
    Management, and the White House initiative on management of Non-native
    Invasive Species. The facility is a key part of the nation's long-term
    biological control program for introduced pests.
        Question. Why does the Administration propose that this project be
    transferred from the Corps of Engineers to the Agricultural Research
    Service?
        Answer. Although the original design funds were appropriated
    through the Corps of Engineers, it had always been the intent that ARS
    would staff and operate the facility.
        Question. Would ARS face any problems or difficulties constructing
    a facility based on the design and engineering work of the Corps of
    Engineers?
        Answer. For project continuity purposes, ARS would likely pursue an
    arrangement with the Corps of Engineers for assistance during the
    construction phase to facilitate the completion of the project. Since
    ARS would be responsible for operating the facility, it is important
    that ARS be involved in management and oversight of construction so
    that the lab will meet the agency's research needs.
        Question. What is the total cost of the project?
        Answer. The latest cost estimate from the Corps of Engineers was
    $3,143,000 in 1996 dollars. Applying escalation, construction
    contingency, and administration costs, the total cost for construction
    is estimated at $4 million.
        Question. Funding of $2.5 million is requested for fiscal year 1999
    to continue the modernization of the Beltsville Agricultural Research
    Center. These funds are to be used for the design and construction of a
    new poultry production facility as well as a number of other
    miscellaneous projects. Please provide a list of each project for which
    funds are requested.
        Answer. In fiscal year 1999, BARC will use $2.5 million to design
    and construct a replacement Poultry Facility for $2.2 million, demolish
    facilities for $100,000, and utilize $200,000 for unplanned small
    projects and unforeseen cost increases on other modernization projects.
        Question. With respect to modernization of the Beltsville
    Agricultural Research Center, please provide the Committee with an
    update of the costs and projects completed and planned for the
    modernization of the Beltsville Agricultural Research Center. Please
    give projects and funding required by fiscal year.
        Answer. Through fiscal year 1998, a total of $106,616,792 has been
    expended on the modernization of BARC. The attached is a listing of
    projects that have been completed, initiated, or are proposed through
    fiscal year 1999. The funding source for these projects is the Building
    and Facility Modernization funding.

          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 (USNA) 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 Marshaling 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 Restoration..........................       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 Maintenance..............................         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 Obsolete 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.........................................         424,488
                        --------------------------------------------------------
                        ____________________________________________________
          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....................       3,960,000
                        ========================================================
                        ____________________________________________________
    Fiscal year 1996:
        Construct Controlled Environment Facility...........       4,700,000
        Design/Construct Infrastructure in 300 Area.........       2,000,000
        Contingencies.......................................          60,000
        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 BARC--East...........................       1,400,000
        Fiber Optic Backbone Cabling........................         700,000
        Contingencies.......................................         700,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................       4,500,000
                        ========================================================
                        ____________________________________________________
    Fiscal year 1998:
        Construct New Feed Center...........................       1,970,000
        Fiber Optic Backbone Cable..........................         850,000
        Contingencies.......................................         380,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................       3,200,000
                        ========================================================
                        ____________________________________________________
    Proposed fiscal year 1999:
        Design/Construct New Poultry Barn...................       2,200,000
        Demolish Facilities.................................         100,000
        Contingencies/Miscellaneous Small Projects..........         200,000
                        --------------------------------------------------------
                        ____________________________________________________
        Total...............................................       2,500,000

        The balance of funds needed beyond fiscal year 1999 is in excess of
    $96 million. Due to the uncertainty regarding funding levels in 1999
    and beyond, and potential changes to priority projects, the Agency has
    not developed a firm phasing plan beyond fiscal year 1999.
        Question. The budget requests $1.2 million to begin the first phase
    of the air handling unit replacement at the National Agricultural
    Library. What additional funding will be required in each future fiscal
    year to complete this replacement project?
        Answer. Replacement of the air handling units is planned in two
    phases. The second phase is planned for fiscal year 2000 and is
    estimated at $1.2 million as well.
        Question. What additional buildings and facilities work is required
    at the National Agricultural Library? Please give projects and funding
    required for each, by fiscal year.
        Answer. NAL completed a facility study in 1991 that identified
    numerous code, mechanical, electrical, and architectural deficiencies
    estimated at $18 million in 1998 dollars. In addition, NAL also
    commissioned a space utilization study in 1990 and 1991 to investigate
    how best to meet competing space needs. As a result of this study, it
    became clear that NAL needed more space for collections. The Total cost
    for the facilities work will increase based on how much is appropriated
    each year and the corresponding rate of inflation.
        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 a
    sprinkler system; insufficient cooling capacity; lack of temperature
    and humidity control; poor air circulation; lack of vacuum breakers;
    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.
        Due to uncertainty regarding future funding levels, the Agency has
    not developed a firm phasing plan beyond Phase 1. Phase 1 was to
    address the replacement of boilers, renovations to the first, third,
    fourth, and fifth floors, and installation of sprinklers. Of the $6
    million requested in fiscal year 1998 only $2.5 million was
    appropriated. These funds will be used to renovate the first floor
    which will include correcting a variety of architectural, mechanical/
    plumbing, and electrical deficiencies. The renovation will also include
    a variety of improvements for library users. In fiscal year 2000, the
    Agency will request the balance of funds to complete Phase 1. This cost
    is estimated at $3.7 million.
        Question. The budget requests $5.6 million to initiate
    rehabilitation of the 80 buildings and supporting infrastructure of the
    National Animal Disease Center. What additional funding will be
    required in each future fiscal year to rehabilitate the Center?
        Answer. In fiscal year 1992, a Facility Condition Study indicated
    that an estimated $140 million (escalated based on fiscal year 1998
    implementation) would be required to upgrade the NADC facilities. In
    fiscal year 1998, the Agency will take action to update the existing
    Facility Condition Study to prioritize remaining needs at NADC. In
    fiscal year 1999, ARS will use $5.6 million for the following
    modernization projects.
      --$1.7 million for design and construction plans for maintenance and
            repair projects common to all research activities (electrical,
            water and sanitary systems, central heating and cooling plants
            and distribution systems, and waste treatment facilities).
      --$3.9 million will be for design and construction costs associated
            with maintenance and repair of the contaminated waste
            collection piping system and treatment plant for infectious
            agents.
        Because of the different types of diseases today, research at NADC
    has changed from Biosafety Level (BSL) 2 to BSL 3. Therefore, it is
    necessary to provide adequate BSL-3 facilities at NADC. ISU has
    received $3.0 million for the initial phase of the new BSL-3 AG Large
    Animal Isolation Facility to complement the Necropsy/Incinerator
    Facility. ISU has started preliminary planning for this new facility.
    ARS will have to provide ISU with an easement authorizing ISU to have
    access to NADC for various tasks related to the design and construction
    of this project. This initial phase (approximately 5,000 gsf) will not
    satisfy ARS needs, however, it will address APHIS immediate needs.
    Ultimately, an additional 15,000 gsf will be necessary to satisfy ARS
    needs beginning with, $2 million for planning and design of an addition
    to the BSL 3 Large Animal Isolation Facility. Also, $3 million will be
    needed for planning, design and construction to perform minimum safety
    upgrades to plumbing and mechanical systems to an existing BSL-3 wing
    of an Animal Isolation Facility.
        Due to uncertainty regarding future funding levels and the update
    to the Facility Condition Study currently underway, the Agency has not
    developed a firm phasing plan beyond the above. In fiscal year 1998,
    the Agency will develop a Master Plan for NADC that will provide the
    Agency with a phasing plan and better cost information.
        Question. The fiscal year 1999 budget requests $8.4 million to
    continue its modernization project at its Center in Peoria, Illinois.
    Which projects will be funded with the $8.4 million requested and what
    additional funds will be required in each future fiscal year to
    complete this modernization effort?
        Answer. The $8.4 million in fiscal year 1999, will be used to fund
    Phase 3 of the North Wing Renovation project. This includes design and
    construction. This will complete the modernization effort of the North
    Wing. Additional funds will be needed in future fiscal years to cover
    planning, design, construction, and construction management of the
    Chemical, Biological, and Administrative Wings as follows:

            Fiscal year
    2000: Chemical Wing Design..............................      $2,500,000
    2001:
        Chemical Wing Construction..........................      20,400,000
        Biological Wing Design..............................       2,000,000
    2002:
        Biological Wing Construction........................      16,400,000
        Administrative Wing Design..........................       2,000,000
    2003: Administrative Wing Construction..................      18,900,000

        Question. Funding of $1.4 million is requested to continue the
    renovation program at the Grain Marketing and Production Research
    Center, Manhattan, Kansas. What work will be funded with the $1.4
    million requested and what funds will be required in each future fiscal
    year to complete this renovation program?
        Answer. The $1.4 million requested will complete the funding
    necessary for:
        1. The estimated construction cost of the Phase 1 and 2
    combination--Phase 1 (Mechanical Room, Cooling Tower, Penthouse
    additions); Phase 2 (renovate the Central Systems and Equipment), and
        2. The construction phase services/construction contingency for
    this construction phase.
        The funds required in each future fiscal year to complete this
    renovation program are:
        Fiscal year 2000--$6.4 million for construction, construction
    management services and contingency for Phase 3. The scope of work for
    Phase 3 consists of: Renovate the laboratory (Sections C, D, B, A, E,
    F); Center Core (Sections C and D); North Wing (Sections A and B); and
    West Wing (Sections E and F).
        Fiscal year 2001--$1.25 million for construction, construction
    management services and contingency of Phase 4. The scope of work for
    Phase 4 consists of a new roof and lighting protection systems.
        Question. Funding of $3.5 million is requested for fiscal year 1999
    to continue the phased plan to renovate and modernize the Plum Island
    Animal Disease Center, Greenport, New York. Will this complete a phase
    of this plan? Please provide the costs and projects completed and
    planned, by fiscal year, for the modernization of the Plum Island
    Animal Disease Center.
        Answer. The $3.5 million in fiscal year 1999 will be used to
    construct Phase 1 of the Power Plant; design renovations to laboratory
    space and animal rooms; and provide location and Architect-Engineer
    support services for modernization projects and other small
    miscellaneous projects. Modernization projects completed, or in design
    and construction at PIADC are as follows:

                                Fiscal year 1993

    Consolidation (c).......................................     $18,400,000

                                Fiscal year 1993

    Underground Storage Tank Removal/Replacement (c)........         443,000
    Old Wastewater Treatment Plant Repairs (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.............................................   \1\ 3,723,000

    \1\ Includes APHIS contribution of $1,183,000.
    ---------------------------------------------------------------------------

                                Fiscal year 1994

    New Wastewater Treatment Plant (c)......................       1,250,000
    Miscellaneous Projects..................................         741,250
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................   \1\ 1,991,250

    \1\ Includes APHIS contribution of $516,250.
    ---------------------------------------------------------------------------

                                Fiscal year 1995

    Above-Ground Fuel Tanks (Phase I)(C)....................       1,168,000
    Miscellaneous Projects..................................         747,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................   \1\ 1,915,000

    \1\ Includes APHIS contribution of $747,000.
    ---------------------------------------------------------------------------

                                Fiscal year 1996

    Upgrade Fire Alarm System B-101 (D/C)...................       1,150,000
    Above-Ground Fuel Tanks (Phase 2) (c)...................         730,000
    Wastewater Treatment Plant Closure/Wetlands Creation (c)       1,200,000
    Boiler Plant Design.....................................         500,000
    PCB Transformer Replacement (D/C).......................          51,000
    Miscellaneous Projects..................................         933,000
    Emergency Repairs Building 102 (c)......................         250,000
    DOE--Energy Savings Technical Support...................         273,000
    Plum Island Harbor Repairs (D/C)........................       1,647,000
    Install Chiller (D/C)...................................       1,267,000
    Electric/Telephone Distribution System (D)..............         199,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................   \1\ 8,200,000

    \1\ Includes APHIS contribution of $3.2 million.
    ---------------------------------------------------------------------------

                                Fiscal year 1997

    Above-Ground Fuel Tanks (Phase 3) (c)...................       1,228,000
    Underwater Electric Telecommunications Cable (c)........       2,754,000
    Sewage Decontamination Plant (D)........................         500,000
    Miscellaneous Projects..................................         668,000
    Upgrade Pathological Incinerators (D)...................         450,000
    Underwater Electric/Telecommunication Cable (c).........       2,370,000
    Wastewater Treatment Plant Improvements (D).............         230,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................   \1\ 8,200,000

    \1\ Includes APHIS contribution of $3.2 million.
    ---------------------------------------------------------------------------

                                Fiscal year 1998

    Renovate East Service Wing (D)..........................         350,000
    Wastewater Treatment Plant Improvements (c).............       1,000,000
    Upgrade Pathological Incinerators Phase 1 (c)...........       3,200,000
    Animal Room Utilization Study (S).......................         150,000
    Miscellaneous Projects..................................         500,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................   \1\ 5,200,000

    \1\ Includes APHIS contribution of $3.2 million.
    ---------------------------------------------------------------------------

                            Proposed fiscal year 1999

    Power Plant Phase 19c...................................       2,700,000
    Renovate Animal Wing (D)................................         300,000
    Miscellaneous Projects..................................         500,000
    Sewage Decontamination Plant Phase 1 (c)................       3,200,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................   \1\ 6,700,000

    \1\ Assumes APHIS Contribution of $3.2 million.
    ---------------------------------------------------------------------------

                      Proposed fiscal year 2000 and beyond

    Sewage Decontamination Plant Phase 2 (c)................       3,000,000
    Power Plant Phase (c)...................................      23,200,000
    Miscellaneous Projects..................................         500,000
    Environmental Remediation...............................       1,500,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................       8,200,000

        In fiscal year 1995 future modernization planning was estimated at
    $81.0 million. Since that projection, $8.2 million was funded in fiscal
    years 1996 and 1997 and an additional $5.2 million in fiscal year 1998.
    A reassessment of current infrastructure, environmental and physical
    plant repair and maintenance need reflect a future funding need of
    $61.0 million as a result of shifts and or changes in project scopes/
    costs and the inclusion of appropriate escalation to the midpoint of
    construction.
        Question. Please provide the Committee with an update of the costs
    and projects completed and planned for the modernization of each of the
    ARS Regional Research Centers, giving the funds required in each future
    fiscal year by project.
        Answer. The status of modernization efforts at the four Regional
    Research Centers is as follows:
        Southern Regional Research Center (SRRC).--The SRRC Modernization
    initially 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 was
    estimated at $17.8 million, phased over 9 years.
        Construction for Phase I of the Chemical Wing 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 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.
        With regard to the renovation of the surrounding site, 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 for Phase 2 of the site repair work. In fiscal year
    1998, $1.1 million was appropriated for the design of the renovation to
    the Industrial Wing. It is expected that construction will occur in
    four phases. Phase I in fiscal year 1999 at $6 million, Phase 2 in
    fiscal year 2001 at $5.5 million; Phase 3 in fiscal year 2003 at $4.5
    million; and Phase 4 in fiscal year 2005 at $4 million.
        The remaining sections of SRRC that need to be modernized are the
    Administration and Textile Wings.
        Eastern Regional Research Center (ERRC).--ARS completed the
    Facility Modernization Study for ERRC in fiscal year 1993. 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 nine years.
        In fiscal year 1994, ARS funded design of Phase 1 (Service
    Building) and Phase 2 (Engineering Research Laboratory in Pilot Plant)
    with $595,000 in Repair and Maintenance funds. In fiscal year 1995, ARS
    funded construction of Phase 1, and design of Phases 3 through 7, using
    $4,175,000 in Repair and Maintenance funds. In fiscal year 1996, ARS
    funded construction of Phase 2 using $4,100,000 in Repair and
    Maintenance funds. In fiscal year 1997, $4,700,000 was needed to fund
    construction of Phase 3, and $4 million was appropriated. In fiscal
    year 1998, $5,200,000 was needed to complete funding of Phase 3 and
    fund construction of Phase 4, and $5 million was appropriated. The
    Agency intends to award construction of Phases 3 and 4 with the $9
    million available.
        Future modernization phases are planned in fiscal year 1999 ($3.3
    million),fiscal year 2000 ($4.4 million),fiscal year 2001 ($3.2
    million). These phases will cover the remainder of the Chemical Wing.
    An additional phase in fiscal year 2001 for the Service Wing ($1.1
    million) and another phase in fiscal year 2002 for the Pilot Plant
    ($7.8 million) will complete the current plan.
        Western Regional Research Center (WRRC).--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 was
    $29.6 million phased over a 7-year period.
        Phases 1 and 2 were awarded in fiscal year 1990 for $5.9 million.
    Phase 3 was awarded in fiscal year 1991 in the amount of $3.4 million.
    Phase 4 was awarded in fiscal year 1993 in the amount of $3.0 million.
    Phases 5 and 6 were awarded in fiscal year 1993 in the amount of $4.4
    million and $3.2 million. Construction for Phase 6 was completed in the
    third quarter of fiscal year 1997.
        In fiscal years 1994, 1995, and 1997, $1.161 million, $919
    thousand, and $4.0 million, respectively, were appropriated for
    construction, construction management, and contingency for Phase 7. The
    Area funded all necessary fine tuning costs. Construction for Phase 7
    is expected to be completed by the first quarter of fiscal year 1999.
        In addition, renovation of the Small Animal Facility (West Annex
    Building) was completed at a cost of $5.0 million from the Agency's
    Repair and Maintenance funds.
        Also, 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 (Pilot Plant) which includes
    Food Processing Laboratory and Industrial Processing Laboratory. A
    program of requirements was concurrently developed using Agency funds,
    $180,000, for the modernization of the Pilot Plant and was completed in
    fiscal year 1997. 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 $17.6 million.
        National Center for Agricultural Utilization Research (NCAUR).--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.
        Appropriations to date include the following: Fiscal year 1992--
    $1,825,000, planning and design for Phase II Pilot Plant. Fiscal year
    1993--$1,545,000 was redirected for Phase IID Modernization. In fiscal
    years 1996, 1997, and 1998, $3.9 million, $1.5 million, and $8.0
    million were appropriated. In fiscal year 1996, a revised plan was
    developed which recommended a three-phased renovation 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 $6.9
    million for this segment. Construction was awarded in the fourth
    quarter of fiscal year 1997 and will be completed in the third quarter
    of fiscal year 1999.
        The remaining two segments are: Segment 2 of Phase IID 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. Design will be completed in the
    third quarter of fiscal year 1998 with construction awarded in the
    fourth quarter of fiscal year 1998. Segment 3 of Phase IID will
    renovate additional laboratory, support space, and testing facilities
    will be provided to support the Pilot Plant modules. Estimated
    planning, design, and construction cost of $8.4 million is requested in
    the fiscal year 1999 Budget.
        Additional funding needed which has been escalated to the planned
    year of implementation is $62.2 million. This will complete planned
    modernization efforts at the Center.
        Question. How did the ARS use funds appropriated to it for repairs
    and maintenance of facilities in fiscal year 1997?
        Answer. The fiscal year 1997 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 1997 include:
    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 Repair and Maintenance funds
    for fiscal year 1998? Please give project and funding.
        Answer. The planned use of Repair and Maintenance funds for fiscal
    year 1998, by project and funding, will be provided for the record.
        [The information follows:]

            State/location/project                                    Amount
    Nationwide--National Seismic Studies..........................  $253,000
    Arkansas, Booneville--Upgrade Sewage Lagoon...................    90,000
    Arizona, Phoenix--Renovate Three Labs.........................   171,000
    California:
        Albany:
            Upgrade Mechanical Rooms..............................   350,000
            Exterior Manlift/Accessibility Issue..................    65,000
        Riverside--Upgrade Electrical Service.....................    58,000
        Salinas--New Replacement Well.............................   106,000
    Delaware, Newark--Remove/Replace Greenhouse Benches and
        Sidings...................................................    30,000
    District of Columbia, U.S. National Arboretum:
        Exterior Lighting.........................................   250,000
        Paths, Irrigation, Drainage and Lighting..................   300,000
        Bonsai Courtyard..........................................    35,000
        Auditorium/Lobby Renovation...............................    20,000
        Trim and Remove Trees.....................................    25,000
        Street Signs..............................................    22,000
        Miscellaneous.............................................    87,633
    Florida:
        Canal Point--Repair/Modify Various Buildings..............   250,000
        Gainesville:
            Replace Fire Alarm System.............................   300,000
            Phase 2 Modernization/Renovation...................... 5,900,000
    Georgia, Athens:
        Elevator/Stair Construction...............................    75,000
        300 KV Energy Generator...................................   127,000
    Idaho:
        Dubois:
            Repair 1.5 Mi. of Entrance Road.......................   225,000
            Repair Gravel Road....................................    35,000
        Kimberly--Repair Roof Bldg. 2, 3, 4, and 5................   165,800
    Illinois, Peoria:
        Replace Cooling Water Tower...............................   125,000
        Install Additional Fire Hydrants..........................    75,000
        Replace Steam Traps.......................................    25,000
        Upgrade Ventilation Basement/Center Wing/Other Areas......    65,000
    Indiana, West Lafayette:
        Fume Hood.................................................    10,000
        Install Insulation in Grinding Room.......................    15,000
    Iowa, Ames:
        Construct Bldg. 5 Improvements............................   120,000
        High Priority Research List 400 NADC Master Plan..........   617,000
    Maryland:
        Beltsville Agricultural Research Center (BARC):
            Annual Demolition.....................................   300,000
            Mod Office Salaries...................................   197,327
            Inspection............................................    51,052
            Replace CFC Refrigerants..............................    20,000
            Telecommunications East and West......................   150,000
            Road Repairs..........................................   100,000
            Roof Repairs..........................................   100,000
            Install Deaeratro Bldg. 014...........................    70,000
            Replace Storm/Sanitary Lines 3rd St...................   100,000
            Convert 10 Boilers to Gas.............................   160,000
            Replace Steamlines, Bldgs. 307 and 306................   150,000
            Remove Pipe Chase Asbestos, Bldg. 200.................   150,000
            Correct Water Leak, Bldg. 008, Rms. 10 and 12.........    20,000
            Install Backflow Prevention on BARC...................   175,000
            Install Fall Protection at Sites......................    70,000
            Install Fence at Manure Pit...........................    10,000
            Install Smoke Indicator, Bldg 309.....................    10,000
            Repair/Replace Granary Docking/Turnheads..............    15,000
            Replace Roof, Bldg. 161...............................   150,000
            Replace Roof, Bldg. 301...............................    40,000
            Replace Variable Frequency Drives, Bldg. 007..........    30,000
            Correct Drainage, Bldg. 50, GH 2/Section 2............    10,000
            Install O/H Garage Doors, Bldgs. 029, 1124, and 1125..    70,000
            Replace HVAC System, Bldg. 046........................    45,000
            Contingencies.........................................   182,683
        Frederick--Upgrade HVAC/Lab Infrastructure Bldg. 1301.....   400,000
        National Agricultural Library:
            Sprinkler System, Phase II............................   250,000
            Replace Cooling Tower.................................   375,000
            Miscellaneous/Emergency Repairs.......................   100,000
            Facility Seismic Study................................    30,000
            Clean Air Ducts.......................................   145,000
    Michigan, East Lansing:
        Sewage Disposal Improvements..............................    18,000
        Replace Roofs.............................................   143,000
    Minnesota:
        Morris:
            Install Fire Alarm System.............................    50,000
            Upgrade Micro-Biology Laboratory......................    45,000
        St. Paul:
            Glazing on Greenhouse #2..............................    15,000
            Repair Structure of Building..........................   132,000
    Mississippi:
        Mississippi State--Replace Telephone System...............   220,000
        Oxford--Renovate Chemistry Labs...........................   150,000
        Poplarville--Replace HVAC Systems and Lights in Bldgs. 1
          and 2...................................................    50,000
        Stoneville:
            Repair Pond Levees....................................    88,000
            Renovation of Laboratory/Quarantine Facility..........   100,000
            Replace Underground Water Supply......................   100,000
    Missouri, Columbia:
        Emergency Exits...........................................    32,000
        Retaining Wall............................................    12,000
        Improve Ventilation.......................................    53,000
        Repair Concrete...........................................     8,000
        Pond Drainage System......................................   100,000
    Montana, Sidney:
        Asbestos Abatement........................................   100,000
        Upgrade HVAC System.......................................   840,000
    New York, Ithaca:
        Replace Fume Hoods, Fans, Stacks..........................   165,000
        Construct Stairway Enclosure, Bldg. 004...................    15,000
        Repair Air Handling Unit, Main Bldg.......................    25,000
    Ohio, Coshocton:
        Repair Air Exchange System................................    16,000
        Historic Survey...........................................    10,000
        Repair Lysimeters.........................................     9,000
    Oklahoma:
        El Reno:
            Develop Facilities Historic Preservation Plan.........   100,000
            Renovate Existing Cattle Barn.........................   440,000
        Lane--Replace Automated Telephone System..................    30,000
        Stillwater--Repair/Renovation of 3 Greenhouses............    46,000
        Woodward:
            Design/Analysis for HVAC/Electrical Upgrade...........    45,000
            Install UFAS Elevator.................................    44,000
    Oregon, Burns--Upgrade Access Road............................    30,000
    Pennsylvania:
        Wyndmoor--Replace Underground Storage Tank................    85,000
        University Park--Upgrade/Replace HVAC.....................    30,000
    South Carolina, Florence--Replace and Expand Exterior Office
        Walls.....................................................   106,000
    Texas:
        Bushland:
            Replace 500 sf. Gas House.............................    25,000
            Upgrade for Accessibility.............................    20,000
        College Station:
            Energy Audit..........................................    20,000
            Replace Electrical Distribution Panels, Bldgs. 11 and
              12..................................................    42,000
        Houston:
            Comprehensive Energy Audit............................    20,000
            Comprehensive Roof Evaluation.........................     7,000
        Kerrville--Repair Polymer Roof Coating....................    80,000
        Temple:
            Upgrade Interior Building Ceiling Light...............   130,000
            Asbestos Removal......................................   155,000
        Weslaco--Replace Boiler Bldg. 203.........................    20,000
    West Virginia:
        Beckley:
            Master Plan/Deficiency Study/Energy Conservation......    35,000
            Alter Soils Prep Bldg.................................    85,000
        Kearneysville--Maintain and Repair HVAC...................    30,000
    Wisconsin, Madison--Upgrade Building Access...................    60,000
    Agency Unassigned Funds.......................................   412,900
                        --------------------------------------------------------------
                        ____________________________________________________

          Total...................................................18,262,395

        Question. The fiscal year 1998 Appropriations Act provides $700,000
    in unrequested funding for planning and design of the Jornado Range
    Research Center, Las Cruces, NM. Please describe the need for this
    Center, the projected schedule for design and construction of the
    project, and what additional funds will be required, by fiscal year, to
    complete the project.
        Answer. The Jornada Experimental Range Program investigates
    ecosystem processes, then uses that knowledge to develop best forage-
    livestock management practices and strategies for remediation and
    protection of desert rangelands. The Jornada programs have outgrown
    their temporary quarters on New Mexico State University's main campus.
    The scientists are currently housed in mobile trailer facilities. The
    laboratory and computer capabilities are inadequate for the research
    and information-sharing needs of Jornada's investigators and the
    cooperative approach necessary for the success of their program.
        The projected schedule for design and construction are as follows:
    Start Design, July 1998; Complete Design, December 1999 (18 months);
    Start Construction, May 1999; Complete Construction, November 2000 (18
    months).
        In fiscal year 1999, $6.7 million will be needed for construction,
    construction management services, and contingency.
        Question. The fiscal year 1998 Appropriations Act provides
    $5,200,000 in unrequested funding for planning and design work and
    initial construction costs for the Western Human Nutrition Research
    Center, Davis, California. Please describe the need for this project,
    the schedule for design and construction of the project, and the
    remaining funds required to complete the project, indicating the fiscal
    year for which the funds will be required.
        Answer. The mission of the Western Human Nutrition Research Center
    (WHNRC) is to conduct research on human nutritional needs with emphasis
    on developing ways to measure these needs and assess nutritional status
    in large populations. The research directly supports the National
    Health and Nutrition Examination Surveys conducted jointly by USDA,
    FDA, and the Centers for Disease Control. WHNRC, created by Congress in
    1980, is located in the former Letterman Army Institute of Research
    (LAIR) building at the Presidio in San Francisco now called The
    Letterman Complex. In October 1994, the Presidio was transferred to the
    National Park Service and became part of the Golden Gate National
    Recreation Area.
        ARS has negotiated an agreement with the National Park Service to
    remain in the LAIR facility with about 37,000 gsf. It currently is the
    only tenant in the 300,000 gsf building. Beginning in fiscal year 1999,
    it is anticipated that the rental cost charged by the National Park
    Service will increase substantially from the current rate due to the
    Park Service's insistence on recouping facility operating costs.
        ARS is currently undertaking a Master Plan Analysis of the proposed
    project site at Davis, California, where it plans to construct a
    replacement facility on the campus of the University of California.
    This analysis is scheduled to be complete by July 1998, with the
    remainder of the project schedule contingent upon appropriations
    received, as follows: Complete Predesign, December 1998; Complete
    Design, January 2000; Award Construction Contract, April 2000; Complete
    Construction, April 2002.
        The Total project cost (planning, design, and construction) is
    estimated to be $17.5 million.
        In fiscal year 1998, $5.2 million was appropriated for design and
    construction, resulting in a remaining need of $12.3 million in future
    years.
        Question. The President canceled the $600,000 provided in the
    fiscal year 1998 Appropriations Act for the ARS Poisonous Plant
    Laboratory (PPRL) in Logan, Utah. Are the current ARS office and
    laboratory space and related facilities at this location adequate?
        Answer. A new laboratory/office building (approximately 17,000 gsf)
    is needed and recommended for the ARS Poisonous Plant Laboratory by the
    Agency. The existing lab/office (early 1960's pre-engineered metal
    building)has exceeded its expected life and its occupants are crowded
    in its 7,500 square feet. The existing building is functionally
    inefficient due to the 5 different additions done over its 30-year
    life.
        Question. Are replacement facilities recommended by ARS?
        Answer. Funds for replacement facilities are not included in the
    fiscal year 1999 budget. As explained, the existing facilities have
    reached their useful life expectancy, and are inadequate for state-of-
    the-art research. Long term plans include a recommendation for
    replacement of these facilities.
        Question. If so, when will these facilities be needed?
        Answer. The fiscal year 1999 budget does not propose funding for
    this facility.
        Question. On March 17, 1997, the Department of Agriculture
    submitted a report to the Committee on ARS' insect rearing
    capabilities. A copy of that report is submitted for the record. When
    will each of the two new facilities which the report indicates are
    needed to mass produce high quality and effective agents at
    economically acceptable costs be required?
        Answer. USDA/ARS recognizes the need to move forward with
    construction and completion of the Waimanalo, Hawaii, and Stoneville,
    Mississippi, rearing facilities. However, the funding for other
    facilities' construction and modernization is more urgent in the fiscal
    year 1999 budget request.
        Question. What is ARS' recommended schedule for construction of
    each of these project?
        Answer. Once funds are appropriated, planning and design will be
    complete in 18 months. Construction will take approximately 24 months.
        Question. Please provide a status report on each of the ARS
    buildings and facilities for which funds were provided for fiscal year
    1997 and 1998, indicating a current status of the work funded and what
    additional funds will be required, if any, to complete the project, by
    fiscal year.
        Answer. The status of the fiscal year 1997 and fiscal year 1998
    Building and Facilities funds, and additional funding required, will be
    provided for the record.
        [The information follows:]

                             [Dollars in thousands]
    ------------------------------------------------------------------------
                                            Appropriation--       Additional
         Location/project status      --------------------------   funding
                                           1997         1998        needs
    ------------------------------------------------------------------------
    Albany, CA, Chemical Wing:              $4,000  ...........  ...........
     Construction of Phase 7 is
     scheduled for completion in the
     1st quarter of fiscal year 1999.
     This will conclude modernization
     of Chemical Wing................
    Davis, CA: Design is scheduled     ...........       $5,200      $12,300
     for award in the 2nd quarter of
     fiscal year 1998 for completion
     by January, 2000. Construction,
     which is projected at $15.8
     million, is partially funded
     with the $3.5 million (within
     the $5.2 million) appropriated
     in fiscal year 1998.............
    Parlier, CA: Design is complete.   ...........       23,400  ...........
     Construction is scheduled for
     award in April, 1998............
    Montpellier, France: Construction  ...........        3,400  ...........
     is fully funded and contract was
     awarded March 23, 1998..........
    Ft. Pierce, FL: Construction is         27,000  ...........  ...........
     fully funded and is scheduled
     for completion in the 3rd
     quarter of fiscal year 1999.....
    Edwardsville, IL, Ethanol Pilot          1,500  ...........       19,700
     Plant: Fiscal year 1997
     appropriation was provided as
     grant award to Southern Illinois
     Univ. for design of facility.
     Construction of facility is
     projected at $19.7 million......
    Peoria, IL, Pilot Plant: $8.4            1,500        8,000        8,400
     million is requested in the
     fiscal year 1999 Budget to
     complete construction of pilot
     plant...........................
    Manhattan, KS: $1.4 million                500  ...........        9,300
     requested in fiscal year 1999
     Budget to complete total funding
     required for construction of
     Phases 1 and 2..................
    New Orleans, LA, SRRC Industrial   ...........        1,100       20,000
     Wing: Design is scheduled for
     completion in December, 1998. $6
     million of the total $20 million
     required for construction is
     requested in the fiscal year
     1999 Budget.....................
    Beltsville, MD, BARC: $2.5               4,500        3,200       98,000
     million is requested in the
     fiscal year 1999 Budget for
     construction of a new Poultry
     Production facility and for
     other miscellaneous projects....
    Beltsville, MD, NAL: $1.2 million  ...........        2,500       17,500
     is requested in the fiscal year
     1999 Budget for replacement of
     air handler units...............
    East Lansing, MI: Design is fully  ...........        1,800       17,200
     funded and contract is scheduled
     for award in the 4th quarter of
     fiscal year 1998. Construction
     of the facility is projected at
     $17.2 million...................
    Oxford, MS: Fiscal year 1998       ...........        7,000  ...........
     appropriation was transferred to
     CSREES for award to Univ. of
     Mississippi for construction of
     Animal Facilities...............
    Sidney, MT: Design of 27,780 GSF   ...........          606        7,300
     lab office and biocontainment
     facility is scheduled for award
     in the 3rd quarter of fiscal
     year 1998. Construction of the
     facility is projected at $7.3
     million.........................
    Las Cruces, NM: Design of 29,000   ...........          700        6,700
     GSF lab office building is
     scheduled for award in the 3rd
     quarter of fiscal year 1998.
     Construction of the facility is
     projected at $6.7 million.......
    Greenport, NY, PIADC: $3.5               5,000        2,000       61,000
     million is requested in the
     fiscal year 1999 Budget for
     construction of Building 101
     Incinerator and for
     accomplishing CERCLA remediation
     activities......................
    Grand Forks, ND: Full restoration  ...........        4,400  ...........
     of Nutrition Center is scheduled
     for completion in the 2nd
     quarter of fiscal year 1999.....
    Wyndmoor, PA: $3.3 million is            4,000        5,000       20,722
     requested in the fiscal year
     1999 Budget for construction of
     Phase 5. Appropriation provided
     in Fiscal years 1997 and 1998 is
     being used for construction of
     Phases 3 and 4..................
    Charleston, SC: Construction of          3,000        4,824        7,324
     Phase 1 is fully funded and is
     scheduled for award in the 4th
     quarter of fiscal year 1998 for
     completion by the 4th quarter of
     fiscal year 2000. Design and
     construction of Phase 2 is
     projected at $7.3 million.......
    Lubbock, TX: Construction is             8,100  ...........  ...........
     fully funded and is scheduled
     for completion in the 1st
     quarter of fiscal year 1999.....
    Weslaco, TX: Construction of             4,000  ...........       14,108
     laboratory, office and
     greenhouse is scheduled for
     completion in the 1st quarter of
     fiscal year 1999. Future
     modernization costs are
     projected at $14.1 million......
    Leetown, WV: Design is scheduled         6,000        6,000  ...........
     for completion in January, 1999.
     Construction, which is projected
     at $12 million, is fully funded.
                                      --------------------------------------
          Total......................       69,100       79,130      319,554
    ------------------------------------------------------------------------

                               appropriations law
        Question. The fiscal year 1999 budget requests statutory language
    to facilitate land exchanges by providing the Agricultural Research
    Service authority to pay more than $100 up to 25 percent of the value
    of land or interest transferred out of Federal ownership in order to
    equalize the value of exchange. Please explain why this language is
    needed.
        Answer. In the past, ARS has received requests from non-federal
    entities, (state, county, and local governments including the
    Commonwealth of Puerto Rico) to use Federally-owned land in the custody
    of ARS for the construction of new schools, roads, flood control
    projects, etc., in exchange for land of equal value. Under ARS' current
    authority, the value of the land received in exchange must be within
    $100 of the value of the Federally-owned land. This creates an undue
    burden on the non-federal entity to find a parcel of land acceptable to
    ARS that is equal in value within $100. The proposed change provides
    more flexibility for ARS to accommodate land exchange requests from
    local jurisdictions.
        Question. The fiscal year 1999 budget requests statutory language
    to grant easements at the Beltsville Agricultural Research Center,
    including for the construction of the Transgenic Animal Facility.
    Please explain in more detail why this language is required.
        Answer. The Transgenic Animal Facility (TAF) will be constructed by
    the University of Maryland (UM) using grant funds received from the
    Cooperative State Research, Education and Extension Service. Section
    523 of Pub.L. No. 100-202, a joint resolution making continuing
    appropriations for the fiscal year 1988, and other purposes, prohibits
    the use of appropriations ``for the purpose of the sale, lease, rental,
    excessing, surplusing, or disposal of any portion of land on which
    [BARC] is located at Beltsville, Maryland, without the specific
    approval of Congress.'' Easements are considered disposals, thus this
    law prohibits BARC from issuing easements.
        Question. Does the Transgenic Animal Facility the University of
    Maryland will construct and this language allow the Secretary to accept
    replacement of an existing USDA facility?
        Answer. The proposed fiscal year 1999 appropriation language
    provides the necessary provision for the Secretary to accept the gifted
    TAF building as a replacement building for an existing USDA temporary
    facility.
        Question. Why is the University constructing this facility and not
    the USDA?
        Answer. The University of Maryland is constructing the facility
    because the funds for constructing this facility are University of
    Maryland funds, not ARS appropriated funds. This will be a cooperative
    venture with USDA.
        Question. What will be the annual operating costs of this facility
    to the ARS?
        Answer. The new facility is currently under design. Therefore, we
    are unable to determine the actual operating costs. The current
    facility costs approximately $110,000 per year for operation and
    maintenance. This is a temporary structure that has outlived its
    usefulness. With the construction of a modern facility that is energy
    efficient, the operating costs should be reduced.
        The fiscal year 1999 budget requests statutory language for the
    purpose of appropriately responding to requests to make Federally-owned
    land and facilities available for special use and to allow fees to be
    charged as authorized by law.
        Question. What law authorizes these fees? Please give citation.
        Answer. Current laws authorizing ARS to collect fees are as
    follows:
      --Easement law 40 USC 319, allows us to collect monetary or other
            consideration.
      --31 USC 9701, provides the Government generally with the authority
            to charge fees for Government services and things of value.
      --20 USC 196, subsection a, (4), authorizes the Secretary of
            Agriculture to charge fees for use of grounds and facilities of
            the U.S. National Arboretum.
      --GSA Bulletin FPMR D-242, dated June 11, 1997, issued in accordance
            with President Clinton's memorandum of August 10, 1995,
            entitled ``Facilitating Access to Federal Property for the
            Siting of Mobile Services Antennas'', and section 704(c) of the
            Telecommunications Act of 1996, PL 104-104, (47 USC 332 note),
            provides authorization for agencies to charge and collect site
            fees and access fees.
        Question. If these fees are authorized by law, why does the
    requested appropriations bill language ``authorize'' the agency to
    charge fees ``commensurate with the fair market value, for any permit,
    easement, lease, or other special use authorization for the occupancy
    or use of land and facilities...as authorized by law''? Why doesn't the
    language simply permit fees authorized by law to be credited to the
    account and available until expended for authorized purposes?
        Answer. Since existing authorities to collect fees are distinct and
    scattered in law, the language simply authorizes the collection and use
    of these fees to assure that there is no question that Congress
    intended ARS to collect fees for these purposes, and credit those fees
    to its appropriations.
        Question. Please give some examples of special use permits which
    would be issued by the agency and what fees would be charged.
        Answer. ARS is requesting the authority to issue specific use
    authorization, such as land use agreements or memorandum of
    understanding, for instances where the Federal or non-Federal entity
    does not use a standard lease, permit, or easement document. Special
    Use Permits is a general term used by some local jurisdictions or non-
    federal entities in place of Permits, Revocable Permits, Leases or
    Easements. For example, the University of California at Davis issues
    Land Use Agreements and CSX Railroad issues Special Use Agreements.
    Having authority to issue Special Use Permits would give ARS the
    authority to use the documents and terminology preferred by the local
    jurisdiction or non-federal entity. Fees, when applicable, would be
    based on the fair market value of the land under Special Uses Permit
    and would be similar to those currently charged by ARS for Easements.
               fiscal year 1999 ars salaries and expenses request
        Question. The President's fiscal year 1999 budget recommends a
    number of project terminations and elimination of ``Congressional add-
    ons'' to fund ``high priority'' research. Why do you consider each of
    these projects to be of lower priority?
        Answer. The fiscal year 1999 Federal budget submitted by the
    President recommends a number of new initiatives to address changing
    priorities facing agriculture and the American consumer. The research
    budget proposed for ARS reflects an increase of $32 million over the
    current year. However, the Department is focusing on many priority
    agricultural issues that must be addressed now by our research
    scientists. This requires that ARS terminate ongoing projects and
    reallocate these resources to the new or expanded initiatives as
    recommended by the President. In this effort a number of projects were
    identified as less critical. As a result, a cost-effective decision was
    made to recommend project terminations and elimination of projects to
    fund higher priority research.
        Question. What criteria did you impose to determine the projects
    and increases proposed for termination?
        Answer. In order to provide financing for new and expanded high
    priority research in a fiscally constrained budget, it was determined
    that the restored projects proposed for termination in the fiscal year
    1998 budget as well as all the Congressionally added projects included
    in the 1998 Appropriations Act be proposed for reduction in fiscal year
    1999.
        Question. Please explain what the Department is doing to make sure
    that the additional ARS positions and research program increases funded
    for fiscal year 1998 but not included in the President's fiscal year
    1999 budget are executed?
        Answer. ARS is moving forward with implementing the initiatives
    funded in the 1998 Appropriations Act. All new positions have been
    established. Recruitment actions are underway with vacancy
    announcements to open April 6. Research plans for these funded projects
    have been established and are underway.
        Question. Please provide a status report on the execution of each
    of the following funding increases provided to ARS in fiscal year 1998:
      --Vomitoxin in Wheat, $500,000;
      --Fusarium Head Blight, MN, $500,000;
      --Karnal Bunt, KS, $500,000;
      --Citrus Tristeza, $750,000;
      --Ergot Disease in Sorghum, $300,000;
      --Asian Long Horn Beetle, $500,000;
      --Apple E.Coli research, PA, $250,000;
      --Food Safety Agency Study (National Academy of Sciences), $420,000;
      --Hydrology, Canal Point, FL, $500,000;
      --Hydrologist, Dade County, FL, $250,000;
      --Melaleuca research, $500,000;
      --Appalachian Soil and Water Conservation Lab, WV, $250,000;
      --Arctic Germplasm Repository, $650,000;
      --Coastal Wetlands and Erosion Control, LA, $1,000,000;
      --Cotton Genetics, MS, $250,000;
      --Cotton Ginning, TX, $500,000;
      --Fish Disease, AL, $250,000;
      --Food Fermentation, NC, $250,000;
      --Formosan Termite, Southern Regional Research Center LA, $5,000,000;
      --Grain Legume, WA, $250,000;
      --Honeybee, TX, $500,000;
      --Hops research, OR, $100,000;
      --Lyme Disease, $200,000;
      --National Aquaculture Research Center, AR, $500,000;
      --National Center for Cool and Cold Water Aquaculture, WV, $250,000;
      --National Warmwater Aquaculture Center, MS, $500,000;
      --Natural Products, MS, $700,000;
      --Northwest Nursery Crops, OR, $500,000;
      --Organics Management Research, $500,000;
      --Plant Genetics Equipment/Greenhouse, MO, $200,000;
      --Poisonous Plant, UT, $100,000;
      --Poult Enteritis Mortality Syndrome, GA, $250,000;
      --Reproductive Efficiency of Beef Cattle, MT, $250,000;
      --Rice Research, Beaumont, TX, $250,000;
      --Rice Research, Stuttgart, AR, $700,000;
      --Small Fruits, MS, $250,000;
      --Small Grains, Raleigh, NC/Aberdeen, ID, $450,000;
      --Sugarcane Biotechnology Research, LA, $200,000;
        Answer. ARS is in the process of releasing each of these program
    increases added by Congress in fiscal year 1998 in the amounts and for
    the purposes authorized in accordance with the fiscal year 1998
    Appropriations Act. A detailed listing of the distribution of these
    increases will be provided for the record.
        [The information follows:]

                                       AGRICULTURAL RESEARCH SERVICE--IMPLEMENTATION OF FISCAL YEAR 1998 PROGRAM INCREASES
    --------------------------------------------------------------------------------------------------------------------------------------------------------
           Funding increase             Amount       Research location                Status/purpose                 Status of new scientist(s) position(s)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Vomitoxin in wheat ($500,000).        $500,000  St. Paul, MN......  Negotiations are underway with the 12      Not applicable.
                                                                         State Consortium to enter into Specific
                                                                         Cooperative Agreements.
    Fusarium Head Blight                   500,000  St. Paul, MN......  Funds have been released for research on   A Plant Pathologist and Pathologist/
     ($500,000).                                                         Fusarium head blight in wheat and other    Microbiologist will be hired.
                                                                         grain crops.                               Recruitment actions are underway with
                                                                                                                    vacancy announcements opening April 6,
                                                                                                                    1998.
    Karnal Bunt ($500,000)........         500,000  Manhattan, KS.....  Funds have been released for research to   An Agronomist/Geneticist/or Molecular
                                                                         improve resistance of wheat varieties to   Biologist will be hired. Recruitment
                                                                         karnal bunt.                               action is underway with a vacancy
                                                                                                                    announcement opening April 6, 1998.
    Citrus Tristeza ($750,000)....         540,000  Headquarters......  Funds temporarily held at HQ. Funds will   Not Applicable.
                                                                         be used to fund cooperative agreements
                                                                         on citrus tristeza virus research.
                                                                         Proposals have been submitted and are
                                                                         under review.
                                           150,000  Beltsville, MD....  Funds have been released for collection    .........................................
                                                                         of isolates of citrus tristeza virus.
                                            60,000  Orlando, FL.......  Funds have been released for               Not Applicable.
                                                                         establishment of full-time program on
                                                                         Citrus Tristeza Virus.
    Ergot Disease in Sorghum               300,000  Headquarters......  Funds temporarily held at HQ.              Not Applicable.
     ($300,000).                                                         Negotiations are underway with Texas A&M
                                                                         and Puerto Rico University to fund
                                                                         cooperative research on ergot disease.
                                                                         In-house research is underway in
                                                                         Lincoln, NE, Frederick, MD, and
                                                                         Mayaguez, PR.
    Asian Long Horn Beetle                 400,000  Newark, DE........  Funds have been released to develop        An ARS Research Entomologist has been
     ($500,000).                                                         integrated pest management and             reassigned to Newark, DE to work on this
                                                                         biological control technology for Long     research.
                                                                         Horn Beetle. Negotiations are underway
                                                                         for a Specific Cooperative Agreement
                                                                         with Cornell University to provide
                                                                         entomology and integrated pest
                                                                         management support.
                                           100,000  Headquarters......  Funds temporarily held at HQ.              Not Applicable.
                                                                         Negotiations are underway to enter into
                                                                         a Specific Cooperative Agreement with
                                                                         Cornell University as outlined in a
                                                                         proposal from the University of Vermont
                                                                         to support taxonomic activities.
    Apple E. coli ($250,000)......         250,000  Wyndmoor, PA......  Funds have been released and research is   A Food Technologist/Microbiologist will
                                                                         underway to determine the source of        be hired. Recruitment action is underway
                                                                         zoonotic pathogens in apples (E. coli)     with a vacancy announcement opening
                                                                         and to identify methods of effectively     April 6, 1998.
                                                                         killing these pathogens.
    Food Safety Agency Study (NAS)         420,000  Headquarters......  Funds have been released to fund a grant   Not Applicable.
     ($420,000).                                                         with the National Academy of Sciences to
                                                                         conduct the Food Safety Agency Study.
    Hydrology, Canal Point, FL             500,000  Canal Point, FL...  Funds have been released and research is   An Agronomist and Geneticist or Soil
     ($500,000).                                                         underway to develop high water table       Microbiologist will be hired.
                                                                         management practices for sugarcane         Recruitment actions are underway with
                                                                         breeding and microbiology programs.        vacancy announcements opening April 6,
                                                                                                                    1998.
    Hydrologist, Dade County, FL           250,000  Miami, FL.........  Funds have been released and research is   This position has been filled by an ARS
     ($250,000).                                                         underway to develop a hydrologic model     Hydrologist selected to work on this
                                                                         to define the risk of flooding to the      research project.
                                                                         agricultural community in Dade County.
    Melaleuca Res. ($500,000).....         250,000  Ft. Lauderdale, FL  Funds have been released and research is   A Research Entomologist will be hired. A
                                                                         underway to expand current research on     position description has been developed
                                                                         biological control technology for          and is currently being reviewed.
                                                                         Melaleuca in the Everglades.               Recruitment action will follow upon
                                                                                                                    approval.
                                           250,000  Headquarters......  Funds have been released and research is   A Research Entomologist will be hired.
                                                                         underway to develop Melaleuca control at   Recruitment action is underway with a
                                                                         the Australian Biological Control          vacancy announcement opening April 6,
                                                                         Laboratory, Brisbane, Australia.           1998.
    Appalachian Soil and Water             250,000  Beckley, WV.......  Funds have been released. Research is      A Plant or Soil Scientist will be hired.
     Conservation Lab. WV                                                underway on the effects of timber          Recruitment action is underway with a
     ($250,000).                                                         management and accelerated harvesting on   vacancy announcement opening April 6,
                                                                         forest biosystems.                         1998.
    Arctic Germplasm Repository            650,000  Pullman, WA.......  Funds have been released and research is   A Horticulturist/Plant Pathologist or
     ($650,000).                                                         underway on the preservation,              Geneticist will be hired. Recruitment
                                                                         evaluation, regeneration and storage of    action is underway with a vacancy
                                                                         disease free germplasm adapted to          announcement opening April 6, 1998.
                                                                         northern soils. A Specific Cooperative
                                                                         Agreement with the State of Alaska Plant
                                                                         Materials Center to support a germplasm
                                                                         repository at Palmer, AK, has been
                                                                         completed.
    Coastal Wetlands and Erosion         1,000,000  Baton Rouge, LA...  Funds have been released and research is   An Ecologist/Water Management scientist
     Control, LA ($1,000,000).                                           underway on coastal wetlands and erosion   will be hired. Recruitment action is
                                                                         control. Proposals have been submitted     underway with a vacancy announcement
                                                                         by Louisiana State University              opening April 6, 1998.
                                                                         Agricultural Center and the Natural
                                                                         Resources Conservation Service for
                                                                         cooperative research with ARS.
    Cotton Genetics, MS ($250,000)         250,000  Stoneville, MS....  Funds have been released. Research is      A Geneticist will be hired. Recruitment
                                                                         underway to develop new germplasm that     action is underway with a vacancy
                                                                         will increase the genetic yield            announcement opening April 6, 1998.
                                                                         potential of upland cotton.
    Cotton Ginning, TX ($500,000).         500,000  Lubbock, TX.......  Funds have been released. Research is      Two Agricultural Engineers will be hired.
                                                                         underway to improve cotton quality         Recruitment actions are underway with
                                                                         through improved harvesting and ginning.   vacancy announcements opening April 6,
                                                                                                                    1998.
    Fish Disease, AL ($250,000)...         250,000  Auburn, AL........  Funds have been released and research is   A Fish Health Management Scientist will
                                                                         underway to develop and implement          be hired. Recruitment action is underway
                                                                         methods to detect and prevent losses due   with a vacancy announcement opening
                                                                         to infectious diseases of cultivated       April 6, 1998.
                                                                         fish.
    Food Fermentation, NC                  250,000  Raleigh, NC.......  Funds have been released. Research is      A Microbial Ecologist will be hired.
     ($250,000).                                                         underway to improve product quality and    Recruitment action is underway with a
                                                                         safety of brined and fermented             vacancy announcement opening April 6,
                                                                         vegetables while reducing the amount of    1998.
                                                                         waste generated.
    Formosa Termite SRRC, LA             5,000,000  New Orleans, LA...  Funds have been released and research is   Nine Research Scientists will be hired.
     ($5,000,000).                                                       underway. Proposals have been received     Recruitment actions are underway with
                                                                         from the University of Florida for         vacancy announcements opening April 6,
                                                                         cooperative research on testing existing   1998.
                                                                         termite control technologies.
    Grain Legume, WA ($250,000)...         250,000  Pullman, WA.......  Funds have been released and research is   A Geneticist will be hired. Recruitment
                                                                         underway to expand the pea, lentil and     action is underway with a vacancy
                                                                         legume program in basic genetics and       announcement opening April 6, 1998.
                                                                         varietal improvement.
    Honeybee, TX ($500,000).......         500,000  Weslaco, TX.......  Funds have been released and research is   An Insect Toxicologist and Research
                                                                         underway on the control of parasitic bee   Entomologist will be hired. Recruitment
                                                                         mites and management of Africanized bees.  actions are underway with vacancy
                                                                                                                    announcements opening April 6, 1998.
    Hops Research, OR ($100,000)..         100,000  Corvallis, OR.....  Funds have been released and research is   Not Applicable.
                                                                         underway for hops breeding and
                                                                         collection. Proposals have been received
                                                                         for cooperative research with Washington
                                                                         State University.
    Lyme Disease ($200,000).......         200,000  Beltsville, MD....  Funds have been released and               Not Applicable.
                                                                         collaborative research is underway with
                                                                         Yale University and the states of CT,
                                                                         RI, MD, NY and NJ to support the
                                                                         Northeast Regional Lyme Tick Control
                                                                         Project.
    National Aquaculture Research          500,000  Stuttgart, AR.....  Funds have been released. Research is      Two Aquaculture Research Scientists will
     Center, AR ($500,000).                                              underway to conduct a comprehensive        be hired. Position descriptions are
                                                                         program to advance the cultivation of      currently being reviewed. Recruitment
                                                                         emerging warmwater aquaculture species     action will follow upon approval.
                                                                         with economic potential.
    National Center for Cool and           250,000  Leetown, WV.......  Funds have been released and research is   A new scientist will be hired to serve as
     Cold Water Aquaculture, WV                                          underway to address high priority          Research Leader. Recruitment action is
     ($250,000).                                                         research needs of the nation's cool and    underway with a vacancy announcement
                                                                         cold water aquaculture. The research       opening April 6, 1998.
                                                                         program will be a cooperative and
                                                                         collaborative arrangement between the
                                                                         Leetown Science Center, West Virginia
                                                                         University and the ARS Appalachian Fruit
                                                                         Research Lab, Kearneysville, WV.
    National Warmwater Aquaculture         500,000  Stoneville, MS....  Funds have been released and research is   An Aquaculture Production Systems
     Center, MS ($500,000).                                              underway on the catfish genetics and       scientist will be hired. Recruitment
                                                                         breeding program. Action is also           action is underway with a vacancy
                                                                         underway to modify the existing            announcement opening April 6. 1998.
                                                                         Cooperative Agreement with the MS Agr.
                                                                         and Forestry Experiment Station to
                                                                         increase funding.
    Natural Products, MS                   700,000  Oxford, MS........  Funds have been released and research is   A Research Microbiologist was selected
     ($700,000).                                                         underway to develop natural products       and reported for duty in December 1997.
                                                                         beneficial to agriculture. The existing
                                                                         Cooperative Agreement with the
                                                                         University of Mississippi has been
                                                                         modified to add additional funding.
    Northwest Nursery Crops, OR            500,000  Corvallis, Or.....  Funds have been released and research is   A Plant Physiologist will be hired.
     ($500,000).                                                         underway to develop physiological          Recruitment action is underway with a
                                                                         studies on improving transplant survival   vacancy announcement opening April 6,
                                                                         to stress and to develop cultural          1998.
                                                                         procedures that lead to improved root
                                                                         development. Proposals have been
                                                                         submitted for competitive cooperative
                                                                         agreements.
    Organics Management Research           500,000  Beltsville, MD....  Funds have been released and will be used  Not Applicable.
     ($500,000).                                                         to increase cooperative funding to
                                                                         Rodale Institute, N-Viro International
                                                                         and the Composting Council Research and
                                                                         Education Foundation.
    Plant Genetics Equipment/              200,000  Columbia, MO......  Funds have been released. Negotiations     Not Applicable.
     Greenhouse, MO ($200,000).                                          are underway to purchase equipment to
                                                                         support Seed Storage and Greenhouse
                                                                         Facility.
    Poisonous Plants, UT                   100,000  Logan, UT.........  Funds have been released and research is   Not Applicable.
     ($100,000).                                                         underway to support poisonous plants
                                                                         containing pyrrolizidine alkaloids which
                                                                         cause excessive economic losses for the
                                                                         U.S. livestock industry.
    Poultry Enteritis Mortality            250,000  Athens, GA........  Funds have been released and research is   Not Applicable.
     Syndrome, GA ($250,000).                                            underway to address the identification
                                                                         and molecular characterization of agents
                                                                         causing Poultry Enteritis-Mortality
                                                                         Syndrome.
    Reproduction Efficiency of             250,000  Miles City, MT....  Funds have been released and research is   An Animal Physiologist will be hired.
     Beef Cattle, MT ($250,000).                                         underway to identify the factors that      Recruitment action is underway with a
                                                                         affect reproduction efficiency of beef     vacancy announcement opening April 6,
                                                                         under range conditions.                    1998.
    Rice Research Beaumont, TX             250,000  Beaumont, TX......  Funds have been released and research is   A Research Chemist will be hired.
     ($250,000).                                                         underway to develop new technologies for   Recruitment action is underway with a
                                                                         evaluating and improving rice milling,     vacancy announcement opening April 6,
                                                                         cooking and processing quality.            1998.
    Rice Research Stuttgart, AR            700,000  Stuttgart, AR.....  Funds have been released and research is   A Research Chemist and Geneticist will be
     ($700,000).                                                         underway to improve domestic rice          hired. Recruitment actions are underway
                                                                         quality needs and breeding methods so      with vacancy announcements opening April
                                                                         the United States can remain competitive   6, 1998.
                                                                         in the world market.
    Small Fruits, MS ($250,000)...         250,000  Poplarville, MS...  Funds have been released and research is   A Research Entomologist will be hired.
                                                                         underway to study insect biology and       Recruitment action is underway with a
                                                                         develop improved methods of control in     vacancy announcement opening April 6,
                                                                         small fruit crops in the southeastern      1998.
                                                                         states.
    Small Grains, Raleigh, NC/             250,000  Raleigh, NC.......  Funds have been released and research is   A Plant Pathologist will be hired.
     Aberdeen, ID ($450,000).                                            underway to control fungal pathogens of    Recruitment action is underway with a
                                                                         small grains.                              vacancy announcement opening April 6,
                                                                                                                    1998.
                                           200,000  Aberdeen, ID......  Funds have been released and research is   Not Applicable.
                                                                         underway for improving both barley and
                                                                         oat genetic stocks.
    Sugarcane Biotechnology                200,000  Houma, LA (New      Funds have been released and research is   A Geneticist/Plant Breeder will be hired.
     Research, LA ($200,000).                        Orleans).           underway to expand sugarcane               Recruitment action is underway with a
                                                                         biotechnology and to develop new           vacancy announcement opening April 6,
                                                                         varieties of sugarcane with improved       1998.
                                                                         quality and field performance.
    --------------------------------------------------------------------------------------------------------------------------------------------------------

        Question. Provide for each of the increases requested for fiscal
    year 1999, how and where the new funding will be allotted.
        Answer. An Implementation Plan for the requested fiscal year 1999
    increases will be provided for the record.
        [The information is provided:]
        Agricultural Research Service Fiscal Year 1999 Budget Estimate
                              Implementation Plans
             objective i: soil, water, and air sciences--$4,750,000
    Watershed Health/Pfiesteria Research--$1,000,000 ($1,000,000 under
            Objective III)
    --Water Quality, Nutrient Management, and Watershed Health ($1,000,000)
        Beltsville, MD, $300,000.--Develop and evaluate management
    practices to prevent movement of nutrients and pathogens in manure to
    surface and ground water. Data will be used to enhance natural resource
    inventory and monitoring programs.
        Beltsville, MD, $300,000.--Evaluate and predict where best
    management practices to protect surface and ground water quality can be
    most effectively used. Data will enhance natural resource inventory and
    monitoring programs.
        Florence, SC, $300,000.--Develop improved methods for handling,
    storage, and application of manure to protect water quality. Data will
    be used to support natural resource inventory and monitoring programs.
        Beltsville, MD, $100,000.--Develop aquatic plant based systems to
    remove excess nutrients from waste and runoff water.
    Global Change/Agricultural Practices and Mitigation of Climate Change
            Impacts--$3,000,000
        Phoenix, AZ, $600,000.--Determine how the availability of water and
    plant nutrients will interact with rising temperatures and atmospheric
    carbon dioxide levels to affect rates of deposition of atmospheric
    carbon in soils of irrigated croplands. Data will enhance natural
    resource inventory and monitoring programs.
        Ft. Collins, CO, $400,000.--Develop a balance sheet approach to the
    modeling of agricultural emissions and sequestrations of greenhouse
    gases at the national scale as a basis for evaluating management
    practices and policies for reducing greenhouse gas levels and
    mitigating climate change impacts.
        Athens, GA, $300,000.--Develop and apply technology for monitoring
    methane emissions from cattle, livestock waste lagoons, and other
    agricultural sources, and accurately document total methane emissions
    attributable to agricultural activities. Data will support natural
    resource inventory and monitoring programs.
        Auburn, AL, $400,000.--Determine the extent of emissions or
    sequestration of greenhouse gases associated with various tillage
    systems, with and without cover crops, and develop soil management
    systems which mitigate against adverse effects of climate change on
    soil ``health''.
        Temple, TX, $300,000.--Determine how a changing climate and rising
    concentrations of atmospheric greenhouse carbon dioxide alter the
    carbon cycle on rangelands with emphasis on rates of accumulation of
    carbon in vegetation and soils.
        Beltsville, MD, $300,000.--Determine the effects of elevated
    atmospheric carbon dioxide levels, rising temperatures, and their
    interaction on physiological and other factors which influence the
    ability of weeds to reduce crop yields under multiple weed management
    systems.
        Gainesville, FL, $400,000.--Determine how water table management
    and other management options can be manipulated to reduce methane
    emissions and avoid yield losses due to elevated temperatures in rice
    and sugar cane.
        Tucson, AZ, $300,000.--Develop basin-scale simulation models of
    soil-vegetation-atmospheric fluxes of water and energy suitable for
    testing of proposed approaches to mitigation of climate change effects
    on the function and productivity of grazed, semi-arid watersheds.
    South Florida Ecosystem Restoration--$750,000
        Miami, FL, $250,000.--Develop farm-scale model to assess water
    quantity and quality for the Everglades restoration plan and assist
    action agencies and farmers in selection of Best Management Practices.
        Ft. Lauderdale, FL, $500,000.--Evaluation of natural enemies and
    assessment of approved natural enemies for Melaleucacontrol including
    economic and environmental impact assessment of control measures.
                   objective ii: plant sciences--$11,300,000
    Emerging Infectious Diseases--$2,300,000
    --Emerging Plant Diseases ($1,100,000)
        Beltsville, MD, $300,000.--Identify, characterize, and develop the
    systematics and taxonomy of bunt and smut fungal pathogens.
        St. Paul, MN, $300,000.--Characterize the ecology and epidemiology
    of wheat scab and improve the genetic resistance of wheat to scab
    through conventional breeding and introduction of alien germplasm.
        Ithaca, NY, $250,000.--Characterize potato late blight development
    and develop integrated control strategies.
        College Station, TX, $250,000.--Characterize the biology, ecology,
    and epidemiology of sorghum ergot and develop disease management
    strategies.
    --Biological Control of Existing Weed Infestations ($600,000)
        Albany, CA, $300,000.--Evaluate insect biological control agents to
    enable effective suppression of Western invasive weeds.
        Montpellier, France, $300,000.--Collect, characterize, and process
    exotic microbial biological control agents in Eurasia.
    --Combating New and Emerging Noxious Weed Pests ($300,000)
        Weslaco, TX, $300,000.--Develop remote sensing technology to
    identify new or expanding weed infestations at early stages.
    --Integrated Management and Maintenance of Lands ($300,000)
        Reno, NV, $300,000.--Develop knowledge of natural stand renewal
    processes to maximize the reestablishment of desirable native grass and
    forage species following control of introduced weeds on rangelands and
    riparian areas.
    Environmental Quality and Natural Resources--$5,500,000
    --Development of Biologically-Active Compounds to Replace Hazardous
            Agricultural Chemicals ($2,600,000)
        Gainesville, FL, $300,000.--Identify plant emitted volatiles that
    naturally attract beneficial insects to control crop pests.
        Oxford, MS, $300,000.--Develop safe natural product-based algacides
    to selectively remove blue green algae from catfish ponds and eliminate
    the problem of off flavor.
        Headquarters, $2,000,000.--Competitively awarded grants to develop
    alternatives to Methyl Bromide.
    --IPM and Areawide IPM ($1,400,000)
        Beltsville, MD, $250,000.--Develop a molecular systematic
    entomology program to support pest and natural enemy taxonomic
    identification and characterization for ARS and APHIS implementation
    programs.
        College Station, TX, $250,000.--Develop new/improved areawide IPM
    technology in support of the boll weevil eradication program now being
    conducted by APHIS and grower run foundations.
        Stoneville, MS, $250,000.--Develop mass propagation technologies of
    beneficial insects for control of arthropods and weed pests, such as
    lygus bugs and leafy spurge.
        Beltsville, MD, $250,000.--Develop technologies for management of
    Entomopharga Maimaiga a fungal pathogen of the gypsy moth in support of
    the Forest Service's ``slow-the-spread'' initiative.
        Columbia, MO, $400,000.--Develop pesticide resistant natural
    enemies in support of new augmentative biological control programs
    targeting significant insect and weed pests.
    --USDA Office of Pest Management ($1,500,000)
        Headquarters, $1,500,000.--Provide coordinated approach to minor
    use pesticides; interact with grower groups, and EPA; and provide more
    rapid response of FQPA data analysis needs.
    Genetic Resources--$3,500,000
    --Food Genome Initiative ($2,500,000)
        Pullman, WA, $275,000.--Identify genetic Loci in scrapie and other
    TSE.
        Geneva/Ithaca, $600,000.--Curate genome data bases for NY tomato-
    potato, and apple-prome fruits. Sequence rice expressed sequence tags
    and curate them and other information in rice genome data base.
    Coordinate effort with Japanese rice mapping andsequencing programs.
    Reconcile rice map with those for maize-sorghum, and wheat-barley-oats.
        Albany, CA, $600,000.--Sequence wheat, barley, and oat expressed
    sequence tags, and manage them and other information in genome data
    bases. Reconcile maps with those for maize-sorghum and rice.
        Columbia, MO, $500,000.--Maintain and manage genome data base for
    maize and sorghum. Sequence a select number of maize expressed sequence
    tags (probably 200,000 or fewer). Reconcile maize-sorghum maps with
    those for rice and wheat-barley-oats.
        E. Lansing, MI, $275,000.--Identify quarantine trail loci for
    disease and production traits in poultry.
        Ames, IA, $250,000.--Sequence soybean, expressed sequence tags, and
    manage them and other information in soybean genome data bases.
    Reconcile soybean maps with those for other legumes, e.g. peanuts, dry
    beans, alfalfa.
    --Expansion of the Animal Germplasm Repository Program ($500,000)
        Headquarters, $500,000.--Develop GRIN (Genetic Resources
    Information Network) data base for animals.
    --Expansion of Microbial/Insect Genetic Resources Management Programs
            ($250,000)
        Peoria, IL, $250,000.--Evaluate collections of yeast and fungi for
    improved agricultural and industrial applications for food and medicine
    utilizing new technologies of genetic analysis.
    --Preservation of Plant Genetic Resources ($250,000)
        Urbana, IL, $250,000.--Acquire collections of genetic stocks of
    maize endangered because of the death or retirement of researchers, and
    improve genetic stocks by introgressing mutants into superior, adapted
    inbred lines.
                  objective iii: animal sciences--$14,700,000
    Emerging Infectious Diseases--$3,700,000
    --Emerging Exotic Infectious Diseases of Livestock ($1,300,000)
        Ames, IA, $300,000.--Johne's disease.
        Pullman, WA, $300,000.--Develop molecular markers and improved
    diagnostic tests to prevent importation of exotic tick-borne diseases
    of livestock.
        Athens, GA, $500,000.--Develop molecular vaccines and immune
    modulatory strategies to prevent outbreaks and spread of exotic poultry
    diseases, such as avian influenza.
        Headquarters, $200,000.--Build U.S. expertise in emerging diseases
    through joint international collaboration to develop new diagnostic
    tests and control strategies for exotic pathogens of livestock.
    --Emerging Domestic Infectious/Zoonotic Diseases of Livestock
            ($2,400,000)
        Laramie, WY, $600,000.--Develop control strategies for arbo-viral
    diseases of livestock, such as vesicular stomatitus, bluetongue and
    related viruses which prevent U.S. livestock exports.
        Ames, IA, $300,000.--Develop improved vaccine control strategies to
    prevent porcine reproductive and respiratory syndrome (PRRS), and gain
    an understanding of the epidemiology of the disease.
        Ames, IA, $300,000.--Identify causes and develop interventions for
    emerging swine enteric diseases, such as transmissible gastroenteritis.
        Beltsville, MD, $600,000.--Develop integrated control strategies to
    enhance immunity in livestock to drug resistant parasites.
        Ames, IA, $300,000.--Develop improved diagnostic tests for
    tuberculosis in wildlife and develop novel vaccines.
        Pullman, WA, $300,000.--Investigate the role tick-borne rickettsial
    bacteria as the cause of abortion in cattle.
    Preharvest Food Safety--$3,500,000
    --Preharvest Food Safety ($3,500,000)
        Beltsville, MD, $900,000.--Develop new disinfection methods and
    farming systems for improved sanitation of animal production
    facilities, and effective animal waste handling systems that will
    prevent the transmission of bacterial and parasitic pathogens to food
    producing animals and food crops.
        Peoria, IL, $300,000.--Determine how plants and Fusarium fungi
    interact during the infection and toxin production processes and how
    the fungi maintain resistance to their own toxins in order to develop
    tools to interfere with the infection process and production of the
    mycotoxins, such as deoxynivalenol (DON).
        College Station, TX, $500,000.--Develop techniques for manipulating
    the microbial ecology of the intestinal tract of agricultural and
    aquaculture animals to prevent the development of antibiotic
    resistance, particularly competitive exclusion techniques (probiotics).
        Clay Center, NE, $300,000.--Develop information on the dynamics and
    ecology of foodborne zoonotic pathogen transmission in cattle and their
    environment in order to prevent initial colonization of plants and
    animals.
        Ames, IA, $300,000.--Develop information on the dynamics and
    ecology of foodborne zoonotic pathogen transmission in swine and their
    environment in order to prevent initial colonization of plants and
    animals.
        Athens, GA, $300,000.--Develop information on the dynamics and
    ecology of foodborne zoonotic pathogen transmission in poultry and
    their environment in order to prevent initial colonization of plants
    and animals.
        Clay Center, NE, $300,000.--Correlate production practices and
    transportation systems used for cattle with post processing
    contamination of food products.
        Ames, IA, $300,000.--Correlate production practices and
    transportation systems used for swine with post processing
    contamination of food products.
        Athens, GA, $300,000.--Correlate production practices and
    transportation systems used for poultry with post processing
    contamination of food products.
    Preharvest Food Safety (Presidential Initiative)--$4,500,000
        Athens, GA, $500,000.--Develop methods to identify pathogens as
    they are found in animal waste, define their survival characteristics,
    and develop methods to handle and treat poultry manure during
    production in order to preclude transmission of pathogens to land and/
    or crops for human food.
        Athens, GA, $500,000.--Develop methods to handle manure on crop
    lands that will prevent transmission of pathogens to run off and
    irrigation waters, crops and to food producing animals.
        Albany, CA, $500,000.--Develop methods to identify pathogens as
    they are found in animal waste, and to define their survival
    characteristics, so that systems for sanitation to kill these pathogens
    can be developed for production facilities, particularly those of
    cattle and swine, to prevent their transmission to human foods.
        Riverside, CA, $500,000.--Define the survival and transport of
    pathogens from animal manures on crop lands in order to develop methods
    that will prevent their transmission to irrigation and drinking waters,
    crops and food producing animals.
        Beltsville, MD, $700,000.--Develop livestock and crop production
    systems to reduce nutrients and minerals that affect algal blooms.
        New Orleans, LA, $650,000.--Identify the life history states of
    major species oftoxic algae, determine what factors control transitions
    between stages, and establish the role of stages in bloom dynamics in
    order to form the basis for effective control measures.
        West Lafayette, IN, $650,000.--Develop knowledge of animal behavior
    and combine with that of other sciences (animal physiology, immunology,
    and microbiology) to develop methods for producers to use to help
    assure that animals, including poultry, will arrive for slaughter
    following transport with fewer pathogens.
        Ames, IA, $500,000.--Develop knowledge of animal physiology,
    immunology, and microbiology and combine with that of animal behavior
    to develop methods for producers to use to help assure that food
    producing species will arrive for slaughter following transport with
    fewer pathogens.
    Environmental Quality and Natural Resources--$2,000,000
    --Livestock Management Systems ($2,000,000)
        Ames, IA, $600,000.--Identify components of swine diets that
    influence odor, and identify alternatives that can reduce odor from
    production environments.
        Ames, IA, $600,000.--Identify microbial populations responsible for
    the generation of major components of volatile odor compounds in fresh
    and stored manure.
        Ames, IA, $500,000.--Determine dietary fracture and feed management
    practices affecting entire microbial populations contributing to
    volatile organic odors.
        Ames, IA, $300,000.--Develop and evaluate environmental computer
    models to predict movement of volatile organic compounds from
    production facilities and manure store areas.
    Watershed Health/Pfiesteria Research--$1,000,000 ($1,000,000 under
            Objective I)
    --Aquatic Ecology and Aquaculture ($1,000,000)
        Auburn, AL, $250,000.--Develop immunological reagents and rapid
    presumptive tests to detect and monitor anti-Pfiesteria antibodies and
    antigens in menhaden and other species of cultivated and wild fish to
    determine exposure to Pfiesteria.
        Auburn, AL, $250,000.--Develop and apply specific mono-clonal
    antibodies to identify and detect different species, strains, and life
    history stages of Pfiesteria and Pfiesteria-like organisms.
        New Orleans, LA, $250,000.--Determine the effects of agricultural
    nutrients,including interactions between specific nutrients and other
    water quality parameters, on outbreaks and toxicity of Pfiesteria and
    Pfiesteria-like organisms.
        Auburn, AL, $250,000.--Develop and apply immunodetection methods
    for epidemiological studies of coastal areas affected by Pfiesteria and
    Pfiesteria-like organisms.
          objective iv: commodity conversion and delivery--$9,970,000
    Postharvest Food Safety--$3,470,000
    --Postharvest Food Safety ($2,220,000)
        Athens, GA, $300,000.--Develop an understanding of the etiology of
    multidrug antibiotic resistance, including site specific integration
    into multidrug resistant plasmids using DNA integrons and elucidate
    factors in animal and plant production systems that influence the
    development of resistance.
        Wyndmoor, PA, $300,000.--Determine how microorganisms associated
    with foodborne disease become tolerant to various types of
    antimicrobials and to traditional food safety safeguards, such as heat
    or cold, low pH, high salt, and disinfectants, and elucidate factors in
    processing environments that influence the development of resistance.
        Wyndmoor, PA, $400,000.--Develop alternatives to traditional heat-
    based preservation technologies that will achieve adequate pathogen
    control while preserving the freshness qualities of fruits and
    vegetables.
        Beltsville, MD, $300,000.--Develop accurate user friendly detection
    methods for Cryptosporidia, Toxoplasma, and Cyclospora in animal- and
    plant-based foods.
        Athens, GA, $300,000.--Develop microbial sampling technologies to
    more accurately estimate true pathogen burden of food products for
    HACCP.
        Wyndmoor, PA, $320,000.--Develop computerized expert systems based
    on food pathogen inactivation and survival in order to evaluate both
    food processing systems and process controls.
        Wyndmoor, PA, $300,000.--Develop sensors to place on food products
    that will alert processors and consumers of products not stored safely.
    New Technology to Maintain Safety/Quality of Fresh Fruits/Vegetables
            ($1,250,000)
        Albany, CA, $600,000.--Develop knowledge of the attachment and
    detachment properties of pathogens on various fruits and vegetables.
        Beltsville, MD, $300,000.--Develop new handling systems and
    pathogen decontamination technology, including disinfectants and
    terminal pasteurization procedures for use in conjunction with packing,
    storing and/or processing of fresh fruits and vegetables to maintain
    their beneficial attributes.
        Wyndmoor, PA, $350,000.--Develop new handling systems and pathogen
    decontamination technology, including disinfectants and terminal
    pasteurization procedures for use in conjunction with packing, storing,
    and processing of fresh fruits and vegetables to maintain their
    beneficial attributes.
    Postharvest Food Safety (Presidential Initiative)--$2,500,000
        Beltsville, MD, $500,000.--For whole and minimally processed
    produce define the dose and conditions of treatment for both chemical
    and physical agents and technologies which will assure both
    microbiological safety and product quality in a cost effective process,
    and provide the necessary support for regulatory approvals.
        Albany, CA, $500,000.--For whole and minimally processed produce
    define the dose and conditions of treatment for both chemical and
    physical agents and technologies which will assure both microbiological
    safety and product quality in a cost effective process, and provide the
    necessary support for regulatory approvals.
        Fargo, ND, $500,000.--Identify and quantify toxins for algae, and
    develop methods for their detection and quantification in both human
    and animal food sources in order to help producers prevent their
    occurrence.
        Ames, IA, $500,000.--Develop reproducible, sensitive, and accurate
    laboratory tests to detect viruses of food safety concern by combining
    the necessary basic biological information about the viruses with the
    newer biotechnology being used for detection and differentiation of
    bacterial and animal genetic material.
        Athens, GA, $500,000.--Develop reproducible, sensitive, and
    accurate laboratory tests to detect viruses of food safety concern by
    combining the necessary basic biological information about the viruses
    with the newer biotechnology being used for detection and
    differentiation of bacterial and animal genetic material.
    Global Change/Biomass for Energy--$4,000,000
    --Improve and Expand Feedstocks ($3,000,000)
        Lincoln, NE, $600,000.--Develop improved varieties and management
    practices for producing switchgrass and other promising grass species
    for conversion to ethanol or for combusting to produce electricity.
        Madison, WI, $600,000.--Develop processes and machinery for
    harvesting, transporting, and storage of crop residues and dedicated
    energy crops, and to develop processes for biomass separation into
    efficient energy and coproduct streams.
        St. Paul, MN, $600,000.--Develop improved varieties and management
    practices for producing alfalfa and other promising legume species for
    conversion to ethanol or for combusting to produce electricity.
        Tifton, GA, $600,000.--Develop more productive varieties and
    improved management practices for switchgrass and other grasses with
    potential for conversion to ethanol or combustion to produce
    electricity.
        Mississippi State, MS, $600,000.--Develop persistent and productive
    legume/grass mixtures for biofuel production, which minimize nutrient
    inputs and energy requirements for nitrogen fertilizer production and
    application.
    --Increase Biofuel and Biochemical Conversion Efficiency ($1,000,000)
        Peoria, IL, $1,000,000.--To accelerate work to develop efficient
    processes for converting crop cellulose and hemicelluloses to ethanol,
    and to develop high-valued coproducts that will substitute for
    petrochemical derived industrial products.
                   objective v: human nutrition--$10,500,000
    Presidential Initiative--$10,500,000
    --Nutrient--Gene Interactions ($2,400,000)
        Boston, MA, $300,000.--Determine the regulation of the synthesis of
    fatty acids in response to oxidative stress and how the regulation is
    responsive to diet.
        Little Rock, AR, $900,000.--Determine the precise relationship
    between nutrients in the diet and the development of cognition
    inchildren at the molecular level.
        Grand Forks, ND, $650,000.--Identify the regulatory genes that are
    responsive to trace minerals in the diet with the aim of determining
    the regulatory genes of importance.
        Houston, TX, $550,000.--Genetic evaluation of fat metabolism in
    children.
    --Diet and Immune Function ($1,400,000)
        San Francisco, CA, $500,000.--Define the relationship between
    nutrition and the induction of the synthesis of immunoglobulins.
        Boston, MA, $250,000.--Determine changes in the immune response
    that occur throughout the aging process and determine if dietary
    antioxidants can delay or prevent such changes.
        Beltsville, MD, $250,000.--Define the role of phytonutrients to
    increase the immune response by looking at the induction of T-cell
    lymphocytes in response to foods of plant origin.
        Little Rock, AR, $400,000.--Determine foods in the diets of young
    children that have a positive effect on growth and development.
    --Role of Nutrition throughout the Life Cycle ($1,550,000)
        Houston, TX, $1,000,000.--Define the relationship of nutritional
    status at various stages of childhood to the long term needs for
    nutrients and the risk of nutritionally related diseases.
        Boston, MA, $550,000.--Develop an understanding of the relationship
    between diet and the development of vascular dementia in the elderly.
    --Update the National Nutrient Databank ($650,000)
        Beltsville, MD, $650,000.--Utilize key foods approach to update the
    National Nutrient Databank by analyzing the nutrient content of those
    foods that supply the bulk of the important nutrients in the American
    diet.
    Diet and Human Performance--$2,400,000
        Beltsville, MD, $500,000.--Adapt or develop methods for measuring
    the emerging class of putative phytonutirents which considers regional,
    seasonal, and maturity at harvest and can be used in field-evaluation
    of dietary patterns of health.
        San Francisco, CA, $750,000.--Define specific effects of energy
    intake on the impact of protective factors in foods on human
    performance.
        Little Rock, AR, $400,000.--Define material on child dietary
    components that affect cognitive development in children.
        Houston, TX, $250,000.--Study ethnic differences in the effect of
    diet on body composition in children.
        Grand Forks, ND, $500,000.--Establish influence of mineral-
    containing or mineral-influenced phytonutrients on marker for human
    performance.
    Increasing the Scope of Food Nutrition Survey Efforts--$850,000
        Beltsville, MD $550,000.--Expand the scope of the Continuing Survey
    of Food Intakes by Individuals to include the NHANES measures
    ofbiological/functional indicators of nutritional status within
    individuals.
        San Francisco, CA, $300,000.--Assess the biological impact of the
    food assistance program to improve the cost-effectiveness of proper
    dieting.
    Development of Food Consumption Methods--$1,250,000
        Beltsville, MD, $500,000; Boston, MA, $250,000; Little Rock, AR,
    $500,000.--Develop analytical methods that will be used to determine
    the concentration of phytonutrients in food. Efforts will concentrate
    onthose components suspected of having health promoting properties,
    particularly in carotenoids, flavonoids, glucosinylates and phenolic
    compounds.
        Note.--In fiscal year 1998, an appropriation of $5 million was
    provided to conduct a supplemental children's survey to the current
    1994-96 Continuing Survey of Food Intakes by Individuals (CSFII). In
    fiscal year 1999, ARS recommends the use of these resources as follows:
        Beltsville, MD, $1,500,000.--Increase the CSFII sample size to
    include population groups that will require special attention as
    pesticide registration decisions are made under the Food Quality
    Protection Act.
        Little Rock, AR, $450,000.--Identify markers of nutritional well-
    being for use in epidemiological evaluations of disease risk.
        Little Rock, AR, $250,000.--Elucidate roles of phyto- and
    micronutrients in improving cognitive development.
        Boston, MA $450,000.--Examine the roles of anti-oxidants in
    maintaining cognitive function in the elderly.
        Boston, MA, $250,000.--Conduct epidemiological studies focused on
    the nutritional factors needed to prevent or delay diseases associated
    with aging, such as Alzheimer's disease, cardiovascular disease, and
    cancer.
        Grand Forks, ND, $700,000.--Determine biological functions of ultra
    trace elements, such as boron, aluminum, and manganese.
        San Francisco, CA, $700,000.--Improve the understanding of
    relationships between diet and chronic disease by evaluating commonly
    consumed phytonutrients' roles in minimizing oxidative damage and
    reducing cancer risk.
        Houston, TX, $700,000.--Determine how nutrients and other dietary
    constituents, including phytonutrients, act to turn on the synthesis of
    proteins that are required for metabolism as an essential step in
    developing meaningful dietary advice.
                       emerging diseases and exotic pests
        Question. The fiscal year 1999 budget proposes a $6 million
    increase for emerging diseases and exotic pests. What is now being
    spent for research on emerging diseases and exotic pests?
        Answer. Emerging diseases and exotic pests are an increasing
    problem in the United States. USDA believes that this problem is linked
    to expanding intercontinental transport of goods and people, and that
    we should anticipate further increases in the rate of emerging diseases
    and exotic pests in the future. In fiscal year 1998, ARS is spending
    $5,244,800 on emerging diseases and exotic pests of plants in addition
    to what is being spent on these pest problems through research reported
    under Areawide Integrated Pest Management (IPM) and IPM component
    research.
        Question. Please provide for each of fiscal years 1997 and 1998 a
    summary of the funding provided and a brief description of the research
    funded and where it is being conducted.
        Answer. A summary of the funding, research and research locations
    for fiscal years 1997 and 1998 will be provided for the record.
        [The information follows:]

    ------------------------------------------------------------------------
                                                     Fiscal year--
                Research area            -----------------------------------
                                                1997              1998
    ------------------------------------------------------------------------
    Vomitoxin/Fusarium Head Blight......          $275,100        $1,273,500
    Karnal Bunt.........................           218,100           714,200
    Citrus Tristeza.....................     \1\ 1,513,700     \1\ 2,457,100
    Ergot Disease in Sorghum............  ................       \2\ 300,000
    Asian Longhorn Beetle...............  ................           500,000
                                         -----------------------------------
          Total.........................         2,006,900         5,244,800
    ------------------------------------------------------------------------
    \1\ In fiscal year 1997, Total includes a Specific Cooperative Agreement
      with the University of Florida ($386,000). In fiscal year 1998,
      approximately $1.1 million will be used to fund competitive research
      proposals.
    \2\ Total includes Specific Cooperative Agreements with Texas A&M
      University ($80,000) and Kansas State University ($30,000).

    Vomitoxin/Fusarium Head Blight
        Peoria, IL.--1997 and 1998, Scientists in Peoria are characterizing
    the genetics and biosynthesis of vomitoxin, and studying the biological
    control of vomitoxin production.
        St. Paul, MN.--1997, Scientists in St. Paul are characterizing the
    genetic resistance and identification of genes involved in head blight.
        St. Paul, MN.--1998, Scientists in St. Paul are continuing the
    research begun in 1997 and are initiating a $500,000 extramural program
    to support a national consortium to enhance plant germplasm to limit
    disease and toxin production. This research is being conducted to
    describe disease development and spread, and to develop new control
    strategies. With an additional $500,000 appropriation, scientists at
    St. Paul will initiate research to evaluate the epidemiology of this
    disease, and describe pathogen ecology and pathotype variability.
    Karnal Bunt
        Frederick, MD.--1997 and 1998, Scientists in Frederick are
    conducting research on pathogen characterization, detection, and
    identification, and on disease epidemiology under field conditions.
        Manhattan, KS.--1998, Scientists in Manhattan are evaluating the
    genetics of host plant resistance, and are conducting studies on the
    enhancement of host plant germplasm.
    Citrus Tristeza
        Fresno, CA.--1997 and 1998, Scientists in Fresno are conducting
    studies on disease epidemiology and identification of management
    strategies for tristeza under California production conditions.
        Orlando, FL.--1997 and 1998, Scientists in Orlando are conducting
    studies on virus characterization, germplasm enhancement, disease
    control strategies, pathogen detection/identification methods, and
    virus-vector relationships.
        Beltsville, MD.--1997 and 1998, Funds are used to maintain a
    worldwide collection of citrus tristeza virus strains. In 1998, the
    operation of the collection activities were increased and Headquarters
    held funds ($500,000) are being used to support intramural and
    extramural competitive grants program that is addressing priority
    research objectives of the citrus tristeza problem.
    Ergot Disease in Sorghum
        Beltsville, MD.--1998, Headquarters held funds ($300,000) are
    temporarily being allocated to: Mayaguez, PR, for research on chemical
    control, disease epidemiology, and germplasm evaluation and enhancement
    of Ergot resistant varieties; to Lincoln, NE, for pathogen detection
    and monitoring, evaluation of disease spread, and to determine
    alternate host plants; and to Frederick, MD, for research on pathogen
    variability.
    Asian Longhorn Beetle
        Newark, DE.--1998, Research is being conducted under both field and
    quarantine laboratory conditions on basic beetle biology, detection
    sampling, and control methodologies, including cultural and biological
    control. A Specific Cooperative Agreement was developed with the
    Department of Entomology at Cornell University to assist in this
    research effort.
        Beltsville, MD.--1998, The ARS Insect Chemical Ecology Laboratory
    is conducting research on pheromone isolation and characterization to
    enhance field detection and sampling. The Systematics Entomology
    Laboratory is working cooperatively with the Department of Entomology
    at Cornell University to conduct research on beetle systematics, basic
    biology and pest identification methods.
        Question. Of the $6 million increase proposed for fiscal year 1999,
    $3.7 million is proposed to be used to enhance the development of
    diagnostic tests, vaccines, and other immune strategies that prevent
    outbreaks and spread of exotic and zoonotic diseases, and pathogens.
    Please indicate for each of fiscal years 1997 and 1998 the research
    being funded in each of these areas and describe the progress we have
    made to date and why additional funds are required.
        Answer. ARS has funded exotic and domestic animal disease research
    at a level of $40,590,800 for fiscal year 1997 and $39,943,900 for
    fiscal year 1998, respectfully. New funding is urgently needed because
    a number of new disease issues have emerged that are negatively
    impacting livestock production in the U.S. or have the potential to be
    introduced into the U.S. as exotic animal diseases. Recent outbreaks in
    1995 and 1997 of the vector-borne disease vesicular stomatitis has cost
    approximately $100 million. Tick-borne parasitic diseases and arbo-
    viral vector-borne diseases restrict U.S. export markets. Porcine
    reproductive respiratory syndrome (PRRS) emerged in the U.S. during the
    1990's and is now considered the most important disease constraint for
    swine production. New variants of the PRRS virus caused major disease
    losses in 1997 in the Midwest. The emergence of several zoonotic
    diseases in wildlife such as tuberculosis and brucellosis pose new
    barriers to disease eradication in several states. The 1997 emergence
    of diseases such as foot and mouth disease (FMD) in Taiwan, hog cholera
    in Europe, and avian influenza in poultry in Hong Kong have each cost
    billions of dollars to animal agriculture in the respective countries
    where these diseases emerged. Bovine spongiform encephalopathy (BSE) in
    Great Britain and Europe continues to be a trade barrier issue. In
    summary, because of the emergence of new diseases within the borders of
    the U.S. and new disease outbreaks abroad, there is an urgent need for
    the U.S. to invest in animal disease research in order to protect our
    animal industries. Improved methods of disease prevention will enable
    U.S. livestock industries to provide the safest and most disease free
    livestock and livestock products in the world. This will lower
    production costs and allow the U.S. to continue to gain competitive
    advantages in international trade markets.
        Highlights of progress made to date in animal infectious disease
    research are listed below:
        Scrapie is now an endemic disease in sheep in the U.S. ARS
    scientists developed a non-invasive preclinical diagnostic test that
    will help the United States Sheep Industry significantly reduce the
    risk of infection from scrapie in their herds. A voluntary ``scrapie
    free'' flock certification has been established.
        ARS scientists developed and evaluated a new vaccine strain of
    Brucella (RB51) that protects cattle from brucellosis and does not
    produce false-positive results in brucellosis screening tests, and
    preliminary efficacy studies show the vaccine to be effective in bison
    calves. However, the vaccine proved to be unsafe in pregnant bison,
    causing abortions after it was administered. Adaptation of the cattle
    vaccine for use in pregnant bison would significantly enhance efforts
    to control and eradicate brucellosis in bison.
        ARS researchers used polymerase chain reaction (PCR) technology to
    identify the mycobacterium that causes TB in tissues submitted for
    pathologic examination. The PCR technique will benefit not only the TB
    eradication program but also will provide a significant contribution to
    agencies that must assess potential public health risks posed by the
    presence of mycobacterial infections in animals.
        ARS scientists at the Plum Island Animal Disease Center, Greenport,
    Long Island, New York, have cloned the genes responsible for FMD viral
    proteins and expressed them in a non-infectious vector thus providing a
    safe source of reagents for a new diagnostic test. The availability of
    this type of test will reduce the risk of international trade of
    animals from countries free from FMD that still practice vaccination,
    as well as in the effective use of FMD vaccines for control strategies
    in the event of an outbreak in the U.S.
        ARS scientists have tested two vaccine technologies using genetic
    material from the hemagglutinin gene of the H5 influenza virus. Both
    vaccines provided protection against illness and death from deadly
    strains of H5 avian influenza virus. The vaccines will provide a tool
    for use by the poultry industry and APHIS to be used in an overall
    eradication strategy emphasizing quarantine, biosecurity and
    controlled-slaughter.
        ARS scientists developed a polymerase chain reaction (PCR) test
    that detects one form of Avian Leukosis virus-subgroup J in blood and
    other tissues of affected chickens. Using the PCR test, broiler breeder
    companies will be able to determine the incidence of this new virus
    infection in their breeder flocks. Additional PCR tests are needed to
    detect other strains of the virus.
        ARS scientists have shown that Culicoides variipennis, a small
    biting midge, transmitted vesicular stomatitis virus to a vertebrate
    host. The understanding of the role of insects in disease transmission
    is essential to the U.S. ability to protect animals, humans, and U.S.
    agriculture against emerging pathogens.
        ARS found a protein in bluetongue virus that binds to a protein in
    the insect vector species. This virus protein provided a first
    demonstration that the insect and animal host interact with this virus
    by different mechanisms. Blocking the attachment of the protein with
    this vector provides a new strategy that may prove useful in
    interrupting transmission.
        ARS developed an electrostatic space charge supplier that removes
    about 95 percent of dust and airborne bacteria, such as Salmonella.
    Hatching cabinets are known to be one of the primary sources for
    Salmonella contamination of poultry. This system greatly reduces the
    need for chemical disinfectants, could greatly reduce cleanup and
    disinfection time, and is effective for dust control in other types of
    poultry environments.
        ARS scientists developed a customized live vaccine to protect birds
    from losses due to coccidiosis and have shown that bird performance is
    comparable to birds which are drug treated. So far, over 60 million
    birds have been treated with this ARS technology. This breakthrough is
    a major contribution in eliminating the need for chemicals in
    production of poultry. In addition, coccidiosis in chickens develop
    resistance to chemicals used for control.
        Preempt, a new product created by ARS scientists, significantly
    reduces the potential of Salmonella contamination in broiler chickens.
    This new product preempts the growth of Salmonella in chicken
    intestines by introducing a blend of 29 live, non-harmful bacteria
    naturally present in healthy adult chickens. The newly developed
    mixture can be sprayed in a mist over newly hatched chicks to give them
    the protection necessary to significantly reduce potentially dangerous
    Salmonella in the chicken Americans eat. Preempt is the successful
    result of the public-private partnership where USDA patented the
    mixture and granted a private company a licensing agreement to market
    the product.
                             food genome initiative
        Question. A $3.5 million increase in the ARS budget is proposed for
    fiscal year 1999 as part of the Food Genome Initiative. Please
    summarize why this funding is important and what you hope to
    accomplish. Is ARS doing any work in this area now or is this a
    completely new undertaking?
        Answer. Among the major challenges facing humankind in the next
    century is the need for substantial increases in the production of high
    quality food. The Food Genome Initiative is an essential part of the
    USDA's and ARS' research strategy to meet that demand. The Initiative
    includes the mapping, identification, and understanding of the function
    and control of genes responsible for economically important traits in
    crops and livestock. ARS now devotes more than $3 million annually to
    support plant genome databases and additional funds for genetically
    mapping of plant and animal species. This has contributed to the
    development of databases for nine crop species. However, there is a
    need to fill in gaps and expand databases on other crops and animal
    species. With the information gained from the genome initiative,
    scientists will be able to develop plants and animals with increased
    production traits such as growth efficiency, disease resistance,
    tolerance to adverse soil and climate conditions and improved
    nutritional quality.
                                  food safety
        Question. A $14 million increase in the ARS budget is proposed for
    fiscal year 1999 for the President's Food Safety initiative. Please
    describe the Total amount of ARS funding now being committed to food
    safety research, where this research is being conducted, what is being
    accomplished, and why additional funds are required.
        Answer. The Total amount of funding for ARS food safety research in
    fiscal year 1998 is $54,949,400.
        This research is being conducted in the following locations:
    Fayetteville, AR; Albany, CA; Athens, GA; Dawson, GA; Tifton, GA; Ames,
    IA; Peoria, IL; New Orleans, LA; Beltsville, MD; Mississippi State, MS;
    Fargo, ND, Clay Center, NE; Ithaca, NY; Wyndmoor, PA; College Station,
    TX; and Logan, UT and Headquarters.
        Accomplishments of the ARS food safety research program are listed
    as follows by subject area:
        Pathogen reduction research program.--To improve detection methods,
    ARS has developed:
        (1) Methods for Campylobacter culture and identification for the
    Food Safety Inspection Service (FSIS).
        (2) A rapid test for detecting E. coli 0157:H7 for use by producers
    and industry.
        (3) Serologic tests to detect animals which have been infected but
    may not be actively shedding E. coli or Salmonella. (4) A single
    procedure Multiplex PCR assay for detection of E. coli 0157:H7 and
    Salmonella.
        (4) PCR and immunohistochemical methods to detect Cryptosporidia.
        Pathogen reduction research program.--To develop prevention
    techniques for pathogen avoidance, reduction, and elimination, ARS has
    demonstrated or developed:
        (1) how infection of E. coli 0157:H7 can occur in neonatal and
    weaned calves, and that it requires 2 factors, intimin and Shiga toxin.
        (2) that viable Cryptosporidia can be transmitted into oysters,
    clams and other aquaculture animals.
        (3) bacterial cultures (preempt) to competitively inhibit
    Salmonella in broiler chicks, and natural substances to enhance the
    immune response in chicks and neonatal swine.
        (4) irradiation procedures to kill Cyclospora on certain fruits and
    vegetables.
        (5) steam pasteurization for poultry to kill pathogens on poultry
    skin.
        (6) information identifying specific equipment materials in poultry
    processing facilities that are conducive to the formation of biofilms
    (bacterial films difficult to remove from surfaces).
        (7) spray scalding procedures to reduce cross contamination in
    poultry processing plants.
        (8) new methods to prevent spillage of fecal matter during initial
    processing and evisceration of poultry.
        (9) a hot water and quick chill (thermoflux) procedure that
    significantly reduces Salmonella incidence in specific, highly
    contaminated pork cuts.
        (10) that Salmonella and Campylobacter are increased during
    transportation of broilers to slaughter and that consumption of litter
    during fasting is a contributing factor.
        (11) that fecal shedding of E. coli 0157:H7 increases in cattle
    that are alternatively fasted and fed.
        (12) that swine carry Salmonella into the slaughter plant, because
    the Salmonella serotypes in trailers used for hauling swine are similar
    to those found in preslaughter holding pens.
        Pathogen reduction research program.--In the area of risk
    assessment, ARS has:
        (1) Helped simplify the use of predictive microbiology in microbial
    risk assessment by updating the USDA Pathogen Modeling Program to the
    Fifth Edition. The models are now available to the public via Internet.
        (2) Targeted the interactions of organic acids and temperature in
    relation to E. coli 0157:H7 for modeling studies, particularly to
    determine the rapidity at which this pathogen can adapt to change.
        (3) Developed a technique, together with an international
    committee, for estimating dose-response curves based on microbiological
    survey and epidemiological data for foodborne pathogens for which
    direct human data is unlikely to be available.
        Drug residues and chemical contaminants research program.--ARS
    research confirmed that levels of regulatory concern of dioxins in
    chickens resulted from ball clay that was added to soybean meal as an
    anticaking agent. Identification of these dioxin sources provides
    producers with the knowledge needed to produce dioxin-free food
    products. Studies of the disposition of the animal drug clenbuterol
    identified metabolites of clenbuterol and determined that they can be
    converted back to the parent drug in the GI tract; this will help to
    evaluate the risk of toxicity to humans. A monoclonal antibody capable
    of binding animal drug hygromycin B was formulated into a rapid ELISA
    assay, a patent issued, and the antibodies licensed to a private test
    kit manufacturing company.
        Research program to prevent mycotoxins.--Specific genetic markers
    were identified in corn which contribute to resistance to both
    Aspergillus colonization and aflatoxin formation. Reporter strains of
    aflatoxin-producing fungi were developed and tested which allowed
    quantification of the amount of fungal invasion in kernels, a critical
    measurement in the assessment of resistance during corn varietal
    development by plant breeders. The reporter strains are also being used
    to detect compounds in corn kernels that modulate aflatoxin production.
    In cotton, genetic engineering has been able to transform embryos with
    antifungal genes to induce resistance to aflatoxin producing fungi.
    With walnut and peanut, ARS has significantly contributed to the
    germline transformation with antifungal genes that will enhance
    resistance to A. flavus in these crops. Biological control with
    competitive non-aflatoxin producing strains of the fungus now shows
    great promise with cotton, corn and peanut. In cotton, continued large-
    scale testing under the EPA Experimental Use Permit in Arizona resulted
    in reduced infection of cottonseed by toxigenic strains and, thus, in
    reduced aflatoxin levels. Experiments in GA with corn showed for the
    first time that biological control with a toxigenic strains of A.
    flavus and A. parasiticus could reduce aflatoxin contamination.
    Additionally, field-grown peanuts from the 1997 drought-stressed crop
    treated with the biocompetitive strains had aflatoxin levels reduced by
    90 percent compared with untreated peanuts. To control the effects of
    Fusarium graminearum and its toxin, deoxynivalenol (DON), in wheat and
    barley, ARS has introduced partial resistance into wheat from lines
    that are more resistant under optimal conditions to the pathogen. The
    toxin, DON, was demonstrated to be a virulence factor for the
    pathogenesis of F. graminearum on wheat, a finding which suggests that
    wheat or barley germplasm with increased resistance to trichothecenes
    might have improved resistance to Fusarium diseases as well. Fungal
    genes that confer resistance to or detoxify DON have been identified
    and will be incorporated into wheat and barley to determine if they
    improve resistance to Fusarium caused head scab diseases.
        Research to control the effects of toxic plants.--A study was
    conducted to quantify swainsonine in tissues of locoweed-poisoned sheep
    and determine the rate of swainsonine clearance from animal tissues.
    Poisoned animals have significant tissue swainsonine concentrations and
    animals exposed to locoweed should be withheld from slaughter for at
    least 28 days to assure that the locoweed toxin has been cleared from
    all animal tissues. Lupine alkaloids have been detected in the blood
    plasma of cattle, sheep and goats after consumption of the lupines.
    Serum elimination times were found to vary for different individual
    alkaloids and measurements will be continued in order to determine
    definitive clearance times. Larkspur is the most important poisonous
    plant problem in cattle in the mountainous regions of the western
    United States.
        Additional funds are being requested to support research
    initiatives to both establish a better biological understanding of
    pathogens and to make possible the technological advances to assure
    food safety and meet the expectations of the American consumer. Food
    safety research must meet the challenge of solving the problems
    resulting from emerging pathogens, changing production practices,
    increased pathogen resistance, increased numbers of food products, and
    poor food storage and preparation practices.
        Question. Of the $14 million increase requested, $8 million is for
    pre-harvest food safety research to design effective control programs
    to prevent the spread of bacteria and parasites from animals to humans
    and to improve post-harvest handling practices for fruits and
    vegetables. Where will this research be carried out?
        Answer. The requested increases for preharvest food safety research
    to design effective control programs to prevent the spread of bacteria
    and parasites between animals and humans will be carried out at the
    following locations: Albany, CA; Riverside, CA; Athens, GA; Ames, IA;
    Peoria, IL; West Lafayette, IN; New Orleans, LA; Beltsville, MD; Clay
    Center, NE; and College Station, TX.
        Question. Are we doing any research in these areas currently? If
    so, what research is being conducted, where is it being carried out,
    and what is its cost?
        Answer. ARS currently carries out food safety research in areas for
    which increases have been requested. Preharvest food safety research is
    currently being conducted at Fayetteville, AR ($297,400); Albany, CA
    ($2,153,200); Athens, GA ($4,937,400); Dawson, GA ($754,800); Tifton,
    GA ($571,400); Ames, IA ($3,367,100); Peoria, IL ($3,384,100); New
    Orleans, LA ($2,972,000); Beltsville, MD ($1,971,700); Mississippi
    State, MS ($677,300); Fargo, ND ($2,024,400); Clay Center, NE
    ($1,588,200); Ithaca, NY ($320,100); College Station, TX ($3,010,600);
    Logan, UT ($1,973,700); and Headquarters ($1,445,000).
        Question. Of the $14 million increase requested, $6 million is for
    post-harvest research in support of the Hazard Analysis and Critical
    Control Point (HACCP) model implemented by the Food Safety and
    Inspection Service. Please describe this research proposal more fully.
        Answer. This proposal provides for research to determine how
    microorganisms associated with foodborne disease become tolerant to
    antibiotics and to traditional food safety safeguards, to develop
    accurate user-friendly detection methods for pathogenic parasites and
    viruses in foods, to develop microbial sampling technologies to support
    HACCP, to develop computerized expert systems to evaluate both food
    processing systems and controls, to develop sensors to alert processors
    and consumers of food products not stored safely, and to develop new
    handling systems and pathogen decontamination technologies to control
    pathogens while preserving the freshness qualities of fruits and
    vegetables.
        Question. Are any research monies being committed to this area
    currently? If so, where is that research being conducted and what is
    its cost?
        Answer. ARS currently carries out food safety research in areas for
    which increases have been requested. Post-harvest research is currently
    being conducted at Albany, CA ($3,876,400); Athens, GA ($3,211,600);
    Peoria, IL ($1,275,700); New Orleans, LA ($104,400); Beltsville, MD
    ($1,886,500); Clay Center, NE ($1,738,500); Wyndmoor, PA ($10,391,100);
    College Station, TX ($806,800); and Headquarters ($210,000).
        Question. Funds were provided to the ARS for fiscal year 1998 for a
    study by the National Academy of Sciences on the scientific and
    organizational needs for an effective food safety system. Please give
    us a status report on this effort. When did the National Academy of
    Sciences receive the funds for the study? Please describe what
    involvement USDA is having in the study, if any.
        Answer. A research agreement between the ARS and the National
    Academy of Sciences was completed on January 13, 1998, which provided
    for the agreement period of performance from January 1, 1998 through
    September 30, 1998. This grant from ARS will provide $420,000 to be
    transferred to the Academy.
        USDA has primarily a consultative and facilitative role in the
    study. USDA participated in the first open meeting of the committee
    (March 23-25, 1998) and will assist in contacting other Federal
    agencies with responsibilities in food safety, and provide information
    as requested by the committee.
                           integrated pest management
        Question. How will the $5.5 million increase requested in the
    budget be utilized by the ARS to reach the Administration's goal of
    encouraging the adoption of IPM practices on 75 percent of the Nation's
    crop land by the year 2000?
        Answer. The funding increase will be utilized by the ARS to support
    the Agency's efforts to develop biologically-based components needed in
    IPM and areawide systems that can be readily adopted by the nation's
    farming community. The agency is committed to reducing the use of
    higher risk pesticides and to promoting IPM, including biological and
    cultural control and other sustainable agricultural practices. The
    funding increase will be specifically targeted at developing
    biologically-active natural compounds ($0.6 million) to attract natural
    enemies for control of crop pests and to control blue-green algae in
    catfish ponds; accelerating development of alternatives to methyl
    bromide by a Competitive Grants Program ($2.0 million); developing
    augmentative biological control and other IPM programs for boll weevil,
    gypsy moth, and weed control ($1.4 million); and to support the new
    USDA Office of Pest Management Policy ($1.5 million) by providing a
    coordinated approach to minor use pesticides and a more rapid response
    to the Food Quality Protection Act data analysis needs.
        The ARS areawide pest management IPM programs are coordinated
    across the USDA agencies, Directors of research and extension in the
    Land Grant system, EPA, and State and private IPM practitioners through
    a Departmental IPM National Coordinating Committee, Regional
    Coordinator Committees and Project Component Coordinating Committees
    with memberships from the Federal and State levels. Additionally, a
    number of research and extension task forces function as coordination
    and communication bodies, not only for the areawide IPM programs, but
    also for other major pest management programs administered by ARS.
    These task forces include representatives from Federal, State and
    private sectors.
                            human nutrition research
        Question. What amount of funding is currently being utilized for
    Human Nutrition Research?
        Answer. The current funding for human nutrition research will be
    provided for the record.
        [The information follows:]

                                 Human Nutrition

            Location                                        Fiscal year 1998
    Arkansas Children's Hospital Research Institute, Little
        Rock, AR............................................      $2,769,500
    Western Human Nutrition Research Center, San Francisco,
        CA..................................................       5,537,500
    Jean Mayer USDA Human Nutrition Research Center on
        Aging, Boston, MA...................................      14,909,000
    Beltsville Human Nutrition Research Center, Beltsville,
        MD..................................................      18,645,200
    Grand Forks Human Nutrition Research Center, Grand
        Forks,
        ND..................................................       8,204,400
    Children's Nutrition Research Center, Houston, TX.......      11,191,700
    National Agricultural Library...........................         675,000
    Lower Mississippi Delta Intervention Research Initiative
        (LA, AR, MS)........................................       3,147,700
    Other Locations.........................................       1,265,000
    Headquarters (Survey of Children's Food Intake).........       5,000,000
                        --------------------------------------------------------
                        ____________________________________________________
          Totals............................................      71,345,000

        Question. Please describe the human nutrition research being
    carried out by each of the ARS Human Nutrition Research Centers and the
    overall objectives of this research.
        Answer. The research carried out by each of the ARS Human Nutrition
    Research Centers and the overall objectives of this research will be
    provided for the record.
        [The information 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. What is an additional $10.5 million required for Human
    Nutrition Research for fiscal year 1999 following the $7.5 million
    increase provided for this research program for fiscal year 1998?
        Answer. The Human Nutrition Initiative is a comprehensive multi-
    year plan for nutrition research, fiscal year 1998-fiscal year 2003 for
    which we request $10.5 million this year. The research of the Human
    Nutrition Initiative will serve all Americans throughout the entire
    lifecycle, from maternal nutrition prior to conception through
    nutrition and the elderly, and includes diverse research strategies
    including molecular, biochemical, metabolic, behavioral, and
    agricultural research techniques. The Nutrition Research Initiative can
    help us reap benefits in terms of reduced health care costs, less
    morbidity and early mortality associated with chronic diseases, and
    improved quality of life. The Initiative harnesses the strengths of
    modern nutrition science and combines them with the fundamental mission
    of the ARS to conduct research that will define relationships between
    diet, genetics, and lifestyle and the risk for chronic disease in order
    to reduce health care costs and enhance health and life quality for
    Americans, improve the scientific basis for more effective Federal
    assistance programs, and generate a more nutritious food supply by
    conducting research that defines the basis for modifying the health
    promoting properties of plant and animal foods.
        Question. How will the $10.5 million requested be allocated, by
    Center, and what research will this additional funding support at each
    of the Centers? Please list the research projects for which increased
    funding is requested in order of priority.
        Answer. The $10.5 million would be allocated to the respective
    Centers to undertake research within the following human nutrition
    initiatives:
    I. Nutrient--Gene Interactions ($2,400,000)
        Boston, MA, $300,000.--Determine the regulation of the synthesis of
    fatty acids in response to oxidative stress and how the regulation is
    responsive to diet.
        Little Rock, AR, $900,000.--Determine the precise relationship
    between nutrients in the diet and the development of cognition in
    children at the molecular level.
        Grand Forks, ND, $650,000.--Identify the regulatory genes that are
    responsive to trace minerals in the diet with the aim of determining
    the regulatory genes of importance.
        Houston, TX, $550,000.--Determine which genes and nutrients
    interact and how they interact to mediate growth and weight gain in
    children.
    II. Diet and Human Performance ($2,400,000)
        Beltsville, MD, $500,000.--Adapt or develop methods for measuring
    the emerging class of putative phytonutrients which considers regional,
    seasonal, and maturity at harvest and can be used in field-evaluation
    of dietary patterns of health.
        San Francisco, CA, $750,000.--Define material on child dietary
    components that affect cognitive development in children.
        Little Rock, AR, $400,000.--Define material on child dietary
    components that affect cognitive development in children.
        Houston, TX, $250,000.--Study ethnic differences in the effect of
    diet on body composition in children.
        Grand Forks, ND, $500,000.--Establish influence of mineral-
    containing or mineral-influenced phytonutrients on markers for human
    performance.
    III. Role of Nutrition throughout the Life Cycle ($1,550,000)
        Houston, TX, $1,000,000.--Define the relationship of nutritional
    status at various stages of childhood to the long term needs for
    nutrients and the risk of nutritionally related diseases.
        Boston, MA, $550,000.--Develop an understanding of the relationship
    between diet and the development of vascular dementia in the elderly.
    IV. Update the National Nutrient Databank ($650,000)
        Beltsville, MD, $650,000.--Utilize key foods approach to update the
    National Nutrient Databank by analyzing the nutrient content of those
    foods that supply the bulk of the important nutrients in the American
    diet.
    V. Diet and Immune Function ($1,400,000)
        San Francisco, CA, $500,000.--Define the relationship between
    nutrition and the induction of the synthesis of immunoglobins.
        Boston, MA, $250,000.--Determine changes in the immune response
    that occur throughout the aging process and determine if dietary
    antioxidants can delay or prevent such changes.
        Beltsville, MD, $250,000.--Define the role of phytonutrients to
    increase the immune response by looking at the induction of T-cell
    lymphocytes in response to foods of plant origin.
        Little Rock, AR, $400,000.--Determine foods in the diets of young
    children that have a positive effect on growth and development.
    VI. Increasing the Scope of Food Nutrition Survey Efforts ($850,000)
        Beltsville, MD, $550,000.--Expand the scope of the Continuing
    Survey of Food Intakes by Individuals to include the NHANES measures of
    biological/functional indicators of nutritional status within
    individuals.
        San Francisco, CA, $300,000.--Assess the biological impact of the
    food assistance program to improve the cost-effectiveness of proper
    dieting.
    VII. Development of Food Composition Methods ($1,250,000)
        Beltsville, MD, $500,000; Boston, MA, $250,000; Little Rock, AR,
    $500,000.--Develop analytical methods that will be used to determine
    the concentration of phyto-compounds in food. Efforts will concentrate
    on those components suspected of having health promoting properties,
    particularly in carotenoids, flavonoids, glucosinylates and phenolic
    compounds.
        Question. What additional funding will be required in each future
    fiscal year, by Center, to meet the objectives of the Administration's
    Initiative on Human Nutrition?
        Answer. The plan for the Administration's Human Nutrition
    Initiative published in the President's fiscal year 1998 Budget, called
    for increases in the research programs at the six human nutrition
    laboratories over the 1998-2002 period. This plan, updated to reflect
    actual 1998 appropriations, is provided for the record. However, as you
    know, budgets are developed on a year-by-year basis and funding
    estimates change based on current budget targets. The fiscal year 1999
    President's Budget, submitted to Congress in February, included an
    additional $10.5 million (for a Total of $18 million) in fiscal year
    1999.
        [The information follows:]

       AGRICULTURAL RESEARCH SERVICE HUMAN NUTRITION INITIATIVE AS PROPOSED IN THE 1998 PRESIDENT'S BUDGET--5-YEAR
                                                         FUNDING
    ----------------------------------------------------------------------------------------------------------------
                                                                                 Fiscal year--
                                                          ----------------------------------------------------------
                                                              1998       1999        2000        2001        2002
                                                            (actual)  (estimate)  (estimate)  (estimate)  (estimate)
    ----------------------------------------------------------------------------------------------------------------
    Beltsville Human Nutrition Research Center (BHNRC)...       $250      $4,200      $7,300     $10,500     $14,000
    Jean Mayer USDA Human Nutrition Research Center on           250       2,300       3,700       5,100       6,000
     Aging (HNRCA).......................................
    Children's Nutrition Research Center (CNRC)..........        500       3,000       5,100       7,100       9,000
    Grand Forks Human Nutrition Research Center (GFHNRC).        250       2,100       3,200       4,300       4,900
    Western Human Research Center (WHNRC)................        250       2,500       4,000       5,400       6,500
    Arkansas Children's Hospital Research Institute......      1,000       3,900       6,700       9,600      12,600
    Headquarters (Survey of Children's Food Intake)......      5,000  ..........  ..........  ..........  ..........
                                                          ----------------------------------------------------------
          Total..........................................      7,500      18,000      30,000      42,000      53,000
    ----------------------------------------------------------------------------------------------------------------

        Question. Will the Administration's Initiative on Human Nutrition
    continue to be funded at the expense of ARS' existing research
    programs?
        Answer. The Human Nutrition Initiative is important. Its
    implementation will be consistent with priorities set by the
    Administration. The Initiative on Human Nutrition complements ARS'
    existing research program. Knowledge about health-promoting foods and
    components of foods can be 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. The National Nutrient
    Databank and the Continuing Survey of Food Intake in Individuals will
    both be strengthened by the Initiative. Both provide information which
    is foundational to agriculture production and food industries.
        Question. For fiscal year 1998, one-time funding of $5 million was
    provided for ARS to conduct a survey on food consumption by infants and
    children. Where is this reduction in funding for the one-year cost of
    this study reflected in the fiscal year 1999 budget?
        Answer. The $5 million allocated to ARS to conduct a survey on food
    consumption by infants and children in fiscal year 1998 was held at
    Headquarters for a one-time allocation to the survey. In fiscal year
    1999, the $5 million will be combined with a proposed increase of $10.5
    million for a Total of $15.5 million to be allocated to the Human
    Nutrition Centers at Boston, MA ($2.05 million), Little Rock, AR ($2.9
    million), Grand Forks, ND ($1.85 million), Houston, TX ($2.5 million),
    San Francisco, CA ($2.25 million), and Beltsville, MD ($3.95 million).
        Question. Please provide the Committee with an update on the
    Dietary Intakes Survey.
        Answer. The final year of data collection was released for the
    1994-96 Continuous Survey of Food Intakes by Individuals (CSFII) and a
    CD-ROM of data for the entire survey was just released. The CSFII has
    been widely praised for its timely release of data, high response rate,
    ease of use of the data, and the quality of the survey. Current efforts
    are underway with a feasibility study directed at developing a new,
    computer assisted telephone interview technology to reduce the costs of
    conducting future surveys by providing an effective alternative to the
    costly on-site interview process. At the same time, data collection has
    begun on the year-long Supplemental Childrens Survey that will be
    combined with the just completed CSFII to provide the sample size
    needed by EPA to comply with the Food Quality Protection Act of 1996.
    ARS plans are to combine the Supplemental Children's Survey with the
    National Health and Nutrition Examination Survey (NHANES) conducted by
    the Department of Health and Human Services whereby food intake data
    can be linked to health status. This combined survey will be consistent
    with the National Nutrition Monitoring and Related Research Act of
    1990.
        Question. Why does the fiscal year 1999 request propose an increase
    of $1.5 million to expand the sample size on the ongoing dietary
    surveys?
        Answer. ARS proposes to reallocate $1.5 million to enhance the
    surveys. The proposed Continuing Survey of Food Intakes by Individuals
    (CSFII) will increase sample size by 2,000 to assess dietary intakes by
    low income populations and populations at risk for disease such as the
    elderly and children. The data will be used by governmental policy
    makers to monitor effectiveness of food assistance programs.
        Question. Why wasn't this expansion of the survey proposed last
    year?
        Answer. Continued support for the survey is an integral part of the
    Human Nutrition Initiative to maintain baseline data on the food
    consumption patterns and to understand their likely impact on health
    and well-being. The proposal to reallocate $1.5 million from the $5
    million 1998 increase for surveys to a specific survey in fiscal year
    1999 is to meet research needs not met by the survey in fiscal year
    1998. Specifically, the survey size will be increased for low income
    populations and populations at risk of disease.
                             environmental research
        Question. An increase of $7 million is requested to support the
    President's Climate Change Technology Initiative. Please explain what
    research ARS will carry out and how this research will complement that
    undertaken by the Forest Service.
        Answer. The $7 million in the request would be utilized in two
    areas: (1) $3 million of the proposed increase would be used to
    accelerate ``Agricultural Practices and Mitigation of Climate Change
    Impacts'' research which focuses on agriculture's opportunities for
    removing carbon dioxide from the atmosphere and storing it in soils as
    organic carbon (carbon sequestration). The Kyoto protocol provides
    credit for sequestering carbon in sinks as a portion of reductions in
    greenhouse gas emissions. Previous research by ARS has demonstrated
    that conservation practices such as the shift from conventional to
    minimum- or no-till systems are very effective in enhancing the uptake
    of soil carbon by the soil and storage in the soil. However, much
    remains to be done to document the various agricultural sinks, and to
    determine the sequestration potential of alternative management
    practices. (2) The remaining $4 million will be used to initiate new
    research under the title ``Biomass for Energy.'' The program's
    objectives are twofold: (1) the development of more productive plant
    materials as sources of fuel (biomass); thus, reducing the use of
    fossil fuels and the associated carbon-producing combustion; and (2)
    the development of more efficient processes for converting plant
    materials like switchgrass to ethanol and high-value chemicals which
    can substitute for petrochemicals in the manufacture of a variety of
    products like coatings, fuel additives, and livestock feed additives.
    This would provide farmers and rural communities with a more
    diversified commodity portfolio by adding energy-producing crops to
    traditional food and fiber production. The research complements that of
    the Forest Service by focusing on the production and utilization of
    highly productive grasses, as opposed to trees, and by developing
    methods for using stalks and other crop residues as a biomass source.
    ARS and the Forest Service cooperated in drafting the initiative, and
    ARS program leaders have begun meetings with their Forest Service
    counterparts to explore coordinated implementation of the research
    program. The research will also be coordinated with the Department of
    Energy.
        Question. Increased funding of $2 million is requested for ARS
    research on the Pfiesteria outbreak in the Chesapeake Bay. Please
    explain ARS' role in this research.
        Answer. The increased funding will be used to develop detection
    methods for Pfiesteria, to determine the effect of Pfiesteria toxins on
    aquaculture and fish production, and to develop specific management
    practices and treatment technologies at the farm and watershed scale to
    protect water quality in order to prevent outbreaks of Pfiesteria and
    other harmful algal blooms. ARS research locations identified for the
    program increase are Beltsville, Maryland; Florence, South Carolina;
    Auburn, Alabama; and New Orleans, Louisiana. The ARS research program
    was developed in coordination with other Federal agencies as part of a
    national research strategy on Pfiesteria and harmful algal blooms. This
    multi-agency strategy was developed in the fall of 1997 through the
    Committee on Environment and Natural Resources of the National Science
    and Technology Council.
        Question. Why is an additional $500,000 requested for Melaleuca
    research for fiscal year 1999?
        Answer. Melaleuca, the Australian paperbark tree, was introduced
    into Florida from Australia at the turn of the century. Well adapted to
    wetland areas, it escaped cultivation and now occupies about 1.5
    million acres, and expands at a rate of about 50 acres per day. In the
    wild, Melaleuca displaces native wetland vegetation in the Everglades
    and other areas/waterways of south Florida, where damage from this tree
    is estimated at $168 million per year. Herbicidal and mechanical
    control of Melaleuca have proven ineffective in many situations,
    particularly for long-term control. ARS believes that biological
    control may provide the best option for sustainable management of
    Melaleuca. Although ARS has identified several potential biological
    control agents of this pest, safety testing, release and evaluation of
    these agents requires significant additional scientific research. The
    first biological control agent for Melaleuca, the weevil, Oxyops
    vitosa, was released in April 1997 following detailed quarantine tests
    that documented both the safety and effectiveness of this agent.
    Although the weevil is established and is beginning to cause damage to
    Melaleuca, ARS believes that a complex of several natural enemies will
    be required to effectively control this weed. In support of this
    program, ARS has identified many other natural enemies that are in
    various stages of assessment for biological control of Melaleuca. The
    proposed $500,000 increase will be used to hire two new scientists at
    the ARS Ft. Lauderdale Laboratory to accelerate biological and safety
    assessments for these agents and to field release those where
    regulatory permits have been granted.
        Question. What amount of funding is currently available for
    Melaleuca research, and how has ARS utilized the $500,000 increase
    provided for this purpose for fiscal year 1998?
        Answer. In fiscal year 1998, ARS allocated $663,400 to research on
    Melaleuca control. These resources have been used in conjunction with
    temporary resources ($225,000) provided by cooperators such as the Army
    Corps of Engineers, the South Florida Water Management District, the
    Florida Department of Natural Resources, the Florida Department of
    Environmental Regulations, and Dade County to initiate an international
    biological control program for management of this invasive tree. To
    accomplish this, ARS has stationed scientists in Australia and Florida
    to accelerate the biological control program for Melaleuca. Of the
    $500,000 allocated to ARS in fiscal year 1998, $250,000 was allocated
    to the ARS International Research Programs to hire a new scientist to
    locate, identify, collect and test new Melaleuca biological control
    agents in the weeds home range of Australia. The remaining $250,000 is
    allocated to the ARS Laboratory at Ft. Lauderdale, Florida to hire a
    new scientist to safety test and release biological control agents onto
    Melaleuca in south Florida.
                    alternative solutions to methyl bromide
        Question. What is the status of your research work to find
    alternative solutions to methyl bromide?
        Answer. ARS is conducting research at 20 locations to find
    alternatives to current soil fumigation and postharvest methods
    requiring methyl bromide. ARS is seeking alternatives through several
    approaches: (1) new cultural practices; (2) improved host-plant
    resistance to pests and diseases; (3) biological control systems using
    beneficial microorganisms; (4) safer fumigants; and (5) combinations of
    the above. For postharvest treatment, research is directed at (1)
    creation of pest-free agricultural zones; (2) finding new physical
    methods such as heat or cold treatment or storage in modified
    atmospheres; (3) alternative fumigants; (4) methyl bromide trapping and
    recycling technologies; (5) biological control; and (6) combinations of
    the above.
        ARS is supporting, through cooperative agreements, methyl bromide
    alternatives research by university scientists in Florida and
    California for crops that will be especially impacted by the methyl
    bromide ban in 2001. ARS has regular and frequent meetings with
    affected industry representatives to make sure that ARS research
    efforts as well as ARS-supported university research are properly
    focused on the most pressing industry problems. ARS is also working
    with the USDA Animal and Health Plant Inspection Service (APHIS) to
    develop quarantine treatment technology to interdict and eradicate
    exotic pests arriving at U.S. ports of entry on imported commodities,
    packing and crating materials, returning military equipment, etc.
        Methyl bromide was only recently identified as an ozone depleting
    material. However, because ARS has for many years been developing non-
    chemical procedures to replace chemical soil and postharvest
    fumigations, ARS has several accomplishments in this area.
        In relation to postharvest treatments ARS developed or assisted in
    developing include cold treatment for citrus and carambola from Florida
    to Japan, pest-free certification for walnuts to New Zealand, heat
    treatments for papaya and cold treatment for carambola from Hawaii to
    Japan and mainland U.S., phosphine fumigation of hay to Japan, gamma
    irradiation treatment of litchi, rambutan, papaya and carambola
    exported to the mainland U.S. and blueberry production in Florida, and
    forced hot air protocol for control of medfly in citrus. In addition,
    ARS scientists have worked with USDA Animal and Plant Health Inspection
    Service (APHIS) personnel to devise a risk-based quarantine standard
    which will be more amenable to non-methyl bromide treatments for some
    low-risk quarantine situations.
        Accomplishments pertinent to replacing methyl bromide as a soil
    treatment include improved strawberry and vegetable varieties with
    increased resistance to some soilborne diseases and pests;
    microbiological agents for the biological control of some soilborne
    diseases of vegetables and ornamental crops; improved cultural
    practices, such as improved soil preparation, crop rotation systems,
    and altered planting dates, to mitigate the effects of some soilborne
    pests of strawberries, vegetable, and ornamental crops; and improved
    pesticide formulation and application technology for available
    chemicals other than methyl bromide to control plant parasitic
    nematodes.
        Non-pathogenic variants of a tomato-infecting fungus were shown to
    be effective in controlling pathogenic strains. Grapevine, peach and
    prune rootstocks with improved nematode resistance have been developed.
    Methods were devised for mass-producing and stabilizing mycoherbicidal
    fungi for control of several weed species. Solarization of soil was
    shown to be effective for controlling weeds in vegetable production.
    Root-knot nematode resistance has been incorporated into commercial
    bell peppers. Impermeable films were shown to dramatically reduce the
    emissions of methyl bromide to the atmosphere. Fumigation with
    alternative chemicals was shown to be effective under some conditions
    for strawberries and tomatoes.
        Question. What is the current level of funding for this research
    and how are those funds being allocated?
        Answer. The current level of funding and where these funds are
    allocated will be provided for the record.
        [The information follows:]

    ----------------------------------------------------------------------------------------------------------------
                                                                                       Fiscal year--
                                Location                             -----------------------------------------------
                                                                        1997 funds      1998 funds      1999 funds
    ----------------------------------------------------------------------------------------------------------------
    Davis, CA.......................................................        $230,100        $228,800        $228,800
    Fresno, CA......................................................       3,531,600       3,542,400       3,542,400
    Riverside, CA...................................................         128,900         128,200         128,200
    Salinas, CA.....................................................         545,600         542,500         542,500
    Washington, DC..................................................         245,500         244,100         244,100
    Gainesville, FL.................................................         196,500         215,600         215,600
    Miami, FL.......................................................       1,241,300       1,234,300       1,234,300
    Orlando, FL.....................................................       1,626,000       1,616,800       1,616,800
    Byron, GA.......................................................          85,400          84,900          84,900
    Tifton, GA......................................................         470,500         467,800         467,800
    Hilo, HI........................................................       1,686,100       1,705,500       1,705,500
    Manhattan, KS...................................................  ..............          71,700          71,700
    Beltsville, MD..................................................       1,140,800       1,061,100       1,061,100
    Stoneville, MS..................................................         185,500         184,500         184,500
    Corvallis, OR...................................................         501,000         493,900         493,900
    Charleston, SC..................................................         336,600         334,600         334,600
    Weslaco, TX.....................................................       1,509,700       1,501,100       1,501,100
    Wenatchee, WA...................................................         213,000         211,800         211,000
    Yakima, WA......................................................         262,700         261,200         261,200
    Kearneysville, WV...............................................         442,900         440,400         440,400
    Headquarters....................................................  ..............  ..............   \1\ 2,000,000
                                                                     -----------------------------------------------
          Totals....................................................      14,579,700      14,571,200      16,571,200
    ----------------------------------------------------------------------------------------------------------------
    \1\ Proposed fiscal year 1999 program increase of $2 million (Environmental Quality/Bio-Active Compounds).

        The fiscal year 1999 budget requests an increase of $2 million for
    research on alternatives to methyl bromide. Dr. Horn, you indicate in
    your prepared statement that grower groups will work with ARS to
    develop the priorities for a competitively awarded program focusing on
    crops or uses most threatened by the loss of methyl bromide.
        Question. Would you please explain how this will work and why ARS
    rather than CSREES will be responsible for a competitive grants
    program?
        Answer. ARS has primary responsibility in USDA for methyl bromide
    alternatives research. As such, ARS has developed a broad network of
    State, university, and industry personnel who are interested in finding
    methyl bromide replacements for a wide range of uses. ARS will use
    these contacts to assure that only high priority issues are addressed
    by any research projects funded by competitive grants funds ARS may
    receive. The ARS National Program Staff will ensure that funded
    projects will be coordinated and complementary to existing methyl
    bromide alternatives research. We think this program serves as an
    excellent model to ensuring coordination of in-house and extramural
    research directed toward a given problem.
                               evaluation studies
        Question. The fiscal year 1999 request proposes the restoration of
    $913,000 for Evaluation Studies. Please provide a list of studies for
    the record which will be conducted with the funding proposed, including
    the purpose and cost of each study.
        Answer. The funds appropriated for the Evaluation Studies Program
    are essential to provide valuable analyses and assessments from outside
    experts on high priority research and related issues relating to the
    broad Research, Education, and Economics (REE) program. These resources
    support studies examining the current status, results and promising
    future directions of research on specific issues within the scope of
    the REE mission. They have also allowed us to gain important
    assessments of the effectiveness of programs and potential ways to
    enhance that effectiveness to promote the highest return on investments
    in REE agencies. As such, these studies have provided invaluable input
    for planning and implementing the REE programs, resulting in stronger
    programs with promising outcomes.
        A partial listing of projects for funding if monies are again made
    available are listed below. Additional study proposals are anticipated
    on other high-priority concerns such as food safety, transmissible
    spongiform encephalopathies, water quality, and other emerging issues.

    1. The National Academy of Sciences Committee on Animal
        Nutrition--compiles nutrient requirement tables used for
        preparing balanced feed rations for all animals...........  $100,000
    2. Calcium and Related Nutrients: American Needs--reviews
        current information on nutrient intake to determine data
        gaps and to recommend adjustment of food consumption......   100,000
    3. Assessing the Overall Impacts of the USDA IPM Initiative--
        examination of IPM programs having the most significant
        impact on farm productivity...............................    60,000
    4. Evaluation of the National Research Initiative--review of
        the impact of competitive grants on agricultural
        technology................................................   100,000
    5. The Benefits of USDA's Investment in the 1890's--evaluation
        of USDA program contribution to the viability of 1890
        universities..............................................    75,000
    6. The Industrialization of Agriculture and Publicly-Funded
        Agricultural Research--evaluation of the impact of modern
        industrial farming enterprise on the structure of
        agriculture...............................................   100,000
                        --------------------------------------------------------------
                        ____________________________________________________

          Total...................................................   535,000
                                   germplasm
        Question. Please identify the current ARS and State resources
    committed to maintaining plant germplasm repositories. Provide a
    listing of the repositories, showing federal and state resources
    committed to each.
        Answer. The estimated funding for maintaining the ARS plant
    germplasm system repositories for fiscal year 1998 is $21,405,000.

    ----------------------------------------------------------------------------------------------------------------
                                                                                       Fiscal year--
                                Location                             -----------------------------------------------
                                                                        1997 funds      1998 funds      1999 funds
    ----------------------------------------------------------------------------------------------------------------
    Davis, CA.......................................................        $572,300        $619,000        $619,000
    Fresno, CA......................................................         217,000         325,800         325,800
    Riverside, CA...................................................         383,900         431,700         431,700
    Ft. Collins, CO.................................................       2,960,200       3,193,400       3,193,400
    Washington, DC..................................................         368,100         366,000         366,000
    Miami, FL.......................................................         670,300         666,500         666,500
    Griffin, GA.....................................................       1,502,800       1,494,300       1,494,300
    Hilo, HI........................................................         447,400         494,900         494,900
    Ames, IA........................................................       1,445,600       1,437,400       1,437,400
    Aberdeen, ID....................................................         843,900         839,100         839,100
    Urban, IL.......................................................         636,800         543,100         543,100
    Beltsville, MD..................................................       3,688,600       3,539,300       3,539,300
    Stoneville, MS..................................................         314,200         312,400         312,400
    Fargo, ND.......................................................         220,600         219,400         219,400
    Geneva, NY......................................................       1,145,000  ..............  ..............
    Ithaca, NY......................................................  ..............       1,249,000       1,249,000
    Corvallis, OR...................................................         767,600         813,200         813,200
    Mayaguez, PR....................................................         943,900       1,159,900       1,159,900
    College Station, TX.............................................         522,500         109,100         109,100
    Logan, UT.......................................................         145,000         144,200         144,200
    Pullman, WA.....................................................       1,120,600       2,312,100       1,662,100
    Madison, WI.....................................................         294,200         292,500         292,500
    Headquarters....................................................         847,400         842,700         842,700
                                                                     -----------------------------------------------
          Total.....................................................      20,057,900      21,405,000      20,755,000
    ----------------------------------------------------------------------------------------------------------------

        State resources committed to certain repositories include both
    direct commitments and in-kind support to Regional Plant Introduction
    Stations (RPIS) and the Interregional Potato Station. In Total, these
    commitments are $2,591,000. The direct commitments of the States can be
    identified and reported more accurately as off-the-top formula funding
    through the Regional Directors' Associations and local funds as direct
    contributions from the host State Agricultural Experiment Stations.
    These resources are identified for fiscal year 1998:

    ------------------------------------------------------------------------
                  Location/site                Formula funds    Local funds
    ------------------------------------------------------------------------
    Griffin, GA, Southern RPIS..............        $250,000        $350,000
    Ames, IA, North Central RPIS............         497,000         324,000
    Geneva, NY, Northeastern RPIS...........         144,000         155,000
    Pullman, WA, Western RPIS...............         346,000         250,000
    Sturgeon Bay, WI, IR Potato Station.....         151,000         124,000
                                             -------------------------------
          Totals............................       1,388,000       1,203,000
    ------------------------------------------------------------------------

        Question. What are our unmet germplasm requirements? Please
    identify by repository.
        Answer. The U.S. General Accounting Office's study of the U.S.
    National Plant Germplasm System (report GAO/RCED-98-20, October, 1997)
    identified some unmet germplasm requirements that fall into three
    principal areas. These include: the need to increase the genetic
    diversity in the national collections, the inadequate information on
    the germplasm in the collections, and the failure of the system's
    preservation activities to keep pace with the collections' needs. The
    needs encompass all activities of the germplasm system, but specific
    needs vary by location and crops. We have identified a number of
    specific activities that are of the highest priority to prevent the
    loss of genetic materials and to replenish long term storage and
    distribution centers with fresh stocks. Other activities are identified
    that make the collections more useful to researchers in publicly
    supported institutions and private industry who continue to place
    increased importance on having access to a broad range of genetic
    diversity that is critical to the improvement of plants for human and
    animal food, industrial, and ornamental use. All collections
    established must be rationalized, duplicates eliminated and core
    collections established which contain maximum diversity in the smallest
    number of samples.
                    location and priority needs for location
    Palmer, AK (Pullman, WA worksite)
    Acquire high latitude germplasm for the Arctic germplasm collection
        (barley, wheat, potato, forages, small fruits).
    Develop an adequate infrastructure to preserve an Arctic germplasm
        collection.
    Maintain virus-free potato germplasm.
    (Activities of primary interest to 6 Crop Germplasm Committees (CGC's))
    Davis, CA
    Develop cultural practices to optimize use of the available space and
        long term maintenance of stone fruit, grape, and walnut germplasm
        collections.
    Document (passport, inventory, evaluation, and distribution data)
        collections in Germplasm Resources Information Network (GRIN)
        database.
    Conduct therapy on and maintain virus-free stone fruit collections.
    Characterize useful traits of stone fruit, grape and walnut
        collections.
    Conduct research to develop backup preservation technologies.
    Institute major regeneration effort for stone fruit, grape and walnut
        collections.
    (Activities of primary interest to 3 CGC's)
    Fresno, CA
    Conduct field regeneration of annual, biennial, and perennial seed-
        propagated crops requiring a long season, arid environment.
    Characterize germplasm during regeneration and document in GRIN
        database.
    (Activities of primary interest to 24 CGC's)
    Riverside, CA
    Acquire additional genetic diversity to fill gaps in the citrus
        collection.
    Conduct therapy on and maintain virus free citrus plants.
    Acquire adequate screenhouse space to accommodate the virus-free citrus
        collection.
    Conduct research to develop backup preservation technologies.
    Institute major regeneration effort for citrus collection.
    (Activities of primary interest to 2 CGC's)
    Ft. Collins, CO
    Develop reliable techniques for cryopreservation of a wide range of
        clonally-propagated species. Perform seed germination tests on
        accessions maintained in base and active collections.
    Provide backup to active collections by preserving seed, vegetative
        buds, in vitro plants and pollen.
    Develop methodologies for the long-term preservation of non-orthodox
        seeds.
    (Activities of primary interest to all CGC's)
    Washington, DC
    Acquire and maintain field plantings of woody and herbaceous ornamental
        germplasm.
    Characterize horticultural value of assembled woody and herbaceous
        ornamental collections.
    Document (passport, inventory, evaluation, and distribution data)
        collections in GRIN database. Cooperate with botanic gardens and
        arboreta to document woody plant collections in the U.S. Conduct
        research to develop backup preservation technologies.
    (Activities of primary interest to 5 CGC's)
    Miami, FL
    Conduct therapy on and maintain virus free sugarcane and fruit
        collections.
    Maintain collections of tropical and sub tropical fruit germplasm of
        important and potentially important species.
    (Activities of primary interest to 3 CGC's)
    Griffin, GA
    Regenerate, backup to base collection, and make available for
        distribution, 1481 diverse species.
    Document (passport, inventory, evaluation, and distribution data)
        collections in GRIN database.
    Maintain in vitro the sweet potato germplasm collection in alternate
        location (Ft. Collins). Rationalize major collections (sorghum,
        cowpea, peanut) for redundancy.
    Complete the elimination of seedbourne viruses from all peanut and
        cowpea accessions.
    Conduct research to develop backup preservation technologies.
    (Activities of primary interest to 7 CGC's)
    Hilo, HI
    Conduct therapy on and maintain virus-free fruit and nut collections.
    Conduct research to develop backup preservation technologies.
    (Activities of primary interest to 1 CGC)
    Ames, IA
    Regenerate, backup to base collection, and make available for
        distribution, 1770 diverse species.
    Expand regeneration and characterization of the maize collection;
        expand germplasm enhancement of maize (GEM) project.
    Document (passport, inventory, evaluation, and distribution data)
        collections in GRIN database.
    Conduct research to develop backup preservation technologies.
    Institute major regeneration effort for maize, sunflower, melon, and
        cucumber collections.
    (Activities of primary interest to 9 CGC's)
    Aberdeen, ID
    Regenerate wheat, barley, oat, and rice accessions on a regular basis
        to insure availability.
    Document (passport, inventory, evaluation, and distribution data)
        collections in GRIN database.
    Regenerate and maintain the integrity of the barley genetic stock
        collection.
    Acquire additional accessions of wheat wild relatives to increase the
        collections genetic diversity.
    Acquire adequate quarantine greenhouse space for increasing weedy
        relatives of small grains.
    Upgrade seed storage facility.
    Institute major regeneration effort for small grain wild relatives.
    (Activities of primary interest to 4 CGC's)
    Urbana, IL
    Acquire additional genetic diversity to fill gaps in the soybean
        collection.
    Upgrade seed storage facility.
    Regenerate maize genetic stocks and fill requests for seed.
    Acquire necessary greenhouse space for maintaining soybean wild
        relatives and maize genetic stocks.
    Institute major regeneration effort for maize genetic stocks.
    (Activities of primary interest to 2 CGC's)
    Beltsville, MD
    Maintain and improve the GRIN database support for all sites.
    Develop acquisition priorities across all crop species.
    Provide taxonomic support for GRIN and all active collection sites.
    Maintain prohibited species in quarantine and conduct required tests to
        determine pathogen status.
    Conduct research to develop improved quarantine testing methods.
    (Activities of primary interest to all CGC's)
    Stoneville, MS
    Institute major regeneration effort for soybean accessions adapted to
        Southern latitudes.
    (Activities of primary interest to 1 CGC)
    Ithaca, NY
    Backup apple germplasm collection as cryopreserved, vegetative buds.
    Conduct research to develop backup preservation technologies for grape
        and sour cherry germplasm.
    Document (passport, inventory, evaluation, and distribution data)
        collections in GRIN database. Institute major regeneration effort
        for apple, onion, brassica, and winter squash collections.
    (Activities of primary interest to 5 CGC's)
    Fargo, ND
    Maintain flax collection.
    Document (passport, inventory, evaluation, and distribution data)
        collection in GRIN database.
    Corvallis, OR
    Maintain field greenhouse and screenhouse plantings of small fruit
        germplasm.
    Document (passport, inventory, evaluation, and distribution data)
        collections in GRIN database.
    Develop cultural practices to optimize use of the available space and
        long term maintenance of pear and temperate nut germplasm
        collections.
    Conduct therapy and maintain virus-free small fruit collections.
    Institute major regeneration effort for small fruit pear, temperate
        nut, mint, and hops collections.
    (Activities of primary interest to 2 CGC's)
    Mayaguez, PR
    Conduct quarantine growout of sorghum and maize accessions introduced
        into the U.S.
    Maintain accessions of tropical fruit and nut species.
    Document (passport, inventory, evaluation, and distribution data)
        collections in GRIN database.
    Maintain sorghum genetic stocks.
    Institute major regeneration effort for sorghum (see Griffin, GA).
    (Activities of primary interest to 2 CGC's)
    College Station, TX
    Upgrade seed storage facility.
    Regenerate cotton collection on a timely basis. Document (passport,
        inventory, evaluation, and distribution data) cotton and pecan
        collections in GRIN database.
    Maintain and distribute cotton genetic stocks.
    Acquire additional genetic diversity to fill gaps in the pecan
        collection.
    Conduct research to develop backup preservation technologies.
    Institute major regeneration effort for cotton and pecan collections.
    (Activities of primary interest to 2 CGC's)
    Logan, UT
    Maintain in-field rangeland grass collection. Document (passport,
        inventory, evaluation, and distribution data) collection in GRIN
        database.
    (Activities of primary interest to 1 CGC)
    Pullman, WA
    Regenerate backup to base collection, and make available for
        distribution 2427 diverse species.
    Regenerate difficult to grow alfalfa, clover, and sugarbeet accessions
        to make them available.
    Complete the elimination of seedbourne viruses from all bean and pea
        accessions.
    Document (passport, inventory, evaluation, and distribution data)
        collections in GRIN database.
    Institute major regeneration effort for alfalfa, sugarbeet, chickpea,
        lentil, clover, pea, and bean collections.
    (Activities of primary interest to 10 CGC's)
    Madison, WI
    Acquire additional potato wild relatives to fill gaps in the genetic
        diversity of the collection.
    Study the effect of the genebank's procedures on the genetic diversity
        of the potato collection.
    Complete taxonomic identification of potato wild relatives in the
        collection.
    Document (passport, inventory, evaluation, and distribution data)
        collections in GRIN database.
    Institute major regeneration effort for potato collection.
    (Activities of primary interest to 1 CGC)
                         funds and research management
        Question. How much money budgeted for positions was due to lapse at
    the end of each of fiscal years 1996 and 1997?
        Answer. Money budgeted for positions in fiscal years 1996 and 1997
    was due to lapse in the amount of $12.4 million and $12.9 million,
    respectively.
        Question. What was done with this savings in each of these years?
    Please be specific as to the purposes for which these funds were used
    and the extent to which funds were obligated at the location at which
    they were saved.
        Answer. A portion of these projected lapsed funds accrued to
    Headquarters and were reallocated as follows:

    ------------------------------------------------------------------------
                                                       Fiscal year--
                  Use of funds               -------------------------------
                                                1996 funds      1997 funds
    ------------------------------------------------------------------------
    Area-Wide Priorities (Research Equipment      $2,343,900      $5,325,500
     and Other High Cost Needs).............
    Location Closures, Conversions, and            2,299,500         602,700
     Transfers..............................
    Food Nutrition Study (Beltsville, MD)...  ..............         500,000
    Remedial Investigation and Feasibility    ..............       1,400,200
     Study (Beltsville, MD).................
    Removal Actions (Hazardous Waste                 436,900  ..............
     Material)..............................
    RCRA Closure Sites (Orient Point, NY)...         360,000  ..............
    Senior Executive Service and Other               309,500         194,000
     Relocations............................
    Oil Spill (Orient Point, NY)............         164,500  ..............
    M. Shahan Repairs(Orient Point, NY).....  ..............         113,000
    Docks and Harbors Repairs (Orient Point,  ..............       1,027,300
     NY)....................................
    Environmental Site Assessment Phase II            70,000  ..............
     Sampling (El Reno, OK).................
    Agency-Wide Hazardous Waste Cleanup.....          68,400  ..............
                                             -------------------------------
          Subtotal..........................       7,452,900       7,762,500
    ------------------------------------------------------------------------

        The balance of accrued lapsed salaries was retained at ARS field
    locations for locally-based spending decision. Approximately, 40
    percent of the savings were obligated at the locations where they were
    lapsed. The primary uses of these funds were for research equipment,
    employee relocations, facilities repair and maintenance, safety and
    health improvements, and unanticipated operating needs. The remaining
    60 percent, as reflected in the funding table above, was used for
    Agency priorities not necessarily at the location where the funds were
    lapsed. An example of this would be the funding provided for location
    closures; no lapse occurred at these locations, however, funds were
    obligated at these sites for closure costs.
        Question. How many active research projects does ARS currently
    engage? How many of these are to support production agriculture?
        Answer. There are currently 1,078 active research projects. Seventy
    percent of these projects support production agriculture.
        Question. How does the ARS assess the needs of producers in
    determining its research priorities?
        Answer. As an Agency committed to finding solutions to
    ``agricultural problems of high national priority,'' ARS actively
    maintains close interaction with its customers. The enactment of GPRA
    has encouraged ARS to make these lines of communication more formal and
    more explicit. At the headquarters level, ARS senior managers,
    including the members of the National Program Staff, are in regular
    contact with a wide range of organizations representing all aspects of
    agricultural production, processing, distribution, and consumption.
    Area Directors are continually interacting with producers within their
    jurisdiction. At the Laboratory level, our scientists are in almost
    daily contact with farmers, ranchers, and other users that have an
    interest in their research. We sometimes enter into agreements with
    local producers to test new practices or technologies under actual
    conditions. ARS conducts a large number of workshops annually to review
    its research programs and results. Customers of the research are
    usually included in order to get their input into the research. The
    accumulated effect of all these interactions is a research program that
    is relevant and able to meet the most critical needs of American
    agriculture. In addition, ARS is currently reorganizing its research
    activities into 25 National Programs. On February 23, 1998, we placed
    25 descriptive statements on the ARS Home Page at the Internet address
    http://www.ars.usda.gov, and invited our customers, stakeholders,
    partners, and the general public to review and comment on them. The
    input we receive from our customers will play a major role in shaping
    our new national programs. We will continue to receive comments until
    the end of April 1998.
        Question. How many scientists are currently on board? How many were
    on board at the beginning of each of fiscal years 1996 and 1997?
        Answer. Currently the Agricultural Research Service employs 1,804
    full time, permanent research scientists. At the beginning of fiscal
    year 1996, there were 1,849. There were 1,824 research scientists at
    the start of fiscal year 1997.
                               extramural funding
        Question. Please list the funding ARS commits to land grant
    universities. Please identify the amounts by recipient.
        Answer. A list of funding committed to land grant universities will
    be provided for the record.
        [The information follows:]
            School                                          Fiscal year 1997
    Alabama Agri and Mech College.................................   $10,000
    Alcorn State (MS).............................................   450,200
    Auburn University.............................................    81,600
    Central Oregon Experiment Station.............................    18,500
    Clemson University............................................    43,900
    Colorado State University.....................................   810,000
    Cornell University............................................ 1,157,900
    Florida Agri and Mech University..............................    25,200
    Georgia Coastal Plain Expt. Station...........................    54,600
    Illinois Ag. Expt. Station....................................    42,000
    Iowa State University.........................................   529,700
    Kansas State University.......................................   483,600
    Langston University...........................................     3,500
    Louisiana State University....................................   145,900
    Michigan State University.....................................   248,700
    Mississippi Ag. and Forestry Expt. Sta........................ 1,501,300
    Mississippi State University..................................   918,600
    Montana State University......................................   262,400
    New Mexico State University...................................   831,100
    New York Ag. Expt. Station....................................    25,000
    North Carolina State University...............................   676,200
    North Central Ag. Expt. Station...............................   134,300
    North Dakota State University.................................   453,500
    Ohio State University.........................................    64,000
    Oklahoma State University.....................................   322,500
    Oregon State University.......................................   526,000
    Pennsylvania State University.................................   220,700
    Prairie View A&M College......................................    10,000
    Purdue University............................................. 1,157,500
    Rutgers University............................................    54,500
    South Dakota State University.................................    80,500
    Southern University...........................................   289,700
    Texas A&M University..........................................   682,600
    Texas Ag. Expt. Station.......................................     8,000
    Tuskegee Institute............................................    61,900
    University of Arizona.........................................   203,100
    University of Arkansas........................................   489,800
    University of California...................................... 2,853,200
    University of Connecticut.....................................    50,000
    University of Delaware........................................    12,500
    University of Florida......................................... 1,143,300
    University of Georgia.........................................   253,200
    University of Hawaii.......................................... 1,573,600
    University of Idaho...........................................   276,600
    University of Illinois........................................   325,500
    University of Kentucky........................................    15,000
    University of Maine...........................................    32,800
    University of Maryland........................................   755,000
    University of Massachusetts...................................    14,800
    University of Minnesota.......................................   209,900
    University of Missouri........................................   765,400
    University of Nebraska........................................   695,500
    University of Puerto Rico.....................................    25,000
    University of Tennessee.......................................    40,000
    University of Vermont.........................................    45,000
    University of Wisconsin.......................................   861,700
    University of Wyoming.........................................   155,000
    Utah State University.........................................   193,900
    Virginia Polytechnic Institute and State University...........    70,800
    Washington State University...................................   727,400
                        --------------------------------------------------------------
                        ____________________________________________________

          Total...................................................24,173,600

        Question. Please identify other extramural recipients of ARS
    research contracts.
        Answer. In fiscal year 1997 ARS committed $11.64 million to Tufts
    University and $.646 million to The Consortium for International Earth
    Science Information Network (CIESIN) for research contracts. In
    addition, Westat Inc. received $3.4 million from ARS of which $.5
    million was provided by Food, Nutrition, and Consumer Services.
        Question. In fiscal year 1998, the Committee directed that general
    reductions be taken across each program, project and activity. What was
    the magnitude of the fiscal year 1998 general reduction and explain how
    this was implemented?
        Answer. As directed by the Congress, the agency applied general
    reductions Totaling $3.8 million in fiscal year 1998. This was
    implemented through an across-the-board reduction of all research
    projects.
        Question. Provide for the record fiscal year 1997 obligations
    incurred and your current fiscal year 1998 funding estimates for the
    following areas of research: canola, hops, kenaf, guayale, lesquerella,
    and sunflowers. Similarly, provide the Committee with information on
    the following pests: bollworm, boll weevil, whitefly, karnal bunt, fire
    ant, and gypsy moth.
        Answer. Obligations incurred for fiscal year 1997 and fiscal year
    1998 estimated funding for crops and pest research are provided as
    follows:

    ------------------------------------------------------------------------
                                                        Fiscal year
                                             -------------------------------
             CROPS AND PESTS RESEARCH              1997
                                                obligations    1998 funding
    ------------------------------------------------------------------------
    Crops:
        Canola..............................        $349,110        $350,000
        Hops................................         382,751         491,000
        Kenaf...............................       1,318,353         737,100
        Guayule.............................         598,601         564,500
        Lesquerella.........................         482,591         329,200
        Sunflower...........................       2,514,329       2,252,300
    Pests:
        Boll Worm/Corn Earworm..............       4,206,110       4,182,500
        Boll Weevil.........................       1,768,202       2,586,100
        Whitefly............................       5,527,905       5,883,400
        Karnal Bunt.........................         423,542         714,200
        Fire Ant............................       1,028,646       1,152,800
        Gypsy Moth..........................       1,675,631       1,832,100
    ------------------------------------------------------------------------

                             centers of excellence
        Question. For fiscal year 1999, please identify the proposed
    funding for ARS Centers of Excellence, where they are located, how they
    were selected, and their proposed funding and staffing levels as
    compared with fiscal year 1997 and fiscal year 1998.
        Answer. The ARS Centers of Excellence are selected by matching the
    critical and/or priority needs of ARS and the collaborating 1890
    Universities which possess the expertise and excellence required to
    address the program mission and goals. These matches are often based on
    expansion of existing cooperative research programs and the
    institution's strength.
        The location, funding and staffing levels of the ARS Centers of
    Excellence for fiscal years 1997, 1998 and 1999 are as follows:

    ----------------------------------------------------------------------------------------------------------------
                                                                         Fiscal year--
                                          --------------------------------------------------------------------------
                   Location                          1997                     1998                     1999
                                          --------------------------------------------------------------------------
                                              Funds     Scientists     Funds     Scientists     Funds     Scientists
    ----------------------------------------------------------------------------------------------------------------
    University of Arkansas Pine Bluff, AR     $373,300         1.0     $537,900         2.0     $537,900         2.0
    Delaware State University Dover, DE..      250,000         1.0      248,500         1.0      248,500         1.0
    University of Maryland Princess Anne,      245,600         1.0      244,400         1.0      244,400         1.0
      MD.................................
    Alcorn State University Lorman, MS...      165,700         1.0      164,700         1.0      164,700         1.0
    Langston University Langston, OK.....  ...........  ..........      199,000  ..........      199,000  ..........
    Tennessee State University                 491,200         2.0      488,400         2.0      488,400         2.0
     McMinnville, TN.....................
                                          --------------------------------------------------------------------------
          Total..........................    1,525,800         6.0    1,882,900         7.0    1,882,900         7.0
    ----------------------------------------------------------------------------------------------------------------

        Question. Describe the programs at each of the Centers.
        Answer. The research programs at each of the Centers will be
    provided for the record.
        [The information follows:]
        Swine Production at Alcorn State University.--The objective of the
    program is to develop an efficient system for the production of meat
    type hogs in the Southern United States. The research includes the
    evaluation of breeds of swine suitable for production in Southern
    climates, the use of local feeds, and development of feeding systems to
    obtain efficient production of pork.
        Aquaculture Products at Delaware State University.--This program
    will develop rapid detection and monitoring methods for pathogens and
    spoilage microorganisms in aquaculture processes and products and
    improving the efficiency of purging contaminants in order to prevent
    human illnesses.
        Grazing Lands at Langston University, Oklahoma.--The objective of
    this program is to 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.
        Horticulture at Tennessee State University, McMinnville.--The
    objective of the program is to develop new and improved ornamental
    trees and shrubs for the U.S. nursery industry. The research includes
    development of basic genetic and physiological information related to
    nursery crop species; reduce pesticide use and fertilizer runoff during
    nursery crop production; develop improved nursery crop propagation
    methods; and evaluate existing germplasm or ornamental trees and shrubs
    for pest resistance, tolerance of environmental stress, and superior
    ornamental value.
        Aquaculture at University of Arkansas at Pine Bluff.--The ARS
    Aquaculture Systems Research Unit develops and evaluates new or
    alternative aquaculture production systems, particularly small scale
    systems, and develops new components of these systems to improve the
    efficiency of fresh water fish farming. Research also addresses
    improvement of cultivation and processing methods to enhance the
    quality of farm-raised fish and their products.
        Critical Control Points in Model Systems at University of Maryland
    Eastern Shore (UMES).--The program seeks to determine the natural
    prevalence of bacterial pathogens in poultry grow-out houses,
    processing plants, and in distribution channels; to conduct challenge
    studies on critical control points in model systems to provide data for
    predictive model development; and to develop risk assessment models for
    use in hazard management systems. In particular, the laboratory is
    developing risk assessment and predictive models to provide the
    scientific basis for Hazard Analysis Critical Control Point (HACCP)
    systems in poultry production, processing, and distribution. ARS
    research is conducted in close collaboration with the USDA Food Safety
    & Inspection Service (FSIS), providing critical research to support
    their regulatory mission.
        Question. What working relationship and accomplishments have
    resulted from these collaborations?
        Answer. The working relationship and accomplishments that have
    resulted from these collaborations will be provided for the record.
        [The information follows:]
        Alcorn State University.--Through meetings and visits of Alcorn
    personnel to ARS laboratories, ARS scientists have developed a good
    working relationship with the Center. As a result, new breeds of swine
    have been purchased for evaluation and an artificial insemination
    program utilizing semen from superior boars, has been initiated.
        Delaware State University at Dover.--The ARS aquaculture program is
    housed in the Delaware State University (DSU), Department of
    Agriculture and Natural Resources. Close working relationships have
    been established with DSU's two aquaculture faculty members who have
    also participated in the recruitment for an ARS aquaculture research
    scientist to be based at DSU. The ARS research program will complement
    DSU's aquaculture research program. The ARS National Program Leader for
    Aquaculture is a cooperator in a Capacity Building Grant application
    for aquaculture research submitted to the USDA Cooperative State
    Research, Education, and Extension Service.
        Langston University, Oklahoma.--ARS will assist Langston University
    in establishing a Grazing Lands Center of Excellence in fiscal year
    1998. It is a worksite of the ARS grazing land research laboratory at
    El Reno, Oklahoma. The details of the program have not yet been
    developed, but it is expected to focus on pasture management by small
    farmers. ARS will soon station a plant physiologist at the Grazing Land
    Center of Excellence.
        Tennessee State University at McMinnville.--A Director of the new
    research facility has been appointed by Tennessee State University
    (TSU). An excellent collaboration has been established between TSU, 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.
    Evaluation of several new shrubs and trees has been initiated in the
    genetics program of plant improvement for the Tennessee industry.
        University of Arkansas at Pine Bluff.--The ARS Aquaculture Systems
    Research Unit (ASRU) and University of Arkansas at Pine Bluff (UAPB)
    have entered into a cooperative partnership to promote and facilitate
    the expansion of aquaculture in Arkansas and the surrounding areas of
    the Mississippi Delta. The location of the ASRU at UAPB has enabled ARS
    to hire UAPB students as aquaculture technicians and has enhanced ARS'
    ability to recruit from a broadened pool of highly-trained and
    competent minority candidates from the UAPB Aquaculture Center of
    Excellence program. As part of an effort to enhance production related
    research capabilities at UAPB, ARS funded a grant to UAPB for the
    construction of a research pond complex of 21 ponds (0.25 acre each)
    and a support building at the UAPB Aquaculture Research Station.
        University of Maryland Eastern Shore (UMES).--The working
    relationships of ARS with the UMES are very close. ARS established a
    work site at the UMES, Princess Anne, MD, in fiscal year 1994 as a
    satellite laboratory of its Eastern Regional Research Center (ERRC).
    The ARS laboratory uses UMES laboratory space and UMES scientists and
    students to provide support for the research program. UMES students are
    employed by the ARS staff to conduct modeling studies. A UMES faculty
    member is employed during the summer months. The ARS laboratory at UMES
    has developed The Salmonella Risk Assessment Modeling Program for
    Poultry, version 1.0 as a guide for processors and regulatory personnel
    to evaluate the public health consequences of changes in the poultry
    grow-out to consumption continuum. It is now being evaluated by two of
    the largest U.S. poultry processors.
                          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
    $477,800 are allocated to PM-10 and PM-2.5 research which refers,
    respectively, to atmospheric particulates equal to less than the 10 and
    2.5 micrometers in size that are said to reach and endanger human
    lungs. The research is directed to a) understanding how particulates
    are emitted from agricultural fields during field operations and wind
    storms, b) determining the origination of particulates, c) developing
    methods for reducing particulate emissions, and d) developing a PM-10
    prediction technology for use in assessing alternative methods of
    controlling particle emissions.
        At Manhattan, Kansas, 1.0 SY and $166,800 are allocated to research
    on PM-10 and PM-2.5 particulates and on developing a PM-10 and PM-2.5
    module for inclusion in a wind erosion model (Wind Erosion Prediction
    System--WEPS). The erosion prediction model will be used to select,
    from among alternative land treatments, the most appropriate treatments
    for controlling wind erosion and particulate emissions.
        At Lubbock, Texas, 1.5 SY and $317,600 are allocated to field
    measurement and documentation of particulate fractions during wind
    erosion events.
        Question. What funding is included in the fiscal year 1999 budget
    for PM-10 research. Please give program, funding, and staffing by
    location.
        Answer. The fiscal year 1999 budget and staffing is the same as
    that for fiscal year 1998; as described above.
        Question. What major accomplishments have come from your research
    in this area?
        Answer. (a) Considerable progress has been made in identifying how
    PM-10 emissions occur during weathering, tillage, traffic, and abrasion
    by wind-blown soil clods. (b) Progress has 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 developed, but still needs validation. (d) The prediction
    model being developed for Washington is an interim model pending
    completion of the wind erosion model. (e) A scientist in Pullman, WA,
    has developed a biologically-based method for determining the sources
    of particulates (e.g. agricultural fields, roads, parking lots).
        Question. How is the ARS research effort connected at all to the
    San Joaquin Valley PM-10 study funded in part through CSREES?
        Answer. The ARS program and the CSREES-administered PM-10 program
    in the San Joaquin Valley of California are funded separately. However,
    there is coordination, communication, and cooperation between the
    programs. California personnel participate in the review and planning
    meetings of the Washington study (which is a jointly funded 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.
                             precision agriculture
        Question. Dr. Horn, I understand that ARS scientists at Stoneville
    and Mississippi State have been working with scientists at the National
    Aeronautics and Space Administration (NASA) and Mississippi State
    University on precision agriculture. Please bring the Committee up to
    date on your current activities and future plans, including possible
    matching funds from NASA.
        Answer. The ARS Application and Production Technology Research Unit
    (APTRU) at Stoneville has been informally collaborating with NASA's
    Space Remote Sensing Center (SRS) at the John C. Stennis Space Center.
    Negotiations are proceeding regarding a more formal collaborative
    arrangement. The Crop Simulation Research Unit (CSRU) at Mississippi
    State is currently a participant, with Mississippi State University
    (MSU), in the 5-year National Site Verification Index Program that is
    funded by NASA. Under the terms of this participation, CSRU has access
    to $25,000 of the $50,000 annual Total provided to MSU under the grant.
    CSRU is also a member of the Mississippi Coalition for Applications in
    Remote Sensing (MCARS), of which MSU and SRS are also members. MCARS is
    currently developing a proposal for funding under the Mississippi
    Challenge program, which is a matching funds program between NASA and
    the State of Mississippi. At both Stoneville and Mississippi State, the
    purpose of the research is to improve the tools and technologies of
    precision agriculture (i.e., remote sensing, geographical information
    systems, yield monitors) to assist producers in treating crop fields on
    a site-specific basis. The role of the APTRU is to conduct research on
    the application of various crop inputs (e.g., fertilizers, pesticides)
    to counteract crop stresses. The role of CSRU is, through simulation of
    crop growth, to provide decision support and even control of settings
    on equipment that apply various crop inputs. A major goal of each
    location is to produce precision agriculture tools that are economical,
    effective, and easy to use and understand.
                         integrated watershed research
        Question. The Joint Explanatory Statement of the Conferees
    accompanying the conference report on the fiscal year 1998
    appropriations Act directed that the USDA-ARS National Sedimentation
    Laboratory initiate an integrated watershed research program in the
    Yalobusha River Basin, stream estuaries, and Grenada Lake. What is ARS
    doing to carry out this directive?
        Answer. The National Sedimentation Laboratory (NSL) has initiated
    several research activities in the Yalobusha River Basin (YRB) to meet
    the Congressional mandate. These research activities were primarily
    designed to establish a reference database against which the effect of
    evolutionary and proposed channel adjustment measures by the Army Corps
    of Engineers (COE) for flood control, as well as their environmental
    impact on Grenada Lake, can be assessed and to provide the COE with
    needed information for selecting locations for channel stabilization
    measures.
        A geomorphic study was conducted which summarizes the historical
    background of channel changes, hydrologic conditions, stages of channel
    evolution, dominant watershed processes, bed material, and streambank
    stability conditions for the preconstruction phase. As part of this
    partially COE-funded study, geographic information (GIS) based maps
    were prepared showing stages of channel evolution, location of
    migrating scour holes, bed material type, and sampling locations. This
    information has been provided to the COE to assist them in selecting
    the most suitable locations for the placement of grade control
    structures and other channel improvement and stabilization measures,
    while at the same time providing the NSL with essential background
    information for river evolution studies.
        Intensive studies were conducted to characterize water depth,
    velocity, habitat, fish and wildlife communities in the lower Yalobusha
    River above and below an existing debris jam. Contour maps of the
    channel bottom in limited reaches upstream and downstream of the
    Yalobusha debris/sediment jam have been developed to obtain background
    information on quantity and quality of in channel aquatic habitats and
    to assess the impact of changes in channel geometry on flow regime and
    habitat following channel adjustments for flood control. Exploratory
    studies in cooperation with the U.S. Corps of Engineers Waterways
    Experiment Station are underway to obtain continuous records of water
    stage above and below the debris jam.
        Water quality measurements have been made at several sites in the
    Yalobusha River main stream, tributaries, and at inflow and outflow
    points of Grenada Lake for determining concentrations of sediment,
    agricultural chemicals, and naturally occurring contaminants. The data
    will assist in selecting erosion control/conservation practice research
    on upland areas and will serve as documentation for determining the
    impact and effectiveness of channel stabilization and watershed
    restoration measures on water quality. A preliminary monitoring
    program, incorporating the biological and habitat components of the
    channel system prior to adjustments, has been initiated at 33 sites in
    the Yalobusha River and its tributaries. This program will facilitate
    the assessment of environmental and ecological changes during
    construction phases and the selection of low-cost remedial measures.
        Discussions are underway to explore the use of funding from the
    Environmental Quality Improvement Program (EQIP) managed by the Natural
    Resources Conservation Service (NRCS), for stabilizing small
    tributaries and erosion control of adjacent land with edge-of-field
    bufferstrips and other soil erosion control measures, in order to
    reduce sediment and non-point source pollutants entering into streams
    and to rehabilitate in-stream habitat conditions.
                                  aquaculture
        Question. Since we continue to hear that aquaculture is the
    fastest-growing sector of U.S. agriculture and you have provided to the
    Committee your research requirements to support this new industry,
    would you please tell us why the President's budget proposes to
    eliminate funding increases provided for fiscal year 1998 for ARS
    research in this area?
        Answer. The President's fiscal year 1999 budget proposal calls for
    $51.2 million in program spending for new and expanded research, plus
    $14.5 million in pay increases and $.9 million for evaluation studies,
    for a Total of $66.6 million, however, proposed increased funding is
    only $32 million. To cover the difference, the budget proposal calls
    for $34.6 million in program reallocations. Specifically, fiscal year
    1998 program increases added by the Congress are proposed for
    termination and redirected to support the Administration's priority
    programs in fiscal year 1999.
        Question. Please list those locations involved in aquaculture
    research, their specific programs and mission, and current funding and
    staffing levels. Please list future funding and staffing requirements,
    by location.
        Answer. The current and future funding and staffing levels for
    locations involved in aquaculture research will be provided for the
    record. The projections are based on the staffing and funding levels
    that will be required for fully functional programs at each location.
        [The information follows:]

    ----------------------------------------------------------------------------------------------------------------
                                                                  Fiscal year 1998--                         Total
                  Location/program and mission               ----------------------------   Total funds   scientists
                                                                   Funds      Scientists     required      required
    ----------------------------------------------------------------------------------------------------------------
    Auburn, AL: Diagnosis and control of diseases and             $1,087,000         4.0      $1,800,000         6.0
     parasites of cultured fish.............................
    Pine Bluff, AR: Aquaculture production and processing            537,900         2.0         537,900         2.0
     technology.............................................
    Stuttgart, AR: Research on therapeutics evaluation,            1,728,600         5.0        3,590,00        11.0
     health mgmt. and culture systems for farm-raised fish..
    Albany, CA (Hilo, HI) Oceanic Institute: Tropical              1,603,300  ..........  ..............  ..........
     aquaculture feeds and culture technology development...
    New Orleans, LA: Improve flavor quality of farm-raised           755,100         2.4        1,005,10         3.4
     catfish................................................
    Beltsville, MD (NAL): Aquaculture Information Program             34,000  ..........          34,000  ..........
     provides the public with information on all aspects of
     aquaculture............................................
    Stoneville, MS: Improve production efficiency, including       3,639,200         5.0        5,298,60         8.0
     breeding, genetics, nutrition, health, harvesting, and
     product quality of catfish.............................
    Wyndmoor, PA (Dover, DE, Worksite): Food safety of farm-         248,500         1.0         248,500         1.0
     raised fish............................................
    College Station, TX: Food safety of catfish.............         363,200  ..........         363,200  ..........
    Kearneysville, WV: Water Quality control and intensive         1,439,600  ..........       1,439,600  ..........
     culture of fish........................................
    Leetown, WV: Cool and cold water aquaculture research...         250,000  ..........       4,000,000        12.0
                                                             -------------------------------------------------------
          Total.............................................       11,686,40        19.4      18,316,900        43.4
    ----------------------------------------------------------------------------------------------------------------

        Question. In its report to this Committee on Aquaculture, USDA
    indicated that it was planning a thorough review of the Stuttgart
    National Aquaculture Research Center to determine the specific
    directions of future research programs. Is that review, which was to be
    undertaken during fiscal year 1997, now complete? Please submit the
    results of this review for the record.
        Answer. The review is now complete. The review consisted of three
    components: (1) a strategic planning session for all ARS aquaculture
    research locations held in New Orleans, Louisiana, on June 5-6, 1997;
    (2) an ARS Warmwater Aquaculture Research Meeting held in Memphis,
    Tennessee, on July 7, 1997; and (3) a review and Program Planning
    Session for the Stuttgart National Aquaculture Research Center (SNARC)
    conducted on February 2-3, 1998. As a result of the review, ARS
    aquaculture scientists and administrators and external stakeholders
    identified the mission, major program components, future species and
    research priorities, and funding and personnel needs for the SNARC.
    These results were shared with review participants and stakeholders in
    a report dated February 3, 1998, and will be the basis for future
    implementation of the SNARC research program and staffing.
        Key points from the review are: (1) The primary focus of SNARC will
    be on warmwater species other than catfish. (2) Major research programs
    at SNARC will be Therapeutic Evaluations and Chemical Registration in
    support of cold, cool and warm species including catfish; and
    Aquaculture Production Systems. (3) Priority species identified are:
    baitfish, striped bass and its hybrids, and polyculture (simultaneous
    culture of multiple species). (4) Additional research areas identified
    for emphasis include bird depredation of aquaculture species.
                delta nutrition intervention research initiative
        Question. Please provide the Committee with an update on the Lower
    Mississippi Delta Nutrition Intervention Project.
        Answer. The Lower Mississippi Delta Nutrition Intervention Research
    Initiative (NIRI) is conducted by 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 ARS. Each partner participates in attaining
    the project objectives. The consortium is governed by a steering
    committee which has representatives from each partner. The research
    committee develops objectives and protocols and has representation from
    each partner.
        Question. What progress has been made to date?
        Answer. The partners reviewed the current state of knowledge of the
    socioeconomic, nutritional and health status of the Lower Mississippi
    Delta and published a monograph in 1997 entitled: ``Nutritional and
    Health Status in the Lower Mississippi Delta of Arkansas, Louisiana and
    Mississippi: A Review of Existing Data,'' Edited by Gail Harrison.
        The partners completed a data collection for validation and pilot
    study of assessment methodologies to be used for repeated cross
    sectional surveys. The partners also completed a Key Informant survey
    to determine the understanding that community leaders have of
    nutritional status in three Delta counties.
        Question. What work on this project is scheduled for each of fiscal
    years 1998, 1999, and each future fiscal year?
        Answer. In fiscal year 1998, the partners will prepare a draft
    research proposal for an expanded community assessment research
    program. The partners are analyzing the data of the Key Informant
    survey and determining community characteristics that will impact
    possible nutrition intervention strategies. The partners are each
    developing strategic plans to determine their contribution to obtaining
    and analyzing data necessary to develop nutrition interventions.
        In fiscal year 1999, the partners propose extensive field surveys
    based on the results of preliminary assessments in 1998. The
    partnership will focus on data collection and analysis. Extensive
    collaborative field work will be required. Post fiscal year 1999,
    research will depend on prior outcomes but will include initial
    planning, implementation, and validation of targeted nutritional
    interventions.
        Question. Please list objectives and funding by participant.
        Answer. The objectives are shared by all members acting as a
    consortium and the funding of $3,147,700 is shared equally. The members
    of the consortium 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 ARS. The project
    objectives are listed:
        1. To review the existing data describing the socioeconomic,
    nutritional, and health status of lower Mississippi delta residents.
        2. To review the existing nutrition and community assessment
    research methodologies in order to identify potential assessment
    methods for the Lower Delta Research Initiative.
        3. (a) To conduct an assessment to determine the nutritional status
    of a population of lower Delta residents (including dietary intake,
    food consumption behaviors, biochemical and physiologic, and
    anthropometric measurements) and to conduct similar assessments so that
    the nutritional status of the population can be measured over time. (b)
    To assess community factors impacting nutritional status.
        4. To identify nutritionally responsive health problems and their
    determinants or causes in the Lower Mississippi Delta populations so
    that interventions may be designed for testing.
        5. To review intervention research methodologies in order to
    identify potential interventions aimed at solving the nutritional
    problems identified in the Lower Delta.
        6. To evaluate, in a research setting, potential solutions for the
    targeted nutritional problems so that successful interventions can be
    implemented on a larger scale.
        Question. What level of funding is included in the fiscal year 1999
    budget request for this project?
        Answer. A Total of $3,147,700 is budgeted for fiscal year 1999 for
    the Lower Mississippi Delta Nutrition Intervention Project.
        I understand that increased funding for this project is required in
    fiscal year 1999 to fund a study to determine dietary intake,
    prevalence of food insecurity, and diet and health knowledge and
    attitudes as well as to fund a pilot study for nutrition assessment
    (biological measures and behavioral measures of nutrition status). This
    information, I am told can not be obtained from other nutritional
    studies funded by USDA.
        Question. Do you agree that these studies are needed? If not, why?
    If so, when are these studies planned?
        Answer. The partners in the Lower Mississippi Delta Nutrition
    Intervention Research Initiative are currently evaluating two trial
    studies, a phone survey and a key informant survey, that should dictate
    methodologies of future surveys. Recommendation for increased funding
    will be based on the results of these pilot studies. A thorough
    analysis was not available to make a recommendation for the fiscal year
    1999 budget.
        Question. Is funding included in the fiscal year 1999 budget
    request for these studies? If so, how much is included? If not, what
    funding is needed for fiscal year 1999?
        Answer. The funding requests for fiscal year 1999 for the Lower
    Mississippi Delta Initiative is $3,147,700. This will be satisfactory
    to analyze the pilot studies and to design large scale studies if
    warranted.
                     government performance and results act
        Question. How are the agency's annual performance goals linked to
    the agency's mission, strategic goals, and program activities in its
    budget request?
        Answer. The ARS Annual Performance Plan parallels the structure of
    the new ARS Strategic Plan, which was developed to meet the
    requirements of the Government Performance and Results Act of 1993. In
    the Annual Performance Plan, the Goals, Objectives, Strategies, and
    Performance Goals are linked to specific anticipated outcomes that the
    Agency expects to achieve in fiscal year 1999 with the funds requested.
    All the activities identified in the Strategic and Performance Plans
    link directly to the Mission Statement which, in turn, directly
    reflects the statutory authorities that underpin the Agency's work. A
    crosswalk is shown at each of the five Goals and at Initiative 2
    linking program activities to the budget request.
        Question. Could you describe the process used to link your
    performance goals to your budget activities?
        Answer. ARS carries out its research through 1100 CRIS research
    projects which are aligned with the 6 Budget Program Activities, 25
    National Programs and the 5 Goals of the GPRA driven Strategic and
    Performance Plan structure. The CRIS research projects are the primary
    level of funding and accountability and provide the linkage essential
    to crosswalk this information.
        Question. What difficulties, if any, did you encounter, and what
    lessons did you learn?
        Answer. There are many challenges in making a transition such as
    this. GPRA requires us to anticipate the longer-term outcomes and
    impacts of our work, which is more difficult in a research environment
    than it is in many other areas. Since the spring of 1994 ARS has
    employed a series of workgroups and teams to help clarify and resolve
    some of these issues. In addition, ARS helped found the Research
    Roundtable, an ad hoc group of Federal research agencies, that meets
    regularly to share information on how best to comply with GPRA. We have
    tried to adopt and adapt all this information to make GPRA work for
    ARS. In the Performance Plan submitted last year we relied heavily on
    numerical measures of outputs. We have since revised our approach and
    moved to using more tangible intermediate outcomes as the indicators of
    progress towards our long-term goals.
        Question. Does the agency's Performance Plan link performance
    measures to its budget?
        Answer. Yes, the funding resources are identified at the level of
    the 5 Agency Goals and Initiative 2, which relates to the work of the
    National Agricultural Library.
        Question. Does each account have performance measures?
        Answer. The Performance Goals relate to the new Strategic Plan
    structure and are linked to the traditional budget accounts by a
    crosswalk.
        Question. To what extent does your performance planning structure
    differ from the account and activity structure in your budget
    justification?
        Answer. There are substantial differences between the ARS Strategic
    and Performance planning structure, our National Programs and the
    Program Activity structure contained in the Budget. The budget activity
    structure is presented on the following areas: Soil, Water, and Air
    Sciences; Plant Sciences; Animal Sciences; Commodity Conversion and
    Delivery; Human Nutrition; the Integration of Agricultural Systems, and
    Agricultural Information and Library Services. The Strategic Plan is
    outcome oriented and includes the following 5 broad societal Outcomes:
    An agricultural production system that is highly competitive in the
    global economy; A safe and secure food and fiber system; A healthy,
    well nourished population; An agricultural system which protects
    Natural Resources and the environment; Enhanced economic opportunity
    and quality of life for Americans. In addition, three management
    initiatives, which includes the National Agricultural Library, are
    identified in the annual Performance Plan.
        Question. Do you plan to propose any changes to your account
    structure for fiscal year 2000?
        Answer. No, the Agency will continue to effectively present its
    budget through the approved Program Activity Structure which is linked
    to the core, CRIS research project system. This system is utilized in
    the allocation of resources as budgeted by the President and as
    directed by Congress. Our accounting system tracks each project to
    ensure compliance with the Appropriations Act and Congressional
    reports. These projects also provide the basis for systematic review by
    the National Program Staff and Area Directors. As stated earlier, the
    CRIS project system provides the essential linkage to the major
    Planning and Financial systems utilized by the Agency.
        Question. How were performance measures chosen?
        Answer. The new ARS Strategic Plan was drafted by an Agency-wide
    team that was always mindful of the need to measure progress towards
    achieving the plan's Strategies, Objectives, and Goals. The ARS Annual
    Performance Plan, that accompanies the fiscal year 1999 budget, was
    developed by the National Program Staff. Input was obtained from each
    of the National Program Leaders who, in consultation with the key
    Research Leaders and Lead Scientists, identified the performance
    indicators that were incorporated into the Annual Performance Plan.
        Question. How did the agency balance the cost of data collection
    and verification with the need for reliable and valid performance data?
        Answer. ARS has various mechanisms in place to retrieve financial
    and programmatic data on all aspects of its research program. At the
    present time, a committee of ARS employees is looking at what data we
    are currently collecting and what data we should be collecting to
    support the new Strategic and Performance Plans and the new National
    Program structure. We do not anticipate that the cost of data
    collection needed to validate future performance will be much greater
    than current costs.
        Question. Does your plan include performance measures for which
    reliable data are not likely to be available in time for your first
    performance report in March 2000?
        Answer. Across the five programmatic goals we have identified
    scores of performance indicators, that can be tracked and reported on
    by the National Program Staff. Accomplishing these performance measures
    will clearly demonstrate progress towards achieving the Goals and
    Objectives identified in the ARS Strategic Plan. We are still
    developing some of the baseline data, tracking and reporting
    requirements for several of the performance measures under Initiative
    3, Creative Leadership, but we expect to have these mechanisms in place
    to meet the timetables identified in the Performance Plan.
        Question. What are the key performance goals from your fiscal year
    1999 Annual Performance Plan that you recommend this subcommittee use
    to track program results?
        Answer. Measuring performance in research provides some unique
    challenges that may not exist in operating programs. The approach used
    in the fiscal year 1999 ARS Annual Performance Plan is to identify
    intermediate outcomes that are tangible and measurable. If ARS achieves
    all or most of these intermediate outcomes it will be a clear
    indication of progress towards meeting the longer-term Strategies,
    Objectives, and Goals in the new Strategic Plan. We would recommend
    that the subcommittee track the performance goals under the 5
    programmatic Goals: Goal I: Through Research and Education, Empower the
    Agricultural System with Knowledge that Will Improve Competitiveness in
    Domestic Production, Processing, and Marketing. Goal II: To Ensure an
    Adequate Food Supply and Improved Detection, Surveillance, Prevention,
    and Educational Programs for the American Public's Health, Safety and
    Well-Being. Goal III: A Healthy and Well-Nourished Population Who Have
    Knowledge, Desire, and Means to Make Health Promoting Choices. Goal IV:
    To Enhance the Quality of the Environment through Better Understanding
    of and Building on Agriculture's and Forestry's Complex Links with
    Soil, Water, Air, and Biotic Resources. Goal V: Empower People and
    Communities, Through Research-based Information and Education, to
    Address the Economic and Social Challenges of Our Youth, Families, and
    Communities.
        Question. In developing your Annual Performance Plan, what efforts
    did your agency undertake to ensure that the goals in the plan include
    a significant number of outcome measures?
        Answer. Because of the diversity of the ARS research program we
    have identified 84 performance indicators in fiscal year 1998 and 86 in
    fiscal year 1999 in the Annual Performance Plan. As we gain experience
    in implementing the GPRA performance and reporting processes, we
    believe we will become better able to identify performance goals and
    indicators that are meaningful in a research environment.
        Question. Do you believe your program managers understand the
    difference between goals that measure workload (output) and goals that
    measure effectiveness (outcome)?
        Answer. Yes, the Agency's senior managers are fully aware of the
    difference in output and outcome.
        Question. What are some examples of customer satisfaction measures
    that you intend to use? Please include examples of both internal and
    external customers.
        Answer. ARS has a long history of positive interaction with its
    customers and stakeholders but a formal process of more systematically
    measuring customer satisfaction is still evolving. Some components,
    such as the National Agricultural Library and the National Arboretum,
    periodically survey their users and visitors to measure and improve the
    quality of their services and general satisfaction. Many of the
    Administrative and Financial Management units regularly measure
    customer satisfaction from the internal agencies and components they
    support. A National Programs Staff committee is currently working to
    develop practical ways to measure customer satisfaction in our research
    programs. In developing our Strategic Plan ARS identified the following
    Customers, Beneficiaries, Stakeholders, and Partners:

        Customers.--Individuals or organizations that directly use ARS
    products or services.
    Producers (farmers, growers, and ranchers) and processors
    National and international organizations
    Advocacy groups
    Commodity and futures markets
    International trade organizations
    International science and research organizations
    Legislative Branch
    Executive Branch
    U.S. Department of Agriculture
    Secretary of Agriculture
    Other mission areas
    Action and regulatory agencies
    Office of Budget and Program Analysis
    Inspector General
    Chief Financial Officer
    Chief Information Officer
    Other Federal agencies
    Scientific community
    Medical community
    Health and dietary community
    Environmental community
    State and local governments
    News media
        Beneficiaries.--Individuals whose well-being is enhanced by the
    agency's activities.
    Domestic consumers
    Foreign consumers of U.S. agricultural exports and technologies
        Stakeholders.--Organizations or individuals that have an interest
    in the work of ARS but do not directly use the agency's products.
    Legislative branch
    Executive branch
    ARS employees
    National and international organizations
    Producer and processor organizations
    Food and commodity organizations
    Foreign countries/governments
    Trade organizations
    Environmental organizations
    Retail organizations
    Consumer organizations
        Partners.--Organizations that ARS works with collaboratively.
    Institutions of higher education
    Federal research agencies
    Private industry

        Question. How were the measurable goals of your fiscal year 1999
    Annual Performance Plan used to develop your fiscal year 1999 budget?
        Answer. The fiscal year 1999 Annual Performance Plan and the fiscal
    year 1999 budget were developed on parallel tracks with crosswalks
    showing the linkages.
        Question. If a proposed budget number is changed, up or down, by
    this committee, will you be able to indicate to us the likely impact
    the change would have on the level of program performance and the
    achievement of various goals?
        Answer. Yes. The version of the Annual Performance Plan currently
    before the subcommittee reflects the President's budget proposal for
    fiscal year 1999. Once the appropriations process is completed, ARS
    will revise the Annual Performance Plan to show the level of program
    performance that can be expected with the actual resources that are
    appropriated.
        Question. Do you have the technological capability of measuring and
    reporting program performance throughout the year on a regular basis,
    so that the agency can be properly managed to achieve the desired
    results?
        Answer. Within reason, yes. ARS is currently revising the type and
    amount of data which it requests from each research unit. This enhanced
    data collection will help the National Program Staff and the Area
    Offices to better monitor and manage the research program. To avoid an
    undue burden on the research leaders, we plan to collect most of the
    data on an annual basis.
        The Government Performance and Results Act requires that your
    agency's Annual Performance Plan establish performance goals to define
    the level of performance to be achieved by each program activity set
    forth in your budget.
        Many agencies have indicated that their present budget account
    structure makes it difficult to link dollars to results in a clear and
    meaningful way.
        Question. Have you faced such difficulty?
        Answer. This Agency will not have any difficulty linking dollars to
    results. As stated, ARS CRIS research projects underpin budget and
    program activities and the goals/outcomes as established under GPRA.
    The 1100 research projects are the foundation for allocating,
    accounting and review of the Agency's research. This is ``the'' level
    of accountability in this Agency and this information can be cross-
    walked or translated into the major systems operated by ARS.
        Question. Would the linkages be clearer if your budget account
    structure were modified?
        Answer. No. The existing budget account structure consisting of 6
    Program Activities does not need to be modified.
        Question. If so, how would you propose to modify it and why do you
    believe such modification would be more useful both to your agency and
    to this committee than the present structure?
        Answer. The Agency's CRIS projects are the accountability unit and
    aggregate and crosswalk to the major program, budget, management and
    review systems.
        Question. How would such modification strengthen accountability for
    program performance in the use of budgeted dollars?
        Answer. There is no need to modify the existing accountability
    systems for program performance or budget activities.
        Question. Does your fiscal year 1999 performance plan--briefly or
    by reference to your strategic plan--identify any external factors that
    could influence goal achievement?
        Answer. The Annual Performance Plan does not refer to external
    factors but the unabridged version of the ARS Strategic Plan 1997-2002,
    which will be printed later this spring, contains the following
    discussion of the external factors that impact on ARS:
        Consumer, Socio-Economic, and Policy Trends.--The abundance and
    affordability of the American food supply is greatly due to U.S.
    agricultural research. The Nation's ability to sustain this plentiful
    and inexpensive food supply continues to be paramount. But in recent
    years, consumer and producer attention has expanded somewhat to other
    areas of concern such as food safety and quality, the relationship of
    agriculture and the environment, the profitability of the agricultural
    enterprise, and the impact of government regulations, land use
    restrictions, and economic options that diminish the supply of farm and
    grazing land. The long-term sustainability of the Nation's food and
    fiber production systems will be determined not only by the continued
    profitability of farming and ranching, but also by how these production
    systems affect the environment. The capacity of U.S. agriculture to
    adapt to environmental changes is also a concern as are the
    availability and quality of natural resources. Another key
    environmental issue is how human activities affect weather patterns,
    atmospheric composition, and soil and water quality and productivity.
    Global population increases, demographic changes, and economic growth
    will substantially increase the demand for agricultural products and
    lead to the development of new markets. At the same time, increased
    agricultural efficiency in other countries will force U.S. agriculture
    to be more competitive.
        Funding.--The ability of ARS to respond to the many and diverse
    needs of producers and consumers is determined by annual
    appropriations.
        1996 Farm Bill and the Pending Revision of the Research Title.--The
    1996 Farm Bill, the Federal Agriculture Improvement and Reform Act, set
    a new direction for American agriculture by beginning the process of
    phasing out farm subsidy payments based on production levels and
    introducing free market disciplines. The effect of this legislation
    will be to heighten the importance of agricultural research as one form
    of a safety net beneath producers. Research to maintain and improve
    productivity; to detect, control, and eradicate diseases and pests
    (insects, weeds, etc.); and to promptly address nontariff trade
    barriers, especially sanitary and phytosanitary conditions will take on
    even greater importance in a market environment. The 1996 Farm Bill
    also updated and expanded the ``Purposes of Agricultural Research''
    which were first enacted in 1990. As described elsewhere, ARS
    incorporated the Purposes into this strategic plan adopting them as the
    agency's objectives. Congressional reauthorization of the Research
    Title will have an impact on ARS, but we are still too early in the
    legislative process to anticipate what that impact will be.
        Competition.--The Department of Labor projects an increase of 19
    percent in the size of the general workforce in the next decade, which
    is slightly lower than the rate of growth for the preceding decade. The
    labor market during this period is also expected to be highly
    competitive for many occupations that require an advanced education,
    including scientists, engineers, economists, and computer specialists.
    The high earning potential of professions, such as law and medicine,
    will continue to make a career in science less attractive to many young
    men and women who have the creative intelligence needed for
    professional success in agricultural research. Consequently, a major
    emphasis on recruitment, student employment, upward mobility, and
    training programs will be needed to attract and retain a quality
    workforce. The trend toward increasing workforce diversity is also
    expected to continue, and opportunities for encouraging women and
    minorities into careers in science, engineering, and economics will
    need to be given a high priority.
        Question. If so, what steps have you identified to prepare,
    anticipate and plan for such influences?
        Answer. As indicated above, the issue of external factors was not
    addressed in the fiscal year 1999 ARS Annual Performance Plan. Having
    said that, we would like to stress that an in-depth examination of the
    major external factors affecting American agriculture was part of the
    strategic planning process and the process for developing the new
    National Programs. The five Vision Conferences are a specific example
    of how ARS identified and considered external factors in its strategic
    and programmatic planning processes. The visioning process consisted of
    a pilot conference in January 1995, followed by five regional
    conferences held in June and July of 1995. The conferences brought
    together over 400 participants, representing a broad cross section of
    the Agency's customers, stakeholders, and partners, who worked in more
    than 30 breakout groups to provide input regarding: (1) the key forces
    that will influence American agriculture during the next 20 to 25
    years, (2) how these changes will affect agricultural research, and (3)
    more specifically, how ARS should respond to these changes. Using the
    input and information gathered from this process, ARS identified the
    following 10 major issue areas that will affect agriculture and
    agricultural research over the next 25 years: international/global
    issues, population/demographics issues, environmental issues,
    sustainability of production systems issues, economic issues,
    government and political issues, consumer/societal issues, food and
    health issues, technological advancement issues, and education and
    information issues. Likewise, ARS has been and is continuing to be
    actively engaged with a wide-range of customers, stakeholders, and
    partners in developing its new National Program structure.
        Question. What impact might external factors have on your resource
    estimates?
        Answer. The most important and direct external factor identified in
    the ARS Strategic Plan is the level of Administration and Congressional
    support, both in terms of the reauthorization of the Farm Bill--
    especially the Research Title, and the level of funds appropriated to
    support the Agency's research activities. Other external factors such
    as the heightened concern about the relationship of agriculture and the
    environment, concerns about food safety, and the impact of government
    regulations gradually change the focus of ARS research. Global
    population growth and economic changes also affects American
    agriculture and the research priorities needed to sustain it. Changes
    in the American workforce may also impact on ARS' ability to attract
    and retain the wide range of skills needed to meet the agricultural
    research needs of the next century.
        Question. Through the development of the Performance Plan, has the
    agency identified overlapping functions or program duplication?
        Answer. No. In managing the ARS research program, the National
    Program Staff seeks to avoid unnecessary duplication while ensuring
    complementarity and coordination between research units and locations.
    Agricultural research must be conducted at different locations to
    account for climatic, regional, and geographic variations as well as
    different combinations of pests, diseases, and agricultural products,
    each with unique problems calling for unique research approaches and
    solutions.
        Question. If so, does the Performance Plan identify the overlap or
    duplication?
        Answer. In developing the Annual Performance Plan we did not find
    any areas of program duplication.
        Future funding decisions will take into consideration actual
    performance compared to expected or target performance. Given that:
        Question. To what extent are your performance measures sufficiently
    mature to allow for these kinds of uses?
        Answer. In our unabridged Strategic Plan which will be printed
    later this spring, we discuss the difficulty of predicting the ultimate
    outcome of research and the near impossibility of applying numerical
    measures to research, especially basic research. Having said that, we
    are confident that the use of a large number of tangible intermediate
    outcomes will enable the subcommittee to determine whether ARS is
    making reasonable progress towards reaching the goals and objectives
    identified in the Strategic and Performance Plans. Two examples of ARS
    Performance Goals and the tangible intermediate outcomes we have
    identified to indicate progress are as follows: Under Performance Goal
    2.1.4.1--``During fiscal year 1999, ARS will conduct research leading
    to registration of a second therapeutic compound useful in treating
    diseases of farm raised fish.'' At the end of fiscal year 1999, the
    subcommittee will be able to determine if ARS completed the research
    and assembled the data on this compound and provided it to the Food and
    Drug Administration to support their decision making process on the use
    of this new drug. In Performance Goal 1.1.3.2--``During fiscal year
    1999, ARS will release technology for calibrating HVI strength
    measurements on cotton fiber which is expected to be adopted worldwide
    as the official calibration procedure. This adoption will ensure that
    cottons are all subjected to the same standards worldwide, allowing
    those cotton growers who produce a superior high-quality product to
    receive compensation for it.'' At the end of fiscal year 1999, the
    subcommittee will be able to determine if ARS produced a reference
    measuring technology that is adopted internationally enabling cotton
    marketers and buyers to compare cotton quality regardless of where it
    is produced. We have learned many lessons as we developed our new
    Strategic Plan and the first Annual Performance Plan and we will know a
    great deal more after we have moved through the entire GPRA planning
    and reporting cycle.
        Question. Are there any factors, such as inexperience in making
    estimates for certain activities or lack of data, that might affect the
    accuracy of resource estimates?
        Answer. Certainly there are. Anticipating the longer range outcomes
    or results of research, especially basic research, runs counter to our
    long experience with predicting scientific research. The great
    unpredictability of research, particularly its unanticipated benefits,
    makes it extremely difficult for scientists to formally offer
    predictions for fear they will engender unrealistic expectations.
    Predicting what problems will need to be address, what type of metrics
    should be used to reasonably measure on-going research, how best to
    express ``future'' research accomplishments, and how to align the
    resources available to out year research results are all areas were we
    lack experience. As we work our way through one or two planning and
    reporting cycles, we will gain the experience we need to more
    meaningfully adapt GPRA to the ARS research environment.
        Question. Based on your fiscal year 1999 performance plan, do you
    see any need for any substantive revisions in your strategic plan
    issued on September 30, 1997?
        Answer. Not at this time. ARS devoted 2\1/2\ years to developing
    its new GPRA driven Strategic Plan and the first Annual Performance
    Plan. We used workgroups, a agency-wide Strategic Planning Team, as
    well as the input we received from outside sources such as the Research
    Roundtable, an ad hoc group of Federal research agencies formed to
    address how best to apply GPRA in a research environment. We held
    visioning conferences, published our draft strategic plan in the
    Federal Register, and placed several drafts on the ARS Home Page to
    expedite customer, stakeholder, and partner review and comments. As we
    move through the early stages of implementing GPRA we are discovering
    things that might have been done differently. Rather than devoting
    resources to the revision of the Strategic Plan, we believe that it
    would be more productive to move forward aggressively with full
    implementation of GPRA. At the end of the ``shake-down'' period (a
    testing under operating conditions of something new for possible faults
    and defects and for familiarizing the operators with it) we will be in
    a much better position to meaningfully revise the ARS Strategic Plan.
                                     ______

                      Question Submitted by Senator Gorton
        For two years in a row now, USDA and the Administration have
    eliminated funding for the operation of the Prosser Research Station in
    Washington state. I understand that the Agriculture Research Service
    did not recommend the closure of Prosser in this year's budget. I am
    told that this was a decision made by the Office of Management and
    Budget.
        Question. Why did USDA and the research arm of USDA (REE) not
    express to OMB the importance of the Prosser Research Station, and for
    that matter, the other facilities which are to be eliminated in ARS'
    budget? Are these research sites not considered to be priorities for
    production agriculture research?
        Answer. The President's budget requires the reallocation of
    existing resources to finance new, high priority research needs. A
    number of projects carried out in ARS research stations at Prosser,
    Washington; Mandan, North Dakota; Orono, Maine and Brawley, California,
    were identified as less critical. As a result, a cost-effective
    decision was made to terminate and redirect resources to new research
    initiatives and recommend closure of these research stations.
                                     ______

                     Questions Submitted by Senator Bumpers
                           human nutrition initiative
        Question. Please provide an update on the Human Nutrition
    Initiative and, in particular, the role of Arkansas Children's
    Hospital.
        Answer. The Human Nutrition Initiative is a multi-year plan to
    enhance the scientific basis for understanding the role of nutrition in
    well-being. The research areas of the Human Nutrition Initiative are:
    (1) nutrient-gene interactions, (2) diet and immune function, (3) role
    of nutrition throughout the life cycle, and (4) diet and human
    performance. The Initiative began in fiscal year 1998 with a
    Congressional appropriation of $7.5 million. Research in the Human
    Nutrition Initiative is carried out at six human nutrition centers:
    Arkansas Children's Hospital Research Institute, in Little Rock, AR;
    Western Human Nutrition Research Center, San Francisco, CA; Jean Mayer
    USDA Human Nutrition Research Center on Aging, Boston, MA; Beltsville
    Human Nutrition Research Center, Beltsville, MD; Grand Forks Human
    Nutrition Research Center, Grand Forks, ND; and Children's Nutrition
    Research Center, Houston, TX.
        The Arkansas Children's Nutrition Center (ACNC) is the newest of
    the ARS Human Nutrition Research Centers. It provides a research
    program that focuses on unique issues. Its major efforts focus on the
    effects of early nutrition on growth, cognitive development in
    children, and the effect of early nutrition on the subsequent risk of
    diseases in adulthood. It currently has funding for two major projects.
    One, is to determine the role of nutrition in brain function,
    especially cognitive and behavioral function of infants and children.
    Data from these long-term studies will provide the understanding of how
    children can improve their learning abilities in the early years and
    later in the classroom. In addition, it is now thought that these
    results will have a far reaching impact on child behavior.
        The second project involves dietary factors other than the
    traditionally studied nutrients. There are many factors in diets that
    affect development and normal metabolic, physiologic and endocrine
    systems. These factors may have beneficial or adverse effects. ACNC is
    studying factors in children's diet, such as the soybean products found
    in infant formula, that are thought to prevent breast cancer later in
    life based on their animal research model. There are factors that have
    been isolated in several foods that are likely to have similar effects
    on such diseases as prostate cancer, colon cancer, osteoporosis,
    obesity, etc. Thus, the role of the ACNC is to develop new and as yet
    unexplored areas of child nutrition.
        Question. How is this Initiative more than just a simple
    restatement of the fact that we should all eat more fruits and
    vegetables?
        Answer. The translation of sound nutritional science findings into
    consumer advice such as `eat more fruits and vegetables' is certainly
    one important outcome of the research. Four important trends which
    affect nutrient intake and nutritional health: (1) Framework condition.
    This refers to the increasing importance of processed foods, and the
    declining presence of farming and gardening in most people's daily
    lives; (2) Acceleration of scientific knowledge about the positive
    biological effects of compounds within foods, particularly in
    preventing degenerative processes formerly thought to be obligate
    consequences of aging; (3) Biotechnology which can drastically alter
    the composition of many foods now under production; (4) Accelerations
    in information exchange which result in more rapid communication about
    nutrition. The Human Nutrition Initiative will strengthen production
    agriculture by defining the nutritional basis for enhancing the health
    promoting properties of foods, the scientific basis of dietary
    recommendations, the effectiveness of food assistance programs, and
    ultimately human health.
        Question. If this Initiative results in a more healthy diet, are
    there projections on health care savings that might result from this
    research?
        Answer. There are many areas where health care costs will be
    reduced. Diet is thought to be a major factor in 60-75 percent of all
    cancers. The delay or prevention of the type of breast cancer being
    studied at ACNC is thought to involve as much as 60 percent of the
    Total breast cancers in the United States. Any progress on prevention
    would result in multi-millions of dollars saved each year. Even if this
    disease onset could just be delayed for 5 years, there would be
    enormous savings in medical care costs. This is also true of other
    potentially diet-related cancers such as prostate cancers and colon
    cancers that if prevented or delayed would significantly reduce health
    care cost. In the central nervous system projects, improvement in
    cognitive function will improve the ability of children to learn and
    help reduce problems with behavior. Improved learning will enable
    individuals to more closely attain their full potential to contribute
    to society through private and public pursuits. It is postulated that
    diet plays a significant role in behavioral problems now treated with
    drugs and therapy. Prevention of these problems would also result in
    substantial cost savings. The success of nutrition research in the last
    30 years in reducing the incidence and severity of cardiovascular and
    digestive disease, is a clear indication that alterations in diet and
    life-style have beneficial effects both through reduced morbidity and
    mortality and a concomitant reduction in the cost of health care.
                        food genome research initiative
        Question. The proposed budget includes an increase for food genome
    research. What role might the ARS Rice Germplasm Laboratory play in
    this initiative?
        Answer. The food genome research will vastly expand our knowledge
    of the genome for species of importance to the food and agricultural
    sectors. ARS will focus on a government-wide effort to map the genomes
    of agriculturally important crops and livestock to determine the DNA
    sequence of the functioning genes in those genomes, and to define and
    understand the function and control of economically important genes.
    ARS will build on current genomic research, such as the Human Genome
    Project and the Arabidopsis Genome Research Project, to understand gene
    structure and function. This is expected to have considerable payoff in
    crop species such as rice. The National Rice Germplasm Evaluation and
    Enhancement Center at Stuttgart, Arkansas, is a national center for
    genetic improvement of rice. The program to be developed at this new
    facility will include the genetic improvement of a broad range of
    traits critical to optimizing rice production and utilization. Thus,
    scientists at this location will be close collaborators with the food
    genome research, particularly in the functional genomics component.
        Question. What role might the Poultry Center of Excellence in
    Fayetteville, Arkansas play?
        Answer. There is potential for the poultry industry to benefit
    greatly from the use of molecular markers to select for superior
    animals. The ARS Avian Disease and Oncology Laboratory, East Lansing,
    Michigan, has developed a genomic map and a national database system
    for chickens. The Poultry Center of Excellence in Fayetteville,
    Arkansas, could work with the East Lansing laboratory to use genetic
    information, as other universities and ARS locations are doing, to
    identify genes or groups of genes that may be responsible for desired
    economic traits such as growth rate, feed efficiency, and resistance to
    disease. At present, we do not have scientists trained in the
    appropriate field of science at the Fayetteville, Arkansas laboratory,
    a necessity in order to initiate a genomics program.
        Question. What role might the ARS National Aquaculture Research
    Center in Stuttgart, Arkansas play?
        Answer. The recent review and planning session for future
    aquaculture research at the SNARC did not identify genome research as
    an area of emphasis for the Center, and there are no immediate plans to
    hire geneticists at the SNARC. However, there will be opportunities for
    genetic improvement of emerging warmwater aquaculture species,
    including hybrid striped bass, a species which will receive research
    emphasis at the SNARC.
        Question. The proposed budget includes an increase for food genome
    research. How does the USDA food Genome research Initiative fit with
    ongoing genome research in other areas of government?
        Answer. The USDA Food Genome Initiative expands the scope of a
    National Plant Genome Initiative to include animals and microbes. USDA
    will lead the Food Genome Initiative and ensure that there is
    coordination with other relevant Government agencies and the
    international research community.
                          ars pest biology--fire ants
        The budget proposes $3.5 million for pest biology.
        Question. Please provide an update on ARS research related to the
    control and eradication of the Imported Fire Ant.
        Answer. Imported fire ants, Solenopsis richteri, and S. invicta,
    currently infest over 300,000,000 acres in the South. Continued
    expansion is expected northward along both continental coasts.
        As a result of ARS research, four bait toxicants have been
    commercialized and two are coming to the marketplace through
    cooperative programs with industry. In addition, ARS scientists are
    working closely with Animal and Plant Health Inspection Service-Plant
    Protection and Quarantine (APHIS-PPQ) and other national and
    international customers, including seven universities to develop
    biologically-based IPM strategies for fire ant control.
        The ongoing research on the imported fire ant at the ARS Unit in
    Gainesville, Florida, includes: development and introduction of three
    biocontrol agents into the United States for non-insecticidal
    management of fire ant in large-scale areas; pheromone enhancement of
    bait attractions; basic biology and ecology of fire ant populations;
    non-toxic, behavioral modification interventions using repellents and
    semiochemicals; and support of the APHIS program.
        Recently, ARS has initiated an effort to introduce some natural
    enemies of fire ants in South America into the U.S. If successful,
    imported fire ant populations in the U.S. could be reduced to levels
    similar to those found in South America.
        For example, parasitic flies in the genus Pseudacteon have been
    shown to stop fire ant foraging and shift the competitive balance to
    other local ant species. The microsporidian parasite, Thelohania
    solenopsae, causes reductions in mound density. The parasitic ant
    Solenopsis (Labauchena) daguerrei has been reported to kill host
    colonies over a period of several years.
        The phorid fly, was released in Gainesville at 3 locations from
    July through early October. Fly populations successfully cycled to
    successive generations and were observed continuing to attack fire ants
    in January. Brood from laboratory colonies of fire ants infected with
    Thelohania solenopsae has been used to infect previously healthy field
    colonies in Florida. Preliminary data suggests that limited secondary
    spread has occurred.
        A software and field-deployable hardware system currently is under
    development by the Gainesville unit that may aid in database
    management, the evaluation of candidate biocontrol agents, and in
    developing and implementing pesticide-reduced strategies incorporating
    existing technologies.
        The long-term goals of ARS fire ant research are:
        (1) Collect and determine relevant remotely sensed data for
    selected sites in cooperation with NASA. Merge ground-based biological
    data with remote sensed data to predict likelihood of success for
    various biocontrol agents.
        (2) Develop computer-based decision support systems to aid fire ant
    control practitioners in day-to-day operations requiring integration of
    management technologies.
        (3) Develop mass propagation of candidate biocontrol agents found
    successful in limited field research/demonstration tests.
        (4) Develop large area-wide integrated management strategies.
        (5) Develop quarantine management that will allow the use of less
    pesticides.
        (6) Develop new technologies with emphasis on biologically-based
    strategies. These may include classical biocontrol agents,
    biopesticides, social disruption using semiochemicals (pheromones),
    genetic manipulation, resource manipulation, manipulation of pathogen
    virulence.
        Question. Is ARS coordinating in any way with the fire ant research
    underway at the University of Arkansas at Monticello?
        Answer. ARS has been cooperating with University of Arkansas at
    Monticello under a specific cooperative agreement for the development
    of an integrated fire ant management strategy. The principal objectives
    of the cooperative research include:
        (1) Production of a hazard-rating model of fire ant range expansion
    into Northern Arkansas.
        (2) Studies of fire ant natural enemies in South America to provide
    the science based knowledge that is needed to manage successfully
    imported biocontrol agents.
        (3) Development of strategies for using existing contact pesticides
    for prolonged fire ant control.
                                     ______

                      Questions Submitted by Senator Kohl
                       integrated farming system program
        I remain very interested in the Integrate Farming System program of
    the Agricultural Research Service. It is very important for USDA to be
    investing in long-term research on sustainable agriculture systems for
    the 21st century and ARS is well positioned to undertake this mission.
    The need for new diversified, integrated crop and animal production
    systems in particularly urgent for your family farmers and for the
    health of our environment.
        Question. Does the budget request include funding for the Wisconsin
    Integrated Cropping System Trials?
        Answer. The fiscal year 1999 budget request includes $497,100 for
    the Wisconsin Integrated Cropping Systems Trials, the same as for
    fiscal year 1998. In fiscal year 1997, funding was appropriated for
    $500,000. This funding is split between the U.S. Dairy Forage Research
    Center, the University of Wisconsin and the Michael Fields Agricultural
    Institute in East Troy, Wisconsin. The Agricultural Research Service
    (ARS), through the U.S. Dairy Forage Research Center, has established a
    long-term cooperative agreement with the University of Wisconsin in
    cooperation with the Michael Fields Agricultural Institute to carry out
    the Wisconsin Integrated Cropping Systems Trials at Arlington and at
    the Lakeland Agricultural Complex at Elkhorn, Wisconsin. A sum of
    $810,000 is to be provided to the University for this cooperative
    project which spans a 5-year period from fiscal year 1997 through 2001.
    Funding of $270,000 was provided in fiscal year 1997 and $180,000 has
    been provided so far in fiscal year 1998. Additional in-house research
    on Integrated Farming Systems by an ARS scientist will be an integral
    part of the overall cooperative effort.
        Question. Last year, this Committee instructed the agency to
    implement interdisciplinary partnerships, including farmers and
    nongovernmental organizations, in carrying out all its IFS projects.
    Can you give me a progress report on this?
        Answer. Currently, 13 ARS locations doing IFS work have farmer and/
    or nongovernmental partners. During the past year, ARS organized its
    1100 projects into 25 national programs. One of the national programs
    is titled `Integrated Farming Systems' (IFS). An executive summary for
    this national program may be found on the Internet at http://
    www.ars.usda.gov/nps/programs/207s2.htm. An important aspect of program
    and project development will be obtaining inputs from farmers,
    nongovernmental organizations, and others as to the priority issues
    that need to be addressed and the manner in which partnerships may be
    developed.
        Question. How many IFS projects are there currently?
        Answer. The IFS national program is in the process of being formed.
    Forty-seven locations have tentatively been identified as participants.
    IFS covers traditional farming, sustainable agriculture, and precision
    agriculture.
        Question. How many are implemented as partnerships?
        Answer. Twelve multi-disciplinary research projects, which include
    partners representing the private sector and other governmental
    agencies, have been implemented.
        Question. How many farmers participate in IFS projects?
        Answer. Twelve of the above projects, including the Wisconsin
    Integrated Cropping Systems project, have direct participation of
    farmers. Ten of them are carried out as on-farm research projects in
    which farmers participate.
        Question. What is your plan to transition more IFS projects to
    partnership arrangements?
        Answer. ARS is encouraging all locations to identify and involve
    customer and stakeholder groups. The goals are to have these groups and
    interested individuals provide input during the periodic review and
    evaluations that all ARS units undergo, and to maintain continuous
    relationships that will lead to increased on-farm research, CRADAs, and
    other partnerships. For example, some ARS program managers and
    researchers recently met with farmers and ranchers associated with the
    Campaign for Sustainable Agriculture, which includes the Michael Fields
    Institute. As a result of that meeting, farmers will be matched with
    appropriate ARS scientists throughout the country to initiate
    partnerships.
                                     ______

                      Questions Submitted by Senator Byrd
        Question. Please provide me with a status report on the
    construction of the National Center for Cool and Cold Water Aquaculture
    (NCCCWA), detailing pertinent dates and milestones.
        Answer. ARS received $1,921,000 in fiscal year 1995 for land
    purchase and laboratory planning and design. Total construction costs
    are estimated at $12 million. ARS received $6 million in fiscal year
    1997 and an additional $6 million in fiscal year 1998 for construction
    of the NCCCWA.
        The architect-engineer has developed the site plan for the NCCCWA.
    Conceptual designs have also been prepared for the laboratory/office
    building and the tank/aquaria building. Final drafts of the Program of
    Requirements and the Investigative Report have been completed. However,
    there has been a delay in design progress as a result of the extreme
    drought conditions experienced in 1997 that resulted in an
    unprecedented reduction in spring water supplies and stream flow in the
    vicinity of the U.S. Department of Interior's Leetown Science Center
    (LSC), including very low flows in two nearby springs (Bell and Link).
    The NCCCWA will be co-located with the LSC. Original plans were to pipe
    the water from these springs to the NCCCWA and provide a return supply
    of water from the facility to prevent drawing down the natural water
    resource. The drought condition called into question whether natural
    water resources would always be sufficient to provide for the future
    needs of both the FHL and the NCCCWA without impacting local residents.
    After extensive investigation, the current plan is for the NCCCWA
    design to include the capability for water recirculation, with
    appropriate treatment, for up to 50 percent of the water supplied to
    the tank/aquaria building. This capability will also provide for
    greater control over water quality for research purposes and will
    obviate the need to develop Bell and Link Springs, as originally
    planned. Preliminary projections are that the capital costs of the
    recirculation capability will be essentially equivalent to the cost
    savings resulting from not developing the Bell and Link Springs.
        The design is expected to be completed by January 1999; and a
    construction contract is scheduled for a May 1999 award. Construction
    is expected to take 18 months and be completed by November 2000.
        Question. Is the current construction schedule the same as the
    Agricultural Research Service's (ARS) original projection?
        Answer. The current schedule has fallen behind the original ARS
    projection by four months.
        Question. If not, why?
        Answer. The drought experienced in 1997 required extensive
    investigation of the adequacy of water resources which delayed the
    schedule beyond that originally envisioned.
        In fiscal year 1998, $250,000 was provided to ARS to initiate the
    program of the National Center for Cool and Cold Water Aquaculture.
        Question. What progress has been made on the Center's program?
        Answer. The program increase for the Center is being used to hire a
    highly qualified scientist to serve as Research Leader for the Center,
    to begin carrying out a cooperative research program with the U.S.
    Geological Survey's Leetown Science Center (LSC), and to oversee final
    design and construction of the facility. The ARS National Program Staff
    is working closely with the LSC to identify areas of mutual research
    interest where collaboration in research could occur.
        Question. What is the status of collaborative efforts between ARS
    and West Virginia University on cool and cold water aquaculture
    activities in Appalachia?
        Answer. The ARS, National Program Staff (NPS) has been discussing
    with scientists and administrators at West Virginia University (WVU)
    opportunities for collaboration in research between the National Center
    for Cool and Cold Water Aquaculture and WVU. There is particular
    interest in a collaborative research program on genetics of rainbow
    trout. ARS has indicated that, if WVU is successful in developing and
    obtaining funding for a proposal on the genetics of rainbow trout, ARS
    could provide additional support for graduate students and/or a post-
    doctoral researcher to work with WVU on the research program.
        Question. What is the status of collaborative efforts between ARS
    and the West Virginia Department of Agriculture on cool and cold water
    aquaculture activities in Appalachia?
        Answer. At the invitation of the Commissioner of the West Virginia
    Department of Agriculture, the ARS National Program Leader for
    Aquaculture is participating in the West Virginia Aquaculture Task
    Force, a partnership formed to support the development of aquaculture
    in West Virginia. The primary mission of the Task Force is to establish
    a State Aquaculture Plan that will set realistic goals and a system to
    achieve them and promote effective cooperation and government
    coordination for aquaculture in the State. The first meeting of the
    Task Force took place on February 25, 1998.
        In fiscal year 1998, $250,000 was provided for an agroforestry
    systems program at the Appalachian Soil and Water Conservation Research
    Laboratory.
        Question. What progress has been made on this new research
    initiative?
        Answer. A plant physiologist with root/soil interactions expertise
    was added to the agroforestry program. This addition filled a critical
    gap in the program. A research plan was developed to address conversion
    of farm woodlots to agroforestry production systems.
        Question. What is the projected timetable to carry out the
    objectives of the research?
        Answer. The envisioned system involves clearing selected areas in a
    woodlot, followed by establishment of a multi-species planting that
    includes high-value hardwood timber species and shade-tolerant
    horticultural (crop producing) tree, shrub, and herbaceous species. The
    resulting system would begin providing income to a landowner within 3-5
    years.
        Implementation of the research plan, experimental site selection
    and preparation has been initiated. This site represents a first-
    generation system for which no temperate-climate prototype exists.
    Within two years the research site will be fully developed, and will
    include establishment of short-term, immediate-return plant species;
    extensive data on the microclimate and rhizosphere characteristics of
    the research site will also be collected. Within 3-5 years, based on
    knowledge gained from the microclimate and rhizosphere
    characterizations, there should be: (1) complete establishment of long-
    lived woody species; (2) a procedure available to farmers on the
    methods needed to establish mid-and long-lived crop species; (3)
    results from the short-term production systems experiments; and 4)
    information on ecological/inter-species interactions in agroforestry
    woodlot systems.
        Within 5-10 years the full production data from short and mid-term
    species will be available for reliable economic analyses of land use
    alternatives and the design of second-generation agroforestry woodlot
    production systems.
        Question. What is the estimated cost of conducting this research?
        Answer. The fiscal year 1999 funding for agroforestry research of
    $438,400 will support the new scientist's research for the next 2
    years. However, resources to purchase and install equipment for the
    research project are severely constrained. An additional $300,000-
    $500,000 (plus the reinstatement of the $250,000 add on to the fiscal
    year 1998 budget, proposed for termination in fiscal year 1999), would
    allow full development of collaborations with university cooperators
    (e.g., West Virginia University), and would also support the addition
    of a new scientist, a soil mycologist, and the technical support to
    manage the research site and collect data. The collaboration of and
    support for University experts are needed to fully analyze and
    interpret the data.
        Question. With the completion of the five-year mission plan for the
    Appalachian Soil and Water Conservation Research Laboratory, please
    provide me with a list of research programs that will be undertaken in
    the future.
        Answer. Four major research programs areas have been identified:
    (1) Management of hilly grasslands in Appalachia for sustainable
    production; (2) Renovation and improvement of underutilized, abandoned
    or disturbed hill lands with browsing livestock; (3) Agroforestry
    systems for the Appalachian regions; and (4) Improving soil quality and
    forage legumes for Appalachia. Each program will have multiple
    objectives directed towards solving problems of the Appalachian small
    farmer.
        Question. Please provide the funding level required for each
    program.
        Answer. The current funding level at the Appalachian Soil and Water
    Conservation Research Laboratory is $4,423,400. Because the programs
    are under development, final decisions have not been made on
    redistribution to the four programs, but approximately an equal split
    is anticipated. A $1.2 to 1.5 million increase (4 to 5 scientists) is
    required for the location, distributed equally to the four programs.
        Question. List any projects that have been terminated or are
    planned for termination at the Appalachian Soil and Water Conservation
    Research Laboratory in fiscal year 1998 or in fiscal year 1999.
        Answer. The current projects to be redirected to the new programs
    are: Livestock grazing systems and water quality in Appalachia;
    management and ecology of pastures in the Appalachian region; forage
    legume breeding for the Appalachian region; alleviation of acid soil
    constraints to plant growth; and selection and improvement of plants
    for infertile acid soils. Agroforestry systems for the Appalachian
    region, will be continued. These projects will be implemented even
    though the fiscal year 1999 budget proposal does not include the fiscal
    year 1998 congressional add on. Many current project activities,
    especially related to the development of useful products for customers,
    will be incorporated into the new programs.
        Question. What are the research results related to those programs?
        Answer. The research results related to those programs are:
        (1) Potentials for Agroforestry.--The research found that 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.
        (2) 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.
        (3) 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.
        (4) 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.
        (5) Management and Ecology of Pastures in the Appalachian Region.--
    Different types of plants are being evaluated for use in Appalachia
    which will lead to increased commodity diversification. 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.
        (6) 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.
        Question. Please provide the number of people on staff and full-
    time employees at the Appalachian Soil and Water Conservation Research
    Laboratory for fiscal year 1997 and budgeted for fiscal year 1998.
        Answer. In fiscal year 1997 there are 58 full-time employees of
    which 15.0 are classified as research scientists. These numbers will
    remain the same for fiscal year 1998.
        Question. With the completion of the five-year mission plan for the
    Appalachian Fruit Research Station, please provide me with a list of
    research programs that will be undertaken in the future.
        Answer. The programs that will be undertaken in the future include
    the development of (1) knowledge of the critical molecular processes in
    fruit development and ripening; (2) genetic materials with improved
    pest resistance, cold hardiness and fruit quality; (3) integrated
    cultural and pest management systems that reduce pesticide/herbicide
    use, increase production cost efficiency and minimize environmental
    impact; (4) harvesting, handling and postharvest quality control
    technologies that increase shelf life and market value.
        Question. Please provide the funding level required for each
    program.
        Answer. To fully develop these programs and operate the laboratory
    at full capacity would require an additional four to five scientists
    for an estimated total of $1.2 to $1.5 million.
        Question. List any projects that have been terminated or are
    planned for termination at the Appalachian Fruit Research Station in
    fiscal year 1998 or in fiscal year 1999.
        Answer. No projects are planned for termination in fiscal year 1998
    or in fiscal year 1999.
        Question. What are the research results related to those programs?
        Answer. Some of the research results from the current programs are
    provided below.
        The peach gene for the chlorophyll a/b binding protein and the
    region controlling gene expression have been fully sequenced. This
    protein is essential for the light reaction of photosynthesis in peach
    and other plants.
        A transgenic line of plum carrying a gene for resistance to plum
    pox virus was developed and shown to have good resistance in greenhouse
    and European field trials. This virus has caused severe economic loss
    in Europe and was recently detected in South America. The transgenic
    plums may provide the only basis for protecting U.S. orchards.
        Transgenic Bartlett and Buerre Bosc pears carrying genes that
    affect growth habit and confer resistance to fire blight were developed
    and are being evaluated.
        A unique, non-chemical approach to pest control in fruit crops
    using hydrophobic particles to coat tree leaves was developed, patents
    filed and successfully demonstrated in field trails in Chile and the
    U.S. Through a cooperative research and development agreement with a
    U.S. company, the technology has received EPA clearance with a zero
    reentry time. This is a major step forward in meeting the regulatory
    limitations of the Food Security Act.
        A mechanical harvester for citrus was developed and successfully
    tested in Florida. A cooperative research and development agreement has
    been signed with the Florida Department of citrus. A similar design for
    a blueberry and raspberry mechanical harvester that meets fresh fruit
    quality requirements was licensed. This could be important to small
    farm operations.
        A 15-year study of herbicides used in orchard systems demonstrated
    no accumulation of herbicide residues in the soil or changes in soil
    microbial populations while effectively control-ling perennial weeds.
        Question. Please provide the number of people on staff and full-
    time employees at the Appalachian Fruit Research Station for fiscal
    year 1997 and budgeted for fiscal year 1998.
        Answer. In fiscal year 1997, there were 17 scientists and 55 other
    full-time-equivalents. For fiscal year 1998, there are 17 scientists
    and 50 other full-time-equivalents budgeted.
                                     ______

                      Questions Submitted by Senator Craig
        Producers in my state, and their suppliers, have grown dependant
    upon the work being done by ARS scientists to develop new crop
    varieties and pest resistance. This work is conducted around the
    country, including four ARS stations in Idaho. I was pleased to learn
    that the President's budget request includes a $32 million increase for
    ARS--pleased until I saw where the money was to be spent.
        The President's budget request cuts important funding for ARS
    research in a wide range of crops, including: soybeans, potatoes, rice,
    cotton, small fruits, and sugar, among others. In place of these
    important research activities, ARS dollars are being syphoned off to
    fund environmental projects such as the Presidential Environmental
    Initiative for Global Change, the Presidential Initiative on South
    Florida Ecosystem Restoration, and programs in watershed health and
    environmental quality.
        Question. How does this effect the ability of ARS to fulfill its
    underlying mission of providing reliable research to American
    producers?
        Answer. Environmental issues such as global change, watershed
    health, and environmental quality are directly relevant to crop
    production and are recognized by commodity groups as important
    concerns. Because ARS does not have enough funds to address all the
    necessary required research, the Administration has proposed for fiscal
    year 1999 that funds be redirected from projects which are less urgent.
    The projects proposed for closure are not limited to production
    agriculture, but also include certain environmental research projects
    that are less critical. ARS' strategic plan, gives a high priority to
    production agriculture. Part of the funds obtained through project
    closures would be redirected to environmental research that is directly
    relevant to crop production. Although many EPA programs do concern
    agriculture and involve ARS research to varying degrees, much of the
    high priority environmental research ARS needs to undertake is not now
    being pursued by other government research agencies, such as the EPA.
        The President's request for ARS also includes $13.97 million in
    support of the Presidential Initiative for Food Safety.
        Question. Will the money be spent on new ARS facilities dedicated
    to food safety?
        Answer. The $13.97 million for ARS in support of the Presidential
    Initiative for Food Safety will not be spent on new ARS facilities
    dedicated to food safety.
        Question. How does USDA propose to incorporate this new work with
    the ongoing efforts being conducted at research universities across the
    nation?
        Answer. ARS food safety research is coordinated with and
    complements that of ongoing efforts being conducted at research
    universities across the Nation.
        ARS works closely with CSREES to explore how the two agencies can
    effectively coordinate their research to plan food safety research,
    identify opportunities for collaborative Federal and State research to
    break down the barriers to communication between Federal agency
    scientists and university scientists, and to identify the unique
    research facilities and expertise of each party. The longer term nature
    of Federal funding complements that of the university research
    programs. The multi-year sustained programs of the Federal laboratories
    support research initiatives that establish the basis for the continued
    biological understanding of pathogens and the technological advances
    necessary to develop the means to assure food safety and meet the
    expectations of the American consumer. The combined efforts of both
    Federal Government and academia are necessary because food safety
    research must solve the problems resulting not only from the complexity
    of the food production and distribution system, e.g., the plethora of
    technological practices, an array of animal and plant species and
    varieties, a range of climatic and regional differences, and a vast
    array of food products and consumer practices, but also recent changes
    in the system, e.g., changes in animal husbandry practices and
    processing technologies and the emergence of new pathogens.
        Question. Has USDA considered the option of matching these ARS
    funds with CSREES monies to establish a series of national food safety
    research centers?
        Answer. Because ARS already has facilities for conducting the
    necessary food safety research, and the critical mass of scientific
    expertise and structure to lead the necessary food safety research
    programs, ARS has not considered the option of matching these ARS funds
    with CSREES monies to establish a series of national food safety
    research centers.
        Question. What impact would the proposed cuts at the ARS research
    station in Aberdeen, Idaho, have on the work being done in small
    grains? How does ARS plan to compensate for these cuts?
        Answer. While the research conducted at Aberdeen is unique in its
    capacity for the molecular enhancement of oat and barley germplasm for
    feed and food efficiency and utility, ARS maintains a large, fully
    coordinated multi-disciplinary program for solving small grain
    production and postharvest issues. Although the work conducted at
    Aberdeen is important, ARS is required to make difficult decisions to
    support and finance other new research priorities. Some components of
    Aberdeen's molecular enhancement of oat and barley research would not
    be expanded and some components would be conducted elsewhere within the
    framework of the overall small grains program. The proposed cuts at
    Aberdeen would reduce the small grains research program by $359,800 and
    impact 1 scientist.
                                     ______

          Cooperative State Research, Education, and Extension Service
                     Questions Submitted by Senator Cochran
                                  food safety
        Question. The fiscal year 1999 budget proposes an increase of $3
    million for the second year of funding for the Food Safety Special
    Research Grants Program, from $2 million for fiscal year 1998 to $5
    million for fiscal year 1999. What is the current status of this new
    program? For what types of research will funds be awarded?
        Answer. We have developed the Request for Proposals for the fiscal
    year 1998 program after substantive internal discussion by our CSREES
    Food Safety Team and consultation with other Federal agencies,
    including FSIS, FDA, ARS, and EPA. It is currently awaiting final
    approval by USDA legal staff. The Request for Proposals will focus on
    issues in the fresh fruit and vegetable industry. Specifically, we are
    seeking proposals that will provide new information about contamination
    of these products with food-borne pathogens during the harvesting and
    transport segments, development of sampling and testing procedures to
    enable more accurate monitoring of the microbial status of fresh
    produce and, finally, development of new techniques or methods for
    preserving the quality and safety of these fresh products from
    harvesting to the consumer. While the explanatory notes implied a
    broader approach to food safety research, the CSREES Food Safety team
    strongly recommended, and the other agencies listed above agreed, that
    it was important to give more focus to the program in this first year.
    Given the high priority on improving the safety of fruits and
    vegetables by the President which occurred after the Explanatory Notes
    were written, and the increasingly obvious gaps in our knowledge for
    preventing contamination of these food products, this seemed to be the
    most effective use of these funds in fiscal year 1998.
        Question. Why is such a significant increase in funding for this
    new program being requested when the results of the first fiscal year
    of the program are not yet known?
        Answer. In preparing the Request for Proposals for this current
    fiscal year, it was clear that there were more high priority issues
    than could be addressed with funds made available in fiscal year 1998.
    In addition, as we are developing the educational materials to assist
    growers in complying with the new proposed guidance document for
    producers of fresh fruits and vegetables which is being issued soon by
    the Food and Drug Administration, it is already evident that there are
    several critical gaps in our knowledge base which will severely hamper
    our ability to provide the growers with the information they need to
    meet these new guidelines and improve the safety of our domestic
    produce. Similarly, the newly implemented regulations for Hazard
    Analysis Critical Control Points programs in slaughter plants has
    already begun to create a further impact on food animal producers to
    implement a series of good production practices in order to meet the
    criteria being set by the packing industry. In several instances, our
    knowledge of the ecology of food borne pathogens in the animal
    production setting is too limited to be of greatest help to the
    producers. Thus, we will need to accelerate some of our research
    efforts on these topics if we are to be of greatest help to the
    production agriculture community. The production segment of our food
    product chain has received lesser attention within the food safety
    research agenda and is now in need of significant resources if we are
    to meet the needs of the producers as they attempt to meet the guidance
    and regulatory demands that they now face. It is out intention to
    broaden the Request for Proposals for fiscal year 1999 and include work
    related to safety of meat and poultry products in a more balanced
    portfolio of research. The exact split of funding between fruits and
    vegetables vs meat and poultry will be determined each year based on
    input from a number of sources including other federal agencies (ARS,
    FSIS, FDA, CDC, EPA), commodity groups, consumer groups, and industry.
        Question. The fiscal year budget proposes a $5 million increase in
    funding for Food Safety Education under the Smith-Lever 3(d) program
    (from $2,365,000 to $7,365,000). What is the justification for this
    increase?
        Answer. In recent years, USDA has announced adoption of a new
    Hazard Analysis and Critical Control Points or HACCP-based method for
    inspecting meat and poultry products. But some industry representatives
    fear that HACCP places the onus for food safety on producers and
    processors. They believe that consumers also must share in the
    responsibility for food safety. The responsibility for ensuring the
    safety and wholesomeness of our nation's food supply is a shared one,
    and both industry and consumers have a critical role to play in food
    safety. But in order for consumers to understand and adopt recommended
    safe food handling practices, a massive public education and outreach
    effort is required. A funding increase for the Food Safety and Quality
    Smith-Lever 3(d) Program will be used to develop a broad, comprehensive
    public education program focusing on the entire spectrum of the food
    chain from farm to table, including the role of the consumer, as we
    work to ensure and improve the safety of the nation's food supply. We
    are having regular discussions with other agencies, including FSIS,
    FDA-CFSAN, and FDA-CVM, and are coordinating our programs with their
    efforts. The educational programs for growers of fruits and vegetables,
    which are designed to assist in reaching compliance with the new
    Guidance Document being promulgated by FDA-CFSAN, are being developed
    by a joint working group which includes USDA, FDA, and industry
    representatives.
        As part of the President's Food Safety Initiative, both domestic
    and imported fruits and vegetables have been identified as an area of
    growing concern. In order to ensure that fruits and vegetables meet the
    highest health and safety standards, it is critical that an education
    and outreach effort be targeted toward producers of domestic and
    imported produce. A funding increase for the Food Safety and Quality
    Smith-Lever 3(d) Program will be used to significantly expand an
    education and outreach program focusing on preventing microbial
    contamination during growing, harvesting, processing, and
    transportation of produce. Expanded education efforts targeting
    consumers will also be required to prevent contamination of fruits and
    vegetables during food preparation, storage and service in homes,
    restaurants, schools, congregate meal sites, food banks, and other
    settings where food is prepared and served.
        Question. How are the current program funds being allocated and
    what have been the achievements of this program to date to increase
    consumer awareness, understanding, and information regarding food
    safety?
        Answer. Current funds are awarded either by formula or
    competitively to faculty at Land-grant colleges and universities
    throughout the U.S. and its territories. The formula funds are
    allocated as $25,000 per institution with a total of $1.4 million
    assigned to this part of the program. Each institution is required to
    submit a plan of work for these funds describing how they will be used.
    The remaining funds in the amount of $775,800 are available for
    competitive awards. The focus of the program for the competitive funds
    is determined each year in consultation with stakeholders. The
    submitted proposals are reviewed by a committee of peer reviewers and
    the ranked proposals are then considered for funding. In fiscal year
    1998, $195,000 of the $775,800 total has been allocated for support of
    the Food Animal Residue Avoidance Data Base (FARAD) program.
        Funds have been used to support the development of educational
    programs and resources that improve peoples' ability to make informed,
    responsible decisions about food safety and quality issues. Educational
    programs developed with these food safety education funds have targeted
    farmers, producers, processors, distributors, educators, researchers,
    and consumers. Programs are developed primarily to help food handlers
    all across the food chain translate research-based food safety
    information into sound, practical behaviors that reduce the risk of
    food-borne illness.
        Federal food safety education funds, and state matching funds have
    enabled Land-grant partners and stakeholders to develop programs and
    resources in food safety that can be sustained beyond the funding year.
    Since the inception of the program in 1991, 49 states and 5 territories
    have established on-going food safety education programs. More than
    half of those states have developed programs targeting youth; more than
    half have developed programs targeting industry; and about one quarter
    of those states have developed programs targeting under-served
    populations or those at increased risk for food-borne illness such as
    pregnant or nursing mothers, young children, the chronically ill, the
    immuno-compromised, and older Americans. Last year 42 percent of
    education program participants reported adoption of recommended food
    handling practices, while 70 percent of program participants reported
    increased adoption of practices that protect the food supply.
                                pest management
        Question. Increased funding is requested for Minor Crop Pest
    Management to allow for expansion of the registration process for minor
    use pesticides and the initial registration of safer and more
    environmentally compatible pesticides. Please give us a report on the
    status of these efforts to date and what will be achieved with the
    additional $1,721,000 proposed. Will this speed up the process so that
    farmers can have these pesticides available?
        Answer. In response to the minor crop re-registrations needs
    created by FIFRA 88, the IR-4 Project conducted an average of 215
    studies per year between 1988-97 and obtained an average of 94
    clearances per year over the same time period. The increase of
    $1,721,000 will allow an additional 20 percent more pesticide
    clearance--about 20--than in 1997. More recently, in response to the
    Food Quality Protection Act, IR-4 adopted a strategy to replace all
    ``at risk'' pesticide registrations on minor crops with ``safer'' pest
    control products, which include reduced risk pesticides, bio-
    pesticides, and IPM-compatible products.
        This initiative began in 1997 with the addition of 45 reduced risk
    pesticide studies and 8 bio-pesticide studies to the on-going minor
    crop research program. In 1998, 165 registration studies involving
    safer pest control products are being conducted by IR-4 and its
    cooperators. This research will lead to the submission to EPA of 218
    registrations, involving 96 minor crops over a two-year time period.
        With an increased level of funding, goals for the IR-4 reduced risk
    strategy are: 195 registration petitions on minor crops in fiscal year
    1999, 215 in fiscal year 2000, 235 in fiscal year 2001, and 250 in
    fiscal year 2002. This research will result in over 1,100 new
    registrations for safer pest control products over the next six years.
    These uses will serve as replacements for pesticide uses that may be
    canceled as a result of FQPA.
        IR-4 also has adopted a policy of close cooperation with commodity
    interests and registrants. The purpose of this policy is to initiate
    early discovery research on pest control products for minor crops where
    expedited registration of these products will benefit producers of
    minor food and ornamental commodities. This policy will provide a much
    earlier start to the registration process than before and will assure
    that minor crop producers have rapid access to products that represent
    lower risk to the user, the consumer, and the environment.
        Question. The budget indicates that the additional funding for the
    Pest Management Alternatives and Expert IPM Decision Support System
    program will permit the continued identification of a list of crop/
    pest/control combinations where only one or a limited number of control
    options are available. How many combinations have been identified under
    these programs to date and why are additional funds required to carry
    out this effort?
        Answer. The Pest Management Alternatives Program provides funding
    to the Land-Grant System to develop alternative pest management tactics
    to replace those lost through EPA regulatory action or voluntary
    withdrawal as a result of FQPA implementation. The funding for this
    program supports two different activities. The first provides annual
    funding for a competitive grants program which solicits proposals from
    agricultural scientists to identify new environmentally sustainable
    pest management alternatives for pesticides which have been lost, or
    are in danger of being lost, due to FQPA regulatory action. The second
    supports the development of an on-line Pest Management Information and
    Decision Support System which accesses numerous specific databases and
    allows decision-makers to identify specific crop/pest pairs for which
    alternative pest management tactics are not available. The Decision
    Support System links informational databases together and provides
    decision-makers with ready access to pest management information needed
    to identify and prioritize the critical needs of American agriculture.
    Together, these two program activities provide a comprehensive response
    in addressing the needs resulting from FQPA implementation by
    identifying pest management systems that are vulnerable to FQPA
    implementation, and conducting programs to develop solutions to pest
    management problems and assist growers in implementing them.
        In the fiscal year 1998 Request for Proposals (RFP) for the Pest
    Management Alternatives Program the Information Decision Support System
    identified 58 crops which have no alternative pest management options
    available for one or more pest of the major pests with the
    implementation of FQPA. These crop/pest sites have been listed in the
    fiscal year 1998 RFP and research to identify pest management
    alternatives on these critical sites will be funded by this program in
    fiscal year 1998. Funding is needed to expand and refine the
    development of the expert decision support system by incorporating
    other existing or new databases into the Pest Management Information
    Decision Support System, and to make the decision support system
    accessible via the world wide web. Web access and data entry at the
    state and local level will identify additional critical pest management
    needs and additional options/alternatives for management. These
    critical needs will be incorporated into future RFP's allowing research
    to address key priority pest management needs of farmers and
    furthermore ensure that we have adequate pest management tools for
    production of both major and minor crops important to US agriculture.
                         pesticide applicator training
        Question. The fiscal year 1999 budget requests $1.5 million for
    Pesticide Applicator Training through the Extension Service. What is
    the demand from growers, commercial applicators, and homeowners for
    this training?
        Answer. The Pesticide Applicator Training Program offers growers
    and commercial applicators a forum, through meetings held at the county
    level and with state agricultural associations and commodity groups,
    for dialogue on important pesticide issues. Each year, extension
    pesticide coordinators and county agents train over 500,000 growers and
    commercial applicators in the proper use of pesticides and keep them up
    to date on issues such as the Food Quality Protection Act, ground water
    concerns, food safety and basic instruction in Integrated Pest
    Management. Total numbers of growers and commercial applicators
    continue to increase each year in these training sessions.
        Homeowner training in the proper selection and use of pesticides is
    critically needed. Recent mis-use practices, such as occurred in
    Mississippi with a highly toxic agricultural pesticide used in homes,
    point up the need for an intensive, coordinated training and
    educational effort. Homeowners will benefit, by being able to make
    intelligent decisions on proper and safe pest control. These
    educational programs will also serve to safeguard agricultural
    pesticides, which if mis-used, may be canceled or further restricted in
    their use.
        Question. Last year, the budget indicated that the Pesticide
    Applicator Training Program was being redesigned. Has this been done?
        Answer. USDA's fiscal year 1998 budget included $1.5 million to
    redesign the Pesticide Applicator Training Program to provide ``seed
    money'' for states to develop partnerships with other USDA supported
    programs such as EFNEP, 4-H, Master Gardener and with selected private
    organizations. The objective of the partnerships was to leverage
    funding to develop educational programs for the general public,
    especially homeowners and small or part-time farmers, that will reduce
    user and environmental exposure to toxic pesticides. The mis-use of
    pesticides in the home environment threatens human health, especially
    infants and children, and the continued availability of products
    essential to agriculture production, structural pest management, and
    public health.
        In the last two years states and federal agencies spent nearly $90
    million investigating and remediating homes deliberately contaminated
    with agricultural pesticides. Unfortunately, the $1.5 million requested
    for the Pesticide Applicator Training Program was not included in the
    fiscal year 1998 appropriation, thus precluding its redesign.
                                pest management
        Question. How are extension activities supported with Integrated
    Pest Management (IPM) funds accelerating the transfer of proven pest
    management technologies from the researchers to farmers, ranchers, and
    other users? How fast are new research findings being transferred to
    the users?
        Answer. Farmers have identified the lack of effective alternative
    pest management tactics as a primary reason for not implementing IPM on
    their farms. Where effective alternative tactics have been developed,
    they are widely and rapidly implemented through extension programs and
    adopted by farmers. These extension efforts are a key element of USDA's
    goal of helping to implement IPM practices on 75 percent of U.S. crop
    acreage, and will help the Nation's farmers adjust to changes in
    pesticide availability resulting from implementation of the Food
    Quality Protection Act of 1996.
        Additional funds requested in fiscal year 1999 will support
    regional and national projects that bring together the expertise of
    multiple organizations and disciplines. Funded projects will address
    research and extension education priorities identified by IPM planning
    teams consisting of farmers, crop consultants, agribusiness, land-grant
    university research and extension faculty, state and Federal agency
    personnel, public policy interest groups and other stakeholders.
    Examples of such projects are ``Cotton IPM in Transition: Opportunities
    for Biologically-Intensive IPM'' scheduled for Mississippi, North
    Carolina, Oklahoma, and Texas, ``Area-wide Mating Disruption of Codling
    Moth on Tree Fruits'' in the Pacific Northwest, and ``Using an Adult
    Attracticide Against Corn Rootworm in the Midwestern United States''.
    With extension faculty being part of the planning teams and
    participating as full members of funded projects, transfer of
    technology and information will occur as soon as it is available.
                              program terminations
        Question. The fiscal year 1999 budget proposes to terminate
    Supplemental and Alternative Crops, Farm Safety, Agricultural
    Telecommunications, and Rural Health and Safety. Please provide a
    description of each of the programs proposed for termination, who will
    be impacted by the proposed reductions, and why you believe the cost of
    these programs can be borne by local governments when you are proposing
    to cut funding for the base Hatch Act and Smith-Lever formula programs.
        Answer. The Supplemental and Alternative Crops program promotes the
    research and development of new crops and conventional crops grown for
    new uses. Traditional and new agricultural materials provide renewable
    raw materials for processing and manufacturing of a broad range of
    chemical, energy, construction, environmental, and fiber products, as
    well as food products. The authority under which this program is
    administered incorporates all phases of research and development
    including agronomics, harvesting and pilot processing operations for
    converting the raw materials into final product. This comprehensive
    approach results in new and expanded markets, reduced dependency on
    imports, and diversification of agriculture in areas affected by
    declining demand for crops grown locally. The proposed termination of
    Supplemental and Alternative Crops funding would affect the two
    research programs that are currently conducted under this authority.
    The first is the National Canola Research Program. Funding is provided
    to six land-grant universities, each representing a region with
    numerous institutions engaged in canola research and extension
    activities to provide a domestic source of the oil and to meet
    increasing market demands. The second program is conducted at the
    University of Arizona for research and development of hesperaloe, a
    plant with the potential to provide a domestic source of hard fibers
    that must currently be imported for use in specialty paper-making.
    Hesperaloe, as a new crop for the semi-arid Southwest, offers a
    potentially viable alternative to conventional crops grown in the
    region that have high water and chemical requirements.
        The Farm Safety program provides seed money to all 50 states and
    Puerto Rico to support a National farm safety extension program
    developed by the State Extension Service Specialists to meet the
    State's most critical needs. These funds support development and
    implementation of extension education programs and methods targeted at
    reducing the injury, illness and mortality rates of farmers/ranchers,
    seasonal and migrant agricultural workers, timber harvesters, and their
    families. Competitive grants are also awarded under this program to
    support the AgrAbility Program that provides education and assistance
    on accommodating the agricultural workplace for the estimated 500,000
    farmers, ranchers, and agricultural workers who have disabilities. The
    proposed reduction in the Farm Safety and AgrAbility programs will
    impact the land-grant universities that provide leadership and
    expertise in collaboration with State and non-governmental entities,
    such as Farm Safety Just 4 Kids, that have an interest in farm safety
    education and the development and implementation of programs that
    encourage citizens to adopt practices that will reduce agricultural
    injuries, illnesses and fatalities. This program can potentially be
    supported with Smith-Lever formula funds and other State and private
    funding sources.
        The Agricultural Telecommunications Program was established to
    improve the competitive position of U.S. agriculture in international
    markets; to train students for careers in agriculture and food
    industries; to facilitate interaction among leading agricultural
    scientists; to enhance the ability of U.S. agriculture to respond to
    environmental and food safety concerns and to identify new uses for
    farm commodities and increase domestic and foreign demand for U.S.
    agricultural products. The legislation provided funding for program
    production, program delivery and technical assistance to eligible
    institutions. The program enables land-grant and other universities to
    develop their capacity to design and deliver education at a distance
    using telecommunications. It also creates access to the information and
    education resources of the universities for citizens nationwide. Those
    impacted by the proposed reduction would include land-grant
    universities, such as 1994 Tribal Colleges, who are new to using
    distance learning and telecommunications to reach learners. Customers
    in rural areas who depend on telecommunications and distance learning
    to help them overcome distance and time barriers to education would
    ultimately be affected. The costs of these programs would be borne by
    universities who would shift existing resources to continue to fund
    these types of programs.
        In support of the REE/CSREES Strategic Goal 3: Healthy, Well-
    Nourished Population, through the Mississippi Rural Health Corps
    project, the Rural Health and Safety Program is conducted by the
    Cooperative Extension Service and 15 community and junior colleges
    represented by the Mississippi Community College Foundation and the
    Mississippi State Board for Community and Junior Colleges. The purpose
    of this endeavor is to improve rural health service through education
    of Mississippians and to train health care professionals in rural
    practice. The Mississippi Rural Health Corps is attacking the rural
    health problem by building capacity to annually train and employ a
    minimum of 400 additional RNs, LPNs, and other allied health care
    professionals who contract to practice in a rural setting following
    their training. A pilot rural medical scholar program for high school
    students and an updated state health service industry needs assessment
    are also planned. Also supported under the Rural Health and Safety
    Program, the rural health and safety project in Louisiana, a joint
    effort of the Southern University Cooperative Extension and School of
    Nursing, has established a mobile clinic-based nurse education
    curriculum that gives students a client-based, culturally-sensitive
    understanding of health care needs and obstacles to accessing health
    care services for inner-city and rural medically underserved
    populations, while providing needed screening and referral services for
    these populations. Rural residents in Mississippi, and both rural and
    inner-city low income residents in selected Louisiana Parishes, would
    be impacted by these proposed reductions.
        The State of Mississippi has been providing matching funds for the
    Mississippi Rural Health Corps program. We expect that the program will
    be maintained at a reduced funding level with the discontinuation of
    funding under the Rural Health and Safety Program. We also expect that
    State level funding in Louisiana can be provided to maintain the nurse-
    managed mobile health care clinic. States have the flexibility to
    support these programs with formula funds, State or local funding, or
    private funding.
        Question. Please provide an update on achievements of the projects
    being carried out through the Rural Health and Safety Program.
        Answer. After five years of operation, the Mississippi Rural Health
    Corps has led to major intermediate outcomes via educational and
    community-based changes in the rural health systems in the state. The
    project has stimulated the development of a network of collaborative
    rural health interests including economic, volunteer, community, health
    consumer, and health service organizations. The broad scope of this
    network positively impacts the Mississippi rural health system through:
    247 Rural Health Association members; 165 Coalition members; 762
    nursing graduates; 325 allied health graduates; 76,245 Cooperative
    Extension health education program participants; and 286 trained lay
    health advisors. To make the resources of the University of Mississippi
    Medical Center and other centralized health facilities available to the
    nursing and allied health departments of the community and junior
    colleges, to registered nurses, RNs, needing graduate level courses,
    and for statewide informal health education, the interactive video
    Community College Network has been established, with some 2,000
    undergraduate rural health program participants and 37 RNs receiving
    graduate level courses. In addition, Mississippi Rural Health Corps lay
    health advisors in self-care, blood pressure, and breast cancer early
    detection reached 2,500 consumers with screening, skills training, and
    awareness education. Although difficult to measure specifically, it is
    clear that the many accomplishments will result in final outcomes that
    include improved delivery of rural health care services, enhanced
    health status for tens of thousands of rural residents, and enhanced
    education and employment opportunities for thousands of rural
    Mississippi youth.
        The Louisiana nurse-managed mobile health care clinic, called the
    ``Jag Mobile,'' has reached needy low-income rural and inner-city
    populations through sixteen community based ``health partners,''
    including senior citizen community centers, public housing authorities,
    church-operated day care and pre-school centers, community feeding
    centers, drop-in environmental shelters, and a battered women's
    program. Project outputs have included over 600 persons fully screened
    for health conditions and over 300 more receiving blood pressure and
    blood sugar screening only. For those persons fully screened, self-
    reported health conditions have included diabetes, high blood pressure,
    heart problems, asthma, kidney disease, cancer, hepatitis, and
    substance abuse. All persons found to have medical problems are
    referred to local physicians for further treatment. Two major
    intermediate outcomes have been realized from this project: first,
    several dozen nursing students have been prepared to provide culturally
    sensitive health care services to needy populations; and secondly, the
    Jag Mobile has become a welcome addition in communities and has made
    many individuals aware of their health needs and what they can do to
    prevent escalation of minor health conditions into more costly major
    medical problems.
        Question. Who is receiving the agricultural telecommunications
    funds in fiscal year 1998 and for what purpose?
        Answer. The request for proposals for the 1998 Agricultural
    Telecommunications Program will be released in June, 1998. As stated in
    the legislation, the competition will be open to accredited
    institutions of higher education. Grants will be awarded for projects
    which use telecommunications and distance education to create access to
    the information and education resources of the universities, and for
    projects that seek to improve the capacity of Land-Grant and other
    universities to design and deliver education at a distance using
    telecommunications.
             expanded food and nutrition education program (efnep)
        Question. Please provide a description of the projects being funded
    through the Expanded Food and Nutrition Education Program (EFNEP) for
    fiscal year 1998.
        Answer. EFNEP does not fund ``projects'' per se, but rather the
    funds are distributed to states based on a formula that takes into
    consideration the proportion of their population that is at or below
    125 percent of poverty. EFNEP operates in all 50 states and the
    territories of American Samoa, Guam, Micronesia, Northern Marianas,
    Puerto Rico and the Virgin Islands. It is designed to assist limited
    resource audiences in acquiring the knowledge, skills, attitudes and
    changed behavior necessary for nutritionally sound diets and to
    contribute to their personal development and the improvement of the
    total family diet and nutritional well-being.
        Within the constraints of the funds available, states select the
    communities with the greatest need, and conduct nutrition education
    programs for low-income youth and families with young children. Today
    EFNEP operates in less than 25 percent of all counties, and reaches
    only a fraction of the eligible population. The number of poor children
    under six years old grew from 3.4 million in 1972 when EFNEP was just
    beginning, to 6.0 million in 1992. This represents 26 percent of all
    U.S. children less than six years old. However, while the population
    that EFNEP focuses on nearly doubled, the funding only increased by 25
    percent over this time period.
        The delivery of EFNEP youth programs takes on various forms. EFNEP
    provides education at schools as an enrichment of the curriculum, in
    after school care programs, through 4-H EFNEP clubs, day camps,
    residential camps, community centers, neighborhood groups, and home and
    community gardening workshops. Youth are taught lessons on nutrition,
    food preparation and food safety, and physical fitness.
        Through an experiential learning process, adult program
    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
    delivered as a series of 10-12 or more lessons, often over several
    months, by para-professionals and volunteers, many of whom are
    indigenous to the target population. The hands-on, learn-by-doing
    approach allows the participants to gain the practical skills necessary
    to make positive behavior changes. Through EFNEP, participants learn
    self-worth--that they have something to offer their families and
    society.
        EFNEP is a program that works; in 1996, 84 percent of adult
    participants showed improvement in one or more food resource management
    practices, 91 percent showed improvement in one or more nutrition
    practices and 66 percent showed improvement in one or more food safety
    practices. Additionally, intakes levels for 6 key nutrients increased,
    and 2\1/2\ times as many participants consumed a minimally acceptable
    diet after completing EFNEP than at entry into the program.
        Question. Why is a reduction in funding being proposed for fiscal
    year 1999? Who will be impacted by this proposed reduction?
        Answer. Funding levels for many of the CSREES formula-funded line
    items, including EFNEP, were reduced to provide the funding necessary
    to support Departmental and Presidential initiatives, such as food
    safety, children, youth and families at risk and other initiatives. The
    4 percent reduction in funding will result in approximately 8,600 fewer
    families and 16,000 fewer youth reached by this educational program.
             sustainable agriculture research and education (sare)
        Question. Please provide a list of the SARE research projects
    funded for each of fiscal years 1997 and 1998, including a description
    of the project, who conducted the research, and the amount of the
    award.
        Answer. Proposals submitted for SARE funding in fiscal year 1998
    are currently undergoing review and final decisions on projects to be
    funded will be made later this year. Projects funded in fiscal year
    1997 are as follows, excluding producer grants, which are discussed in
    response to the next question.

    ----------------------------------------------------------------------------------------------------------------
                Projects funded in fiscal year 1997--                                Conducted by--
    ----------------------------------------------------------------------------------------------------------------
                 Description                      Contact                    Organization/State             Amount
    ----------------------------------------------------------------------------------------------------------------
    No-till Forage Establishment to       Panciera...............  University of Alaska, AK.............    $100,000
     Improve Soil and Water Conservation
     and Reduce Associated Production
     Risks.
    Blueprinting Traditional Sustainable  Frank..................  American Samoa Community College, AS.      91,850
     Food Production Systems of Samoa in
     Development of a Research/Extension
     Model.
    Sustainable Culture of the Edible     Glenn..................  Environmental Research Laboratory, AZ      95,201
     Red Seaweed Gracilaria parivspora
     Abbott in Traditional Hawaiian
     Fishponds.
    Development and Implementation of     Daane..................  University of California, CA.........      79,858
     Trap Cropping Strategies for
     Control of Hemipteran Pests in
     Pistachio Orchards.
    Decomposition and nutrient release    Mitchell...............  University of California, CA.........      41,604
     dynamics of cover crop materials.
    Reducing Insecticide Use on Celery    Trumble................  University of California, CA.........     100,000
     Through Low Input Pest Management
     Strategies.
    Nitrogen Management for Pumpkins and  Ashley.................  University of Connecticut, CT........      40,000
     Squash.
    Biological and Cultural Methods of    Stoner.................  Connecticut Agricultural Experiment        20,000
     Insect Management in Vegetables:                               Station, CT.
     Survey and Case Studies of Organic
     Farms and Evaluation of the
     Scientific Literature.
    An Integrated Vegetable Production,   Payton.................  The Pine Center--Bainbridge College,      134,800
     Postharvest and Marketing System                               GA.
     for Limited Resource Farmers in
     South Georgia.
    Producers assessment of sustainable   Steiner................  USDA-ARS, GA.........................     228,864
     land management practices to
     project water quality.
    Management of Soilborne Plant         McHugh.................  Waikele Farms, HI....................      21,900
     Parasitic Nematodes for Sustainable
     Production of Field Grown Tomatoes
     and Cucumbers by Cover Cropping.
    Combining Landscape and Augmentative  Lewis..................  Iowa State University, IA............      92,740
     Biological Control to Suppress
     European Corn Borer Populations in
     Sustainable Low-Input Systems.
    Management, Impact and Economics of   Momont.................  University of Idaho, ID..............     105,400
     Beef Cattle Grazing in Mountain
     Riparian Ecosystems.
    Development of Market Infrastructure  Bonney.................  Sustainable Earth, Inc., IN..........      86,200
     to Support Local and Regional Food
     Systems.
    Cluster Use of Whole-Farm Planning    Janke..................  Kansas State University, KS..........     106,400
     with Decision Cases and Evaluation.
    Yesterday's Research for Tomorrow's   Kok....................  Kansas State University, KS..........      63,500
     Needs.
    Integration of Freshwater Prawn       Tidwell................  University of Kentucky, KY...........     155,197
     Nursery and Growout Systems Into
     Diversified Systems.
    Impacts on Agricultural System        Hamilton...............  Center for Sustainable Systems,  KY..     174,858
     Sustainability from Structural
     Change in Peanut, Poultry, Swine,
     and Tobacco Production Systems.
    Chinese Medicinal Herbs as Crops for  Craker.................  Univ. Massachusetts, MA..............      60,718
     the Northeast.
    Integrating High-Density Orchards     Cooley.................  Univ. Massachusetts, MA..............     121,535
     and Biointensive Integrated Pest
     Management Methods in Northeastern
     Apple Production.
    Design and Implementation of a        Millner................  USDA-ARS, MD.........................      20,000
     Searchable Database on Compost
     Production and Use for Internet
     Users.
    Enhancing Adoption of Sustainable     Mutch..................  Michigan State University, MI........     100,405
     Agriculture Practices via Farmer-
     Driven Research.
    Farm Beginnings: An Educational       Schwartau..............  Minnesota Extension Service, MN......      90,000
     Training and Support Program to
     Establish Young Dairy Farmers in
     Southeast Minnesota.
    A Sustainable Approach to             Spivak.................  University of Minnesota, MN..........      78,750
     Controlling Mite Pests of Honey
     Bees.
    Use of a Vegetative Filter as an      Crawford, Jr...........  University of Missouri, MO...........      55,755
     Alternative Waste Management System
     for a Sustainable, Seasonal
     Management-Intensive Grazing Dairy..
    Comparison of Pest Management         Lenssen................  Montana State University, MT.........     150,964
     Interactions in Spring Wheat-Cover
     Crop and Spring Wheat-Fallow
     Cropping Systems.
    Equal Access to Agriculture Programs  Harris.................  Land Loss Project, NC................     151,290
     and Opportunities: Advocacy to End
     USDA Racial Discrimination and
     Reestablish Viable and Sustainable
     Minority Farm Agriculture.
    Maximizing Forage and Minimizing      Anderson...............  North Dakota State University,  ND...      78,360
     Grain Intake in Bison Fed for Meat.
    Improving Sustainability of Cow-Calf  Adams..................  Univ. Nebraska West Central Res & Ext      81,000
     Operations with Natural Forage                                 Ctr, NE.
     Systems.
    Farmer-Designed Research on the use   Baltensperger..........  University of Nebraska, NE...........      91,000
     of Legumes in Sustainable Dryland
     Cropping Systems.
    Potential of Earthworms as            MacHardy...............  University of New Hampshire, NH......      99,069
     Biocontrol Agents of Scab and
     Leafminers in New England Apple
     Orchards.
    Sustainable Phosphorous Fertilizer    Heckman................  Rutgers University, NJ...............      92,780
     Recommendations for Corn Production
     in the Northeast USA.
    Flowering Plants to Enhance           Shrewsbury.............  Rutgers University, NJ...............      80,344
     Biological Control in Landscapes.
    Integration of Behavioral,            Polavarapu.............  Rutgers University, NJ...............     133,179
     Biological, and Reduced-Risk
     Chemical Approaches into a
     Sustainable Insect Management
     Program for Cranberries.
    CORE VALUES Northeast: A Northeast    Gordon.................  Mothers & Others, NY.................      20,000
     IPM--Apple Consumer Education and
     Market Development Project.
    Farmer-Centered, Value-Added          Frisch.................  Regional Farm/Food Project of              53,000
     Processing and Marketing                                       Citizens, NY.
     Opportunities for Northeast Dairy
     Farmers: A Participatory Research.
    Demonstration of Narrow Row Corn      Cox....................  Cornell University, NY...............      70,346
     Production in New York.
    Ethnic Markets and Sustainable        Lawrence...............  Just Food, NY........................      99,961
     Agriculture.
    Eastern Gamagrass Determining its     Salon..................  USDA-NRCS, NY........................     108,252
     Feasibility as a Forage Crop for
     the Northeast.
    A Strawberry IPM Systems Comparison   Kovach.................  Cornell University, NY...............     116,586
     Demonstration.
    Use of Cover Crop Practices to        Dickinson..............  Stratford Ecological Center, OH......      87,823
     Control Weeds in Integrated Lower-
     Chemical Input Systems of Vegetable
     Production.
    Advancing Sustainable Potato          Murphy.................  The NW Coalition for Altern. to            35,000
     Production in the Northwest.                                   Pesticides, OR.
    Sustainable Crop/Livestock Systems    Allen..................  Texas Tech University, TX............     222,125
     in the Texas High Plains.
    The Hometown Creamery Revival.......  Dunaway................  Dairy Farm Cooperators, VA...........     145,474
    Regionally Centered Sustainable       Flaccavent.............  CPSDI, VA............................     173,240
     Agriculture System.
    Managed Riparian Buffer Zones and     Jokela.................  University of Vermont, VT............     142,448
     Cover Crops to Minimize Phosphorus
     and Nitrogen Runoff Losses from
     Corn Fields.
    Efficacy Evaluation of Homeopathic    McCrory................  Northeast Organic Farming                 161,026
     Nosodes for Mastitis and Calf                                  Association, VT.
     Scours, and Documentation of
     Homeopathic Practices in Organic
     and Conventional Dairy Production.
    Documentation of Organic and          Wonnacott..............  NOFA-Vermont, VT.....................      43,986
     Transitional Dairy Production
     Practices.
    Building Community Support for        Butler.................  Washington State University, WA......     113,000
     Agriculture on the Urban Edge.
    Enhancing No-Till and Conservation    Fiez...................  Washington State University, WA......     125,842
     Farming Success Through The Use of
     Case Studies. Conferences, and
     Workshops to Facilitate Farmer to
     Farmer Learning in The Pacific
     Northwest.
    Sustainable Crop Production           Kuo....................  Washington State University, WA......     118,000
     Practices with Mixed Leguminous and
     Nonleguminous Cover Crops.
    Development of Sustainable Practices  Andrews................  University of Wisconsin-Madison, WI..      92,892
     for Integrated Management of Apple
     Diseases.
    Training and Transitioning New        Klemme.................  University of Wisconsin-Madison, WI..      29,000
     Farmers: A Practical Experiment in
     Farmer Self-Development and
     Institutional Reinvention.
    Using Small Grain Cover Crop          Posner.................  University of Wisconsin, WI..........      92,300
     Alternatives to Diversify Crop
     Rotations.
    Evaluating Pasture-Based Poultry      Stevenson..............  University of Wisconsin-Madison, WI..      89,348
     Systems: Potential Contribution to
     Farm Diversification, Human
     Nutrition, and Marketing
     Alternatives.
    Integrating Nematode-Resistant Crops  Koch...................  Univ. of Wyoming, WY.................     113,184
     into Sugarbeet Rotations.
    ----------------------------------------------------------------------------------------------------------------

        Question. What portion of SARE funds have been awarded to producers
    in each of the past two fiscal years, please include a description of
    the project and the amount of the award.
        Answer. In fiscal year 1997, 113 producer grants were awarded for a
    total of $513,423. These projects represent 68 percent of the total
    number of projects funded, and six percent of fiscal year 1997 funds.
    In fiscal year 1996, 114 producer grants were awarded for a total of
    $512,618, representing 67 percent of the total number of projects
    funded, and six percent of fiscal year 1996 funds.

                        Fiscal year 1997 Producer Grants

            Description/producer/State                                Amount
    Growing American and Korean Ginseng in Alaska, Smith, AK......    $5,000
    Crop Production Systems for Nonchemical Control of Reniform
        Nematodes, Edgar, AL......................................     8,892
    Sustainable Pumpkin Production in the Southeast, James, AL....     4,655
    Evaluation of a Low-Cost Innovative Ensiling System for Small-
        to Medium-Sized Dairy Operations, Wright, AL..............    10,000
    Continuation of a Sustainable Agroforestry System, Paleso'o,
        AS........................................................     2,315
    Feasibility of Soil Solarization for Strawberry Production on
        the Central Coast of California, Galper, CA...............     5,000
    Vermicomposting Demonstration Project, Renner, CA.............     5,000
    Pheromone Foggers for Pesticide Replacement, Thompson, CA.....     5,000
    Individual Confinement Rearing vs. Pasture-Based Group Rearing
        of Dairy Calves, Wackerman, CA............................     3,248
    Pasture Fryer Chickens, Mattics, CO...........................     2,500
    Converting Pasture Land to Specialty Crop Production as an
        Alternative Farm Enterprise, Taylor, CO...................     2,500
    Perennial Grass Establishment in Existing Alfalfa, Wiley, CO..     1,825
    Biological Insect Control of Herbaceous Perennials, Berecz, CT       600
    Composting Tobacco Stalks Using PAW (Passive Aerated Windrow)
        System, Collins, CT.......................................     2,042
    Effect of Limited Environmental Controls on Shiitake Mushroom
        Production in the Southern Coastal Plain, McRae, FL.......     9,990
    Evaluation of an Alternative Low-Input Production System for
        Fresh Market Tomato, Murray, GA...........................     5,109
    Algae-Based Winter Feed for Small-Scale Goat Farm Operations,
        Szostak, GA...............................................     7,907
    Use of Sunnhemp in Cucumber Production, Quan, GU..............     4,300
    Sustainable Alternatives To Herbicide for Weed Control: Using
        Cover Crops To Combat Panicum repens and Panicum maximum
        In Lowland, Eastern Hawaii, Acciavatti, HI................     3,500
    Growing Ring-Spot Virus-Free Papayas Using Anti-transpirants
        and Other Sustainable Techniques, Biloon, HI..............     4,000
    Trees for Food, Carter, IA....................................     5,000
    Converting Unproductive Woodlands Into a Profitable Shade-
        Plant Nursery, DeWitt, IA.................................     2,925
    Feasibility of Corn Stalk Ash as a Fertilizer Source, Reinig,
        IA........................................................     4,974
    Systems Thinking in a Range Environment, Black, ID............     5,000
    Non-irrigated Alfalfa Performance Trial, Benewah County,
        Idaho, Crawford, ID.......................................     3,500
    Paradise Time Controlled Grazing, Pratt, ID...................     5,000
    Long-Term Benefits of Cover Crops and Crop Rotations, Upton
        Jr., IL...................................................     4,818
    Ornamental Bittersweet Production for Small Woodland Farms,
        Klueh, IN.................................................     2,915
    Great Circle Farm CSA/Permaculture Demonstration Site, Neff,
        IN........................................................     5,000
    Biological Control of Small Soapweed (Yucca glauca Nutt.),
        Baldwin,
        KS........................................................     4,515
    Comparing Controlled Microbial Systems (CMS) Composting to
        Conventional Composting to Piled Feedlot Manure, Boller,
        KS........................................................     5,000
    Creating the Link: Cooperative Marketing of Organic (All-
        Natural) beef, Endicott, KS...............................     9,854
    Machinery Link Co., Govert, KS................................     5,000
    Tree Filter & Wetland Livestock Waste Management Plan, Sextro,
        KS........................................................     4,808
    Sustainability Starts at Home-Building Regional Self Reliance
        through Agritourism, Armstrong-Cummings, KY...............     9,580
    Overwintering Survival of Kentucky Honeybees, Lee, KY.........     5,283
    Managed Grazing System to Increase Sustainability, McCord, KY.     2,630
    Maximizing Corn Production through Tillage Methods, Cultivar
        and Fertilization in the Mountains of Southeast Kentucky,
        Teague, KY................................................     4,956
    Echinacea Field Trials, Baker, MA.............................     1,730
    High Tunnel Strawberries for New England, Coldwell, MA........     2,720
    Regulation of lateral branching in Genovese Basil (Ocimum
        basilicum) via application of bacterial spray, Kellett, MA     1,152
    Using Dogs to Control Bird Depredation of Blueberries,
        Valonen, MA...............................................     2,900
    Mixed Field Forage, Walker, MD................................     2,230
    Establishing and Enlarging on Maine Ginseng Production, Drane,
        ME........................................................     6,000
    Successful Marketing Through Product Identification/Packaging,
        Holmes, ME................................................     3,500
    Biological Management of Colorado Potato Beetle, Johanson, ME.     1,701
    Conservation of Wild Blueberry and Cranberry Pollinators,
        Kelley, Jr., ME...........................................     3,950
    Field Trials of Ag Covers to Reduce Cranberry Fruitworm
        Damage, Macfarlane, ME....................................     1,770
    Improving Production Methods for Shiitake Mushrooms, Woodward,

        ME........................................................     2,225
    Swine Finishing in a Hoop Structure with Deep Bedding, Blonde,
        MI........................................................     5,000
    Transition from Traditional Grain/livestock agriculture to on-
        farm roadside marketing of produce, Bosserd, MI...........     5,000
    Innovative Farmers Seeking Lowest Nitrogen Rates for Corn on
        Sandy Soils to protect Ground Water, Hiscock, MI..........     4,021
    The Economics of Seed Saving on three Biological Farms in
        Western Michigan, Keiser, MI..............................     4,676
    Developing partnerships between Southern Michigan cash crop
        farmers and Northern Michigan livestock farmers, Miller,
        MI........................................................     5,000
    The Custom Grazing of Replacement Dairy Heifers on Fuego
        Fescue and Barenbrug Ryegrass Pasture Under a Management-
        Intensive Grazing System, Paulik, MI......................     3,518
    Processing and Marketing Milk Produced on Our Small Family
        Dairy, Shetler, MI........................................     5,000
    Marketing On-Farm Composted Manure, Slater, MI................     9,700
    Innovative Farmers Seeking Sustainable Solutions Through On-
        Farm Demonstrations, VandyBogurt, MI......................     4,750
    Farmer Networking to Direct Precision Ag Technologies Toward
        Sustainability, Waller, MI................................     4,950
    Integrated Row Tillage Project, Williams, MI..................     3,523
    Diversifying a Small Crop Farm with Hogs and Poultry on
        Pasture, Apple Trees, and Plums, Aspelund, MN.............     1,536
    Increased Pasture Profitability Through South African Dorper
        Sheep, Burke, MN..........................................     1,790
    Feeding the Saints Pilot Project, King, MN....................     9,650
    Development of Cultivation Equipment for Diversified Vegetable
        Production, Lancaster, MN.................................     3,194
    Cattle, Grass, and Streams: Can They Exist Together as a
        Sustainable Ecosystem, Lentz, MN..........................     4,690
    Native Minnesota Medicinal Production Feasibility Study,
        Soberg, MN................................................     5,000
    Community-Based Direct Marketing with the World Wide Web, Van
        Der Pol, MN...............................................     9,992
    Conversion of a Marginal Row-Crop and CRP Farm to a Seasonal
        Grass-Based Dairy, Bright, MO.............................     5,000
    Evaluation of Mycorrhizal Inoculation on Growth and Quality of
        Three Eastern North Carolina Christmas Tree Species,
        Dorsey, NC................................................       650
    Effect of Different Application Rates of Swine Lagoon Effluent
        on Corn and Wheat, Hart, NC...............................     2,317
    Forest Site Preparation with Swine, Livingston, NC............     5,088
    Grazing Yearlings on Annual Forage Pastures, Klamm, ND........     4,986
    Promotion of Crop Diversification and Research of Specialty
        Crop Markets for Western North Dakota, Trulson, ND........     9,680
    Kentucky Blue Grass Management and Variety Evaluation for
        Sustainable Seed Production in Western Nebraska and
        Surrounding Area, Laursen, NE.............................     4,250
    No-Till vs Conventional Tillage for Butternut Squash
        Production and Phytophthora blight control, Grasso, Jr.,
        NJ........................................................     1,680
    Limiting Gopher Deprivation By Time-Control Livestock Grazing,
        Schneberger, NM...........................................     3,500
    Value Added Wheat Production, Siebel, NM......................     3,500
    Mechanical Cultivation and Fertility Workshops, de Graff, NY..     3,450
    Recycling composted poultry manure to grow various crops,
        Kreher,
        NY........................................................     5,782
    Cover Crop Interseeding into Soybeans at Time of Last
        Cultivation: Adapting Experimental Results into Practical,
        Farm-scale Methods, Potenza, NY...........................     5,550
    Nutrient Retention and Humus Formation in Various Bedding
        Materials, Walker, NY.....................................     5,080
    Linking Sustainable Agriculture Production with Low-Income and
        Minority Consumers, Stewart, OH...........................     9,195
    Economics of Seasonal Extension of Cut Flower Production,
        Stamback, OK..............................................     8,100
    Sustainable Wheat Management Systems, Torrance, OK............     9,344
    Using Truffles to Enhance Douglas Fir Production On A Small
        Family Farm, Grant, OR....................................     2,800
    Biological Control of Pear Pests, Ing, OR.....................     5,000
    ``Foxtail'' Reduction in Permanent Pastures, Panner, OR.......     3,500
    Constructed Wetland for Waste Water Treatment, Shull, OR......     3,200
    The Use of Goats to Control Juniper, Sage & Rabbit Brush,
        Snyder,
        OR........................................................     3,500
    Comparison of Weed control and Soil Erosion Control in 15''
        row Corn vs 30'' row Corn, Groff, PA......................     1,495
    Rotational Grazing in South Dakota/Dairy Cattle, Maas, SD.....     3,448
    Effects of Conservation Tillage on Water Quality in Southern
        Texas, Eubanks, TX........................................     8,000
    Cool Season and Warm Season Grasses to Stabilize Erodible
        Soils and Increase Profitability, Kearney, TX.............    10,000
    Alternative Cropping For the Navajo Reservation, Maryboy, UT..     4,300
    Increased Forage Production during Alfalfa Crop Rotation Years
        in Johnson Canyon, Utah. Biological Control of Scotch and
        Bull Thistle on Disturbed Alfalfa Pastures, Noel, UT......     2,900
    Greenhouse Subsurface Pipe System to Convert Solar Energy to
        Soil Heat, Johnson, VT....................................     4,475
    Technical Assistance for New Sheep Dairy Farms, Major, VT.....     7,431
    Northeast Livestock Export Program (Phase II), Ratcliff, VT...     4,600
    Development of NOFA Certified Pastured Poultry contractual
        Company to Diversify and Revitalize Vermont Agricultural
        Industry, Rich, VT........................................     5,450
    Education of Public in the Use of Native Woodland Plants and
        Wildflowers in the Home Garden, Schlegel, VT..............     1,145
    Organic Meat/Poultry Processing, Marketing, and Distribution
        Effort, Sheehan, VT.......................................     3,345
    Diversifying an Organic Grain System: Spring Wheat & Edible
        Bean Variety Trials, Van Hazinga, VT......................     6,000
    Sorghum Syrup Production in Vermont, Williamson, VT...........     6,000
    Dryland Corn Production in Columbia and Walla Walla Counties
        (WA), Carlton, WA.........................................     3,000
    Release of the Predator Mite, Amblyseius fallacis to Control
        Spider Mites in Red Raspberries and Reduce Reliance on
        Pesticides, Cieslar, WA...................................     1,850
    Small Farm Harvest Labor Reduction Project, Critchley, WA.....     2,500
    Bamboo Alternative Crop for Southwest Washington, Northcraft,
        WA........................................................     2,000
    Vegetation Management on Small Acreages Using Short Duration,
        Intensive, Rotational Grazing, Swagerty, WA...............     2,043
    Replacing Chemical Weed Control With Mulch in Commercial
        Blueberries, Cuddy, WI....................................     4,980
    Composting For Disease Suppression, DeWilde, WI...............     4,610
    Cooperative Marketing of Sheep Milk, Foster, WI...............    10,000
    Christmas Lights and Deer Scents, Bonhage-Hale, WV............       937
    Evaluating Forage Quality and Yield in Pastures in the
        Shenandoah Valley, Grantham, WV...........................     2,753

                        Fiscal year 1996 Producer Grants

            Description/producer/State                                Amount
    Establish More Efficient and Biological Practice for Bringing
        Forest Land into Agricultural Use through Sustainable
        Development Using Indigenous Species for Alaska, Talbot,
        AK........................................................    $3,000
    Pig Manure Control and Utilization Project, Tuli, AS..........     5,000
    Moving Succession Forward in a Lahmann Lovegrass Monoculture,
        Getzwiller, AZ............................................     3,000
    Goal-Driven Intensive Management of a Riparian/Sandy Bottom
        Site, Holtschlag, AZ......................................     4,310
    Managing Biological Processes for Maximum Diversity and
        Productivity, Mercer, AZ..................................     2,500
    Farming, Agriculture, and Resource Management for
        Sustainability (F.A.R.M.S.), McNamara, CA.................     5,000
    Habitat Management as a Transitional Tool to an Insecticide:
        Free Pest Management Program in Apples, White, CO.........     1,500
    Pedal-Powered Tillage for a Small Community-Supported Farm
        (CSA), Haney, CT..........................................     2,400
    Certified Organic Associated Growers (COAG), Norris, CT.......     2,670
    Growing Potatoes Organically 3 Different Ways, van Acterberg,
        CT........................................................     1,670
    Kenaf/Vegetable Rotation in an Organic Farming System, Kemble,
        DE........................................................     1,200
    Economical Analysis of Kenaf Grown with Different Nutrient
        Sources, Palmer, DE.......................................     3,140
    Dry-Extrusion of Wet Garbage for Swine Feeding, Pangelinan, GU     4,350
    Vegetable Soybean Cultivar Trials, Quan, GU...................     3,020
    Sustainable Greenhouse Tomato Production: Evaluating
        Alternatives to Pesticide Use for Controlling Tomato
        Pinworm Larvae in Hawaii, Tresky, HI......................     3,520
    Non-Chemical Suppression of Perennial Weeds, Frantzen, IA.....     9,875
    Iowa Network for Community Agriculture: Forming a Network to
        Support Producer Initiatives for Local Food Systems (CSA
        and Similar Efforts) in Iowa., Hall, IA...................     9,850
    Organic Farming Mentor Project, Thicke, IA....................    10,000
    Rural Action Ag Center, Varley, IA............................     9,580
    Comprehensive Integrated Agroforestry Project, Wahl, IA.......     4,838
    Comparison of Finishing Pig Performance in Hoophouse Building
        vs. a Conventional Slatted, Curtain-Sided Building, Weis,
        IA........................................................     1,775
    Economic Viability of Greenhouse Solarization, Higgins, ID....     2,450
    A Matted Mulch as an Alternative to Herbicide use in
        Strawberries, Melons and Tomatoes, Fouts, IN..............     4,393
    Community Farm Project, Schabacker, IN........................     5,000
    Livestock Re-Establishment Research Project at White Violet
        Farm, Sullivan, IN........................................     5,000
    Cover Crop Inter-Row Seeder For Row Crops, Ediger, KS.........     3,200
    Erosion-Sensitive Farm is Converted to a Clean Water Farm that
        Includes a Management-Intensive Rotational Grazing System
        and Well-planned Calving Facility, Howell, KS.............     4,947
    Prairie Hills Marketing Network: Marketing for Producers in
        Northwest Kansas, Rowh, KS................................     9,962
    Group Strategic Alliances for Carroll County Feeder Calves,
        Hendrick, KY..............................................    10,000
    Technical Assistance for Meat Goat Marketing, Hoffman, KY.....     8,900
    Vegetative Filter Strips & Artificial Wetlands to Filter
        Silage & Manure Effluent, Burt, MA........................     3,000
    High Density Planting for Weed, Disease and Pest Management in
        Commercial Strawberry Production, Hatch, MA...............     8,381
    The Use of Ethylene as a Chemical Pinching Agent on
        Floricultural Crops, Konjoian, MA.........................     5,000
    Commercializing State-of-the-Art Thermal Aquatic Technology
        for Orchard Weed, Fungi, and Insect Control, Smith, MA....     5,670
    Improving Aquaculture Productivity & Safety with Dockside
        Elevator Systems, Pels, MD................................     3,869
    Establishing An Integrated Rotational Grazing & Watering
        System, Vorac, MD.........................................     2,500
    Maximizing the Benefit of Rotational Pasture by Using a
        Combination of Early Calving and Creep Feeding Heavy
        Calves Barley on Pasture, Boisvert, ME....................     1,000
    Improving Potato Seed Performance, Crane, ME..................     2,400
    Using Composted Paper Mill Wood Fiber Residual as a Mulch/Soil
        Amendment in Potato Production, Fitzpatrick, ME...........     2,974
    The Development of Rhubarb Agriculture in Maine, Jacoby, ME...     3,200
    The Efficacy of Red Oak Sawdust as a Mulch to Control Grass
        and Weeds in Organic Wild Blueberries, Johnson, ME........     2,827
    Dairy Farm Diversification/Waldo County, Maine, Keene, ME.....     3,000
    Sustainable Pollination of Wild Blueberry and Cranberry,
        Kelley, Jr.,
        ME........................................................     4,880
    Broad Based Organic Control of Cranberry Fruit Worm,
        Macfarlane,
        ME........................................................     2,950
    Extending the Vegetable Production Season in Northern Michigan
        with Polyhouses, Chadwick, MI.............................     2,696
    Permaculture Greenhouse System: Integrating Greenhouse and
        Poultry Production, Meisterheim, MI.......................     5,000
    Using Forages and Grazing Systems as an Alternative to Crop
        Production on Michigan Muck Soils, Oswalt, MI.............     5,000
    Sheep Offal Composting Project, Essame, MN....................     9,580
    Pipestone Lamb Marketing Project, Fruechte, MN................    10,000
    Hog Production in an Existing Facility using Swedish
        Techniques, Haroldson, MN.................................     5,000
    Prairie Farmers Coop Producer-Owned Livestock Processing and
        Marketing, Timmerman, MN..................................    10,000
    Establishment of Rotational Grazing System Utilizing Warm and
        Cool Season Grasses, Bohmont, MO..........................     5,000
    Growing Day-Neutral Strawberries using the Sunbelt/
        Polyacrylamide Gel System, Compton, MO....................     3,126
    Extending the Grazing Season in a Rotational Grazing System
        for Dairy, Hedges, MO.....................................     4,160
    Management-Intensive Grazing, Stump, MO.......................     5,000
    The Production of Bromus Willdenowii Kunth Prairie Grass
        (Grasslands Matua) and Bromus Stamineus Desv. Grazing
        Brome (Grassland Gala) in the Tennessee Valley as an
        Alternative to Fescue and Ryegrass, McKee, Jr., MS........     9,900
    Legume Grazing in Rotation with Small Grains, Alger, MT.......     4,000
    Green Manure/Covercrop Combination Experiment, Daniel, MT.....     1,923
    Evaluation of Grass Species for Improved Pasture Management,
        Lee,
        MT........................................................     4,800
    Vegetative Changes through Alternative Water Sources, Veseth,
        MT........................................................     2,500
    Aquaculture Conversion Model Emphasizing Poultry and Hog
        Facilities Re-Use and Recycled On-farm Resources, Bunting,
        NC........................................................     6,000
    Identification of Cover Crops to Enhance the Habitat of
        Specific Beneficial Insects in Sustainable Production
        Systems, Haines, NC.......................................     9,462
    Multiple On-Farm Use of Aquatic Plants and Animals, Harman, NC     9,575
    Alternatives to Chemicals in the Peanut Cotton Rotation,
        Morris, NC................................................     9,366
    Networking and Education of Sustainable Bison Producers in the
        Northern Plains, Lautt, ND................................     9,966
    Corn Starch Amendment for Marginal Soils, Johnson,, NE........     1,297
    Plant Population Effect on Yields of Sweet Corn, Hardy, NH....       632
    Comparison of Drainage Methods for Phytophthora Root Rot
        Control, Lee, NJ..........................................     3,500
    Increasing the Value of Irrigated Pastures, Baker, NM.........     4,200
    Test Plot Demonstration for Organically Produced Small Grains,
        Phase II, Roybal, NM......................................     5,000
    Feasibility of No-till Frost Seeding, Bishop, NY..............     1,285
    Permanent Bed Vegetable Production Systems, Blomgren, NY......     3,190
    Use of a Biological Filter in a Recirculating Aquaculture
        System, Brockway, NY......................................     1,758
    Answering Questions About Ditch Bank Stabilization, Cocot, NY.     2,100
    Rotational Grazing of Sheep to Control Weeds in Christmas
        Trees, Drexler, NY........................................     1,325
    An Evaluation of Chinese Medicinal Herbs as Field Crops in the
        Northeast, MacLean, NY....................................     3,498
    Development & Adoption of Computerized Crop Record Keeping
        Program, McChesney, NY....................................     4,000
    Full Capitalization of Water Resources, Rounsaville, NY.......     6,000
    Multiple-Site Evaluation of Cover Crops Established in Wheat
        Stubble, Bennett, OH......................................     9,613
    The Study of Alternative Management Strategies for European
        Red Mite in North Central Ohio Apple Orchards, Eshelman,
        OH........................................................     9,722
    Organic Mulch for Weed Control in Rhubarb, Boden, OR..........     2,500
    Use of Aerated Compost Teas for Control of Foliar Diseases of
        Spinach, Lettuce and Broccoli and to Promote Plant Vigor
        and Quality, Booth, OR....................................     2,620
    Low Tillage Weed Control, Fullmer, OR.........................     1,895
    The Effect of Aerated Compost Teas on Disease Control in
        Blueberries and Tomatoes, Gray, OR........................     2,610
    Grazing Sheep in New Forest Plantings, Lehman, OR.............     1,575
    Use of Aerated Compost Teas as a Preventative Foliar Fungicide
        on Grape Vines Vitus vinifera, Michul, OR.................     2,930
    School Cafeteria Compost System for Soil Amendment Production,
        Strong, OR................................................     3,000
    Minimizing Equipment Costs on a Grazing Farm, Bowlan, PA......     2,683
    4-H Sustainable Approach to Raising Beef, Curtis, PA..........     2,260
    Economic Comparison & Weed Control Observation of 15'' Row
        Corn vs. 30'' Row Corn, Groff, PA.........................     1,040
    Crownvetch Living Mulch Grazing, Hubbard, PA..................       470
    Alternative Rotation System for Vegetables, Matthews, PA......     2,960
    Finishing Beef Calves on Legume Pasture, Berry, SD............     2,504
    Low Input Sustainable Agriculture Short Course, McGregor, TN..     9,650
    Sustainable Cultivation of Medicinal Herbs as an Alternative
        to Tobacco as a Cash Crop, Miller, TN.....................     5,004
    Grazing Alternatives to Tall Fescue for Stocker Cattle, Pitts,
        TN........................................................     9,982
    Can Organically Managed Native Warm Season Grasses Provide a
        Sustainable and More Cost Effective Hay Source for a
        Family Operated Goat Dairy than Input Intensive Annual
        Sorghum/Sudan Grass Crosses?, Dexter, TX..................     9,638
    Agri-Tourism: Educating the Public and Generating On-Farm
        Income, Hayden, VT........................................     1,450
    Sustainable Yield Sugaring & Marketing, Hinsdale, VT..........     4,920
    Northeast Livestock Export Program, Ratcliff, VT..............     4,400
    Best Method for Establishing Globe Artichoke Seedlings,
        Rozendaal,
        VT........................................................     1,060
    Sorghum Syrup Production in Vermont, Williamson, VT...........     5,875
    Carrot Rust Fly Control, DeWreede, WA.........................     1,150
    Weed Control in Organic Apple Orchard, Holwegner, WA..........     2,550
    Alternative Crop Production in a ``Direct Seed Annual Crop
        Intense Rotation Program'', Kupers, WA....................     4,400
    Achieving Sustainability in San Juan County Hay Fields,
        Matthews,
        WA........................................................     2,750
    Organic vs. Synthetic Fertilizer-Container Nursery Trials,
        Sundquist, WA.............................................     4,575
    Improved Nitrogen Utilization and Herbicide Reduction Through
        Relay Intercropping, Tinkelberg, WA.......................     4,230
    Life after CRP: The Conservation and Economic Benefits of
        Improved Grassland Cover Using Managed-Intensive Grazing,
        Cates, WI.................................................     4,100
    Exploring Low-input Alternative for Watering Ewes in Winter,
        Fyksen, WI................................................     3,195
    Northwood Farm Sustainable Raised Beef, Goodman, WI...........     5,000
    Sustainable Mushroom Cultivation in the North for Disabled
        Growers, Huebner, WI......................................     4,055
    An Analysis of Producing and Niche Direct Marketing Pasture-
        Finished Beef, Wrehota, WI................................     5,912
    Tall Stature Grasses for Winter Grazing and Spring Calving,
        Weber,
        WY........................................................     2,800

        Question. Please summarize the achievements of the SARE program to
    date.
        Answer. In its ten-year history, SARE has funded 1,122 projects.
    Five hundred of those projects are Research and Education projects--
    including projects in the USDA/EPA co-funded Agriculture in Concert
    with the Environment program--which are usually multi-disciplinary and
    often multi-institutional; 497 are producer grants to individual
    farmers or ranchers or small groups of producers to do on-farm
    research, demonstration, or education; and 125 are projects in the
    Professional Development Program funded with Smith-Lever 3(d) funds.
        These 1,122 projects span a wide range of topics, farming systems,
    and geography, all related to improving the scientific base and
    practical knowledge about food and farming systems that are profitable,
    protect the environment, and contribute to quality of life for people
    and communities. Many if not most projects address multiple topics,
    however a breakdown of project numbers by primary topic is as follows:
    Approximately one-fourth of the projects address production of field or
    horticultural crops, for example soil-enhancing cover crops, crop
    rotation, ridge tillage, or crop diversification. Nearly one-fifth
    address animal production systems on topics such as management-
    intensive grazing, forage improvement, manure management, or less
    capital-intensive poultry and hog production for small farmers. Nearly
    one-fifth concern biologically-based IPM or other pest management
    topics. Ten percent of the projects are primarily educational, in
    addition to the requirement that each SARE research project include an
    education/outreach component; another 11 percent provide educational
    opportunities to field professionals--the 125 PDP projects. Eight
    percent address marketing, economics or community development, such as
    economic comparisons of different production systems, direct marketing,
    or on-farm processing and other value-added opportunities that provide
    jobs in local communities as well as improved profits for producers.
    Five percent of SARE projects are primarily concerned with protection
    of wildlife, riparian areas, and other natural resources. Another five
    percent explore the integration of crops and livestock in farms or
    ranches.
        Many concrete impacts have resulted from these diverse projects.
    For example, a survey of participants in a Nebraska project that worked
    with more than 130 people on about 80,000 acres of farm and ranch land
    found that sixty percent of participants increased the diversity of
    commodities grown, thirty percent reported improved profitability,
    forty percent reported decreased soil erosion, and fifty percent
    reported improved wildlife habitat. A project re-introducing
    agriculture and value-added marketing to small producers in northern
    New Mexico is projected to bring them $100,000 per year in agricultural
    income. A Michigan producer participating in a SARE project looking at
    the ability of grass and legume filter strips to provide habitat for
    beneficial insects while controlling nutrient runoff, saved $6-10 per
    acre by reducing insecticide sprays. A New York grape producer saved
    $31-36 per acre in reduced fungicide applications after learning to
    monitor conditions with a weather station and computer model. These are
    but a few of the ways that SARE project findings are contributing to
    producer profits, resource stewardship, and vital communities.
        Question. The fiscal year 1999 budget proposes that with the
    additional funding proposed for SARE, emphasis will be given to helping
    farmers and ranchers save money through grazing system improvements
    that also protect natural resources. Why?
        Answer. Grazing systems are one of several opportunities for SARE
    in the coming years. Management-intensive grazing has been shown,
    through dozens of research and demonstration projects funded by SARE
    and others, to be an excellent strategy for producers to improve
    profits, protect natural resources, and improve quality of life for
    ranching families and communities. Traditional grazing systems turn
    livestock loose on large pastures, where the animals often remain for
    weeks at a time. In management-intensive grazing systems, graziers
    place livestock in smaller paddocks and move the animals frequently
    with the help of affordable, portable fencing. These grazing systems
    reduce feed costs because farmers and ranchers do not have to grow or
    purchase forage or grain year-round. Pastures require few or no inputs
    of pesticides and allow natural recycling of manure. They also provide
    a continuous soil cover while protecting wildlife habitat and important
    ecosystems. Graziers can work fewer hours and spend more time with
    their animals instead of worrying about field equipment and hauling
    manure. Thus grazing systems offer a fine example of a win-win approach
    where producers profit along with the environment and communities.
    Other areas of great opportunity for SARE include soil health,
    livestock waste management, crop and enterprise diversification, and
    other marketing alternatives for family farms both small and large. In
    each case, SARE funds will be used to study and extend these types of
    win-win solutions.
        binational agricultural research and development program (bard)
        Question. The fiscal year 1999 budget proposes to increase funding
    for the Binational Agricultural Research and Development Program (BARD)
    from the fiscal year 1998 funding level of $500,000 to $1,500,000.
    Given the fact that the budget proposes reductions in base programs
    such as the Hatch Act, McIntire-Stennis Cooperative Forestry, the
    Smith-Lever Act, EFNEP and Aquaculture Centers, the termination of
    existing programs, and the elimination of special research and federal
    administration grants in support of domestic needs, why is increased
    funding for BARD a priority?
        Answer. The $2 million requested for BARD would restore funding to
    the fiscal year 1997 level. Restoration of the $2 million funding level
    is requested because the Administration supports increasing the
    proportion of agricultural research funding that is awarded by merit
    review with peer evaluation, as 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. What agricultural research is currently being supported
    with funding through BARD? Please give a description of the research
    being funded, the amount of funds provided for each project, and who is
    conducting the research.
        Answer. The information follows.
    Fiscal year 1997 projects
        Regulation of Arabidopsis Glutamate Decarboxylase in Response to
    Heat Stress: Modulation of Enzyme Activity and Gene Expression. Auburn
    University. Locy, R.D., Cherry, J.H., Singh, N.K. $130,400
        Farmer's Time Allocation Decisions in Different Institutional
    Environments: A Household Perspective. University of California at
    Davis. Chalfant, J.A., Sumner, D.A. $76,182
        Control of Fertilization-Independent Development by the fie2 Gene.
    University of California at Berkeley. Fischer, R.L. $120,900
        Etiology of the Rugose Wood Disease of Grapevine and Molecular
    Study of the Associated Trichoviruses. University of California at
    Riverside. Rao, A.L.N. $124,900
        Interactions of Cloud Proteins, Pectins and Pectinesterases in
    Flocculation of Citrus Cloud. University of Georgia. Wicker, L., Kerr,
    W.L. $124,900
        Streptococcus iniae Infections in Trout and Tilapia: Host-Pathogen
    Interactions, the Immune Response Towards the Pathogen and Vaccine
    Formulation. University of Georgia. Evans, D.L. $133,200
        Lek Behavior of Mediterranean Fruit Flies: an Experimental
    Analysis. University of Hawaii. Shelly, T.E. $122,400
        Molecular-Based Analysis of Cellulose Binding Proteins Involved
    with Adherence to Cellulose by Ruminococcus albus. University of
    Nebraska. Morrison, M.$142,660
        Improving Methionine Content in Transgenic Forage Legumes. New
    Mexico State University. Sengupta-Gopalan, C. $142,600
        On-line Fault Detection and Diagnosis for Greenhouse Environment
    Control. Cornell University. Albright, Louis D. $112,400
        Use of Anti-Fungal Gene Synergisms for Improved Foliar and Fruit
    Disease Tolerance in Transgenic Grapes. Cornell University. Reisch,
    B.I., Kikkert, J.R. $133,820
        Controlling Ethylene Responses in Horticultural Crops at the
    Receptor Level. North Carolina State University. Sisler, E.C. $124,320
        Prediction of Nitrogen Stress Using Reflectance Techniques. Texas
    A&M University. Searcy, S.W. $127,400
        Control of Bovine Anaplasmosis: Cytokine Enhancement of Vaccine
    Efficacy. Washington State University. Palmer, G.H., Brown, W.C.
    $143,230
        Regulation of Avocado Resistance to Postharvest Pathogens by
    Modulation of the Biosynthesis of Antifungal Compounds. Washington
    State University. Browse, J. $109,900
    Fiscal year 1996 projects
        Functional Biogenesis of V-ATPase in the Vacuolar System of Plants
    and Fungi. University of California at Berkeley. Schekman, R.W. $81,000
        Enhancement of Baculoviruses' Insecticidal Potency by Expression of
    Synergistic Anti-Insect Scorpion Toxins. University of California at
    Davis. Hammock, B.D. $125,000
        Genetic Diversity of Resistance Gene Clusters in Wild Populations
    of Lactuca. University of California at Davis. Michelmore, R.W.
    $125,000
        Resistance to Tomato Yellow Leaf Curl Virus by Combining Expression
    of a Natural Tolerance Gene and a Dysfunctional Movement Protein in a
    Single Cultivar. University of California at Davis. Gilbertson, R.L.,
    Lucas, W.J. $121,250
        Mapping and Tagging by DNA Markers of Wild Emmer Alleles that
    Improoove Quantitative Traits in Common Wheat. University of California
    at Davis. Qualset, C.O., McGuire, P.E. $137,000
        Biosensors for On-line Measurement of Reproductive Hormones and
    Milk Proteins to Improve Dairy Herd Management. University of
    California at Davis. Delwiche, M.J., BonDurant, R. $145,870
        Creating and Characterizing Genetic Variation in Tilapia Through
    the Creation of an Artificial Center of Origin. University of
    California at Davis. Gall, G.A.F., May, B. $145,500
        Molecular Genetic Analysis of Citric Acid Accumulation in Citrus
    Fruit. University of California at Riverside. Roose, M. $125,000
        Rhizosphere Ecology of Plant-Beneficial Microorganisms. University
    of California at Riverside. Crowley, D.E. $130,430
        Osmotin and Osmotin-Like Proteins as a Novel Source for
    Phytopathogenic Fungal Resistance in Transgenic Carnation and Tomato
    Plants. Purdue University. Hasegawa,, P.M., Bressan, R.A. $125,000
        Study of the Basis for Toxicity and Specificity of Bacillus
    thuringiensis Delta-endotoxins. Purdue University. Aronson, A. $113,630
        Elicitor-Induced Response in Lycopersicon esculentum. Purdue
    University. Martin, G.B. $125,000
        Regulated Expression of Yeast FLP Recombinase in Plant Cells.
    Purdue University. Lyznik, L.A., Hodges, T.K. $135,610
        Ozone Altered Stomatal/Guard Cell Function: Whole Plant and Single
    Cell Analysis. Pennsylvania State University. Pell, E.J., Assmann, S.
    $135,400
        Developing Nutritional-Management Protocols which Prevent Tibial
    Dyschondroplasia. Pennsylvania State University. Leach, Jr. R.M., Gay,
    C.A. $125,000
        Identification of Staphylococcus aureaus Virulence Factors
    Associated with Bovine Mastitis. Pennsylvania State University.
    Sordillo, L.M., Wojchowski, D.M., Perdew, G.H. $142,000
        Virus Synergy in Transgenic Plants. Cornell University. Palukaitis,
    P., Zaitlin, M. $124,480
        Role of Placental Lactogen in Sheep. Texas A&M University. Bazer,
    F.W. $116,130
        Creating and Characterizing Genetic Variation in Tilapia Through
    the Creation of an Artificial Center of Origin. Virginia Polytechnic
    and State University. Hallerman, E.M. $65,700
        Question. What research will be supported with the $1.5 million in
    fiscal year 1999 funding proposed for this program? Where will the
    research be carried out?
        Answer. There are eleven discipline areas within which awards will
    be made using fiscal year 1999 funding. The discipline categories are:
    (1) Agricultural Engineering; (2) Animal Production; (3) Animal
    Protection; (4) Aquaculture; (5) Fruit Tree Crops; (6) Field & Garden
    Crops; (7) Post Harvest; (8) Soil & Water; (9) Agricultural Economics;
    (10) Cellular & Molecular Biology; and (11) Plant Protection. Research
    supported by funding administered through CSREES for BARD is carried
    out at land-grant institutions.
        Question. How are BARD funds awarded?
        Answer. 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 BARD 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, and 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 recommended
    for funding. A binational Technical Advisory Committee (TAC) reviews
    the recommendations of the peer review panels and policy
    recommendations which the Executive Director, BARD Executive Staff,
    presents to the binational BARD Board of Directors. All final decisions
    regarding support of proposals are made by the Board of Directors.
        Question. The prepared testimony indicates that low interest rates
    and an increase in the cost of research have impeded the ability of
    BARD to adequately meet the needs of each country's producers and
    consumers. Please explain what increases in the cost of research have
    been incurred and what needs are not being met.
        Answer. Increases in the cost of research are due to various
    factors, including the cost of complying with regulations, the use of
    more sophisticated equipment, and the complexity of problems being
    addressed. 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 Israeli agriculture. The generation of
    new knowledge is an ongoing process, and 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). Fundamental research supported by BARD
    provides the knowledge base needed to develop solutions to pressing
    agricultural problems in the U.S. and in Israel.
        Question. What level of interest was available off the BARD
    endowment to support joint research efforts in each of the past three
    fiscal years? Has this interest off the BARD endowment been used to
    support research projects? If not, why? If yes, which research projects
    were funded with the interest off the existing BARD endowment in each
    of these years?
        Answer. The level of interest has been approximately 7 percent on
    the initial BARD endowment of $80 million and 6.9 percent on the
    subsequent $30 million increase to the endowment to support joint
    research efforts in the past three fiscal years. The cumulative funding
    provided by BARD for projects awarded in fiscal years 1995 through 1997
    is approximately $32.9 million. This amount is derived from
    approximately $6.1 million from CSREES and $6.1 million in matching
    funding from the Israeli government for a total of $12.2 million, and
    approximately $20.7 million from the interest earned on the endowment.
    Copies of the BARD Annual Scientific Reports for 1995, 1996, and 1997
    are being provided to the Committee. The Reports include scientific
    abstracts and other information about the BARD projects supported with
    combined CSREES, Israeli, and endowment interest funds in those three
    fiscal years.
         national research initiative (nri) competitive grants program
        Question. The prepared testimony indicates that NRI has expanded
    the science base for the Hazard and Critical Control Point (HACCP)
    approach to meat and poultry inspection. What HACCP requirements are
    based on NRI-funded research?
        Answer. Incidence of disease-causing microorganisms in eggs,
    poultry, swine, cattle and shellfish, as well as the economic impact on
    food exports, lead to NRI-funded research on development of strategies
    to control, eliminate or prevent foodborne pathogens from entering the
    food supply. Research is ongoing to develop improved means for pathogen
    control and elimination, as well as determination through risk
    assessment, what critical control points from ``farm to fork'' are
    vulnerable. NRI has supported research to develop reduction strategies
    for Salmonella on commercial poultry and swine farms, as well as
    production systems; to understand the specific critical control points
    from harvest to consumption, in Vibrio vulnificus from shellfish;
    strategies are being developed to identify, then prevent or eliminate
    E. coli contamination on the farm. Additionally, the NRI supported
    research on HACCP-based quality assurance programs on table eggs and
    the incidence of salmonellosis, and the potential impacts upon overall
    food quality and international trade.
        Question. The fiscal year 1999 budget proposes to fund NRI at $130
    million, an increase of $32.8 million from the fiscal year 1998 funding
    level. Please prioritize the specific increases requested for each
    component of NRI-funded research.
        Answer. Priority will be given in each of the specific components
    to research topics that reflect national needs identified by
    stakeholders and reflected in the Administration's proposed
    initiatives. Further, a general priority of the NRI that applies to all
    of the components is that of making research grants that are both
    larger in awarded dollars and longer in duration while maintaining a
    reasonable funding success rate. By so doing, the use of Federal
    dollars is made more effective and the competitive process, for both
    the NRI and the recipient institutions, is made more efficient. The NRI
    also acknowledges an increase in sophistication of technological tools
    and instrumentation available to scientists conducting research
    relevant to agriculture. Such advances may allow for a broader scope to
    some types of proposals, while also requiring substantially higher
    levels of funding. In fiscal year 1999, NRI will be an important
    component of the National Food Genome Initiative and the President's
    Food Safety Initiative.
        The requested increase in the Natural Resources and Environment
    component would ensure that the research programs contained therein
    were offered on a regular, annual basis, and that each program would be
    able to attain a better success rate, which has ranged from as low as 6
    to 15 percent for some programs. The research areas currently supported
    are critical for sustainability of agriculture and forestry. They will
    contribute both fundamental and mission-linked information for
    improving understanding of: (1) plants as they respond to their
    environment, both normal and stressed by nature and man-made
    pollutants; (2) soils, the basic medium upon which all terrestrial
    organisms depend and where physical structure, chemistry, biology, and
    hydrology interact in ways that ultimately determine whether natural
    and managed soil and environmental quality are maintained and improved;
    (3) ecosystems, where an understanding of the flow of energy and the
    cycling of nutrients is requisite to the development of management
    strategies to ensure the sustainability and health of both natural and
    managed ecosystems; and (4) water quality and availability, as all
    agricultural and forestry practices ultimately influence the nation's
    water resource. A final priority is that of developing a new research
    area to enhance understanding weather and climate interactions with
    agricultural systems. Such a program would be complementary to the
    above areas, address current agricultural problems such as particulate
    pollution, and lead to improved management.
        The increase requested for the Plant Division would be used for
    high priority research areas in Food Genomics; Energy Conversion by
    Plants; Synthesis of Plant Products; Plant/Microbe Interactions; Insect
    Community/Plant Habitat Interactions and; Assessment of Risks of
    Biological Control Agents. The increase will provide additional
    resources for plant genome research that will focus on mapping,
    identifying, and understanding the function and control of genes in
    agriculturally important plants, with emphasis on functional genomics,
    identification of expressed sequence tags and quantitative trait loci,
    development of comparative and physical genomic maps, technology, and
    bioinformatics. This knowledge is the key that will permit the United
    States to develop new genetic technologies for improvements in yield,
    pest resistance, composition, and quality of the domestic agricultural
    output. Increased funding will support research metabolic pathways in
    plants that will enable the genetic engineering for designing and
    altering agriculturally important plants for enhanced and new
    functions. Increased funding will answer questions about (1) how the
    composition and ecology of microbial communities surrounding a plant
    and the microbial flora inside a plant affect plant processes, such as
    disease resistance; beneficial plant/microbe interactions; response to
    environmental factors; water and nutrient uptake by the plant and; (2)
    the genetic and metabolic pathways and controls in both plants and
    microbes that govern these processes Increased funding will focus on
    understanding ecological interactions between insect and plant
    communities to enhance development of new pest control strategies for
    US agriculture. For example, insects developing in non-crop plants
    (e.g., weeds, ornamentals, and native vegetation) can significantly
    impact their importance in many agroecosystems. In addition, funding
    will be used to assess the possible effects of classical biological
    control on non-target species.
        In the area of Nutrition, Food Safety and Health, priority will be
    given to research to develop strategies to prevent or eliminate
    disease-causing micro-organisms, naturally occurring toxicants, or drug
    residues from entering our food supply; to develop or improve current
    sampling procedures for detection of disease-causing microorganisms,
    naturally occurring toxicants or drug residues, expected to lead to
    rapid, reliable and practical quantification methods for microbial
    agents, naturally occurring toxicants or drug residues; to develop
    approaches to and models for risk assessment in support of food safety;
    examine the role of livestock/poultry manures and their applications in
    the transmission of foodborne diseases; examine the mechanisms
    responsible for antibiotic resistance in livestock and poultry that
    could lead to foodborne illness; identify obstacles to adopting
    appropriate food safety habits, and develop recommendations for
    interventions to improve safe food consumption among consumers. All
    these research areas are complementary to the President's Food Safety
    Initiative.
        In the Animals component, the proposed increase will provide
    additional resources for high priority animal genome research such as
    functional genomics, comparative and physical mapping, identification
    of expressed sequence tags and economic trait loci and bioinformatics.
    The research would also include whole genome sequencing of animal
    pathogens, previously unsupported in the NRI due to insufficient funds.
    These research areas would be complementary to that of the National
    Food Genome strategy. Additional high priority animal health research
    will also be supported that responds to disease challenges posed by new
    and re-emerging diseases that threaten US animal agriculture.
        In the Markets, Trade and Rural Development component, the Markets
    and Trade program provides priority consideration for agricultural
    competitiveness, and technology and sustainability. To these, a fourth
    priority would be added dealing with natural resource economics. The
    program has purposely limited the priority areas initiatives because of
    the relatively small size of the program. Expanding the program in this
    way would invite proposals that examine many of the critical
    environmental issues that are resulting from changes in the structure
    of various agricultural sectors, one example being increased
    concentration in the food animal production sector. The Rural
    Development Program currently places priority on research goals that
    deal with understanding the forces affecting rural areas and on the
    design and evaluation of new approaches to rural development. Because
    of resource constraints, a lower priority has been placed on
    understanding the quality of life aspects that are important to and
    result from living and working in rural areas. Increased funding would
    permit an expansion to capture research goals that address in a more
    direct manner, quality of life characteristics of rural areas, and how
    those characteristics might be improved.
        The proposed increase for the Processing for Adding Value or
    Developing New Product components would allow additional resources to
    be directed toward: metabolic engineering of plants and microorganisms
    to produce value-added products from agriculture; new crop development,
    focusing on genetic and agronomic issues in addition to the current
    emphasis of value-added product development; greater emphasis on
    research of foods and food systems with health promoting properties;
    and additional resources directed toward development of novel food
    manufacturing processes, including greater process automation and
    control, to strengthen competitiveness of the US food industry.
        An increase in the NRI will also allow additional high priority
    Agricultural Systems research to be supported. With the current level
    of funding, the NRI's Agricultural Systems Program can only support ten
    percent of the proposal submissions.
        Question. What are the returns on NRI-funded research? What is the
    documentation for these findings?
        Answer. The cost-effectiveness of the NRI or individual research
    projects has not been specifically estimated. However, the benefits of
    public investment in agricultural research, through programs such as
    the NRI, have consistently been shown to outweigh the costs.
        For example, work by the Economic Research Service (ERS) indicates
    a return on investment for agricultural research of 20-60 percent. The
    ERS further concludes that agricultural basic research tends to have
    twice the benefits to society, with returns on investment of 60-90
    percent as compared to more applied agricultural research. Publicly
    funded research was found to have twice the return as compared to
    privately funded research. A report by the Council of Economic Advisors
    further supports the link between research and positive economic and
    social returns, citing consistent positive returns from research.
        Agriculture productivity has increased at an average annual rate of
    1.94 percent for the period of 1948-1994, one of the highest rates of
    productivity growth of all U.S. industries. For the period of 1990-
    1994, this rate of productivity increase was 2.77 percent. Publicly
    funded research has been a major contributor to this increase in
    productivity, not only by providing higher yielding crop varieties,
    better livestock breeding practices, more effective fertilizers and
    pesticides, and better farm management practices, but also through
    research that keeps productivity from falling, such as by overcoming
    pesticide resistence. Agriculture research not only benefits the farmer
    through decreased costs and higher profits, but also the nation, and
    low-income people in particular, through lower food prices. In
    addition, publicly funded agricultural research has been broadened to
    impact environmental protection and food safety.
        The sources for these findings are Economic Research Service,
    ``Agricultural Productivity in the United States,'' Agriculture
    Information Bulletin Number 9510, January 1998, USDA, Economic Research
    Service, ``The Value and Role of Public Investment in Agricultural
    Research,'' Staff Paper Number 9510, May 1995, and the Council of
    Economic Advisors ``Supporting Research and Development to Promote
    Economic Growth: The Federal Government's Role,'' October 1995.
                      extension indian reservation program
        Question. An increase in funding is requested for fiscal year 1999
    to expand the presence of extension agents on Indian Reservations. How
    many extension agents are currently funded and which reservations are
    being served? How many additional extension agents will be funded with
    the increased funding requested and where will they be located?
        Answer. Currently we have 25 agents in 16 states. They serve the
    following reservations:

    Alaska: Tanana Chiefs Council
    Arizona: Colorado River; Hopi; San Carlos Apache
    Arizona/New Mexico/Utah: Navajo (Window Rock); Navajo (Ship Rock)
    Florida: Seminole
    Idaho: Fort Hall
    Mississippi: Choctaw
    Montana: Flathead; No. Cheyenne; Blackfeet; Ft. Belknap
    North Carolina: Cherokee
    North Dakota: Ft. Berthold
    New Mexico: Jicarilla Apache; Zuni
    Nevada: Pyramid Lake & Walker River (one agent)
    Oklahoma: Muscogee
    Oregon: Warm Springs
    South Dakota: Rosebud; Pine Ridge
    Washington: Chehalis; Colville
    Wyoming: Wind River

        The requested increase will be used to provide 31 additional agents
    for some of the unmet needs, as follows:
                                                                      Agents
            State                                                     Needed
    Alaska............................................................     3
    Arizona...........................................................    14
    California........................................................     2
    Colorado..........................................................     2
    Idaho.............................................................     2
    Maine.............................................................     1
    Minnesota.........................................................     2
    Montana...........................................................     4
    Nevada............................................................     3
    New Mexico........................................................     9
    Oklahoma..........................................................     2
    South Dakota......................................................     8
    Utah..............................................................     4
    Washington........................................................     4
    Wisconsin.........................................................     2
    Wyoming...........................................................     1

        We have a backlog of about 20 unfunded projects from Arizona,
    Colorado, Idaho, Minnesota, Montana, Oklahoma, South Dakota, Wisconsin,
    and Wyoming as a result of previous competitive applications. These
    will be accorded some priority in any subsequent competition. We will
    issue a request for (competitive) proposals when an increase in funding
    is received. The requested increase for EIRP in fiscal year 1999
    supports the CRAT team recommendations to expand agricultural
    opportunities to small-scale and disadvantaged farmers.
                            1890 facilities program
        Question. Additional funds are requested for fiscal year 1999 for
    the 1890 Facilities Program to allow facilities at these institutions
    to be more comparable to the facilities found on campuses of the 1862
    land-grant universities. Have you done an inventory of the facilities'
    improvements required at each of the 1890 Institutions to achieve this
    goal? If so, please provide the committee with a list of facilities'
    needs by institution and the funding required to meet these needs.
        Answer. The agency has not yet conducted an inventory of the
    facilities' needs required for the use of the proposed fiscal year 1999
    funds. The agency has instructed the 1890 Universities to update its
    inventory of needs for the use of the proposed funds. The agency will
    issue, in April 1998, a request for a Five-Year Plan for the
    development of facilities. The Five-Year Plan details the proposed use
    of the funds over a five year period. Each construction or renovation
    project must have a statement of need which describes the factors or
    circumstances which led to the institution's need for the planning,
    construction, renovation or acquisition project proposed. Also, the
    plan must show the procedures to be used to accomplish the goals of the
    individual project. Tentative timetables are developed for--
    accomplishing each goal. A proposed construction budget is submitted,
    indicating the sources of funding--federal and/or non-federal--for the
    completion of the project. A review panel must approve each Five-Year
    Plan, before a grant is awarded to the institution. The increase is
    consistent with the CRAT team recommendations.
        Question. Please provide how the 1890 facilities funds were
    allocated, by institution, in each of fiscal years 1997 and 1998, and
    how much each institution would receive if the program is funded at the
    fiscal year 1999 request level.
        Answer. The 1890 facilities funds were allocated in fiscal year
    1997 and fiscal year 1998 as shown on the following table. The
    allocation for fiscal year 1999 has not yet been determined. This will
    be determined when the fiscal year 1999 budget is approved.

        COOPERATIVE STATE RESEARCH, EDUCATION, AND EXTENSION SERVICE 1890
                    EXTENSION AND RESEARCH FACILITIES PROGRAM
    ------------------------------------------------------------------------
                                                  Allocated fiscal year--
                  Institutions               -------------------------------
                                                   1997            1998
    ------------------------------------------------------------------------
    Alabama:
        Alabama A&M University..............        $403,755        $403,755
        Tuskegee University.................         403,755         403,755
    Arkansas: University of Arkansas at Pine         387,818         387,818
     Bluff..................................
    Delaware: Delaware State University.....         310,482         310,482
    Florida: Florida A&M University.........         408,640         408,640
    Georgia: Fort Valley State University...         448,874         448,874
    Kentucky: Kentucky State University.....         497,465         497,465
    Louisiana: Southern University..........         379,624         379,624
    Maryland: University of Maryland Eastern         356,775         356,775
     Shore..................................
    Mississippi: Alcorn State University....         392,395         392,395
    Missouri: Lincoln University............         495,381         495,381
    North Carolina: North Carolina A&T State         511,065         511,065
     University.............................
    Oklahoma: Langston University...........         399,604         399,604
    South Carolina: South Carolina State             394,830         394,830
     University.............................
    Tennessee: Tennessee State University...         455,003         455,003
    Texas: Prairie View A&M University......         588,339         588,339
    Virginia: Virginia State University.....         430,885         430,885
                                             -------------------------------
          Subtotal..........................       7,247,040       7,247,040
    Federal Administration..................         301,960         301,960
                                             -------------------------------
          Total.............................       7,549,000       7,549,000
    ------------------------------------------------------------------------

        Question. Please provide a list of the facility improvements funded
    through the 1890 Facilities Program for each of the past two fiscal
    years and for fiscal year 1998 to date, indicating the amount of funds
    provided by institution and the facilities funded.
        Answer. The U.S. Department of Agriculture 1890 Facilities Program
    is authorized to provide Federal support in the design and construction
    of research and education facilities that assist in the discovery of
    new knowledge and the delivery of relevant and timely information to
    solve production problems and other problems of importance to diverse
    audiences served by the eligible universities. In addition to
    traditional programs, these institutions provide an emphasis on small
    farmers and other limited resource families, an important focus for the
    Department in the implementation of the Civil Rights Implementation
    Team recommendations.
        Research and education programs are focused on the five outcomes
    adopted by the Research, Education, and Economics (REE) Mission Area
    and goals of the Cooperative State Research, Education, and Extension
    Service (CSREES) Agency strategic plans (An agricultural system that is
    highly competitive in the global economy; A safe and secure food and
    fiber system; A healthy well-nourished population; An agricultural
    system which protects natural resources and the environment; and
    Enhanced economic opportunity and quality of life for Americans). This
    ensures that the 1890 facilities programs focus on issues of national
    importance.
        Completed and planned facilities will focus research and education
    efforts on issues, such as: water quality; food safety; nutrition;
    community development, particularly the rural/urban interface; plant
    and animal biotechnology, including forestry; small ruminant
    management; the use of distance and mobile education technologies;
    youth programming; plant and animal genome research; aquatic
    entomology; etc. Finally, the facilities will also provide training
    opportunities for minority undergraduate and graduate students who will
    become future scientists and agricultural leaders, with the potential
    to take advantage of employment opportunities with the U.S. Department
    of Agriculture. The broad scope of these activities is documented in
    the Five year plans of work developed by each university for approval
    by CSREES before facility funds are allocated. Program/project
    monitoring is possible through review of annual facility plans and the
    program plans and reports submitted for agency review as part of the
    Government Performance and Results Act accountability process initiated
    by the agency and land-grant partners.
        Facilities Improvements as follows.

                                                                                         1890 FACILITIES PROGRAM
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       Fiscal years--
                                      ----------------------------------------------------------------------------------------------------------------
                                        Total cost of
               Institutions            approved 5-yr.                                                                                   1998 proposed        Status of approved 5-yr. plan \3\
                                       plan \1\ (1993-         1996 appropriated funds                 1997 appropriated funds          projects \2\
                                             97)
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Alabama:
        Alabama A&M University.......      $2,093,113  $416,242                                $403,755                                ..............  --Major purchases have been made for water
                                                       1. Animal Science Research and          1. Animal Science Research and                           quality equipment, computer hardware/fiber
                                                        Demonstration Facility.                 Demonstration Facility.                                 optics lines and wiring for networking
                                                       2. Food Science & Nutrition             2. Food Science & Nutrition                              improvements.
                                                        Demonstration Laboratories.             Demonstration Laboratories.                            --The Alternative Crops facility was
                                                       3. Downlinking & networking             3. Downlinking & networking                              completed.
                                                        development.                            development.                                           --Renovations in the Family and Consumer
                                                       4. Construct Agricultural Mechanical    4. Construct Agricultural Mechanical                     Sciences Management Laboratory, Animal
                                                        Research Laboratory.                    Research Laboratory.                                    Physiology Laboratory, and Research and
                                                       5. Plant, food & animal laboratory      5. Plant, food & animal laboratory                       demonstration facilities.
                                                        equipment.                              equipment.
        Tuskegee University..........      $2,093,113  $416,242                                $403,755                                ..............  --Caprine research facility completed.
                                                       1. Construction/renovation Woodruff     1. Asbestos Removal Replacement of                      --Replacement of the Campbell Hall Research
                                                        Lab.                                    Campbell Hall roof.                                     building's roof completed.
                                                                                                                                                       --Renovation of the food processing
                                                                                                                                                        laboratories & the construction of the
                                                                                                                                                        Extension Activities Center in progress.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Arkansas: University of Arkansas       $2,010,493  $399,812                                $387,818                                ..............  --Laboratory equipment purchased for
     Pine Bluff.                                       1. Construct facility for               1. Construct slaughter house for swine                   aquaculture and small ruminant research
                                                        horticulture, aquaculture, human        demonstration program.                                  programs.
                                                        nutrition, child development, and      2. Support construction of an                           --Aquaculture facilities renovated.
                                                        small ruminant (sheep) research and     aquaculture demonstration processing                   --Extension complex completed.
                                                        improve infrastructure.                 and marketing facility.                                --Furnishings and equipment for new Extension
                                                       2. Construct mixing pad for             3. Repair station infrastructure                         complex purchased.
                                                        agricultural chemicals.                 including roads and ponds.
                                                       3. Contract engineering design for      4. Purchase and install growth chamber
                                                        fish processing/marketing building.     for agronomy and horticulture
                                                                                                research.
                                                                                               5. Purchase irrigation accessories for
                                                                                                agronomy area and farm.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Delaware: Delaware State               $1,607,900  $319,672                                $310,482                                ..............  --Accumulating funds.
     University.                                       Expansion of Herbarium                  Expansion of Herbarium and Small                        --Installed equipment in new extension
                                                                                                Animal Laboratory                                       building.
                                                                                                                                                       --Installed feed storage handling system.
                                                                                                                                                       --Mobile teaching unit operational.
                                                                                                                                                       --Pond construction complete.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Florida: Florida A&M University..      $2,118,441  $421,279                                $408,640                                ..............  --Accumulating funds.
                                                       1. Research & Extension Complex.        1. Research and Extension Complex.                      --Completed research and extension complex.
                                                       2. Plant and soils research equipment.  2. Teleconference Center.                               --Renovated entomology laboratory.
                                                                                               3. Pavilion.                                            --Installed irrigation system.
                                                                                               4. Environmental Center installation.                   --Renovated ponds.
                                                                                               5. Animal science research equipment.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Georgia: Fort Valley State             $2,327,016  $462,757                                $448,874                                ..............  --Accumulating funds.
     University.                                       1. Small Ruminant Research and          1. Small Ruminant Research and                          --Under construction--Small Ruminant Research
                                                        Extension Center.                       Extension Center.                                       & Extension Center.
                                                       2. Research/Extension Education         2. Research/Extension Education                         --Completed the Communication Production
                                                        Support Center.                         Support Center.                                         Center.
                                                       3. Research/Extension Human             3. Research/Extension Human
                                                        Development and Family Life Center.     Development and Family Life Center.
                                                                                               4. Communication Production Center.
                                                                                               5. Technology Development Transfer
                                                                                                Center.
                                                                                               6. Multipurpose Agricultural
                                                                                                Demonstration Pavilion.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Kentucky: Kentucky State               $2,578,915  $512,850                                $497,465                                ..............  --Horticulture and Entomology Laboratories in
     University.                                       1. Equipment for the Atwood Research    1. Pond Site (new construction).                         the Atwood Research Facility completed.
                                                        Facility.                              2. Research farm (multi-purpose                         --Telecommunications equipment was purchased
                                                       2. Renovate Water Quality lab.           building).                                              and installed in four rooms in the
                                                       3. Equipment for Extension building.                                                             Cooperative Extension Building.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Louisiana: Southern University...      $1,968,017  $391,365                                $379,624                                ..............  --Accumulating funds.
                                                       1. Renovation of livestock pavilion.    1. Renovation of livestock pavilion.                    --Contract awarded for renovation of
                                                       2. Multi-purpose Research &             2. Multipurpose Research &                               livestock pavilion.
                                                        Demonstration Center                    Demonstration Center
                                                       3. Extension Telecommunication Center.  3. Extension Telecommunication Center.
                                                       4. Equipment purchases.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Maryland: University of Maryland       $1,849,563  $367,809                                $356,775                                ..............  --Accumulating funds.
     Eastern Shore.                                    1. Food Science Technology, Research &  1. Food Science Technology, Research &                  --Major equipment purchased.
                                                        Extension Center.                       Extension Center.
                                                       2. The Lifespan Human Development       2. The Lifespan Human Development
                                                        Center.                                 Center.
                                                       3. Major equipment installation.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Mississippi: Alcorn State              $2,034,222  $404,531                                $392,395                                ..............  --Accumulating funds.
     University.                                       1. Planning the construction of         1. Construction of Research &                           --Construction underway on Research &
                                                        Research and Extension building.        Extension building.                                     Extension building.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Missouri: Lincoln University.....      $2,568,115  $510,702                                $495,381                                ..............  --Construction of Phase II of Allen and
                                                       1. Construction of Phase II of Allen    1. Construction of Phase II of Allen                     Foster Halls was completed.
                                                        and Foster Halls.                       and Foster Halls.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    North Carolina: North Carolina         $2,649,257  $526,830                                $511,065                                ..............  --Accumulating funds.
     A&T State University.                             1. Renovation of Coltrane Hall.         1. Renovation of Coltrane Hall.                         --Constructed off-campus farm storage
                                                       2. Construction of Extension/Research   2. Construction of Extension/Research                    building.
                                                        office building at the University       office building at the University                      --Constructed second floor to Coltrane Hall
                                                        Farm Complex.                           Farm Complex.                                           for Extension office complex.
                                                       3. Renovation of Ward Hall.             3. Renovation of Ward Hall.                             --Established an Extension/Research
                                                       4. Renovation of Analytical and Food &  4. Renovation of Layer and Broiler                       Telecommunications studio.
                                                        Nutrition Labs.                         Facilities.
                                                       5. Scientific equipment purchases.      5. Biotechnology purchase (growth
                                                       6. Construct building for research       chamber and accessories for plant
                                                        into adaption of small machinery to     stress studies).
                                                        small scale farming.                   6. Telecommunications studio.
                                                       7. Telecommunications studio.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Oklahoma: Langston University....      $2,071,598  $411,963                                $399,604                                ..............  --Accumulating funds.
                                                       Construction of Research and Extension  1. Construction of Research &
                                                        building.                               Extension building.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    South Carolina: South Carolina         $2,046,844  $407,041                                $394,830                                ..............  --Construction underway on extension
     State University.                                 Renovate extension facility             Renovate extension facility.                             facility.
                                                                                                                                                       --Purchase and installation of distance
                                                                                                                                                        education equipment underway.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Tennessee: Tennessee State             $2,358,790  $469,075                                $455,003                                ..............  --Accumulating funds.
     University.                                       1. Construct Research & Extension       1. Construct Research & Extension
                                                        Facility.                               Facility.
                                                       2. Purchase land for research farm.     2. Purchase land for research farm.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Texas: Prairie View A&M                $2,958,522  $588,339                                $570,689                                ..............  --Constructed office and training complex.
     University.                                       1. Install irrigation system in         1. Purchase research laboratory                         --Purchased equipment for training complex.
                                                        research plots.                         equipment.
                                                       2. Install security fencing around      2. Purchase equipment for Abattoir.
                                                        research plots.                        3. Purchase communications equipment.
                                                       3. Install animal waste disposal        4. Run satellite (teleconferencing)
                                                        system.                                 cabling.
                                                       4. Install environmental plant growth   5. Renovate and upgrade bio-safety/
                                                        chambers.                               surgery and environmental chamber
                                                       5. Construction of multi-purpose         labs at International Dairy Goat
                                                        pavilion.                               Research Center (IDGRC) and other
                                                       6. Renovate facility and equipment in    general repairs and replacements in
                                                        the Abattoir.                           the IDGRC.
                                                       7. Renovate facility and equipment in
                                                        creamery.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Virginia: Virginia State               $2,233,761  $444,211                                $430,885                                ..............  --Accumulate funds.
     University.                                       1. Construct Extension building         1. Renovate buildings on university                     --Major equipment purchased and installed.
                                                        (office complex).                       farm.                                                  --Satellite downlinking equipment installed
                                                       2. Renovate buildings on university     2. Purchase major equipment for                          and in use.
                                                        farms.                                  distance education.                                    --Renovated research meat goat building.
                                                       3. Water quality and aquaculture        3. Purchase major research equipment.                   --Construction of Extension Office Complex
                                                        equipment.                             4. Renovate research storage building.                   has been completed. Building occupied.
                                                       4. Further develop the multi-purpose                                                            --Aquaculture equipment installed.
                                                        pavilion at the university farm.                                                               --Multi-purpose pavilion completed.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    \1\ CSREES funding of the approved five-year plan is contingent upon the appropriation of funds for the 1890 Facilities Program.
    \2\ Fiscal year 1998 funds have not been allocated to the Universities to date. Waiting review of rules and guidelines by Office of General Counsel.
    \3\ In many cases, 1890 Institutions are required by State law to have all funding in-hand before construction may begin; for that reason, construction accomplishments do not correspond to
      funds provided through fiscal year 1998; i.e., Institutions must ``accumulate'' funds before starting projects.

        Question. How are 1890 Facilities Program funds allocated?
        Answer. The distribution is as follows for the 1890 Facilities
    Program: 4 percent for Federal administration; of the remainder 60
    percent will be distributed equally and 40 percent will be distributed
    based on the Section 1444 formula of the 1977 Farm Bill, as amended.
    Sec. 1447 states the following:
        A sum equal to 4 percent of the total amount appropriated each
    fiscal year under this section shall be allotted to the Cooperative
    State Research, Education, and Extension Service of the Department of
    Agriculture for administrative, technical, and other services, and for
    coordinating the extension work of the Department of Agriculture and
    the several States.
        Of the remainder, 20 percent shall be allotted among the eligible
    institutions in equal proportions; 40 per centum shall be allotted
    among the eligible institutions in the proportion that the rural
    population of the State in which each eligible institution is located
    bears to the total rural population of all the States in which eligible
    institutions are located, as determined by the last preceding decennial
    census; and the balance shall be allotted among the eligible
    institutions in the proportion that the farm population of the State in
    which each eligible institution is located bears to the total farm
    population of all the States in which the eligible institutions are
    located, as determined by the last preceding decennial census.
                           higher education programs
        Question. Please provide the Committee with a report on each of the
    CSREES higher education programs, indicating the institution receiving
    grants under each program and an assessment of how each program is
    meeting its objectives.
        Answer. The information follows.
    Higher Education Challenge Grants Program
        Institutions funded in fiscal year 1997:

    University of Arizona
    University of California--Davis (2) \1\
    ---------------------------------------------------------------------------
        \1\ Number indicates grants awarded.
    ---------------------------------------------------------------------------
    University of Connecticut
    University of Georgia
    University of Hawaii at Manoa (2)
    University of Idaho (2)
    Purdue University, Indiana (2)
    Iowa State University (2)
    Kansas State University (3)
    University of Kentucky
    Louisiana State University
    University of Missouri--Columbia (3)
    University of Nebraska
    Rutgers--The State University of New Jersey
    New Mexico State University
    Cornell University, New York (2)
    North Carolina State University
    Ohio State University (2)
    Cameron University, Oklahoma
    Oklahoma State University
    Oregon State University
    Pennsylvania State University
    Southwest Texas State University
    Texas Tech University
    University of Vermont
    Virginia Polytechnic Institute & State University (3)
    Washington State University (3)
    University of Wisconsin--River Falls (2)

        The Challenge Grants Program's objective 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 the entire
    four-year academic community, making it the centerpiece of all USDA
    teaching grants programs. However, in spite of exciting projects that
    demonstrate its worth, only approximately 45 projects can be funded
    each year at the current level of funding. During the eight years of
    the program only 23.8 percent of proposals could be funded, in spite of
    many more worthy and needed projects.
    Hispanic-Serving Institutions Education Grants Program
        Institutions funded in fiscal year 1997:

    Central Arizona College
    California State University, Los Angeles
    California State University, Bakersfield
    Porterville College, California
    Rancho Santiago College, California
    Trinidad State Junior College, Colorado
    Miami-Dade Community College, Florida
    Albuquerque Technical Vocational Institute, New Mexico
    University of New Mexico
    Eugenio Maria De Hostos Community College, New York
    Interamerican University of Puerto Rico
    Southwest Texas Junior College
    Texas A&M University--Kingsville

        The Hispanic-Serving Institutions Education Grants Program was
    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.
    1890 Institution Capacity Building Grants Program
        Institutions funded for teaching projects in fiscal year 1997:

    Alabama A&M University (2)
    University of Arkansas-Pine Bluff (3)
    Florida A&M University (4)
    Southern University, Louisiana
    University of Maryland-Eastern Shore (2)
    Alcorn State University, Mississippi (2)
    Lincoln University, Missouri
    North Carolina A&T State University (2)
    South Carolina State University (2)
    Prairie View A&M University, Texas
    Virginia State University (3)

        Institutions funded for research projects in fiscal year 1997:

    Alabama A&M University (2)
    Tuskegee University, Alabama (2)
    Delaware State University
    Fort Valley State University, Georgia (3)
    Kentucky State University
    Lincoln University, Missouri
    North Carolina A&T State University
    Langston University, Oklahoma (3)
    Prairie View A&M University, Texas (2)

        4The 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 the proposal
    and carrying out the project.
    Multicultural Scholars Program
        Grants are awarded every two years. Thus, institutions funded in
    fiscal year 1997, with both 1996 and 1997 funds, are:

    Alabama A&M University
    University of Arkansas, Fayetteville
    California Polytechnic State University--San Luis Obispo
    California State University, Fresno
    University of Florida
    University of Hawaii at Manoa
    University of Idaho
    University of Illinois, Urbana
    Purdue University, Indiana
    Michigan State University
    Rutgers University, New Jersey
    New Mexico State University
    Cornell University, New York
    University of North Dakota
    North Dakota State University
    Oklahoma State University
    Pennsylvania State University
    Seton Hill College, Pennsylvania
    South Dakota State University
    Tennessee State University
    University of Vermont
    Virginia Polytechnic Institute & State University
    University of Wisconsin-River Falls
    University of Wisconsin-Stout

        The Multicultural Scholars Program ultimately aims to increase the
    utilization 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 under-represented in the food and agricultural sciences for
    careers in agriscience and agribusiness. The program accomplishes these
    goals by providing grants to universities for undergraduate
    scholarships for outstanding students from such underrepresented
    groups. The program is open to all colleges and universities. Since the
    program began in 1994, participating colleges and universities have
    provided 206 scholarships.
    USDA National Needs Graduate Fellowships Program
        Grants are awarded every two years. Thus, institutions funded in
    fiscal year 1998, with both 1997 and 1998 funds, are:

    University of Arkansas, Fayetteville
    University of Arizona
    University of California, Davis
    University of Florida
    University of Georgia
    Indiana University
    Iowa State University (4)
    University of Illinois, Urbana (3)
    Purdue University (5)
    Kansas State University
    University of Kentucky
    Worcester Polytechnic Institute, Massachusetts
    Michigan State University (3)
    University of Minnesota, St. Paul (6)
    University of Missouri--Columbia (3)
    North Carolina State University (3)
    North Dakota State University
    University of Nebraska--Lincoln (2)
    Cornell University, New York (5)
    Ohio State University
    Pennsylvania State University (2)
    Texas A&M University
    Virginia Polytechnic Institute & State University (3)
    University of Wisconsin, Madison (3)

        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.
    Approximately 1,028 Fellows have been trained within these areas of
    expertise under the Fellowships Program.
        The program also provides competitive, special international study
    or thesis/dissertation research travel allowances for a limited number
    of current USDA Graduate Fellows. In 1997, seven Fellows from the
    following institutions were awarded funds for such international study:
    Indiana University; Iowa State University; Michigan State University;
    Purdue University; Cornell University; Oregon State University; and,
    Pennsylvania State University.
    Tribal Colleges Endowment Fund and Tribal Colleges Education Equity
            Grants Program
        All 29 tribally controlled Land-Grant Institutions were funded in
    the Tribal Colleges Endowment Fund and the Tribal Colleges Education
    Equity Grants Program in fiscal year 1997. They are:

    Bay Mills Community College, Michigan
    Blackfeet Community College, Montana
    Cankdeska Cikana Community College, North Dakota
    Cheyenne River Community College, South Dakota
    College of the Menominee Nation, Wisconsin
    Crownpoint Institute of Technology, New Mexico
    D-Q University, California
    Dine Community College, Arizona
    Dull Knife Memorial College, Montana
    Fond du Lac Tribal and Community College, Minnesota
    Fort Belknap College, Montana
    Fort Berthold Community College, North Dakota
    Fort Peck Community College, Montana
    Haskell Indian Nations University, Kansas
    Institute of American Indian Arts, New Mexico
    Lac Courte Oreilles Ojibwa Community College, Wisconsin
    Leech Lake Tribal College, Minnesota
    Little Big Horn College, Montana
    Nebraska Indian Community College, Nebraska
    Northwest Indian College, Washington
    Oglala Lakota College, South Dakota
    Salish Kootenai College, Montana
    Sinte Gleska University, South Dakota
    Sisseton Wahpeton Community College, South Dakota
    Southwest Indian Polytechnic Institute, New Mexico
    Standing Rock College, North Dakota
    Stone Child Community College, Montana
    Turtle Mountain Community College, North Dakota
    United Tribes Technical College, North Dakota

        The Tribal College Endowment Fund distributes interest earned by an
    endowment established for the 1994 Land-Grant Institutions (29 Tribally
    controlled colleges) as authorized in the Equity in Education Land-
    Grant Status Act of 1994. The Endowment Fund enhances education in
    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. Interest earned in fiscal year 1997 was
    $451,397. After a 4 percent set-aside for administration, the remaining
    funds are distributed by formula: 40 percent in equal shares and 60
    percent based on student count.
        The Tribal Colleges Education Equity Grants Program is designed to
    strengthen higher education instruction in the food and agricultural
    sciences at 1994 Land-Grant Institutions. Projects focus on
    undergraduate and/or graduate studies in the food and agricultural
    sciences in the same areas as the Endowment Fund. Each institution
    receives $50,000.
                             small farm initiative
        Question. Describe in more detail the Small Farms Initiative
    proposed to be funded at a level of $4 million for fiscal year 1999.
        Answer. The Initiative will support multi-functional, mutually
    reinforcing research and extension activities that address high
    priority needs of small farmers as identified by the National Small
    Farm Commission, USDA's National Plan for Small Farms, and participants
    in the 1996 National Small Farm Conference. These high priority needs
    include:
      --Research that focuses on solutions to production, environmental
            protection, and processing problems that demand low capital
            inputs, but build on small farmers' management, labor, and
            entrepreneurial skills;
      --Research and extension programs that help small farmers build
            alternative markets for their products and develop value added
            products;
      --Education and extension programs that small farmers can use to
            enhance their entrepreneurial skills and business acumen;
      --Extension programs that focus on developing farmer networks to
            enhance the flow of information and knowledge both to and from
            USDA and the Land Grant system and among farmers; and
      --Educational and extension programs directed at the specific needs
            of new or beginning farmers.
        CSREES will apply the lessons learned in previous research,
    education and extension programs to build a grass-roots-driven,
    participatory program that involves farmers, non-governmental
    organizations, USDA, other federal and state agencies, and all of the
    Land Grant partners in program development and delivery. These programs
    will:
      --Involve farmers in every aspect of program development, delivery
            and evaluation, including serving on review teams, conducting
            on-farm research, and taking leadership of farmer networks;
      --Include non-governmental organizations that represent or work
            closely with small farmers in program development to build a
            sustainable public-private sector partnership;
      --Bring women farmers, minority farmers, farm youth, socially
            disadvantaged farmers, and physically challenged farmers into
            the mainstream of program activities; and
      --Build on the research, education and extension strengths of the
            1994, 1890 and 1962 Land Grant partners to ensure the program
            meets local needs.
        The structure of the CSREES program will be frugal with taxpayers'
    money while ensuring representation from a broad sector of the
    government and non-government community and targeting local needs.
    CSREES will develop a structure for program delivery that:
      --Keeps operating costs down by using existing structures where
            possible and relying to the maximum degree possible on new
            cost-saving technologies to administer the program;
      --Encourages regional flexibility in organization and program content
            to meet local needs;
      --Uses one or more virtual centers or consortia, including both Land
            Grant and non-governmental organizations, to administer program
            activities; and
      --Relies heavily on competitive grants with 100 percent nonfederal
            match encouraged for commodity-or location-specific activities.
        Question. Why is this new initiative needed?
        Answer. Small farms are an important part of the total agricultural
    sector. About 1.4 million of the nation's 1.9 million farms are small
    farms. Small farmers hold about one-third of the nation's farm land.
        Small farms complement and contribute to the productivity of mid-
    and large-sized farms and agribusinesses. For example, a medium-sized
    feedlot averages 10,000 head of cattle. The feedlot operator depends on
    thousands of cow/calf operations, each with an average of 49 head of
    cattle, to provide the feeder calves for his feedlot.
        Small farms often lead the way in new product development. For
    example, the fastest growing sectors of the agricultural market in the
    United States today are the organic and natural food markets. Small
    farms led the way in both areas and contribute most of the production.
        Small farms enhance the quality of life for millions more Americans
    and protect natural resources for the entire nation. Small farms play a
    dynamic and important role in maintaining and stabilizing rural
    communities. Small farmers are often major clients of the entire
    business community in rural areas. Their tax dollars are critical to
    the entire community.
        Small farms also enhance the quality of life for urban communities.
    Small farms are often the only productive land use that can serve as a
    buffer between high density population centers and rural areas. They
    contribute significantly to the quality of the urban diet by providing
    fresh, high-quality, diverse produce through direct markets to urban
    residents.
        Small farms protect resources that serve all Americans. They
    provide open space for wildlife habitat, water recharge and the human
    need for contact with nature.
        Small farms have special and varied needs and new research,
    education and extension programs are required to address these needs.
    Small farms are not failed large farms. Small farmers are resourceful
    entrepreneurs who produce valuable agricultural products using more
    limited fiscal, human and land resources than their larger scale
    neighbors. Because they have fewer resources available to them, they
    have special research, education and extension needs.
        Small farms differ widely from state to state and even within the
    same state. Small farmers include many different cultural and social
    groups. For example, language can be a barrier for some and these
    groups need information available to them in their own languages. Some
    small farmers have limited educational backgrounds. They also have
    special information needs. Education and extension programs must
    address these multiple groups of clients.
        Small farms produce an enormous range of products and many of them
    are products for which the existing research base is not well
    developed. Organic production provides one example. Relatively little
    research-based information is available for organic producers.
        This Initiative will help address the issues raised by the National
    Small Farm Commission and the USDA Civil Rights Action Team. All of the
    priority needs that this Initiative will address are prominent in the
    Report of the National Small Farm Commission. Many of the programs and
    activities that this Initiative will fund will address the USDA Civil
    Rights Action Team's ``Recommendations for Strengthening USDA's
    Research and Educational Assistance to the Socially Disadvantaged.''
        This Initiative contributes significantly to achieving USDA's
    overall goals and objectives. It specifically addresses four of the
    CSREES goals outlined under the REE mission area.
        Goal 1, to achieve an agricultural production system that is highly
    competitive in the global economy;
        Goal 2, to provide a safe, secure food and fiber system;
        Goal 4, to achieve greater harmony between agriculture and the
    environment; and
        Goal 5, to enhance economic opportunities and quality of life for
    families and communities
        Question. What legislative authority is required for this new
    initiative?
        Answer. The Administration has proposed that a new authority for an
    Integrated Research, Extension, and Education Competitive Grants
    Program be included in the re-authorization of the research title of
    the 1996 Farm Bill.
                               forestry research
        Question. Why is a reduction in the McIntire-Stennis research
    program being proposed for fiscal year 1999? What will be the impacts
    of this proposed funding reduction?
        Answer. This change will reduce the amount of funding available for
    formula distribution. McIntire-Stennis funding provides the base for
    development of faculty and graduate students to respond to current
    issues through State, private, and other sources of funding at eligible
    State institutions. States have maximum flexibility to fund specific
    programs through formula funds, thus the proposed decrease would have
    the least impact in those areas States identify as high priority.
        Question. What specific research is being carried out under the
    McIntire-Stennis research program?
        Answer. Research under McIntire-Stennis includes investigations
    relating to:(1) Reforestation and management of land for the production
    of crops, timber, and other related commodities; (2) management of
    forested watershed lands to improve conditions of water flow and to
    protect resources against floods and erosion; (3) management of forest
    and rangeland for production of forage for domestic livestock and game
    and improvement of food and habitat for wildlife; (4) management of
    forest lands for outdoor recreation; (5) protection of forest land
    against fire, insects, diseases, or other destructive agents; (6)
    utilization of wood and other forest products; (7) development of sound
    policies for the management of lands and the harvesting and marketing
    of forest products; and (8) such other studies as may be necessary to
    obtain the fullest and most effective use of forest resources.
        Question. Other than through the McIntire-Stennis program, what
    forestry research is being supported by the ARS and CSREES? Please
    provide a description of each project funded, the level of funding for
    each project and who is conducting the research.
        Answer. ARS scientists conduct considerable research related to
    forestry problems and interests. Some ARS laboratories and Forest
    Service Research Laboratories are co-located to facilitate cooperative
    research. Additional cooperation is with scientists at Lant Grant
    Universities and other research institutions. Brief descriptions of ARS
    research projects most applicable to forestry issues, including the
    level of funding for forestry related research in the fiscal year 1998
    budget, and the ARS Facility doing the research, are as follows:
      --Systematics of Flies of Importance in Biological Control,
            Agricultural Crops, and Forests--Systematics Entomology
            Laboratory, Beltsville, MD. This project is directed toward
            developing identification tools and a classification system for
            flies of agricultural importance. About $72,000 of the total
            project funding of $602,600 directly supports forestry related
            research.
      --Discovery of Pest Behavior-Modifying Chemicals with Enhanced
            Biological Potency--Insect Chemical Biology Laboratory,
            Beltsville, MD. The objectives of this project are to discover
            and develop new and efficacious behavior-modifying compounds
            that will assist in the control of a wide range of insect
            pests. About $34,000 of the total project funding of $339,400
            directly supports research on forest insect pests.
      --Development of Sustainable Urban Agro-Systems and Biocontrol
            Strategies for Gypsy Moth--Insect Biocontrol Laboratory,
            Beltsville, MD. The principal objective of this project is to
            develop integrated insect pest management programs for urban-
            forest areas, such as home sites and parks. While not directly
            focused on forest ecosystems, much of the total project funding
            of $548,000 supports research that could prove beneficial to
            insect control in forests.
      --Development of Biological Control Technology for Exotic Insect
            Pests with Emphasis on the Asian Longhorn Beetle--Beneficial
            Insects Introduction Research, Newark, DE. This project is
            directed toward promoting cooperation with other state and
            federal scientists in identifying, importing, releasing, and
            evaluating biological control agents for major exotic insect
            pests, such as the Asian Longhorn beetle. About $240,000 of the
            total funding of $400,000 for this project, which was initiated
            in fiscal year 1998, supports forestry related research.
      --Biological Control of Gypsy Moth & Quarantine Services for
            Introduced Beneficial Insects--Beneficial Insects Introduction
            Research, Newark, DE. This project is directed toward: the
            exploration for natural enemies of gypsy moth in Asia; the
            importation, quarantine handling, and rearing of promising
            species; assessment of the danger these introduced insects pose
            to non-target organisms; and evaluation of the effectiveness of
            released species on the target pest. About $280,000 of the
            total project funding of $403,700 supports research on forest
            insect control.
      --Agroforestry Systems for the Small Farmer--Dale Bumpers Small Farms
            Research Center, Booneville, AR. The major goals of this
            project are to provide a scientific basis for managing small
            farm ecosystems and to develop technologies that enhance their
            sustainability and productivity. Agroforestry systems, that
            combine livestock, tree, forage, and crop production, provide
            opportunities for small farms to enhance their economic
            competitiveness and visibility. About $375,000 of the total
            project funding of $1,259,500 directly supports forestry
            related research.
      --Agroforestry Systems for the Appalachian Region--Appalachian Soil
            and Water Conservation Laboratory, Beckley, WV. The major
            objective of this project is to evaluate the simultaneous
            production of trees and understory species to optimize the
            economic and environmental integrity of Appalachian farms.
            Specifically, the research will target the development of tree/
            forage/specialty crop systems that can fill high value niche
            markets and provide raw materials for associated value added
            enterprises. The competitive and synergistic mechanisms by
            which agroforestry systems partition sunlight, water and
            nutrients will be determined for use in developing improved
            land management strategies. About $70,000 of the total funding
            for the project of $688,400 directly supports forestry related
            research.
      --The Development of Pest-Resistant Landscape Trees to Enhance the
            Environment and Reduce the Use of Pesticides--Arboretum,
            Washington, D.C. The objectives of this project are: to breed
            and select pest resistant individuals and progenies of
            important landscape trees with an emphasis on fungal, bacterial
            and insect pests, and tolerance to environmental stresses; to
            assess the range of variability in resistance among host
            plants; and to propagate, evaluate, and release improved
            cultivars. None of the total funding for the project of
            $743,300 supports research that is focused on forest
            ecosystems, but should benefit forest management.
      --Genetics and Germplasm Evaluation of Landscape Woody Plants--
            Arboretum, Washington, DC. The objectives of this project are
            to select, evaluate and develop new cultivars of important
            nursery crops with pest and disease resistance, improved
            flowering and fruiting characteristics, better climatic
            adaptability, and greater tolerance to environmental stresses.
            None of the total funding for the project of $745,300 directly
            supports research on forest ecosystems, but should benefit
            forest management.
        Other forestry research funded by CSREES includes an array of
    forestry research in the same general areas as McIntire-Stennis--the
    range of physical sciences, biology, and the social sciences, in forest
    ecosystems, forest management and forest products. These areas of
    research are being conducted under the Special Grants, the National
    Research Initiative, Hatch, Small Business Innovation Research, and
    Evans-Allen programs, and multi-disciplinary projects through the Fund
    for Rural America.
        The information on CSREES forestry research follows.

      COOPERATIVE STATE RESEARCH, EDUCATION, AND EXTENSION SERVICE FORESTRY RESEARCH (EXCLUDING McINTIRE-STENNIS)--
                                                    FISCAL YEAR 1996
    ----------------------------------------------------------------------------------------------------------------
                                 Station                                   Hatch          Grants           Other
    ----------------------------------------------------------------------------------------------------------------
    Alabama.........................................................        $167,543         $26,156  ..............
    Alaska..........................................................           9,378  ..............  ..............
    Arkansas........................................................          36,095         126,459  ..............
    Arizona.........................................................          15,987          18,468  ..............
    California......................................................         157,187         240,034  ..............
    Colorado........................................................         102,729          28,000  ..............
    Connecticut.....................................................          73,190          87,174  ..............
    Delaware........................................................  ..............  ..............          $7,593
    Florida.........................................................          44,004  ..............  ..............
    Georgia.........................................................           9,042          28,414  ..............
    Hawaii..........................................................          31,475           3,011  ..............
    Illinois........................................................         245,115          19,195  ..............
    Indiana.........................................................          79,168  ..............  ..............
    Iowa............................................................          19,376  ..............  ..............
    Kansas..........................................................          16,978  ..............  ..............
    Kentucky........................................................           7,157  ..............          81,469
    Louisiana.......................................................           4,000  ..............         154,228
    Massachusetts...................................................          22,127         355,996  ..............
    Maryland........................................................  ..............          76,363  ..............
    Maine...........................................................          54,402         448,556  ..............
    Michigan........................................................         103,620         613,353  ..............
    Minnesota.......................................................         200,513  ..............           3,263
    Mississippi.....................................................          72,308         713,392  ..............
    Missouri........................................................          85,089          34,903           3,570
    Montana.........................................................  ..............  ..............  ..............
    North Carolina..................................................          11,864  ..............  ..............
    Nebraska........................................................          46,451  ..............  ..............
    Nevada..........................................................          77,548           9,218  ..............
    New Hampshire...................................................          25,041  ..............  ..............
    New Jersey......................................................          27,025          13,907  ..............
    New Mexico......................................................          19,469  ..............  ..............
    New York........................................................          22,619         330,257  ..............
    Ohio............................................................          19,054  ..............  ..............
    Oregon..........................................................          84,609       1,335,001  ..............
    Pennsylvania....................................................          49,639          20,019  ..............
    South Carolina..................................................           5,394  ..............         106,922
    Tennessee.......................................................          12,612  ..............  ..............
    Texas...........................................................          47,372          25,976  ..............
    Utah............................................................          14,343             447  ..............
    Virginia........................................................          53,856          90,646  ..............
    Wisconsin.......................................................          95,839          89,373  ..............
    Washington......................................................          62,568         796,337  ..............
    West Virginia...................................................         229,202  ..............  ..............
    Wyoming.........................................................  ..............          30,987  ..............
                                                                     -----------------------------------------------
          Total.....................................................       2,460,988       5,561,640         357,045
    ----------------------------------------------------------------------------------------------------------------

    ------------------------------------------------------------------------
                  State                   Hatch        Grants       Other
    ------------------------------------------------------------------------
    Alabama:
        Machinery systems for              $60,140  ...........  ...........
         improved forest management..
        Simulation and automation to        17,582  ...........  ...........
         improve quality,
         productivity and performance
         in agriculture..............
        Effects of ecosystems on soil        6,629  ...........  ...........
         acidity and aluminum
         toxicity....................
        Microbial interactions in            1,124  ...........  ...........
         agricultural and forestry
         ecosystems..................
        Transgenic manipulation of             595  ...........  ...........
         higher fungi
         (homobasidiomycetes)........
        Pit membrane structure and           2,750  ...........  ...........
         development in hardwoods....
        Effect of environmental        ...........      $26,156  ...........
         conditions on load duration
         behavior of structural
         composite lumber............
        The National Atmospheric       ...........  ...........  ...........
         Deposition Program..........
        Urban tree evaluation and           75,714  ...........  ...........
         environmental factors
         affecting urban landscape
         plant use...................
        Growth regulation of                 2,849  ...........  ...........
         herbaceous and woody
         ornamental plants...........
        Nutrition, growth and antler           159  ...........  ...........
         development of Alabama white-
         tailed deer.................
        Biological reconnaissance of   ...........  ...........  ...........
         the Grady Pond depression
         wetlands of the Central Gulf
         Coastal Plain...............
        Evaluation of benthic          ...........  ...........  ...........
         invertebrates, water quality
         and watershed conditions in
         Southeastern streams........
                                      --------------------------------------
            Total....................      167,543       26,156  ...........
                                      ======================================
    Alaska: Classification and               9,378  ...........  ...........
     interpretation of permafrost
     soils in Alaska.................
                                      ======================================
    Arkansas:
        Regional advantages in                2368  ...........  ...........
         producing and marketing
         woody ornamentals...........
        National Atmospheric                12,601  ...........  ...........
         Deposition Program..........
        Integrated forest management   ...........      126,459  ...........
         strategies..................
        Ecology and impact of gypsy         21,126  ...........  ...........
         moth invasion...............
        Arkansas Forest Resources      ...........  ...........  ...........
         Center: A continuing
         research program............
        Arkansas Forest Resources      ...........  ...........  ...........
         Center......................
                                      --------------------------------------
          Total......................       36,095      126,459  ...........
                                      ======================================
    Arizona:
        Criteria for defining site           1,103  ...........  ...........
         conservation thresholds for
         Arizona rangelands..........
        Forage utilization patterns            593  ...........  ...........
         and plant response under
         short duration grazing......
        Nutritional content of forage          451  ...........  ...........
         used by Sonoran pronghorn in
         Arizona.....................
        Evaluating forest policies to          778  ...........  ...........
         determine their adequacy for
         ecosystem management........
        Advanced resource technology         9,945  ...........  ...........
         for natural resource
         management and environmental
         assessment..................
        Social, economic and                   415  ...........  ...........
         institutional influences on
         rangeland management........
        Hydrology of Southwestern            1,488  ...........  ...........
         wetlands and riparian areas.
        Can cattle use artificial and          416  ...........  ...........
         social visual cues to track
         forage locations............
        Alien grass invasion and               798  ...........  ...........
         ecosystem feedback in
         southern Arizona............
        Seed and seedling fate of      ...........        1,853  ...........
         warm-season grasses in
         relation to seedbed water
         availability................
        Shifts in lower treeline:      ...........       16,615  ...........
         Identifying causal factors..
        Water source controls tree     ...........  ...........  ...........
         ecophysiological processes
         in riparian ecosystems......
                                      --------------------------------------
            Total....................       15,987       18,468  ...........
                                      ======================================
    California:
        Pesticides and other toxic           5,901  ...........  ...........
         organics in soil and their
         potential for ground and
         surface water contamination.
        Reactions of chemical species        5,765  ...........  ...........
         in soils....................
        Organic compounds in forest         21,858  ...........  ...........
         soil, and effects on
         microbial processes and
         nutrient availability.......
        Environmental transformation,        1,507  ...........  ...........
         exposure, and effects of
         pesticide resi-  dues.......
        Climate and land use controls       14,951  ...........  ...........
         on the soil carbon cycle of
         California..................
        The role of biological              15,852  ...........  ...........
         control in urban pest
         management systems..........
        Nest-box barriers for               16,367  ...........  ...........
         population and roosting
         protection..................
        Interactions among bark                424  ...........  ...........
         beetles, pathogens, and
         conifers in North American
         forests.....................
        Interactions among bark             13,225  ...........  ...........
         beetles, pathogens and
         conifers in North American
         forests.....................
        Ecological investigations of        18,399  ...........  ...........
         mycorrhizal fungi in
         California forest ecosystems
        Fungal evolution: Pathogen             116  ...........  ...........
         population genetics and
         identification..............
        Interactions among bark              2,828  ...........  ...........
         beetles, pathogens, and
         conifers in North American
         forests.....................
        Poverty in rural forest        ...........        2,604  ...........
         communities: An historical
         and biographical assessment.
        Engineering factors in forest-      11,581  ...........  ...........
         resource production,
         utilization and management..
        Analysis of energy usage and         3,640  ...........  ...........
         development of energy
         conservation technology.....
        Improve food safety through            898  ...........  ...........
         discovery and control of
         natural and induced
         toxicants and antitoxicants.
        Requirements for natural             4,186  ...........  ...........
         regeneration of red fir in
         disturbed and undisturbed
         sites.......................
        Herbivore-host interactions    ...........  ...........  ...........
         and interactions between
         herbivores mediated through
         their hosts.................
        Prediction of coast redwood          1,560  ...........  ...........
         and giant sequoia growth
         rates as a function of
         climate.....................
        Interactions among bark              4,682  ...........  ...........
         beetles, pathogens, and
         conifers in North American
         forests.....................
        Interactions among bark        ...........  ...........  ...........
         beetles, pathogens, and
         conifers in North American
         forests.....................
        Chemical ecology and IPM               809  ...........  ...........
         programs for pest insects...
        Interactions among bark              8,548  ...........  ...........
         beetles, pathogens, and
         conifers in North American
         forests.....................
        Fire and dynamics of conifer         4,089  ...........  ...........
         forest ecosystems in
         southern California and
         northern Baja California....
        The edaphic role of weathered  ...........       43,271  ...........
         rock in a seasonally-dry
         coniferous forest ecosystem.
        Climate change and genetic     ...........      179,161  ...........
         diversity in Mexico's
         threatened spruce ecosystems
        Influence of substrate         ...........       14,998  ...........
         heterogeneity on ecosystem
         productivity and resource
         use.........................
                                      --------------------------------------
            Total....................      157,187      240,034  ...........
                                      ======================================
    Colorado:
        Cattle preference as a tool    ...........  ...........  ...........
         to modify riparian
         vegetation..................
        Benefits and costs transfer         28,806  ...........  ...........
         in natural resource planning
        Grazing management for                 153  ...........  ...........
         efficient water use and
         conservation in mountainous
         riparian ecosystems.........
        Management of rangeland             73,618  ...........  ...........
         vegetation and animals for
         system sustainability.......
        Economic analysis of                   152  ...........  ...........
         rangeland use...............
        Identifying the mechanism for  ...........       28,000  ...........
         reduced photosynthetic
         performance in old trees....
                                      --------------------------------------
            Total....................      102,729       28,000  ...........
                                      ======================================
    Connecticut:
        Using supplemental food to     ...........       51,874  ...........
         increase effectiveness of
         ants as gypsy moth predators
        Transgenic strains of the      ...........       35,300  ...........
         chestnut blight fungus for
         biocontrol in the forest....
        Ecology and impact of gypsy          2,304  ...........  ...........
         moth invasion...............
        Government policies for                765  ...........  ...........
         regulating the use of water
         and land resources..........
        Acquiring an ethic of               39,812  ...........  ...........
         stewardship among
         Connecticut woodland owners.
        The role of cytokinin                  936  ...........  ...........
         metabolism and absorption in
         controlling in vitro plant
         development.................
        Forest landscape ecosystem          13,484  ...........  ...........
         assessment through satellite
         remote sensing and neural
         processing..................
        Determination of UVB solar             312  ...........  ...........
         radiation above forest
         canopies from meteorological
         measurement.................
        Drift of pesticides from            15,577  ...........  ...........
         orchard spray operations:
         Model development and
         validation..................
                                      --------------------------------------
            Total....................       73,190       87,174  ...........
                                      ======================================
    Delaware: Some effects of          ...........  ...........       $7,593
     agricultural drainage on natural
     systems.........................
                                      ======================================
    Florida:
        The National Atmospheric             8,358  ...........  ...........
         Deposition Program..........
        Biology and pest management          3,282  ...........  ...........
         of arthropod pests of
         ornamental alents of
         southern Florida............
        Comparison of two management   ...........  ...........  ...........
         programs on the growth &
         incidence of decline
         (blight) of citrus trees....
        Comparison of two management        32,364  ...........  ...........
         programs on the growth and
         incidence of decline
         (blight) of citrus..........
                                      --------------------------------------
            Total....................       44,004  ...........  ...........
                                      ======================================
    Georgia:
        Benefits and costs in natural        2,420  ...........  ...........
         resource planning...........
        Semiochemical management of          1,562  ...........  ...........
         southern pine bark beetles..
        Pathology and management of            279  ...........  ...........
         diseases of forest and shade
         trees and woody ornamentals.
        Examination of the components        4,782  ...........  ...........
         of cold hardiness in woody
         landscape plants............
        Relationship of plant root     ...........       28,414  ...........
         traits to resource
         competition and stress
         tolerance...................
                                      --------------------------------------
            Total....................        9,042       28,414  ...........
                                      ======================================
    Hawaii:
        Evaluating alternative crops           216  ...........  ...........
         in Hawaii using crop growth
         models......................
        The influence of sediment      ...........        3,011  ...........
         removal and deposition on
         soil and water quality in
         Hawaii......................
        Antiquality factors affecting  ...........  ...........  ...........
         the utilization of leucaena
         as a livestock  feed........
        Molecular analysis of               13,903  ...........  ...........
         rhizobium-tree legume
         symbiosis...................
        Biological control of exotic        15,557  ...........  ...........
         weeds of Hawaiian range and
         forest lands................
        Diseases of Niu, Olona, Noni,  ...........  ...........  ...........
         Milo and Kou................
        Propagation of native                   43  ...........  ...........
         Hawaiian plants for the
         ornamentals industry........
        Weed control in vegetable and        1,545  ...........  ...........
         ornamental crops growing in
         the tropics.................
        Altitudinal variations in              210  ...........  ...........
         arthropods associated with
         decomposing remains in
         Hawaii......................
                                      --------------------------------------
            Total....................       31,475        3,011  ...........
                                      ======================================
    Illinois:
        Utilization of soybean meal/           104  ...........  ...........
         soy molasses in polymers:
         Plywood adhesives and
         polyurethane foams..........
        Biomass and nitrogen cycling        12,532  ...........  ...........
         in sewage sludge amended
         fields......................
        Inventory and analysis of the      14,4863  ...........  ...........
         mesophytic forest and its
         western extensions..........
        Genetic manipulation of              4,190  ...........  ...........
         perennial plants............
        Forest community dynamics of        36,753  ...........  ...........
         east-central Illinois
         forests.....................
        Rate of biodegradation of           23,693  ...........  ...........
         treated hardwood............
        Agriculture and urbanization:        3,582  ...........  ...........
         Toward satisfying competing
         demands.....................
        Adaptations of black oak to         17,265  ...........  ...........
         fire........................
        Biological control of                2,134  ...........  ...........
         verticillum wilt in woody
         nursery crops...............
        Organic perspectives of C N S  ...........       19,195  ...........
         and P biogeochemistry in a
         low elevation spruce-fir
         ecosystem...................
                                      --------------------------------------
            Total....................      245,115       19,195  ...........
                                      ======================================
    Indiana:
        Separations of bioproducts...        1,842  ...........  ...........
        Quality control in wood             22,770  ...........  ...........
         product manufacturing.......
        Soil spatial information             3,366  ...........  ...........
         systems for global modeling
         and ecosystem management....
        Influence of surface and             1,172  ...........  ...........
         canopy morphology on radiant
         energy transport............
        Managing insect and mite             1,638  ...........  ...........
         pests of ornamental plants..
        Productivity relationships in       19,432  ...........  ...........
         benthic communities.........
        Genetics of reintroduced             7,532  ...........  ...........
         wildlife species in North
         America.....................
        Climate and structural         ...........  ...........  ...........
         control of canopy processes
         in mixed-hardwood forests...
        Population processes of             21,060  ...........  ...........
         forest mammals in fragmented
         landscapes..................
        Utilization of biomass.......          356  ...........  ...........
                                      --------------------------------------
          Total......................       79,168  ...........  ...........
                                      ======================================
    Iowa:
        Production of wood adhesives             2  ...........  ...........
         from soy and corn proteins..
        Interactions among bark             10,391  ...........  ...........
         beetles, pathogens, and
         conifers in North American
         forests.....................
        Induction and optimization of        8,790  ...........  ...........
         biological nitrogen fixation
         in temperate woody legumes..
        Development of coconut coir            193  ...........  ...........
         products as horticultural
         substrates..................
                                      --------------------------------------
          Total......................       19,376  ...........  ...........
                                      ======================================
    Kansas:
        Improved systems of                  6,209  ...........  ...........
         management for pecan insect
         and mite pests..............
        Range improvement                    3,616  ...........  ...........
         investigations..............
        Climate and agricultural             1,073  ...........  ...........
         landscape productivity
         analysis and assessment in
         the North Central region....
        Pecan experiment field.......        5,040  ...........  ...........
        Rootstock and interstem              1,040  ...........  ...........
         effects on pome and stone
         fruits......................
                                      --------------------------------------
          Total......................       16,978  ...........  ...........
                                      ======================================
    Kentucky:
        Biological improvement of            7,157  ...........  ...........
         chestnut and management of
         the chestnut blight fungus..
        Development of clonal mass     ...........  ...........       81,469
         propagation procedures for
         forest tree species.........
                                      --------------------------------------
            Total....................        7,157  ...........       81,469
                                      ======================================
    Louisiana:
        Impact, population dynamics,         4,000  ...........  ...........
         and control of insect
         defoliators in Louisiana
         forests.....................
        Effect of soil compaction and  ...........  ...........      154,228
         flooding on survival, growth
         and physiological responses.
                                      --------------------------------------
            Total....................        4,000  ...........      154,228
                                      ======================================
    Massachusetts:
        Navigation and habitat use by        7,298  ...........  ...........
         raccoons and opossums in
         suburban forests--
         implications for management.
        The National Atmospheric             8,952  ...........  ...........
         Deposition Program..........
        Allocation of scarce                 5,877  ...........  ...........
         recreation resources:
         Enhancing support and
         understanding for management
         decision....................
        The role of forest floor       ...........       39,996  ...........
         nitrogen leaching in
         ecosystem itrogen retention.
        Influence of above- and below- ...........      316,000  ...........
         ground litter on forest soil
         organic matter dynamics.....
                                      --------------------------------------
            Total....................       22,127      355,996  ...........
                                      ======================================
    Maryland: Production of nitrogen   ...........       76,363  ...........
     gases in riparian forests
     receiving cropland discharges...
                                      ======================================
    Maine:
        Northern New England Product   ...........       30,392  ...........
         Development and Marketing
         Center......................
        New England wood research....  ...........      211,470  ...........
        New England wood research....  ...........      200,511  ...........
        Modeling and analysis of            10,148  ...........  ...........
         value-added production
         systems.....................
        Benefits and costs of               21,110  ...........  ...........
         resource policies affecting
         public and private  land....
        Evolutionary biology of        ...........  ...........  ...........
         amelanchier (shadbush),
         picea (spruce), and isotria
         (small whorled poronia).....
        Policy analyses of maine's     ...........  ...........  ...........
         forestry sectorMaine........
        Effects of climate and         ...........  ...........  ...........
         substrate quality on soil
         microbial populations.......
        The National Atmospheric            23,144  ...........  ...........
         Deposition Program (NADP)...
        Wood properties and yield of   ...........        6,183  ...........
         northern conifers grown
         under short rota-  tions....
                                      --------------------------------------
            Total....................       54,402      448,556  ...........
                                      ======================================
    Michigan:
        Plant germplasm and                  4,029  ...........  ...........
         information management and
         utilization.................
        Physiology of carbon balance   ...........  ...........  ...........
         in fruit crops: Abiotic and
         biotic thresholds...........
        Biological improvement of            7,222  ...........  ...........
         chestnut and management of
         the chestnut blight fungus..
        Fates and effects of trace     ...........  ...........  ...........
         contaminants in aquatic
         systems.....................
        Microbial ecology of                 2,453  ...........  ...........
         denitrification and
         biodegradation..............
        Biological control and               1,815  ...........  ...........
         integrated management of
         insects in nurseries, turf
         and the urban forest........
        Physiological adaptation and   ...........  ...........  ...........
         cultural manipulation of
         plant systems...............
        Lignin degradation by          ...........  ...........  ...........
         basidiomycete fungi and
         applications................
        Plant chem. defenses: Insect   ...........  ...........  ...........
         detox. & ecol. factors
         affecting gene flow and host
         sel./hybrid zone............
        Wildlife responses to habitat  ...........  ...........  ...........
         management..................
        Avirulent fungal and                 4,540  ...........  ...........
         bacterial plant pathogens:
         Their role and fate in plant
         disease epidemics...........
        Predicting recreation and      ...........  ...........  ...........
         tourism choices.............
        Impacts of recreation and      ...........  ...........  ...........
         tourism.....................
        Biol. active nat. prod. &            2,806  ...........  ...........
         value added prod. from
         plants & microbes for agri.
         & pharmaceutical use........
        Application of present value         2,618  ...........  ...........
         techniques for financing
         design and selection of
         durables....................
        Degradation of lignocellulose  ...........  ...........  ...........
         by termites and their
         microbial symbionts.........
        The National Atmospheric            33,302  ...........  ...........
         Deposition Program (NADP)...
        Temporal and spatial dynamics       19,917  ...........  ...........
         of insects in diverse
         landscapes: A risk
         assessment perspective......
        Development of arthropod       ...........  ...........  ...........
         resistance management
         systems.....................
        Ecological impacts and         ...........  ...........  ...........
         management of forest insects
         in Michigan.................
        Environmental and genetic      ...........  ...........  ...........
         components of reproduction
         in bird populations.........
        Mechanisms of baculovirus      ...........  ...........  ...........
         pathogenesis in insects.....
        Diet choice and foraging in         14,171  ...........  ...........
         ants........................
        Improving public involvement   ...........  ...........  ...........
         in agricultural and natural
         resource issues.............
        The Center for the Study of         10,577  ...........  ...........
         Insect Diversity............
        Relationship between habitat   ...........  ...........  ...........
         characteristics and fish
         population dynamics.........
        Influences of natural          ...........  ...........  ...........
         resource recreation on land
         management in Michigan......
        Social science and             ...........  ...........  ...........
         communications in outdoor
         recreation resource
         management..................
        Physiological basis for                170  ...........  ...........
         integrated approach towards
         sustainable mgt. of plant-
         parasitic nematodes.........
        Advanced technology            ...........      103,416  ...........
         applications to Eastern
         hardwood utilization........
        Advanced technology            ...........      34,2271  ...........
         application to Eastern
         hardwood utilization........
        Advanced technology            ...........       44,977  ...........
         applications to Eastern
         hardwood utilization........
        Infectious mitochondrial       ...........      105,041  ...........
         hypovirulence in
         cryphonectria parasitica....
        Isolation of symbiosis         ...........       17,648  ...........
         related genes essential to
         ectomycorrhizae formation...
                                      --------------------------------------
            Total....................      103,620      613,353  ...........
                                      ======================================
    Minnesota:
        The impact of land and water         8,648  ...........  ...........
         management decisions on
         Minnesota's people and their
         environment.................
        Biology, ecology and control        76,685  ...........  ...........
         of tree diseases............
        Atmospheric deposition: Long-  ...........  ...........  ...........
         range transported and local
         source emitted air
         pollutants..................
        Diagnosis, epidemiology and            669  ...........  ...........
         control of plant diseases
         caused by badna viruses.....
        Quantification of nutrient          12,362  ...........  ...........
         cycles of Minnesota forests.
        Growth and succession in             9,741  ...........  ...........
         forested ecosystem
         simulations.................
        Wild ungulates: Relationships        6,575  ...........  ...........
         with timber, vegetation,
         sodium, urban problems, and
         restoration.................
        Forestry and forest products   ...........  ...........        3,263
         research in the United
         States: A review and
         assessment..................
        Remote sensing inputs to            37,246  ...........  ...........
         inventory and analysis of
         natural resources...........
        Methods and procedures for     ...........  ...........  ...........
         benefits-based management of
         recreation and nonrecreation
         resources...................
        Assessment and use of genetic  ...........  ...........  ...........
         diversity of Northern tree
         species.....................
        Physiology of tree growth--    ...........  ...........  ...........
         mineral nutrition and
         vegetation manage-  ment....
        Wood-based composites:              20,462  ...........  ...........
         Investigations leading to
         new and improved products
         and raw materials...........
        Assessment of raw material           3,826  ...........  ...........
         trends and life cycle
         environmental impacts of
         alternative raw materials...
        Dimensional instability of     ...........  ...........  ...........
         paper: Thermodynamic
         approach....................
        Lignin biosynthesis,                24,299  ...........  ...........
         biodegradation and
         derivative plastics.........
        Biochemistry of fungi: The     ...........  ...........  ...........
         heat shock response.........
                                      --------------------------------------
          Total......................      200,513  ...........        3,263
                                      ======================================
    Mississippi:
        Interaction among bark              72,308  ...........  ...........
         beetles pathogens and
         conifers in North American
         forests.....................
        Development and maintenance    ...........  ...........  ...........
         of microcomputer software
         for agricul-  ture..........
        Tree mortality as a result of  ...........  ...........  ...........
         insect-fungal-host
         interactions: Elucidation of
         mechanisms..................
        Wood Utilization Research      ...........      222,921  ...........
         Program.....................
        Improvement in furniture       ...........       10,140  ...........
         design and manufacturing
         technology..................
        Development of specialty wood  ...........        8,270  ...........
         composites..................
        Compaction of soils on         ...........       51,840  ...........
         forested lands and assessing
         its effect on the growth of
         loblolly pine...............
        Wood-derived chemicals.......  ...........        5,132  ...........
        Business and production        ...........        1,736  ...........
         systems.....................
        Wood Utilization Research      ...........      122,636  ...........
         Program.....................
        Load-deformation relation of   ...........        7,383  ...........
         staple joints and factors
         affecting its behavior......
        Development of new wood        ...........  ...........  ...........
         preservatives based on
         synergistic combinations....
        Wood Utilization Research      ...........      122,280  ...........
         Program.....................
        Wood Utilization Research      ...........      161,054  ...........
         Program.....................
                                      --------------------------------------
          Total......................       72,308      713,392  ...........
                                      ======================================
    Missouri:
        Drought tolerance mechanisms   ...........       32,592  ...........
         in black walnut (juglans
         nigra l.)...................
        The importance of root         ...........        2,311  ...........
         signaling in drought
         adaptation mechanisms.......
        Macropore-scale water and            2,427  ...........  ...........
         solute transport processes..
        Dynamics of Missouri fish            3,225  ...........  ...........
         populations.................
        Nutrient cycling in                  3,562  ...........  ...........
         agroecosystems..............
        Seasonal patterns in the             8,879  ...........  ...........
         trophic State of Missouri
         reservoirs..................
        Ecology and conservation of         10,510  ...........  ...........
         urban greenspace............
        The ecology and behavior of          2,592  ...........  ...........
         Missouri fishes, with
         emphases on reproduction and
         non-game species............
        Ecology and conservation of          5,181  ...........  ...........
         birds in grassland and
         wetland ecosystems in
         Missouri....................
        Deer ecology in rural and           12,804  ...........  ...........
         urban landscapes............
        Temporal and spatial                 5,214  ...........  ...........
         variability in soil
         landscapes..................
        The relationship of soil             2,161  ...........  ...........
         properties with landscape
         position in Missouri........
        Ecology, conservation, and           3,244  ...........  ...........
         restoration of mammals......
        Ecology and impact of gypsy         10,755  ...........  ...........
         moth invasion...............
        Horticultural utilization of         1,112  ...........  ...........
         organic residues............
        Ecology and epidemiology of          9,341  ...........  ...........
         plant diseases in
         agricultural and native
         ecosystems..................
        Leadership for advanced        ...........  ...........        3,570
         materials from renewable
         resources...................
        Economic and environmental           4,077  ...........  ...........
         implications of expiring
         conservation reserve
         contracts...................
        Compliance benefits of the               7  ...........  ...........
         Conservation Reserve Program
                                      --------------------------------------
          Total......................       85,089       34,903        3,570
                                      ======================================
    Montana:
        Agricultural policy..........  ...........  ...........  ...........
        Validation & use of            ...........  ...........  ...........
         multispectral radiometry to
         measure forage biomass in
         wildlife livestock..........
        Dwarf mistletoe and biomass    ...........  ...........  ...........
         allocation, gas-exchange,
         and water relations of
         Douglas fir.................
                                      --------------------------------------
            Total....................  ...........  ...........  ...........
                                      ======================================
    North Carolina:
        Development and integration          4,111  ...........  ...........
         of entomopathogens into pest
         management systems..........
        Ecology of forest tree               2,539  ...........  ...........
         diseases....................
        Balancing soil arthropod               472  ...........  ...........
         management and soil health
         in agriculture..............
        The rosette bud mite and the         3,109  ...........  ...........
         balsam woolly adelgid on
         Fraser fir Christmas trees..
        Relationships between soil           1,633  ...........  ...........
         fertility and plant
         communities in the Southern
         Appalachians................
        Wood machining and tooling     ...........  ...........  ...........
         research....................
                                      --------------------------------------
          Total......................       11,864  ...........  ...........
                                      ======================================
    Nebraska:
        Changes in soil properties          15,000  ...........  ...........
         associated with changes in
         land use over the past
         century.....................
        Flow of water and particles          7,500  ...........  ...........
         in soils and porous media...
        Regulation of photosynthetic         4,815  ...........  ...........
         processes...................
        Regulation of photosynthetic         3,180  ...........  ...........
         processes...................
        The design of an enzyme              3,080  ...........  ...........
         reactor for the conversion
         of hemicellulose to
         menosaccharides.............
        A national agricultural        ...........  ...........  ...........
         program to clear pest
         management agents for minor
         use.........................
        Cultural practices to                  280  ...........  ...........
         minimize environmental
         stress on vegetable crop
         production and physiology...
        Introduce and develop high              75  ...........  ...........
         value crops from hardy woody
         plant germplasm for the
         north central region........
        Wildlife damage management             205  ...........  ...........
         for sustainable systems.....
        Water quality and water                260  ...........  ...........
         quantity criteria for
         Nebraska fishes.............
        Avian species in diverted            1,689  ...........  ...........
         farmland....................
        Primary water quality                   30  ...........  ...........
         determinents of attached
         algal communities in
         Nebraska....................
        Evaluation of environmental            393  ...........  ...........
         factors and fish species for
         aquaculture development in
         Nebraska....................
        Exchange of carbon dioxide             530  ...........  ...........
         and other atmospheric trace
         gases in vegetated
         ecosystems..................
        Remotely sensed estimates of           875  ...........  ...........
         productivity, energy
         exchange processes and water
         stress in vegetation........
        Drought: Response and policy         3,258  ...........  ...........
         implications................
        Relationships between                  705  ...........  ...........
         remotely-sensed spectral
         properties of vegetated
         surf. & biophysical property
        Feedlot management and               1,750  ...........  ...........
         production considerations
         for the cattle feeder.......
        Selection and development of         2,828  ...........  ...........
         native herbaceous landscape
         plants......................
                                      --------------------------------------
          Total......................       46,451  ...........  ...........
                                      ======================================
    Nevada:
        Improved characterization and        3,250  ...........  ...........
         quantification of flow and
         transport processes in soils
        Natural products chemistry as       56,873  ...........  ...........
         a resource for biorational
         methods of insect control...
        Natural product chemistry as           464  ...........  ...........
         a resource for biorational
         methods of insect control...
        Natural products chemistry as       16,716  ...........  ...........
         a resource for biorational
         methods of insect control...
        Natural product chemistry as           245  ...........  ...........
         a resource for biorational
         methods of insect control...
        Conceptual and predictive      ...........        9,218  ...........
         models of paleovegegation
         dynamics in the Great Basin.
                                      --------------------------------------
            Total....................       77,548        9,218  ...........
                                      ======================================
    New Hampshire:
        The National Atmospheric            15,620  ...........  ...........
         Deposition Program..........
        Molecular probes for nitrogen- ...........  ...........  ...........
         fixing symbionts of pioneer
         plants......................
        Fitness indicators for forest        4,937  ...........  ...........
         tree populations in a
         changing climate............
        Riparian denitrification as a        1,966  ...........  ...........
         control on nitrate export
         before forest harvesting....
        Developmental potential of           2,518  ...........  ...........
         New Hampshire lakes and
         shorelines: Supply and
         demand issues...............
                                      --------------------------------------
            Total....................       25,041  ...........  ...........
                                      ======================================
    New Jersey:
        Small mitochondrial dsrna      ...........       13,907  ...........
         that causes hypovirulance of
         cryphonactria darasitica....
        Ecosystem causes and           ...........  ...........  ...........
         consequences of exotic plant
         invasions in hardwood
         forests.....................
        Cellulase, the biologic key          3,221  ...........  ...........
         to renewable energy.........
        Technical and economical               102  ...........  ...........
         efficiencies of producing
         marketing and managing
         landscape plants............
        Controlled environment and           7,197  ...........  ...........
         facilities engineering for
         greenhouses.................
        Biological improvement of           15,550  ...........  ...........
         chestnut and management of
         the chestnut blight.........
        Molecular characterization of          955  ...........  ...........
         intracellular membrane plant
         K+ chan-  nels..............
        The effects of                 ...........  ...........  ...........
         ectomycorrhizae on
         decomposition in coniferous
         forest  soil................
                                      --------------------------------------
            Total....................       27,025       13,907  ...........
                                      ======================================
    New Mexico:
        Plant genetic resource               3,395  ...........  ...........
         conservation and utilization
        Benefits and costs in natural          970  ...........  ...........
         resource planning...........
        Systematic and floristic             5,894  ...........  ...........
         studies of Southwestern
         plants......................
        Cellular and molecular               9,210  ...........  ...........
         genetics approaches for crop
         improvement in semiarid
         lands agriculture...........
                                      --------------------------------------
            Total....................       19,469  ...........  ...........
                                      ======================================
    New York:
        The National Atmospheric             1,297  ...........  ...........
         Deposition Program..........
        Integrated pest management     ...........        5,268  ...........
         for diversified fresh market
         vegetable producers.........
        Intraspecific variation in          14,199  ...........  ...........
         host plant water relations
         in response to infection by
         ash yellows.................
        A new soil medium for urban          4,703  ...........  ...........
         tree survival...............
        Response of pin cherry-        ...........  ...........  ...........
         Northern hardwood stands to
         changes in resource
         availability................
        Transmission of hypovirulence  ...........       12,025  ...........
         in populations of
         cryphonectria parasitica....
        Diseases of ornamental trees   ...........  ...........  ...........
         and shrubs in New York State
        The taxonomy and uses of the         2,420  ...........  ...........
         cultivated oaks (quercus) of
         the United States...........
        1995 Cary Conference:          ...........        6,840  ...........
         Enhancing the ecological
         basis for conservation......
        Effects of predation and       ...........      117,732  ...........
         abiotic factors on detritus
         food webb in for-  ests.....
        Organic matter chemistry in    ...........       55,304  ...........
         clear-cut and unmanaged
         forest ecosys-  tems........
        Pathogen incidence & rate of   ...........       38,472  ...........
         spread: Impact of habitat &
         landscape attributes........
        Aggregation pheromone in Ips   ...........  ...........  ...........
         Pini........................
        Biomass conversion to          ...........  ...........  ...........
         industrial polysaccharides..
        Acid-catalyzed hydrolysis of   ...........       38,358  ...........
         lignin aryl-ether linkages
         in wood.....................
        Genetics of pheromone based    ...........       56,258  ...........
         assortative mating in the
         bark beetle Ips Pini........
                                      --------------------------------------
            Total....................       22,619      330,257  ...........
                                      ======================================
    Ohio:
        A national agricultural        ...........  ...........  ...........
         program to clear pest
         control agents for minor
         uses........................
        Developing useful control           14,598  ...........  ...........
         tactics for arthropod pests
         of landscape  plants........
        The economics of solid waste         2,504  ...........  ...........
         management and recycling....
        Economics of sustainable             1,952  ...........  ...........
         food, forest and mining
         systems.....................
        The National Atmospheric       ...........  ...........  ...........
         Deposition Program..........
        Rural economic development:    ...........  ...........  ...........
         Alternatives in the new
         competitive environment.....
                                      --------------------------------------
            Total....................       19,054  ...........  ...........
                                      ======================================
    Oregon:
        Biological control of weeds..        3,358  ...........  ...........
        Ecology and management of            2,289  ...........  ...........
         foothill rangelands.........
        Interactions among bark             33,598  ...........  ...........
         beetles, pathogens and
         conifers in North American
         forests.....................
        Ecology and management of            6,331  ...........  ...........
         forest insects..............
        Environmental transformation,        3,454  ...........  ...........
         exposure, and effects of
         pesticide resi-  dues.......
        Behavior and persistence of          1,798  ...........  ...........
         pesticides in crops and the
         environment.................
        Ecology and management of            7,446  ...........  ...........
         Western juniper (juniperus
         occidentalis) in Oregon.....
        Biotechnology in Oregon......  ...........          528  ...........
        Characterization of stream/          1,312  ...........  ...........
         river fish assemblages in
         Oregon......................
        Ecosystem dynamics,                 14,816  ...........  ...........
         anthropogenic impacts and
         restoration of wildlife and
         fish habitats...............
        Measuring N(2) fixation & N    ...........        1,318  ...........
         cycling in pure & mixed red
         alder strands using 15(N)...
        Size and diversity of frankia  ...........       47,188  ...........
         populations that nodulate
         ceanothus SPP...............
        Ecological interactions in          10,209  ...........  ...........
         high elevation lakes:
         Impacts of human and natural
         disturbance.................
        Center of Wood Utilization     ...........      140,219  ...........
         Research....................
        Center for Wood Utilization    ...........      174,870  ...........
         Research....................
        Center for Wood Utilization..  ...........      286,469  ...........
        Center for Wood Utilization    ...........      226,456  ...........
         Research....................
        Center for Wood Utilization    ...........       48,074  ...........
         Research....................
        Elucidation and optimization   ...........       30,391  ...........
         of bioprotectant mechanisms
         against wood staining fungi.
        Dynamic characteristics of     ...........       31,197  ...........
         metal-plate-connected wood
         joints......................
        Vapor copper--a potential new  ...........       37,886  ...........
         wood preservative...........
        Mapping of genes related to    ...........       68,048  ...........
         adaptation in Douglas-fir
         hybrids.....................
        Root decay in 3 coniferous     ...........       50,593  ...........
         forests: Substrate,
         temperature and moisture
         effects.....................
        Identifying the mechanisms     ...........       25,974  ...........
         for reduced photosynthetic
         performance in old trees....
        Controls on forest soil        ...........       73,206  ...........
         carbon dynamics: Does
         nitrogen management matter..
        Predicting decomposition       ...........       92,584  ...........
         dynamics of woody detritus
         of forest ecosys-  tems.....
                                      --------------------------------------
            Total....................       84,609    1,335,001  ...........
                                      ======================================
    Pennsylvania:
        Ecological indicators &                204  ...........  ...........
         restoration strategies for
         wetland/riparian/stream
         components of watersheds....
        National Atmospheric           ...........  ...........  ...........
         Deposition Program--
         monitoring of atmospheric
         chemical deposition effects.
        Non-traditional land-based          10,499  ...........  ...........
         solutions for municipal
         waste disposal..............
        Economic impact of travel and  ...........  ...........  ...........
         tourism in Pennsylvania.....
        Biochemistry of biorational         26,675  ...........  ...........
         pesticides--bacillus
         thuringiensis and
         baculoviruses...............
        Improving the efficacy of      ...........  ...........  ...........
         biorational pesticides used
         in aerial applica-  tion....
        Enhancing international value- ...........       13,184  ...........
         added opportunity for U.S.
         hardwoods (in Japan)........
        Effect of forest irrigation    ...........  ...........  ...........
         on avian and mammalian
         communities.................
        Determining the efficacy and         8,334  ...........  ...........
         crop tolerance of herbicides
         used in ornamentals and
         right-of-ways...............
        Creep behavior of wood-foam    ...........        6,835  ...........
         composite structural
         insulated panels............
        Artificial intelligence-based        3,310  ...........  ...........
         modeling of natural and
         managed systems.............
        Ecological indicators &                616  ...........  ...........
         restoration strategies for
         wetland/riparian/stream
         components of landscapes....
                                      --------------------------------------
            Total....................       49,639       20,019  ...........
                                      ======================================
    South Carolina:
        Impact of bark boiler ash            5,394  ...........  ...........
         recycling on heavy metal
         loads in wildlife in coastal
         plain forests...............
        The potential of forestry-     ...........  ...........      106,922
         based rural economic
         development in South
         Carolina....................
                                      --------------------------------------
            Total....................        5,394  ...........      106,922
                                      ======================================
    Tennessee:
        Endophyte infected &                 8,236  ...........  ...........
         endophyte free tall fescues
         & other forages in
         management systems for
         herbivore...................
        Reducing environmental               4,376  ...........  ...........
         impacts of production
         agriculture.................
                                      --------------------------------------
          Total......................       12,612  ...........  ...........
                                      ======================================
    Texas:
        Benefits and costs transfer            242  ...........  ...........
         in natural resource planning
        Biological improvement of           12,822  ...........  ...........
         chestnut and management of
         the chestnut blight fungus..
        Environmental soil chemistry,        4,863  ...........  ...........
         fertility, management, and
         plant nutrition for forage
         and other crops.............
        Development of PCR based       ...........  ...........  ...........
         probes for detection of
         fungal plant patho-  gens...
        Information engineering and            166  ...........  ...........
         development of integrated
         resource management systems.
        Sustainable farming systems            537  ...........  ...........
         and resource conservation...
        Production and improvement of       24,593  ...........  ...........
         plants for urban
         environments................
        Development of propagation           4,150  ...........  ...........
         technologies and assessment
         of drought tolerant
         ornamental species..........
        Amelioration of degraded rain  ...........       23,366  ...........
         forest soils by trees.......
        Conifer transformation with    ...........        2,610  ...........
         shoot apices and
         agrobacterium...............
                                      --------------------------------------
          Total......................       47,372       25,976  ...........
                                      ======================================
    Utah:
        Interactions among bark             14,343  ...........  ...........
         beetles, pathogens, and
         conifers in North American
         forests.....................
        Shrub selection and breeding   ...........          447  ...........
         for rangeland rehabilitation
                                      --------------------------------------
          Total......................       14,343          447  ...........
                                      ======================================
    Virginia:
        Antioxidant metabolism in           30,606  ...........  ...........
         soybean and Eastern white
         pine: Enzyme purification
         and characterization........
        Investigating the role of      ...........  ...........  ...........
         pales weevil in procerum
         root disease epidemiology...
        Biological improvement of           23,250  ...........  ...........
         chestnut and management of
         the chestnut blight fungus..
        The effect of continuous       ...........  ...........  ...........
         process technology on
         softwood lumber quality.....
        Measurement of drying          ...........  ...........  ...........
         stresses in red oak.........
        Solid-state NMR, dielectric    ...........  ...........  ...........
         and viscometric study of PF
         resin cure..................
        Mechanisms by which R.         ...........       90,646  ...........
         maximum influences forest
         canopy structure............
                                      --------------------------------------
          Total......................       53,856       90,646  ...........
                                      ======================================
    Wisconsin:
        Development of statistical           3,197  ...........  ...........
         methodologies for biology...
        Biochemical ecology of              23,584  ...........  ...........
         interactions between aspen
         and forest insect  pests....
        Sphaeropsis blight of pines:        23,296  ...........  ...........
         Pathogen types and host
         resistance..................
        Interrelation of                    30,339  ...........  ...........
         photosynthesis, respiration
         and biomass distribution as
         determinants of tree growth.
        Advanced modeling of the       ...........       16,581  ...........
         North American pulp and
         paper sector................
        Ecology and impact of gypsy    ...........  ...........  ...........
         moth invasion...............
        Ecological, sociological and        13,157  ...........  ...........
         economic aspects of white-
         tailed deer damage to
         agricultural crops..........
        Beyond tiger: The links              2,266  ...........  ...........
         between the human layer and
         natural resource layers in a
         GIS environment.............
        Analysis and forecasting of    ...........       63,840  ...........
         the impacts of GATT and
         NAFTA on the U.S. forest
         products industry...........
        Mechanisms of persistence of   ...........        8,952  ...........
         aspen seedlings following
         the 1988 Yellowstone fires..
                                      --------------------------------------
            Total....................       95,839       89,373  ...........
                                      ======================================
    Washington:
        Physical chemical state and         58,411  ...........  ...........
         plant availability of
         uranium in contaminated mine
         soil........................
        Biological and systematic            4,157  ...........  ...........
         studies of xylaria and
         allied genera...............
        Effect of enhanced UV-B        ...........       79,308  ...........
         radiation on carbon dynamics
         in selected tree species....
        Enhancing the competitiveness  ...........       13,500  ...........
         of ag and forest products...
        Benefits of post resistance    ...........       31,196  ...........
         to sustainability of hybrid
         poplar production systems...
        Defense reactions in           ...........       71,521  ...........
         conifers: Oleoresinosis.....
        Forest ecosystem study, Fort   ...........      123,160  ...........
         Lewis, WA...................
        A comparison of sporocarp and  ...........       85,274  ...........
         mycorrhiza dominance by
         ectomycorrhizal fungi.......
        Carbon isotope discrimination  ...........       36,858  ...........
         and water use efficiency of
         poplars.....................
        Competitiveness in             ...........      257,991  ...........
         international forest
         products....................
        The use of fiber wettability   ...........       18,237  ...........
         to assess sizing efficiency.
        Effects of plant competition   ...........        3,825  ...........
         in secondary succession: An
         experimental approach.......
        Molecular genetics of          ...........       37,766  ...........
         populus: Collaborative
         network.....................
        Mapping quantitative trait     ...........       10,040  ...........
         loci in populus.............
        Single fiber kappa analyzer..  ...........       27,661  ...........
                                      --------------------------------------
          Total......................       62,568      796,337  ...........
                                      ======================================
    West Virginia:
        Inventory of Appalachian            63,000  ...........  ...........
         hardwood stands.............
        Biological improvement of          110,856  ...........  ...........
         chestnut and management of
         the chestnut blight fungus..
        Bionomics of forest                 34,328  ...........  ...........
         defoliating insects and
         insects secondarily
         attacking defoliation
         stressed trees..............
        Benefits and costs transfer         14,707  ...........  ...........
         in natural resource planning
        Investigation of the                 6,311  ...........  ...........
         environmental impacts of
         kiln drying Appalachian
         hardwoods...................
                                      --------------------------------------
            Total....................      229,202  ...........  ...........
                                      ======================================
    Wyoming: Spatial disturbance       ...........       30,987  ...........
     history in the Medicine Bow
     National Forest, Wyoming........
                                      ======================================
          Total......................    2,460,988    5,561,640      357,045
    ------------------------------------------------------------------------

        Question. Please distinguish the role of the Forest Service and
    that of ARS/CSREES in forestry research.
        Answer. ARS conducts limited research related to forestry. Even
    though this research has relevance, and potential benefits for forest
    management, it is not directed toward the management of forest
    ecosystems. One of the principal targets for this ARS research is the
    urban environment. ARS research on agroforestry is primarily directed
    toward optimizing the economic and environmental benefits to both crop
    and livestock operations from interactions created when trees or shrubs
    are deliberately combined with farm crops and animals. Other ARS
    activities related to forestry research include research projects on
    the use of trees as windbreaks, in arboretums, and for horticultural
    applications. CSREES has a very different mission than the in-house
    research at USDA. The McIntire-Stennis funds are part of the land grant
    system, which has a tripartite mission of research, extension, and
    education. The Forest Service has no dedicated programs for the
    extension of their research results, nor for education.
        The McIntire Stennis Act, states ``it is further recognized that
    forestry schools are especially vital in the training of research
    workers in forestry.'' Thus, the capacity building aspect of this
    program was laid out in the original legislation. The forestry schools
    are also unique, in comparison to the Forest Service in that they have
    more forest scientists available, from a wider range of disciplines,
    and have a graduate student workforce available and therefore provide
    an organization capable of responding quickly to new trends and issues.
    Given their mandate, the Forest Service spends a higher proportion of
    its effort on research relating to public land management.
        Finally, research direction and priorities are set nationally and
    regionally in Forest Service research, and state by state in CSREES
    cooperative research. The Dean or Department Head is usually in direct
    contact with stakeholders at the state level, so that in general,
    statewide and short-term research is the niche of the universities, and
    regional/national and long-term research is the niche of the Forest
    Service. The Forestry Research Advisory Council (FRAC) provides advice
    and reports on regional and national planning and coordination of
    forestry research within the Federal and State agencies concerned with
    developing and utilizing the Nation's forest resources, forestry
    schools, and the forest industries, as well as advising on the
    apportionment of funds for the McIntire-Stennis Program. Finally, some
    Forest Service research stations do not have all the relevant
    disciplines represented, and so for some areas in some disciplines,
    only universities are available to conduct research. This is
    particularly the case in social science research. The Forest Service,
    CSREES and the universities participate in ongoing coordination of
    research efforts.
                       special and administrative grants
        Question. For each of the special research and administrative
    (research and extension) grants funded for fiscal year 1998, please
    indicate the following: a detailed description of the project funded;
    who is carrying out the research; federal and nonfederal 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
        The main focus of work on this problem has been identification of
    corn germplasm resistant to aflatoxin. Of continuing importance are the
    identification of Aspergillus flavus-inhibiting compounds and fungus-
    inhibiting enzymes, including developing effective transformation
    methods and plant regeneration techniques. There has been increased
    national concern over aflatoxins as carcinogens, possessing other toxic
    properties, as well as the potential for health risks wherever toxin-
    contaminated corn is found. Aflatoxin contamination continues to occur
    with some regularity in the southeastern United States, and more
    recently in the southwestern United States. Outbreaks also have
    occasionally occurred in the upper midwest region. The original goal of
    this research was the reduction of aflatoxin production in corn. During
    the past year, corn plants have been produced with the antifungal genes
    chitinase and B-glucanase. These antifungal genes have the potential of
    conferring resistance to many ear rots including that caused by
    Aspergillus flavus. Additional useful data have been collected on
    inheritance of resistance from the inbred line Tex6.
        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, 1997, and 1998, $113,000 per year. A total of $1,064,000
    has been appropriated. The non-federal funds and sources for this grant
    are $22,349, derived from project investigator salaries and fringe
    benefits.
        This research is being conducted at the University of Illinois. The
    anticipated completion date for the original objectives was 1995, but
    last year, the scientists updated the estimate to 2000-2002, because
    there is concern that they do not have one mechanism of resistance that
    will completely solve the problem. It now appears necessary to pyramid
    genes for resistance, including naturally-occurring genes and possibly
    those that can be placed into the plant using biotechnology. The
    scientists continue to anticipate solving these related problems by the
    above estimated dates. The last agency evaluation was December, 1996.
    That evaluation stated that the research techniques are consistent with
    a high likelihood that specific objectives will be satisfied. There is
    good balance between fundamental and applied research.
            agricultural diversification and specialty crops, hawaii
        With the resurgence of interest in Hawaiian culture and
    corresponding increased prevalence of Hawaiian dances, there is
    increased pressure on plant materials found in State and Federal
    forests in Hawaii. To this end, the University of Hawaii College of
    Tropical Agriculture and Human Resources have been working on the ``lei
    project'', involving about 20 members from the College and different
    organizations in the state working together to develop a handbook for
    the production and business of materials for Hawaiian lei (body
    adornment made of plant materials). The group identified 85 candidate
    plants and assembled a source book of 90 nurseries in Hawaii that have
    these plants for sale as starter material. Efforts continue to find
    entrepreneurs to grow and process taro on a large scale for
    hypoallergenic products. The new taro production manual will help
    prospective entrepreneurs understand the requirements of this
    opportunity.
        Work is continuing with Maui onion growers who are potentially
    interested in obtaining a Federal Marketing Order for their unique
    onions. Most of the effort in this area has been on researching
    information about market potential and giving informational talks. Work
    is continuing on kava, a root crop that might be used as a non-
    addictive natural relaxant, in the area of collecting production stock
    and researching and assembling production information. Some work on
    market potential has also been done. Work is continuing on Stevia, to
    explore its use as a natural food sweetener and an ornamental plant.
        Although this special research grant is awarded noncompetitively,
    the proposal is reviewed for merit by the university before submission
    to CSREES and reviewed by CSREES for technical merit and allowable
    costs and procedures. The principal investigator believes this research
    to be of local and Pacific regional need, and, in some cases, national
    need. The small projects that are being undertaken under the umbrella
    of the Diversified Agriculture project are one attempt to provide to
    some current and would-be entrepreneurs the tools they need to make
    business decisions about agricultural opportunities.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1988-1989, $156,000 per year; fiscal years 1990-1993, $154,000 per
    year; fiscal year 1994, $145,000; and fiscal years 1995-1998, $131,000
    per year. A total of $1,597,000 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 1994-1998. In addition, nearly
    $50,000 of in-kind support has come from private sector and state
    partners, $8,000 from the Office of Hawaiian Affairs, and $30,000 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 on the island of Oahu, and
    on the islands of Maui and Hawaii. The lei materials and Maui onion
    work will conclude by September 30, 1998. All taro related work is
    complete. Work on the marketing book is complete. Work continues on
    kava, high pressure processing, and other projects consistent with the
    original goal.
        The CSREES's agency representative to this project has met with the
    University of Hawaii investigators to review progress and plan
    subsequent activities. This close interaction has led the project
    though a progression of steps from research discovery to near-term
    commercialization of various products, and, in the case of high
    pressure processing, back to testing and development of a new
    technology for possible commercial use.
                  agricultural diversity/red river, mn and nd
        This multi-year, multi-phase project will have six specific
    components. They are: (1) vegetable growing research--especially field
    and glasshouse related research, (2) vegetable collection and storage
    research and/or related storage or distribution business development,
    (3) development of processing industries for the fresh market or
    research related to the fresh products for market, (4) development of
    marketing and/or supply associations among vegetable producers, (5)
    development of processing industries for the ready-to-eat salad market
    or research related to ready-to-eat products, and (6) development of
    processing industries for the frozen vegetable products market or
    research related to frozen products. This first phase of this multi-
    phase project will concentrate its industry development and research
    activities in three areas: vegetable growing research--especially field
    and glasshouse related research, development of marketing and/or supply
    associations among vegetable producers, and development of processing
    industries for the ready-to-eat salad market or research related to
    ready-to-eat products.
        Initially the growing of vegetables in the region was driven by an
    opportunity to meet increasing consumer demand for fresh vegetables and
    concerns over both the cost of water and the environmental impacts of
    the use of chemicals in the traditional vegetable producing regions of
    the southern United States. This industry currently raises three crops
    of vegetables a year. This requires extensive irrigation in the hot
    summer months. Population growth and increased domestic and industrial
    demands for water have created significant pressures to shift water
    usage away from agriculture and toward other domestic and industrial
    needs. The shift in cropping patterns can have a positive effect on
    farm income and lessen the need for outside or federal financial
    assistance. The project objectives include: (1) Conduct three
    replicated field trials on growing of carrots; (2) Continue study of
    vegetable growing techniques in Europe an continue negotiations with
    vegetable growing research facilities/laboratories in Europe to
    transfer growing knowledge to the region; (3) Review current and future
    market opportunities for further development of the industry and
    identify strategies and partners for pursuing these opportunities and
    take appropriate organizing steps; (4) Develop and maintain a WWW
    Webpage for this vegetable industry project; (5) Conduct market
    research for establishment of a ready-to-eat delicatessen salad
    processing facility in the region; (6) Conduct market research for
    establishment of a ready-to-eat fresh-bagged salad processing facility
    in the region; (7) Continue business development planning for
    establishment of a ready-to-eat delicatessen salad processing facility
    in the region; and, (8) Continue business development planning for
    establishment of a ready-to-eat fresh-bagged salad processing facility
    in the region.
        This work supported by this grant begins in fiscal year 1998 and
    the appropriation for fiscal year 1998 is $250,000. Non-federal support
    will come from private growers, state agri-development project funds,
    the Ford Foundation and other local foundations. The work is being
    carried out in Minnesota, North Dakota and South Dakota. Since this is
    a new project and has not started yet, original objectives have not
    been met. It is expected that this will be a multi-year, multi-phase
    project.
             ag-based industrial lubricants research program, iowa
        This project is a continuation of seven years of activity conducted
    to target specific applications, establish baseline performance data,
    develop formulations of additives and chemical modifications,
    administer laboratory and field tests, characterize, and build
    relationships for commercialization of industrial lubricants derived
    from U.S. grown vegetable base oils. Baseline performance data will be
    compiled to establish fatty acid compositions, guide genetic
    modifications, additive development, establish standards relative to
    toxicity and biodegradability, and characterize compatibility with
    specific metallic and non-metallic components. The grant has been peer
    reviewed internally at the University of Northern Iowa.
        Primary local and regional need is related to expanding value-added
    applications of agricultural commodities in order to stimulate
    increased demand and raise crop prices paid to farmers. On a national
    level, the need is to provide renewable, safer, more environmentally
    sound alternatives to petroleum based industrial lubricants. The
    principal investigator believes this research to be of local, regional
    and national importance.
        The original goal of the program was sponsored by non-federal
    funding to develop a soybean based hydraulic oil which was introduced
    to market in July of 1997, marketed by AGRI Industries of West Des
    Moines, Iowa as BioSOY hydraulic fluid. The original goal of the
    project sponsored by federal appropriation which has not yet officially
    started, is to replicate the success of the BioSOY introduction among
    several other currently targeted lubricant applications. Federal
    funding for this project began with an appropriation of $200,000 in
    fiscal year 1998. No prior federal funding has been appropriated to
    this research.
        Since 1992 this research program has received cash grants from the
    Iowa Soybean Promotion Board, Carver Scientific Research Initiatives,
    in addition to several in-kind donations from industry to develop and
    coordinate commercializa-tion of what has since become BioSOY hydraulic
    oil. Beginning in 1995, the state of Iowa began to support the program
    through its Wallace Technology Transfer Foundation. Beginning in 1996,
    state funding was provided by legislative appropriation through the
    Iowa Department of Economic Development. Additional funding has been
    provided by the Iowa Department of Agriculture and Land Stewardship.
        Laboratory and literature studies are being carried out primarily
    at the Ag-based Industrial Lubricants Research Program facility in
    Waverly, Iowa, with minor portions of activity being conducted on the
    campus of the University of Northern Iowa in Cedar Falls, Iowa and the
    laboratories of various industrial affiliates located throughout the
    state and country. Field tests are being conducted a Sandia National
    Laboratories, U.S. Department of Army test sites, some municipalities,
    and in industrial equipment located throughout the nation.
        The original objectives of the project sponsored by federal
    appropriation have not yet begun, however these objectives are
    anticipated to be complete within the first year of the project.
    Additional lubricant applications are anticipated to be targeted during
    the first year for development in subsequent periods. Agency evaluation
    of this project has not been completed to date.
                      alliance for food protection, ne, ga
        The fiscal year 1998 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 1997 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
    and environmental factors on controlling Bacillus cereus, and
    developing a device to rapidly detect foodborne pathogens using immuno-
    magnetic separation technology. CSREES has requested, but has not yet
    received, proposals from the University of Georgia and the University
    of Nebraska in support of the fiscal year 1998 appropriation.
        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, toxic fungal
    metabolites in corn products, 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.
        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 detection of almond and hazelnut residues in
    processed foods, produced high-quality antibodies for these assays,
    identified a soybean allergen, discovered that certain types of
    Fusarium fungi do not produce mutagenic substances, and developed a
    simple liquid chromatographic procedure for determination of
    moniliformin 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, 1997, and 1998, for a
    total appropriation of $900,000. The non-federal funds and sources
    provided for this grant were $117,000 state funds and $250,000 industry
    and miscellaneous in fiscal year 1996 and were estimated to be a
    minimum of $75,000 state funds and $35,000 industry in fiscal year
    1997.
        Research is being 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 and the original objectives have not yet been met.
    The researchers anticipate that work will be completed on the original
    objectives in 1999.
        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 in support of
    the fiscal year 1997 appropriation was conducted on December 20, 1996,
    and good progress was demonstrated on the objectives undertaken in
    1996. 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, north dakota
        The alternative crops project has two main thrusts, development and
    utilization of alternative or novel crops and utilization of
    traditional crops. The goals of the project are to diversify income at
    the farm gate, reduce reliance on monoculture to help alleviate pest
    problems, while providing new agricultural and industrial products to
    society. Some of the new areas under investigation include, production
    and use of dry field peas for the northern plains, production of levan
    from sugar beets, and development of a fresh-pack carrot industry in
    the northern plains. Previous work continues with oilseed crops such as
    crambe, rapeseed and safflower as a renewable supply of industrial oil,
    products from food crops for novel new uses in paints, coatings, food
    ingredients, and the development of new biochemical and enzymatic
    processes to refine oils for industrial uses. The projects funded in
    this appropriation are evaluated by a peer-panel chosen by the Director
    of the North Dakota Agricultural Experiment Station.
        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 and 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.
    Regionally, the temperate areas of the Midwest have the potential to
    grow a 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 spawned
    several crops and products into profitable private sector businesses.
        The original goal of this research was and still is to introduce,
    evaluate and test new crops which will broaden the economic diversity
    of crops grown in North Dakota. The primary emphasis is to find new
    crops with non-food uses and create value added products. 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
    lupin flower, 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 biochemical 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.
        Appropriations by fiscal year are as follows: 1990, $494,000; 1991,
    $497,000; 1992 and 1993, $700,000 per year; 1994, $658,000; 1995,
    $592,000; and in 1996, 1997 and 1998, $550,000 per year. A total of
    $5,291,000 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, totaling $173,837. 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, totaling $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. The
    principal researcher believes that the development of new crops and
    products should be an on-going effort in North Dakota and other states.
        Fiscal year 1998 is the ninth 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, and
    continue to expand. As U.S. agriculture enters a new policy era with
    less emphasis on commodity subsidies, great opportunity may exist to
    better establish more biodiversity in agriculture. Such a change,
    however will remain dependent upon research and development programs
    specifically targeted at such a goal. This project has been evaluated
    based on the annual progress report. The cognizant staff scientist has
    reviewed the project and determined that the research is conducted in
    accordance with the mission of this agency. An evaluation of this
    project will be conducted in 1998.
             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
    project undergoes merit review by the university and by the CSREES
    Program Leader on an annual basis.
        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. Research generated from this
    grant should lead to alternative production systems that can have
    national, regional and local impact.
        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 has led to improved feed
    formulation and feeding strategies for hybrid striped bass. Researchers
    have also developed management strategies to improve production
    efficiency and cost effectiveness in non-forage based crawfish
    production systems.
        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 1995-1998 each year. A
    total of $2,315,000 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, $79,935 in fiscal year 1996, and $124,893 in fiscal year
    1997. 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 2000. 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 1997 review indicated that the research addresses an important
    opportunity in the aquaculture industry, research objectives were met,
    that progress on previous research was well documented, and that the
    proposed research builds on the previous work funded through this
    program. The research on hybrid striped bass funding through this
    program complements research conducted through other USDA programs.
                        alternative salmon products, ak
        This is a new grant in fiscal year 1998. Research will be aimed at
    developing a commercial pin-bone removal machine to reduce production
    costs of salmon fillets and thus open markets for salmon fillet shatter
    packs. CSREES has requested, but has not yet received a proposal in
    support of the fiscal year 1998 appropriation.
        The Alaska salmon industry has lost considerable market share
    worldwide to farmed salmon production. In 1994, the farmed salmon
    market share surpassed Alaska's market share of the world's salmon
    supply and has continued to climb every year since. In 1997, Norwegian
    farmed salmon production exceeded Alaska wild stock harvests. Also in
    1997, Chilean coho salmon exports to Japan exceeded North American
    sockeye salmon exports to Japan. Japan has traditionally been Alaska's
    strongest and most lucrative export market. The current situation is an
    example of foreign competition undermining a traditional American
    industry.
        The Alaska salmon industry is a multi-state industry. Though the
    product is harvested in Alaska, the benefits are shared with fishermen
    residents in Washington state, Oregon, California and throughout the
    nation. The appropriation will be used to support development of
    market-desired salmon products using wild-caught salmon. Because this
    is a new grant, no progress has been reported. The work supported by
    this grant will begin in fiscal year 1998, with an appropriation of
    $400,000. Industry will contribute approximately $200,000, based on an
    estimated cost of $50,000 per plant, times four plants, for commercial
    testing of the beta prototypes during the summer 1998 salmon season in
    Alaska.
        The work with be conducted at the University of Alaska Fairbanks:
    Fishery Industrial Technology Center in Kodiak Alaska and at the
    Geophysical Institute of the University in Fairbanks, Alaska. The
    anticipated completion of the full objectives of this research area,
    including original and related objectives, will require about five
    years. It is anticipated that the proposal received in support of the
    fiscal year 1998 appropriation will be reviewed for merit by a CSREES
    specialist shortly after it is received by the agency.
                     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 and Critical Control
    Point programs by USDA; 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. CSREES has requested and received proposals from the
    consortium members in support of the fiscal year 1998 appropriation.
    Projects included for funding in the proposal submitted to CSREES have
    been reviewed for scientific merit by scientists at a non-recipient
    institution.
        The principal researchers believe a safer national meat product
    food supply could reduce large economic losses--$5 to $6 billion a
    year--as a result of lost productivity and wages and medical treatment
    of victims, in addition to reducing the human suffering and loss of
    life that occur every year as a result of foodborne illnesses. The
    consortium's efforts for technology transfer with groups such as
    hospitality associations, health departments, and trade associations
    are helping educate the consumer and food service worker on safe
    handling procedures across the nation. Scientific based testing for
    safe food products will also find greater acceptance in international
    markets, which will continue to contribute to increased exports and
    sustainable rural economies at home. 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
    included findings that for about 30 percent of households with children
    experiencing salmonellosis symptoms, Salmonella cells were recovered
    from multiple sources other than food. Researchers also found that some
    commercial ``natural'' antimicrobial compounds with claims of being
    able to control pathogens on poultry were either ineffective or not
    cost effective. A model poultry carcass spray unit using different
    chemical mixtures produced significant reductions in counts of total
    bacteria and of Salmonella. For raw deboned poultry items, an X-ray
    imaging system was coupled with laser system to aid in detection of
    small residual bone fragments in such products. Researchers have
    developed a rapid, non-destructive measurement model using near-
    infrared reflectance and transmittance spectroscopy to correlate
    heating patterns with destruction of pathogenic Salmonella and Listeria
    bacterial cells as poultry is thermally processed. The target pathogen
    Listeria monocytogenes was found to change its surface makeup with
    different selective growth media and thereby elude detection by
    monoclonal antibodies that can detect these pathogens when cells are
    grown in non-selective media. A 24-hour tissue culture procedure was
    developed that was able to detect the harmful cytotoxins of the
    pathogen E. coli O157:H7 in raw and cooked foods. Two new natural
    biopeptide bacteriocins active against Listeria were isolated and
    characterized and shown to be unlike previously reported bacteriocins.
    A novel simple adsorption method using rice hull ash was developed to
    harvest and concentrate bacteriocins from the production broth. A
    nested PCR assay was developed that is able to detect small numbers of
    Campylobacter in 14 different raw foods including selected raw fruits
    and vegetables. A DNA fingerprinting method recently reported to be
    very useful for separating strains and pinpointing sources of E.coli
    O157:H7 was shown to not be as helpful for separating ten different
    serotypes of Salmonella linked to human illnesses in Arkansas and
    Michigan, apparently because serotypes of this latter pathogen have a
    more highly similar DNA makeup.
        At Iowa State University research was expanded in production animal
    food safety on farms. A triplex PCR technique for detection of
    Escherichia coli 0157:H7 in ground meat was found to be more rapid and
    more sensitive than culture techniques. In another study, a test
    developed for rapid enumeration of coliforms and generic E. coli in
    water was adapted to monitoring these organisms on pork carcasses. E.
    coli and Salmonella spp. were found most frequently in ground pork
    samples collected from packers and purveyors and least frequently at
    supermarkets. Listeria monocytogenes was found in up to a third of
    samples taken at food services and supermarkets but was not identified
    in samples collected at packing plants. Hot water rinses of hog
    carcasses contaminated with hog feces were effective in reducing the
    bacterial load on the carcasses; an additional organic acid rinse
    achieved further reductions. Some acceleration of lipid oxidation and
    production of more volatiles were found in irradiated ground pork, but
    levels were low and oxygen availability either before or after cooking
    caused more changes than did irradiation.
        Research at Kansas State University showed that low dose
    irradiation resulted in minimal or no changes in beef and pork color,
    flavor and texture. Studies demonstrated that standard commercial
    processes for Lebanon-style bologna achieved a 5-log reduction in E.
    coli O157:H7. The ongoing work with steam pasteurization of carcasses
    has proved that this process can consistently meet the pathogen
    reduction requirements for E. coli control which is to be used as an
    index for process control. Results with Salmonella control demonstrated
    that steam pasteurization can achieve the pathogen control standards
    also required by USDA. Researchers have carried these findings to the
    industry, consumer groups, and classrooms. For example, the research
    demonstrating that ground beef can ``brown'' prematurely and before it
    reaches the temperature to control E. coli O157:H7 has helped USDA and
    others to recommend measuring the temperature to assure safety.
        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; fiscal
    year 1997, $1,690,000; and fiscal year 1998, $1,521,000. A total of
    $17,329,000 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 $1,776,167
    State appropriations and $824,378 industry, for a total of $2,600,545
    in 1997. Thus, from 1991 through 1997 a total of $14,753,169 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. Continuing and evolving issues related to the safety of beef,
    pork and poultry products will necessitate that research be ongoing to
    ensure the safety of these products.
        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 proposals was conducted during January 1998. In
    addition, the CSREES scientist conducting the merit reviews of the
    proposals participated in the Consortium's annual meeting in October
    1997 where results of Consortium research projects were presented. Good
    progress continues to be demonstrated by Consortium researchers in
    meeting research objectives. Consortium researchers have helped develop
    and validate procedures that have been adopted by USDA' s Food Safety
    and Inspection Service to detect and reduce or destroy foodborne
    pathogens on beef carcasses.
                    apple fire blight, michigan and new york
        This project studies fire blight in apple trees, which is a
    bacterial disease that can kill spurs, branches, and whole trees. The
    management of this disease is difficult because only one antibiotic
    treatment is available. The objectives of this research are to develop
    fire blight resistance varieties, evaluate biological and chemical
    control methodologies for disease management, and develop an education
    and extension component for disease management. Fire blight is a
    destructive disease of apple trees that can kill the trees. This
    disease is caused by bacteria and effects apple trees in all apple
    growing areas of the nation. In the northeast, the disease is more
    prevalent because of humid weather conditions.
        The goals of this research are to develop transgenic apple trees
    through various molecular technologies, to develop new approaches to
    antibiotic treatments of 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. The last objective involves
    using disease prediction models.
        Fiscal year 1977 was the first year funds were appropriated for
    this grant at $325,000. For fiscal year 1998, $500,000 was
    appropriated. A total of $825,000 has been appropriated. The non-
    federal funds for 1997 were $40,127 for Michigan and $104,166 for New
    York State. The funds for 1998 are state appropriated $25,071 and
    $15,000 in funds from the Michigan Apple Research Committee for a total
    of $40,071 from Michigan whereas New York is estimating state
    appropriated funds at $104,166 for 1998.
        Research is being conducted at Michigan State University and
    Cornell University, New York Experiment Station and the anticipated
    date of completion for the original objectives was 1998. The objectives
    have not been met. It is estimated by the researchers that three to
    five years are needed to complete this project.
        The last merit review of this project was in January, 1997. In
    summary, the evaluation indicated that progress was demonstrated in all
    the objectives. In New York, rootstock transformation was successful in
    two commercially important apple varieties and another transgenic line
    performed well in field trials. New biological and chemical control
    agents were evaluated for their use in integrated pest management of
    fire blight. Commercial orchards were mapped for tree loss due to fire
    blight rootstock infection and were used in an economic analysis to
    determine a potential economic loss. In Michigan, a fire blight control
    activity of a mixture of phage was conducted on apple trees under field
    conditions. There was significantly less fire blight in inoculated
    blossom clusters that had been treated. The use of antibiotics on the
    bacteria were also effective under field conditions. A new technique
    for detection of fire blight was developed that allows for the rapid
    detection of low levels of bacteria from large samples.
                             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 project undergoes merit review by the
    university and by the CSREES Program Leader on an annual basis. The
    principal researcher believes the development of alternative
    aquaculture production systems, such as closed recirculating systems,
    would 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.
        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
    have also been evaluated. The research has led to improved production
    efficiency and cost effectiveness in closed recirculating systems.
        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,
    and in fiscal year 1998, $158,000. A total of $1,253,000 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; in fiscal year 1996, $171,970; and in fiscal year 1997
    $209,781. The primary source of funding is from the state with grants
    and industry funding 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 and 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 2000.
        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 1997 review of the project indicated that the project has
    met stated objectives to develop best management practices, evaluate
    solid waste management techniques, and improve production efficiency
    and cost effectiveness in closed recirculating systems. The researchers
    have indicated that the proposal is consistent with the NSTC's
    Strategic Plans for Aquaculture Research and Development.
                             aquaculture, louisiana
        Research has focused on catfish, crawfish, redfish, 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. Grants are awarded to
    scientists within the university on a competitive peer review basis.
    The entire proposal is also reviewed by the CSREES Program Manager on
    an annual basis. The principal researcher indicates that there is a
    need to improve production efficiency for a number of important
    aquaculture species 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. The research funded through this program focuses on the
    production of a number of important aquaculture species such as
    catfish, crawfish, hybrid striped bass, and redfish.
        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
    continues to be directed at important opportunities to enhance
    production efficiency and the commercial viability of sustainable
    aquaculture systems in the region.
        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 1995-1998 each year, for a total of $2,467,000. 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; in fiscal year 1996, $150,104; and in fiscal year 1997
    $158,808. 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 and the
    original specific objectives were to be completed in 1990. These
    specific research objectives have been met, however, the broader
    objectives of the research program are still being addressed. The
    specific research outlined in the current proposal will be completed in
    fiscal year 2000.
        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 conducted site visits
    in 1996 and 1997 to meet with the scientists involved in the project
    and review the progress of the research. The 1997 review of the project
    indicated that the research is addressing the aquaculture industry,
    that the facilities are excellent, the principal investigators are well
    qualified, the experimental design is sound, 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. The researchers are asked to develop a
    research proposal consistent with the NSTC's Strategic Plans for
    Aquaculture Research and Development.
           aquaculture food and marketing development, west virginia
        CSREES has requested the university to submit a grant proposal that
    has not yet been received. The proposal will be put through the
    university's peer review process and is reviewed by the CSREES Program
    Manager. Since this is the first year of this project, CSREES will send
    the proposal out for external peer review. The researchers indicate
    that there is a regional and national need to evaluate marketing and
    product development for small scale aquaculture systems in rural
    communities. In addition there is a need to improve the efficiency and
    sustainability of these systems. The researchers also indicate that the
    proposed research is consistent with the NSTC's Strategic Plan for
    Aquaculture Research and Development. This research could also
    potentially be funded through the Fund for Rural America.
        The goal of this research program is to develop sustainable
    aquaculture production systems for small scale aquaculture producers in
    rural communities. Research is likely to focus on refining culture
    technologies, economics, marketing, value added processing and product
    quality. Researchers will utilize an integrated systems approach in
    addressing opportunities for these systems that may include biological
    and system design components.
        The work supported by this grant begins in fiscal year 1998 and the
    appropriation for fiscal year 1998 is $600,000. The university
    estimates that significant non-federal funding will be provided in
    fiscal year 1998 primarily from state sources to cover the salaries of
    the principal investigators. As the program develops, additional non-
    federal funding is expected.
        The research would be conducted at the University of West Virginia
    in Morgantown and at off campus sites with a variety of potential
    cooperators and the anticipated completion date for the original
    objectives is fiscal year 2000.
        The agency will evaluate the progress of this project on an annual
    basis. The university will be required to submit an accomplishment
    report each year when the new proposal is submitted to CSREES for
    funding. Since this is the first year of the program, CSREES will
    conduct an external peer review of the proposal.
                 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. In
    fiscal year 1996 the water quality component of the program was not
    included in the proposal. The project undergoes merit review by the
    university and by the CSREES Program Leader on an annual basis. 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 farmed-
    raised catfish industry accounts for over 55 percent of the total U.S.
    aquaculture industry. Research funded in this program is directed
    towards improved feeds and feeding strategies. In addition, research is
    directed towards acoustical monitoring and inventory of catfish in pond
    production systems.
        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 ratios of protein to energy in catfish feed formulations
    using conditions that closely reflect commercial production ponds.
    Vitamin supplements are also being evaluated. Research findings from
    this program have had a direct impact on feed formulations utilized by
    the commercial feed mills resulting in reduced cost of commercial feeds
    without reducing performance and productivity. 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; and fiscal years 1992-1993, $700,000 per year; fiscal year
    1994, $658,000; and fiscal years 1995-1997, $592,000 each year, and
    $642,000 in fiscal year 1998. A total of $9,045,000 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; $601,473 in fiscal year 1996; and
    $463,990 in fiscal year 1997. 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 is 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 2000.
        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 1997
    review indicated that the research addresses important opportunities in
    the farm-raised catfish industry, significant progress has been
    reported on specific research objectives, experimental design and
    scientific design are sound, there are excellent linkages between the
    researchers and the catfish industry leading to accelerated adoption of
    research findings, and the scientists involved in the project are
    leading authorities in this area of research. This program has had a
    tremendous impact on improving production efficiency in commercial
    catfish ponds through improved feeds and feeding strategies.
        The 1998 CSREES review will be completed within three weeks of
    submission of the proposal. The researchers are asked to develop a
    research proposal consistent with the NSTC's Strategic Plans for
    Aquaculture Research and Development.
       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. 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. dairy
    cattle 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 mid-west 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''. The Great Lakes Dairy Sheep Symposium was sponsored in 1995
    and 1996. A World Wide Web site was created 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. An analysis of the
    impact of changes in European dairy policies has been completed. The
    Institute sponsored a Minnesota-Wisconsin Dairy Policy Conference to
    provide insights into current agricultural programs and policy issues
    in the dairy sector of the U.S. economy.
        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 1995-1998, $312,000 per year. A total of $1,648,000 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 1994-1997.
        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 US 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. The Babcock Institute has remained true to its original
    objective of linking Wisconsin and the US to dairy industries around
    the world. 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, 1999.
        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. The objectives of the proposal are within the mission of the
    United States Department of Agriculture and the Cooperative State
    Research, Education, and Extension Service.
                   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.
    The project was subjected to a merit review.
        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. 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 fiscal year 1996 and the
    appropriation for fiscal year 1996 was $250,000, for fiscal year 1997,
    $500,000, and in fiscal year 1998, $600,000. The total appropriation is
    $1,350,000. Nonfederal funds for this project were $160,000 in 1996 and
    $174,500 in 1997.
        Research is conducted at Montana State University and the project
    is proposed for completion following fiscal year 2001. Progress toward
    the objectives have been reported by the principal researcher. The
    project was peer reviewed annually through the project approval
    process. Progress has been made toward the goal of identifying feed
    quality parameters for barley and quantifying it's value as cattle
    feed. Additional work will address the development of cultivars with
    improved feed quality.
        binational agricultural research and development program (bard)
        The Binational Agricultural Research and Development Program, or
    BARD, is a competitive grants program that supports agricultural
    research of importance to both the United States and Israel. The areas
    of research supported by the BARD program include plant and animal
    sciences, water and soil science, aquaculture, economics and
    engineering. Research projects submitted for funding must involve
    collaboration between U.S. scientists and Israeli scientists. Proposals
    competing for the fiscal year 1998 funding were due by September 1,
    1997. Those proposals are currently under review and funding decisions
    are expected by May of 1998. The funds available through the BARD
    Special Research Grants Program are used to support the U.S. portion of
    projects receiving BARD awards.
        All proposals receiving awards through the BARD Program have
    national, regional and/or local significance to agriculture in both the
    United States and Israel. Thus, applicants must convince the review
    panel of the global significance of the proposed work in order to
    receive funding. The fundamental research supported by the BARD program
    provides the knowledge base needed to solve important agricultural
    problems in the U.S. and Israel as they arise.
        The goal of the BARD program is to support fundamental research
    that is important to agriculture in both the U.S. and Israel. Many
    fundamental discoveries and accomplishments have been made in the
    research areas supported by BARD. These discoveries and accomplishments
    will lead to reduction of livestock diseases, increased livestock
    production, improved production of plants under harsh environmental
    conditions, and improved resistance of plants to disease. In the period
    between 1979-1997, a total of 796 grants were awarded, over 1,000
    scientific articles were published, and 8 patents awarded. As an
    example, work supported by the BARD program at the University of
    Florida resulted in the DNA sequencing of the citrus tristeza virus.
    This virus has caused major economic losses to the citrus industry in
    both the U.S. and Israel. The sequencing information can now be used to
    develop effective methods to protect citrus trees by creating safe
    strains of the virus that protect the trees from disease-causing
    strains.
        In 1977, an agreement was signed between the U.S. and Israeli
    governments which established BARD. An initial endowment fund of $80
    million was established through equal contributions from each country.
    Subsequently, that endowment was increased by $30 million for a total
    of $110 million. Funds for BARD are available from the interest earned
    on that endowment. In the early part of this decade, a reduction in
    interest rates, combined with increased research costs, impeded the
    ability of the BARD program to adequately meet the agricultural
    research needs of each country's producers and consumers. In fiscal
    year 1994, the Department directed that $2.5 million of funding, which
    had been appropriated for CSREES's National Research Initiative
    Competitive Grants Program, be used for the BARD Program to supplement
    the interest earned from the endowment. The supplementary funds were
    matched by Israel. In fiscal year 1995, Congressional language directed
    that CSREES again use $2.5 million of the National Research
    Initiative's appropriation for BARD, and in fiscal year 1996, the
    Department directed that a third $2.5 million increment of the National
    Research Initiative's appropriation be used for BARD. CSREES received a
    direct appropriation in the amount of $2 million for BARD in fiscal
    year 1997, and $500,000 in fiscal year 1998.
        The supplemental funds provided by CSREES are matched each year by
    the Israeli government. Each BARD grant funded by CSREES is for the
    U.S. portion of a collaborative project between U.S. and Israeli
    scientists. The Israeli portion of the project is supported by
    supplemental funds from Israel or from interest on the endowment.
    Therefore, a significant portion of each project is supported by non-
    federal funds.
        The objective of BARD is to support fundamental science of
    importance to agriculture in the U.S. and Israel. The generation of
    knowledge is an ongoing process. Every year new research projects are
    awarded funding through the competitive review process. The trust fund
    was established to provide a long-term source of funding to conduct
    priority research for both the U.S. and Israel. The creators of the
    BARD Program determined that a ten-year review should be conducted to
    ensure its relevance and impact. The ten-year external review panel y
    endorsed the success of BARD and recommended its continuance and
    enhancement. Due to the ongoing nature of scientific research, the
    annual funding of grant awards is focused n development and application
    of state-of-the-art science. Each grant project is funded for two or
    three years and the results feed into the greater scientific body of
    knowledge generated by these and other scientists.
        The USDA and the Israeli Ministry of Agriculture conducted a ten-
    year External Review of the BARD program and published the report in
    September of 1988. The objective of that external review was to
    evaluate the effectiveness of BARD and the suitability of its concept
    for bi-national collaborative research. The report concluded that the
    BARD program had achieved its objectives. The Report of the Review
    Committee concluded that ``BARD'' is working well, with efficiency.
    ``The project evaluation and management infra-structure has been
    paramount in allowing BARD's programs to evolve. The Report made
    recommendations relative to operational procedures for managing the
    grant proposals and emphasized the need for increasing the corpus of
    the endowment. BARD is now commissioning a twenty-year external review
    of its oepration to evaluate its efficiency and economic impact.
                          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 part of the market 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.
    This project undergoes merit review at the University of Missouri
    College of Agriculture. The initial work is being conducted 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 will result in
    increased investment in local communities, additional jobs, and
    increased value added in the farm and rural community sectors.
        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 at least $4.00 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 an increase of $9.6 million in total economic activity in
    the region. 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 for 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, 1996, 1997, and 1998 $152,000
    annually. A total of $799,000 has been appropriated. The source of non-
    federal funds is state appropriated funds. The level in 1994 was
    $7,310. The funding level 1995 was $74,854. Cost sharing by the
    University of Missouri each year for fiscal year 1996 and fiscal year
    1997 was $80,000 and $86,000 respectively. Total cost sharing for the
    project by the University of Missouri has been $242,224. 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 and 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 result in
    more value added opportunities for farmers and rural communities. Also,
    much of the work in commercializing biodiesel has been with the B20,
    twenty percent blend, with petroleum-based diesel. This biodiesel
    research is evaluating the use of biodiesel in much smaller blends,
    such as one percent or one-half percent. At this use level, biodiesel
    would be considered an additive rather than as a fuel extender. With
    this scenario, the primary benefit would be a cost competitive
    lubricant with superior performance characteristics, thereby making the
    product more valuable as a lubricant that as a fuel.
        The evaluation of using biodiesel as a complete fuel and in a blend
    has been met. Also, the cost of biodiesel, when produced by a new
    generation cooperative and used by members, has been evaluated.
    However, the most promising commercial uses appear to be when it is
    used for non-fuel uses and in very low blend levels. This project is
    evaluated on an annual basis based on the annual progress report,
    discussions with the principal investigator as appropriate, and agency
    participation in collaborative activities related to this project. The
    review is conducted by the cognizant staff scientist and it has been
    determined that the research is performed in accordance with the
    mission of this agency.
                                broom snakeweed
        Current research addresses several areas for broom snakeweed
    control, including efforts to understand 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. Grants are
    awarded competively based on a peer review panel administrated by an
    executive committee to researchers at the New Mexico State University.
    The project holds an annual update meeting whereby investigators
    present findings to outside scientists.
        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.
        Research is addressing three general areas which are ecology and
    management, biological control, and toxicology and animal health. One
    specific accomplishment is the biological control arena; several plant
    pathogens and insects are proving to be effective in broom snakeweed's
    control. Grazing management techniques and feeding studies to minimize
    toxicological effects on livestock have shown that a 10 percent diet of
    broom snakeweed did not impair fertility or semen characteristics in
    test animals which were 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; fiscal
    year 1997, $175,000; and fiscal year 1998, $185,000. A total of
    $1,684,00 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 appropriation in 1995, and an estimated $300,000 in state
    appropriation in each fiscal year of 1996 and 1997.
        Research is being conducted at New Mexico State University on the
    project since it 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.
        Each year the grant is peer reviewed with oversight by an
    administrative executive committee within the College of Agriculture
    and Home Economics at New Mexico State University. Additionally
    CSREES's senior scientific staff review the progress of the grant.
    Those reviews indicated progress in achieving the objectives.
            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 a farm 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. Two on-site reviews of the program have been conducted by the
    CSREES Project Officer and a third is planned during 1998. The animal
    and farm models have been published in peer reviewed scientific
    journals.
        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.
        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.
        Grants have been awarded from funds appropriated in fiscal year
    1993 for $134,000 and in fiscal year 1994 for $126,000. In fiscal years
    1995-1998, $113,000 was appropriated each year. A total of $712,000 has
    been appropriated.
        Research is being conducted at the University of Pennsylvania,
    College of Veterinary Medicine and the University researchers
    anticipate that work currently underway will be completed by September,
    1999. 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.
        The Center for Animal Health and Productivity project was last
    reviewed in June, 1997. 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 the
    USDA and CSREES, and the institution is well equipped and qualified to
    carry out the research project. The institution has made excellent
    progress towards the completion of the original goals of the project,
    but still must evaluate the effectiveness of the use of the new tools
    developed in reducing nutrient runoff from commercial dairy farms in
    the watershed of the Chesapeake Bay.
                  center for innovative food technology, ohio
        Funds from the fiscal year 1997 grant are supporting research
    projects on using neural network/fuzzy logic tools to develop a model
    of a growing and processing cycle for canning tomatoes, using membrane
    filtration to remove organic material from fluid dairy wastewater,
    combining several non-thermal processing techniques to sterilize liquid
    foods, developing a system to eliminate the contamination of turkey
    carcasses during slaughter, developing a non-contact, real time system
    for evaluating grain hardness, and developing a dry process to apply
    calcium carbonate, a hardening agent, to diced vegetables. Fiscal year
    1997 funds support research from February 1, 1997 through February 28,
    1998. CSREES has requested, but not yet received, a proposal in support
    of the fiscal year 1998 appropriation. Projects included for funding in
    the proposal submitted to CSREES have been reviewed by industry
    representatives for relevance and by industry and university scientists
    for scientific merit.
        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. The principal researcher believes that, although the initial
    impact of this research will be regional, the recipient organization of
    this grant is part of a technology transfer network and proactively
    seeks opportunities to deploy technologies developed through this
    research to the food industry on a national basis.
        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 developed a model for
    predicting the harvesting time that will optimize product quality and
    economic return to the grower, processor, and consumer. The fecal
    contamination control project has led to the development of a system in
    current operation that allows a turkey processor to operate within the
    zero fecal material tolerance guidelines established by the Food Safety
    and Inspection Service. The filtration project will allow fluid milk
    processors to lower their costs and increase water quality at municipal
    treatment systems. The sterilization project will lower processing
    costs by increasing the shelf life of liquid products.
        The work supported by this grant began in fiscal year 1995. The
    project received appropriations of $181,000 in fiscal years 1995
    through 1997 and $281,000 in fiscal year 1998. A total of $824,000 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. In fiscal year 1997, non-federal funds
    included $35,000 in state funds and $95,000 in industry memberships.
        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. At the current funding level, it is
    anticipated that funding will be required through fiscal year 2000 to
    achieve the goal of self-sufficiency.
        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 1998 proposal, the last review of the proposal was
    conducted on March 4, 1997. 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 Center for Rural Studies Project involves applied research
    focused on developing and refining social and economic indicators used
    to evaluate the impact of economic development programming and
    activities. They are perfecting a delivery format for technical
    assistance for community and small business development. A major
    component of current research relates to utilization of the World Wide
    Web as a delivery vehicle. Project proposal undergoes a merit review
    within the agency.
        The original goal was to create a database and analytical
    capability for rural development programming in Vermont. Examples of
    past accomplishments include maps presented to target child hunger
    programs, targeted areas for other types of rural development program
    intervention, analytical reports to guide the development of retail
    shopping areas, an ``Economic Handbook for Vermont Counties'', and
    strategies for using the World Wide Web to disseminate information.
        The grant was initiated in fiscal year 1992. Appropriated amounts
    are: fiscal year 1992-93, $37,000; fiscal year 1994, $35,000; fiscal
    year 1995-98, $32,000 for total appropriations of $237,000. Fiscal year
    1991 included $91,130 in state matching funds. Fiscal years 1993,
    $143,124; 1994-96, $3,547 state matching funds. Fiscal years 1997 state
    dollars were $2,931 plus researcher's salary. Fiscal year 1998 dollars
    are not known at this time.
        Applied research and outreach is being carried out through the
    University of Vermont. and the original completion date was September
    30, 1993. The original objectives of this research have been met, and
    additional objectives will be completed by August 31, 1998. A proposal
    for fiscal year 1998 has not been received to date.
        The agency evaluates the merit of research proposals as they are
    submitted. No formal evaluation of this project has been conducted. The
    principal investigators and project managers submit annual reports to
    the agency to document impact of the project. Agency evaluation of the
    project includes peer review of accomplishments and proposal objectives
    and targeted outcomes.
                      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 good balance between basic and applied research. The university
    awards grants based on an internal competitive peer review and the
    CSREES Program Manager reviews the proposal each year. 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.
        The original research goal was to generate new knowledge that can
    be utilized by the aquaculture industry to address serious 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. Progress has been
    made in developing controlled artificial spawning techniques and
    refining the nutritional requirements of striped bass. Scientists
    continue studies to optimize water quality in closed systems.
    Researchers indicate that intermediate salinity levels may improve the
    feed conversion efficiency in juvenile striped bass.
        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 1995-1998 $370,000, each year. A total of $3,572,000 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; in fiscal year 1996, $536,000; and in fiscal year 1997
    approximately $400,000. 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 and the
    original specific research objectives were to completed in 1993. 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 2000.
        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 1997
    review indicated the proposal was well written with objectives clearly
    stated; excellent progress is reported on previous work; scientific and
    technical expertise is excellent; and the proposal addresses high
    priority research needs. The researchers are asked to develop a
    research proposal consistent with the NSTC's Strategic Plans for
    Aquaculture Research and Development.
                          citrus decay fungus, arizona
        The research being funded under this proposal is crucial to the
    development of effective management strategies for Coniophora
    eremophila, brown wood rot of citrus. Basic studies will include
    research on the life cycle of the fungus and its secondary hosts.
    Chemical control methodologies will be conducted to determine if any
    commonly available fungicides are effective and tree management for
    maintaining tree vigor will be determined. The decline appears in
    certain scion/rootstock combinations and therefore the
    incompatibilities of graft unions will be investigated. This project
    was not awarded competitively but will undergo peer review at the
    university level and merit review at CSREES. The principal researcher
    believes this research is of local need as of now but could potentially
    be a problem on lemon trees in other desert citrus production areas of
    the United States.
        The objectives of this research to be conducted are to determine
    the extent of brown heartwood rot in mature lemon trees in Arizona;
    determine the relative susceptibility of various types of citrus to the
    fungus; evaluate the possible effects of different rootstocks on brown
    heart rot development; determine the fungus origin and secondary desert
    hosts; and explore the potential chemical control of the disease.
        Fiscal year 1998 was the first year funds were appropriated for
    this grant. A total of $250,000 was appropriated. The non-federal funds
    and sources provided for this grant is $110,155 in state appropriations
    for 1998.
        The research will be conducted at the University of Arizona,
    Tucson, and the field studies will be carried out by the extension
    facility at the Yuma Agricultural Center, Yuma, Arizona and the
    anticipated completion date for the original objectives is 1999. This
    is a new project and will be evaluated when received by the agency.
                               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. Funds are awarded
    competitively among scientists working at this location. The proposed
    research under this project has regional significance for coastal zone
    land in the South Eastern US on potential new plants for the growing
    market for ornamentals and speciality fruits and vegetables for the
    area. 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 began in fiscal year 1997 and
    funds appropriated as follows: fiscal year 1997, $200,000 and fiscal
    year 1998, $250,000. A total of $450,000 has been appropriated. The
    non-federal supporting this project in 1997 was $50,150.
        Research will be conducted at the University of Georgia coastal
    garden and this project was initiated in 1997 with the anticipation of
    meeting the major objectives in four years. A [eer panel has been
    established to set priorities and review subproposals from eligible
    scientists at the Georgia Agricultural Experiment Stations. Subprojects
    are selected competitively based on scientific merit from among
    proposals that address high priority issues associated with production
    of new cultivars for the region. The combined proposal is then reviewed
    by CSREES for scientific merit. This review process has been used for
    both fiscal years 1997 and 1998.
              competitiveness of agriculture products, washington
        Competitiveness of forest products research is conducted at the
    University of Washington. Competitiveness of food products is conducted
    at Washington State University. Export opportunities for forest
    products continue to increase although they have been substantially
    impacted by environmental restrictions on harvest and the Asian
    economic crisis. Research has been focused on the more complete
    transfer of U.S. light frame construction building technology primarily
    to Japan in direct support of the efforts to deregulate the Japanese
    housing sector, thereby opening their markets. Research has also been
    focused on the causes of declining wood resource availability and
    forest management alternatives that can better satisfy environmental
    goals with less negative impacts in serving global consumer needs for
    products. Research project priorities are first prioritized by an
    outside Executive Board. Faculty then review the technical merits of
    each project proposal.
        Export of food improves the global competitiveness of the Pacific
    Northwest region's value-added agricultural products. Research results
    are disseminated 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 technology that can add
    value to U.S. agricultural products and to meet the changes brought by
    international trade agreements. This grant is awarded competitively at
    the state level. The agency's last formal review was in 1992.
        While there is a very large opportunity to increase the export of
    materials and building systems to Asian markets, the companies are
    generally small and are not able to provide their own research.
    International markets have a long history and cultural appreciation for
    different construction technologies that are both higher cost and lower
    in construction quality than U.S. technology. Research on these market
    opportunities has been critical to the deregulation of foreign markets,
    development of acceptable product and building standards, understanding
    the quality and service needs, and the understanding and training in
    the customization of U.S. construction technology to foreign consumer
    values.
        Research on forest management alternatives for the Pacific
    Northwest has also demonstrated that more wood, higher quality wood,
    and substantial increases in critical forest habitats can be produced
    using more advanced technologies, thereby reducing the substantial
    economic and market share losses that have been caused by harvest
    constraints to protect certain species.
        The goal of the research in both wood products and food is to
    provide the information on markets and product technologies that can
    open higher valued international markets to U.S. exporters. Critical
    information is needed to support the deregulation of foreign markets,
    the education of foreign purchasers on the advantages of U.S. products,
    the education of potential U.S. exporters on the substantially
    different quality and service requirements for serving foreign markets.
    The food production research has given Pacific Northwest producers
    high-value options never before available, such as Wagyu beef, which
    retails at twice the price of traditional U.S. beef; azuki beans, which
    sell for 50 percent above other dry beans; and wasabi radish, which
    sells for up to $60 per pound and is especially suited to small
    holdings. Burdock is arousing a lot of interest among Japanese buyers.
    In food processing, the Center has found beneficial uses of new
    technologies, such as hurdle techniques for shelf-stable foods, pulsed
    electric systems for pasteurization, microwave for drying, and high
    hydrostatic pressure for cheese and egg processing.
        The work began in fiscal year 1992. The appropriation for fiscal
    years 1992-1993 was $800,000 each year; fiscal year 1994, $752,000; and
    fiscal years 1995-1998, $677,000 each year. A total of $5,060,000 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 $2,000,000 gift of a ranch due to the
    International Marketing Program for Agricultural Commodities and Trade
    Center's research on Wagyu cattle, for a total of $3,637,970 in 1995;
    $844,000 State appropriations, $45,000 product sales, $900,000
    industry, and $45,000 miscellaneous, for a total of $1,834,000 in 1996;
    and $876,000 State appropriations, $1,606,000 industry, for a total of
    $2,482,000 in 1997.
        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. The project
    is projected for 3 years duration and, therefore, should be completed
    following fiscal year 2000. New opportunities arise continuously as
    international markets undergo change.
        Two evaluations of the Washington State University component of the
    project were conducted in 1992 by the U.S. Department of Agriculture.
    The State of Washington Legislative Budget Committee gave the
    Washington State Center exemplary marks for meeting its objectives. We
    anticipate a follow-up evaluation in 1999. On-site reviews are
    conducted annually of the University of Washington component of the
    project through annual meetings of the project's executive board,
    attended by the agency's staff. Both components are reviewed annually
    by the agency. The project is meeting the key objective of trade
    expansion through innovative research. The University of Washington
    project was formally reviewed by the agency in 1991. State reviews were
    completed in 1992 and 1994. A formal review by the University was
    completed in 1997. A broad survey of constituents impacted by the
    research was completed, resulting in a very favorable review of the
    Center's activities and a recommendation to continue this research.
    Another state review is currently scheduled to start this coming year.
                          cool season legume research
        The Cool Season Legume Research Program involves projects to
    improve efficiency and sustainability of pea, lentil, chickpea and fava
    bean cropping systems collaborative research. 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. This project is
    subjected to a merit review by peer scientists. The principal
    researcher indicates that 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.
        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; and fiscal years 1996 through 1998, $329,000 per year. A
    total of $2,603,000 has been appropriated. The nonfederal funds
    provided for this grant were as follows: 1991, $304,761 state
    appropriations, $14,000 industry, and $18,071 other nonfederal; 1992,
    $364,851 state appropriations, $15,000 industry, and $14,000 other
    nonfederal; 1993, $400,191 state appropriations, $19,725 industry, and
    $10,063, other nonfederal; and 1994, $147,607 nonfederal support.
    Nonfederal support for 1995 was $150,607, for 1996 it was $386,887, and
    for 1997 it was $384,628.
        Research has been conducted at 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. This research
    has provided vital information which is already being used to improve
    production management. However, a number of critical issues related to
    insect and disease control as well as crop quality remain to be
    addressed. Breeding for insect and disease resistance is given the
    highest priority, while crop management alternatives to help reduce
    disease and insect pest problems will continue to be studied.
                             cotton research, texas
        CSREES has requested the university to submit a grant proposal that
    has not yet been received. The proposed project is expected to help
    support a broad based program to address priority research needs of
    cotton grown on the Texas high plain. The goal of this project is to
    improve cotton production in West Texas.
        The work supported by this grant begins in fiscal year 1998 and the
    appropriation for fiscal year 1998 is $200,000. Nonfederal funding for
    the project is not yet known.
        The work will be conducted at the Texas A&M University Research and
    Extension Center, Lubbock and Texas Technical University Campus. The
    initial phase of this work is projected to require 3 years, this
    project is just starting this year, and results are not yet available.
    The proposal will be evaluated by the institution project approval
    process.
              cranberry-blueberry disease and breeding, new jersey
        The 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 fruit-
    rotting 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 finding here are being shared with experts in
    Wisconsin, Michigan, and New England.
        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 with wild blueberry
    accessions resistant to secondary mummy berry infections were moved
    into advanced testing. 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 maggots 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 cranberry were
    determined. It is likely that resistance to fruit rot 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
    year 1988-1989, $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 1995-1998, $220,000 each year. A total of $2,989,000 has
    been appropriated. State and non-federal sources are providing funds in
    the amount of $95,000 for this grant in fiscal year 1998.
        This research is being conducted at the New Jersey Agricultural
    Experiment Station. The 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 estimated that an
    additional five to nine years will be required.
        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 materials and environmentally-balanced pesticides being areas of
    major impact. Some specific accomplishments included differentiating
    isolates of a fungus classified into different fungicide sensitivity
    groups using DNA-based probes, testing blueberry varieties with DNA for
    leafhopper resistance, and development of an infection assay for
    evaluating cranberry germplasm for Phytophthora root rot.
                                critical issues
        These funds support research on critical issues related to new or
    emerging pests and diseases of animals and plants. The program is
    expected to initiate research in a short time period until other
    resources can be secured to address the issue. The program began in
    fiscal year 1996 when potato late blight and vesicular stomatitis in
    animals were the two targeted emerging problems chosen for funding.
    Funding for vesicular stomatitis research was continued through fiscal
    year 1997 in an effort to identify either insect carriers of the virus
    that could transmit the disease among animals or the wildlife
    reservoirs of the virus which could contribute to initiation of future
    outbreaks. In fiscal year 1997, the critical issues funding continued
    to support research on potato late blight so that growers will be able
    to manage disease outbreaks more effectively with integrated pest
    management programs. Research is being conducted to identify molecular
    markers for specific strains of the fungus, develop epidemiological and
    prediction models, and educate growers about improved management
    approaches. Proposals for this research program are reviewed by
    scientific peer panels utilizing both USDA and non-USDA staff members.
    When appropriate, investigators may be asked to revise or improve
    certain components of the project to ensure that it meets the highest
    priority issues.
        Vesicular stomatitis is of national impact due to its similarity to
    foot and mouth disease and the negative effect on movement of horses,
    cattle and swine during an outbreak. The last outbreak in 1995 had a
    very large impact on the economics of horse and cattle owners in the
    far western US. Since 1992 new, highly virulent strains of the potato
    late blight fungus Phytophthora infestans caused severe losses in
    potato and tomato production throughout the United States, resulting in
    what some experts term a national crisis. From 1993 to 1995, a series
    of meetings involving growers, consultants, industry, academia and
    government assessed the growing problem and participants concluded that
    extraordinary steps were needed to mobilize research efforts that would
    help address the problem in the near term.
        In animals the goal was to discover natural reservoirs of the virus
    and insects which are capable of transmitting the disease among
    animals. At this time, we have been unable to find significant wildlife
    hosts which could serve as a reservoir for the virus during periods
    between outbreaks nor have the researchers been able to isolate the
    virus from insects in areas affected during the most recent outbreak.
    Research was initiated to provide growers with the knowledge and
    technologies they need to reduce economic losses resulting from potato
    late blight with less reliance on pesticides. Research initiated with
    fiscal year 1996 funds is making progress in developing modeling tools
    and management approaches that are an important step towards reducing
    the devastating effects of late blight. The National Late Blight
    Fungicide Trial provided important information on the efficacy of an
    array of fungicide programs. A World Wide Web site was established to
    provide growers, researchers and industry with the latest information
    on management of potato late blight. Funds appropriated for fiscal
    years 1996-1998 were $200,000 for each year, for a total appropriation
    of $600,000 to date.
        The vesicular stomatitis work is being conducted at the University
    of Arizona and Colorado State University. The potato late blight work
    has been conducted at Washington State University, Oregon State
    University, University of Idaho, University of Wisconsin, and
    Pennsylvania State University, and North Carolina State University.
        The Critical Issues funds are intended to support the initiation of
    research on issues requiring immediate attention until other, longer-
    term resources are available. The objectives of the projects are short-
    term and are expected to be completed within a 1-2 year period. This
    has been true for the vesicular stomatitis and potato late blight work.
    These projects have been reviewed to ensure compliance with the
    original goals during fiscal year 1997. All projects were reviewed for
    scientific merit before funding decisions were made. Also, scientists
    being supported with these funds are in close contact with CSREES'
    National Program Leaders in these areas so that the agency is kept
    abreast of developments as they occur. In addition, site visits are
    arranged when convenient to include as part of other official travel to
    that state. Project locations have been visited and progress reports
    submitted to document expected progress. Results are also shared with
    APHIS scientists to ensure implementation of findings and verify that
    we are meeting their needs.
             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 assess the
    economics of alternative breeding and rearing systems for goats in the
    southeastern region of the U.S., to study the incidence and impact of
    intestinal parasites, and to develop least-cost health management
    strategies for parasite control. 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.
        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
    1995-1998. A total of $1,206,000 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 1999.
    The Dairy/Meat Goat Research grant was reviewed in June, 1997 and it
    was determined that the institution is well equipped and qualified to
    carry out the research project.
                    delta rural revitalization, mississippi
        The Delta Rural Revitalization, Mississippi Project involves
    applied research and outreach focused on creating new and expanded
    economic development opportunities for the Mississippi Delta region.
    The project has gone through several phases in the delineation of a
    strategy for long range development within the 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 and includes to development and
    refinement of data bases and development statistics. The proposals are
    submitted for internal review and evaluation within the agency.
    Recommendations are presented to enhance impact on regional and
    national agendas and provide greater impact on targeted region.
        This is an on-going pilot to demonstrate the effective development
    and implementation of applied research, training, education, and
    technical assistance related to job and business development as a
    development strategy. The principal researcher believes that the
    databases, technical assistance, and analytical capability will
    increase the effectiveness of economic development and entrepreneurial
    activity in the region. The applied research and outreach project was
    designed to increase ability to strategically guide economic
    development through target industry attraction. They developed an
    analytical baseline for the Delta region to benchmark economic
    development progress and to profile potential arenas of opportunity. An
    entrepreneurial forum was established to help new business ventures
    with start-up advice and assistance. A venture capital association was
    formed to help both inventors and businessmen find capital resources to
    carry out development initiatives. The emphasis of the project is now
    shifted to technical assistance for existing industries.
        Grants have been awarded from appropriated funds in the following
    amounts per year: fiscal year 1989, $175,000; fiscal year 1990,
    $173,000; fiscal year 1991-93, $175,000; fiscal year 1994, $164,000;
    and fiscal year 1995 to 1998, $148,000 per year. A total of $1,629,000
    has been appropriated and awarded. 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; fiscal year 1998, $57,404. Reports for other years are
    incomplete at this time.
        Applied research and outreach is being carried out through
    Mississippi State University and sub-contractors. The original
    completion date was September 30, 1990. The original objectives of this
    research have been met. The additional objectives being presented for
    the current year should be completed by September 30, 1999.
        The agency evaluates the merit of research proposals as they are
    submitted. No formal evaluation of this project has been conducted. The
    principal investigators and project managers submit periodic reports to
    the agency to document impact of the project. Significant suggestions
    have been offered to improve the relevance and impact of this project.
    Time lines tend to lag on targeted accomplishments. An assessment of
    the project was conducted by the Social Science Research Center at
    Mississippi State University and a report compiled in November, 1996.
                          drought mitigation, nebraska
        This grant supports the National Drought Mitigation Center program
    in the School of Natural Resource Sciences 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. This grant has not been awarded
    competitively, largely because of the national and international
    reputation of the University of Nebraska for research in the field of
    drought mitigation and management. The grant proposal is reviewed
    annually by the University of Nebraska for its scientific merit.
        Studies conducted by the principal researcher show that drought is
    a normal feature of the climate of virtually all regions of the United
    States. The Federal Emergency Management Agency has recently estimated
    that annual losses attributable to drought in the United States are
    between $6-8 billion. Losses resulting from drought have increased from
    an estimated annual loss of $7 million to $1.2 billion in the mid-
    1970's. Drought impacts are escalating in response to increasing
    demands for water and other natural resources, increasing and shifting
    population, new technologies, and social behavior. These impacts are
    diverse and affect the economic, environmental, and social sectors of
    society. This fact was reinforced dramatically in 1996 in the
    Southwestern United States. Impacts in Texas alone were estimated to be
    more than $5 billion.
        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, local, and tribal level. Rather than the ``crisis management''
    approach of the past, a ``risk management'' approach is needed where
    the emphasis is on preventive measures, such as contingency planning,
    mitigation strategies, and public education. Until the creation of the
    Center in 1995, little attention has been focused on drought among the
    long list of natural hazards that affect the Nation. The Center is
    receiving non-federal funds in support of this research from the
    University of Nebraska. In addition, the Center is attracting support
    for specific projects that are an integral part of its mission from
    federal and state sources.
        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 and is delivering information to a diverse
    audience of users through its home page. Over 50,000 users now access
    the Center's home page each month. The Center's award winning 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 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. In addition to
    providing timely and relevant information on drought severity and
    alternative response, mitigation, and planning measures, the Center
    participated in the Multi-state Drought Task Force workshop organized
    at the request of President Clinton and helped 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 Drought Task Force. This task force also made
    recommendations to reduce the risks associated with drought in the
    western United States.
        There have been several notable outcomes of the Western Governors'
    Association actions and the Center has been closely associated with
    each of these outcomes:
        1. A Memorandum of Understanding was signed between Western
    Governors' Association and key federal agencies to develop a
    partnership to improve drought management and preparedness in the West.
        2. A Western Drought Coordination Council was formed in 1997 to
    implement these actions. The National Drought Mitigation Center is
    serving as headquarters for the Council and the Director of the Center,
    is serving as the administrative director of the Council.
        3. The Center has worked closely with both the Senate and the House
    in the formulation of the National Drought Policy Act. This bill was
    passed by the Senate in November 1997 and will be considered by the
    House in early 1998. This bill would create a Commission to review
    federal, state, and local drought programs and make recommendations to
    the President and Congress on the needs for a national drought policy.
    The Commission's work will be done in consultation with the National
    Drought Mitigation Center.
        4. The Center has been organizing and conducting a series of
    training workshops on drought contingency planning. The purpose of
    these workshops is to train representatives of local, tribal, state,
    and federal governments on how to develop a drought contingency plan.
    Two workshops were held in 1997; three workshops are planned for 1998.
        5. The Center continues to work with specific states and tribal
    governments on drought contingency planning efforts. The number of
    states with drought plans has increased dramatically since 1982--from 3
    to 27 states; and the Director of the Center has been instrumental in
    this increased attention to drought planning at the state level. His
    research is the basis for recent drought planning efforts in Texas and
    Oklahoma. In addition, the Center will begin working with New Mexico in
    1998 in the development of a long-term drought mitigation plan.
        The work supported by this grant received an appropriation of
    $200,000 in fiscal years 1995 through 1998, for a total appropriation
    of $800,000. 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, and $61,545 in fiscal year 1997. The
    University of Nebraska will contribute $67,819 in fiscal year 1998.
        The research will be conducted at the University of Nebraska-
    Lincoln. The research conducted under this project is being undertaken
    under a series of nine tasks. Significant progress on each of these
    tasks has been made, but these activities are ongoing. The information
    clearinghouse has been created, but new information and documents are
    continuously added to the home page in response to users' needs and
    requests. In addition, the drought watch section is updated monthly to
    assist users in evaluating current climate and water supply conditions.
    Research on new climatic indices to monitor drought and water supply
    conditions are being tested and mitigation technologies and existing
    state drought plans are continuously evaluated. New activities are also
    being initiated in response to the growing interest and awareness in
    drought mitigation in the United States and elsewhere. For example, the
    activities of the Western Drought Coordination Council provides the
    Center with a broadening range of activities on an annual basis.
                              ecosystems, alabama
        This is a collaboration between Auburn University, Faulkner State
    Community College, and the Alabama Southern Community College. The
    Faulkner State Community College's research will focus on marine and
    estuarine environmental issues, including water quality, habitat loss,
    non-point source pollution and watershed management in the Gulf of
    Mexico region. The Alabama Southern Community College's research will
    focus on issues facing the forestry industry in the southeastern United
    States, including the reduction of chemical discharge from wood and
    pulp processing. Goals for this project are still being refined, and no
    work on this project has been initiated. However, we anticipate that
    work will begin during the Spring 1998, and the appropriation for
    fiscal year 1998 is $500,000.
        Research will be conducted at the Faulkner State Community College
    Aquaculture Center and the Alabama Southern Community College Center
    for Forestry, Paper, and Chemical Technology. Objectives for the
    project and a timetable for completion should be included as part of
    the proposal, which has not been received by the agency. This project
    has not yet been evaluated, as it is still in the early stages. The
    first evaluation of the project will be a review of the research
    proposal, and will be conducted when the proposal has been received by
    the Agency.
                        environmental research, new york
        The environmental research in New York has several major goals.
    These are: (1) to better understand the impacts of nutrient flows,
    principally nitrogen, from agriculture on non-agricultural ecosystems,
    forests, wetlands, and water resources in mixed ecosystem landscapes;
    (2) to improve knowledge of agricultural contributions to greenhouse
    gas emissions and effects of projected climate change on crop
    production; and (3) to develop innovative approaches and technologies
    for improving the efficiency of agricultural production and/or reducing
    environmental impacts of agriculture. New goals for the coming year
    include: (1) to improve understanding of the impacts of land
    application of biosolids on the sustainability of New York agriculture
    and on water quality, and to develop management practices and
    guidelines for sustainable use of biosolids in New York agriculture;
    and (2) to evaluate spatial and temporal variability of crop yields
    within fields and to develop management practices that increase
    productivity, increase the efficiency of use of inputs, and reduce
    environmental impacts of agriculture.
        Interactions between agriculture and the environment are many and
    complex and require multi-disciplinary efforts to both understand the
    interactions and to develop effective management strategies.
    Traditionally, research and research funding, has been discipline-based
    and, hence, uni-dimensional. Programs supported by the special grant
    are multi-disciplinary in nature, involving technical scientists from a
    range of disciplines, together with social scientists and economists.
    Additionally, translation of knowledge from plot or field studies to
    larger scales, such as landscape to regional and global, is needed to
    provide information that is useful to policymakers.
        One goal of the program is to identify impacts of nitrogen flows
    from agricultural lands on adjacent natural ecosystems, forests and
    wetlands, and water resources and to devise management strategies to
    minimize these impacts. Nitrogen leaching from maize-based cropping
    systems has been shown to be higher when organic sources of nitrogen,
    manures, and plow-down alfalfa are used as nitrogen sources for crop
    growth compared to use of inorganic fertilizers. Attempts to use an
    interseeded cover crop to capture and recycle excess nitrogen left over
    after the cropping season were only marginally successful due to
    limited growth of the cover crop following maize harvest in New York's
    climate. Studies demonstrated that protection of groundwater resources
    in New York from contamination by nitrate in areas of intensive dairy
    farming must rely on dilution by water from non-intensively used areas
    within the watershed and on ammonia volatilization from manure. A
    computer based nitrogen decision support system to improve
    recommendations for on-farm nitrogen management was developed and
    implemented in New York.
        A second goal of the program is to investigate several interactions
    between agriculture and climate change. Studies have included:
      --Impacts of agricultural use of land on methane fluxes to/from
            soils;
      --Effects of interactions between elevated carbon dioxide and
            environmental variables on yields of vegetable crops;
      --Effects of climate variability on crop production;
      --Agronomic and economic effects of gradual climate change on grain
            yields, cropping patterns and food prices; and
      --Carbon sequestration in agricultural soils.
        Studies of methane fluxes to/from soils showed that northern
    hardwood forests are both a source and a sink for this powerful
    greenhouse gas and overall may be a net source of methane. In contrast,
    upland agricultural systems were consistently found to be a sink for
    methane; thus the surface land smoothing and improved drainage of
    upland agricultural lands has had a mitigating effect on atmospheric
    methane levels. Flooding land for rice production is known to create a
    substantial source of methane. Use of legume green manures to supply
    nitrogen in an organic production system increased methane emissions
    two-fold, creating a conflict between a sustainable agriculture
    practice and the environment.
        Climate, crop production, and economic models were linked to
    provide an integrated framework for assessment of the impact of
    climatic change at the farm level. The model projected that a grain
    farm in a cool climate, Minnesota, could effectively adapt to climate
    change; whereas a similar farm in a warmer climate, Nebraska, would
    have reduced crop production and income.
        No-tillage agriculture was shown to increase preservation of
    existing soil organic carbon but accumulation of carbon derived from
    crop inputs was higher with conventional tillage. Inputs of carbon to
    soils from root exudates and residues were found to be more important
    to carbon sequestration in soils than were residues from the tops of
    plants. The effects of soil texture and soil aggregation, coupled with
    tillage management, on carbon sequestration in soil organic matter are
    being investigated.
        A third goal of developing innovative approaches to management,
    systems, and technologies has had the following components:
      --Whole farm analysis and planning;
      --Use of weather forecasts to predict weed management impacts on corn
            production;
      --Soil quality changes in the Chesapeake farms sustainable
            agriculture project; and
      --Use of constructed wetlands to mitigate phosphorus run-off from
            barnyards.
        Assessments of nutrient use and management on farms have been
    carried out in Cayuga County, New York, and in Pennsylvania, in
    conjunction with Rodale Institute. In New York, mass nutrient balance
    data on dairy farms has shown that, because of nutrient imports in feed
    and inadequate cropland area, nutrients excreted in manure exceed crop
    requirements. Coupling of models for nutrient management and animal
    diets was used to develop improved management practices. On one farm,
    production of nitrogen in manure was reduced 25 percent by more
    accurate balancing of animal diets and on a second farm modification of
    the cropping pattern reduced the imported nitrogen in feed by 13
    percent. In Pennsylvania, it was demonstrated that management of a
    mixed grain and livestock farm without external chemical inputs was
    economically feasible. Appropriate crop rotation was found to be the
    key element.
        Soil quality assessments at the Chesapeake farms sustainable
    agriculture project on Maryland's Eastern shore, where various cropping
    systems are being compared with the conventional corn-soybean rotation,
    have shown that soil quality improves as the cropping system becomes
    more complex, involves less tillage, and has more organic inputs.
        Mitigation of phosphorus in runoff from barnlots by a constructed
    wetland system is being evaluated on a 500-head dairy farm in New York.
    Different substrates in the wetland beds are being evaluated, including
    soil, limestone, norlite, and wollastonite. To date, the soil and
    norlite materials are proving to be the most effective at phosphorus
    removal.
        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 1998, $486,000 each year. A total of $3,931,000 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 5-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 govern-
    mental perspectives and needs. Estimated completion dates for current
    program elements are:
    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 agriculture project (a 10-year project)

        The project was peer reviewed in 1997 and 1998. Overall, the
    project was rated very high. Specific ratings included the following:
        1. Outstanding scientific merit.
        2. Appropriate methodology
        3. Excellent previous accomplishments.
        4. The project has potential for significant impact concerning the
    relationship of agriculture to global change.
        5. The proposal is well conceived and well written.
                  environmental risk factors/cancer, new york
        The American Cancer Society estimated that over 184,000 women in
    the United States were 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. This project,
    emphasizing risk reduction prevention information, will work at filling
    that void.
        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, pubic 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 began in fiscal year 1997, and
    appropriations were as follow: fiscal years 1997-1998, $100,000 for a
    total of $200,000. 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) were requested for fiscal year
    1997.
        Research is conducted at the Cornell University, Ithaca, New York
    and the anticipated completion date is March 31, 1999. As a relatively
    new project, an evaluation has not been conducted, although the
    proposal is currently under review. Periodic progress reports have been
    made throughout the year and the project is moving towards achieving
    its desired goals. A final evaluation will be made after March 31,
    1999.
                        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 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.
        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-
    1998, $285,000 each year. A total of $2,954,000 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, for 1996 were $120,000, and
    for 1997 were $190,510.
        The research is being done at Oklahoma State University and 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.
        This program has not been subjected to a comprehensive review.
    However, each year's funding cycle is reviewed internally by CSREES
    scientists for scientific merit and relevance. Results from this
    project are currently being used by ranchers to help with management
    decisions concerning stocker cattle grazed on wheat that will be
    harvested for grain. Current work is designed to refine the current
    information and identify wheat cultivars and grazing management for
    optimum economic return.
                       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 US Environmental
    Protection Agency (EPA) review status of pesticides, crop losses caused
    by pests, status of minor use registrations (IR-4), current research in
    progress, and priorities of IPM implementation teams are components of
    the Pest Management Information Decision Support System (PMIDSS). With
    the information in the current data bases, commodity/pest problems are
    prioritized using a science-based logic. 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 recognizes IPM as
    helping to provide workable solutions to pest problems. The decision
    support system is incorporating increased information to address these
    needs. The PMIDSS 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 identify
    crop protection gaps and to find alternatives to pesticides under
    regulatory review or those being lost due to pest resistance. The
    system has identified priorities for the Pest Management Alternatives
    Program request for proposals for the past two years. 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-setting process and the ultimate result
    is to help insure that farmers have adequate alternatives for managing
    pests at the specific local level.
        The goal of the PMIDSS 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 were
    reported for inclusion in the decision support system. Twenty-five
    minor commodities on which 40 specific pests were identified in the
    1997 request for proposals. Results were also used by the regional IPM
    request for proposals. The Pest Management Alternatives Program
    WorkBench ( a major component of PMIDSS) has been refined and placed on
    the CSREES local area network and is available to all pest management
    national program leaders.
        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 years 1997-
    1998, we are expending $177,000 per year to Purdue University and
    Argonne National Laboratory. The total resources to date are $887,425.
    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 part of the Pest Management Information Decision Support
    System.
        The work is carried out by the Argonne National Laboratory which
    has a Washington, D.C. office where information, decision support
    personnel are housed and there are frequent interactions between CSREES
    and other USDA staff. Interactions and information is provided by every
    state in our system.
        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.
        PMIDSS underwent a formal review in June, 1997 and a major piece of
    the system, the Pest Management Alternatives Program WorkBench was
    reviewed by regionally selected land grant scientists in November,
    1997. The June review recommendations included: focus of the system on
    the needs of the Pest Management Alternatives Program, delivery of the
    software product to USDA, and development of a plan to sustain the
    system in a user-friendly, widely available format. Evaluation of the
    WorkBench in November brought the following comments and
    recommendations: the WorkBench provides good linkages to relevant data
    bases and brings together essential information on pest management
    issues; the system should be placed on the World Wide Web for greater
    access and utility; tell potential users that it is available; and
    invest in high quality data bases to support and enhance data integrity
    of the WorkBench. In addition, we have a PMIDSS guidance committee that
    gives us input on an ongoing basis.
             farm and rural business finance: illinois and arkansas
        Federal funding for this project provides partial support for the
    Center for Farm and Rural Business Finance which conducts an on-going
    program of research and information focused on financing of farms and
    rural businesses in the United States. The long-range plan of work for
    this program focuses on three principal areas: (1) financial management
    and performance or rural businesses; (2) research on financial markets
    and credit institutions serving rural America; and (3) the impact of
    public policies and programs on the financial health of rural America.
    The need for the program is national in scope with some of the
    individual projects focusing on regional or local needs associated with
    particular commodities or situations. The need is greater now than when
    the program was first initiated because government commodity programs
    which reduced financial risk for agricultural producers have been
    substantially altered. 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. 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.
        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 are examining time and risk attitudes of decision
    makers, risk-adjusted returns on Illinois farms, management performance
    and the role of nontraditional lenders, financial implications of
    property tax reform at the State level and investment options for
    farmers and businesses during high income periods. Other projects are
    weighing regulatory costs in rural lending, conducting statistical
    analysis of Chapter 12 bankruptcy filing data and identifying
    determinants of the type and terms of leases used in agriculture, and
    their impact on firm profitability.
        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, $106,000 in fiscal year 1995 through fiscal year 1997, and
    $87,000 in fiscal year 1998. Appropriations through fiscal year 1998
    total $773,000.
        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, $125,000 was appropriated
    from State sources, $103,000 was received through a National Research
    Initiative grant, and $150,879 was received from the Council on Food
    and Agricultural Research. Non-federal support for fiscal year 1998 has
    not been identified.
        The work is being carried out by the Center for Farm and Rural
    Business Finance. Investigators are located at the University of
    Illinois and the 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 initial objectives have
    been met, changing conditions and new financial environments call for
    continuing work to address new dimensions of the objectives as
    originally proposed. Anticipated completion date of these related
    objectives extend to August, 1998.
        The project is evaluated periodically during the year through
    direct contact with the Director of the Center, as reports are
    received, and annually when proposals are received. The Project
    Investigators also prepare a biannual summary which details
    accomplishments during that period. The general objectives are met on a
    continuing basis with specific aspects being addressed as they evolve
    from year to year. One dimension, accomplished annually, is the
    sponsorship and conduct of a National Symposium for Agricultural
    Finance Executives which provides a valuable service as well as
    visibility for the Center. During this past year, the projects have
    addressed financial structure and efficiency of grain farms, vertical
    coordination in hog farms, competitive challenges to bankers, farm
    business planning, stochastic simulation analysis of Farm Credit System
    income allocations, and the impact of banking structure on rural
    financial markets. Evaluation of the program considers the focus of
    specific projects on current issues as well as review of the conduct
    and products from the various projects.
                              floriculture, hawaii
        The research carried out with these funds involves wholesale and
    retail U.S. 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 anthurium, 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.
        The original goal of the research was to develop superior Hawaii
    anthuriums, orchids, protea, 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 1995-1998 $250,000 each year. A
    total of $2,762,000 has been appropriated. The non-federal funds and
    sources provided for this grant were as follows: State appropriations
    of $87,937 in 1995, 1996, and 1997.
        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. 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 State 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.
        The original goal was to develop the analytical capability to
    assess and evaluate U.S. farm policies on the U.S. agricultural sector
    and disseminate this information to farmers, farm and other
    agricultural organizations, 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. This update was especially valuable for
    conducting analyses to assess policy options for the 1996 farm bill.
    During the past year, the FAPRI completed roughly 50 studies addressing
    policy issues such as assessments of the 1996 Farm Bill, alternative
    ethanol programs, the impact of changing interest rates, alternative
    crop insurance programs and the impact on U.S. agriculture of the
    European Union's Agenda 2000 policy reform. Numerous studies were
    completed addressing improvements made to the empirical modeling system
    to improve domestic and international policy capabilities. The FAPRI
    staff has made numerous public appearances throughout the U.S. before
    agricultural groups and Congressional committees and Executive branch
    groups addressing policy issues.
        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 years 1997 and 1998, $800,000 each year. The total amount
    appropriated is $9,471,000.
        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 1991; $321,074 State
    appropriations, $51,500 industry, and $35,100 miscellaneous for a total
    of $407,674 in 1992; $234,796 State appropriations and $70,378 industry
    for a total of $305,174 in 1993; $78,286 State appropriations, $43,925
    industry, and $29,750 miscellaneous in 1994 for a total of $151,961 in
    1994; $80,155 State appropriations, $37,128 industry, and $42,236
    miscellaneous for a total of $159,519 for 1995; $124,123 in State
    appropriations with no other funding for 1996; $79,000 in State
    appropriations, $50,000 industry and $25,000 miscellaneous for a total
    of $154,000 in 1997; and $88,800 State appropriations, $75,200
    industry, and $34,687 miscellaneous for a total of $198,687 in 1998.
        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 other policies and proposed actions likely
    to affect the agricultural sector and its components. The annual
    proposal is carefully reviewed for adherence to stated objectives and
    progress before the special research grant is awarded. No formal
    evaluation of this program has been conducted.
                             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 non-irradiated 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. Research on the
    effect of packaging materials on quality of irradiated meat is in
    progress. 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. The recent massive
    recall of over 25 million pounds of ground beef due to illness caused
    by E. coli 0157:H7 contamination has resulted in huge economic losses.
    With the recent FDA clearance of irradiation of red meat, research
    needs leading to commercialization of this technology have been
    enhanced. Additionally, researchers from eight other research
    institutes have used the irradiation facility for research projects.
    Thus, the principal researcher believes this research to be of
    national, regional and local need.
        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; fiscal years 1995-1997, $201,000 each year; and fiscal year
    1998, $200,000. A total of $1,600,000 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; $72,772 in state funds,
    $100,000 in industry grants and $55,211 in user fees in fiscal year
    1995; $81,540 in state funds, $115,300 in industry grants and $50,963
    in user fees in fiscal year 1996; and $77,963 in state funds, $253,450
    in industry grants and $46,550 in user fees in fiscal year 1997.
        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. Research on the factors affecting the quality of irradiated
    red meat will be primarily conducted using the Iowa State University
    facility.
        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 supporting the fiscal year 1997 appropriation
    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 research on
    food and agricultural marketing and related policy questions. The
    general intent is to provide information that can contribute to
    improved performance of the food production and marketing system. The
    Policy Center is primarily an economic research organization, but
    conducts interdisciplinary research when appropriate and communicates
    results to the public. Key users include farmer and consumer
    organizations, agribusiness firms, public agencies, state legislatures,
    and the U.S. Congress. The Center facilitates research at cooperating
    institutions by organizing research workshops twice annually,
    furnishing common data bases, preparing research publications, and
    providing leadership for joint research efforts including the
    sponsorship of research conferences. 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.
        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 serves as a core
    research group for Regional Research Project NE-165, Private
    Strategies, Public Policies, and Food System Performance. The research
    agenda includes industrial organization, strategic marketing, food
    safety economics, agricultural cooperatives, and public policy
    including antitrust and regulatory issues. The Center conducts research
    on food marketing, including descriptions of food quality issues and
    enhancement policies; private label branding; advertising strategies
    for agricultural cooperatives; assessment of food retail mergers and
    competition; evaluation of 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 has prepared 45 working papers, 35 policy research
    reports, 16 policy issue papers, 8 books, and has reprinted and
    distributed 61 important journal articles to researchers, industry, and
    Federal and State legislators, and decision makers. This grant will be
    used to support research on nine projects with research targeted at two
    problem areas: analysis of impacts of changes in strategies,
    technologies, consumer behavior and policies on the economic
    performance of the food system, and to provide economic analysis of
    private and public strategies in order to assess their impact on
    improvement in food safety and other quality attributed. Projects
    include competitive strategy analysis of cooperatives and investor-
    owned firms; firm dominance in food manufacturing; advertising and the
    U.S. food system; mergers, product relatedness and performance
    outcomes; effects of market structure and concentration on promotional
    activity; testing theories of oligopoly conduct; relationships between
    market structure, firm position and price levels; strategic responses
    to food safety and nutritional regulation; and, trade agreement effects
    on food quality and trade.
        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, for fiscal years 1995-1998, $332,000 each year. A total
    of $3,684,000 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; $134,399 in fiscal year 1996; and,
    $135,490 in fiscal year 1997. The decline reflects a change in
    reporting only salary and related fringe benefits and excludes overhead
    for facilities and utilities.
        The research is being carried out by the Agricultural Experiment
    Station at Storrs, and at the University of Massachusetts. The original
    proposal in 1987 was for 24 months. According to the principal
    researcher, the objective of conducting policy-oriented research on
    food manufacturing and distribution industries to assist state and
    Federal policy makers in improving the performance of the food system
    is still an ongoing public concern, given increasing levels of
    concentration in food processing. The current phase, initially funded
    in fiscal year 1997, will be completed in 2001. CSREES annually reviews
    project reports, succeeding annual project proposals, research studies
    and educational programs. A merit review of the fiscal year 1997
    proposal was conducted in January 1997. An outside review is scheduled
    for April 1998. Assessment criteria include peer review of results and
    publications, administrative review and approval of proposals, and
    reports by external sources.
                        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.
        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 181
    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 1995-1998
    each year. A total of $315,000 has been appropriated. The Food
    Processing Center received $300,054 in State funds and $1,515,721 in
    food industry grants and miscellaneous sources from 1992 through 1997.
        Research is being conducted at the University of Nebraska. Because
    this project supports ongoing technical assistance to clients, the
    objectives are ongoing. 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 12,
    1998. Progress under previous grants for this project appears to be
    satisfactory, with numerous examples of assistance cited and summaries
    of short-term projects provided by the principal investigator.
                                  food safety
        This program is to provide funding for competitively-awarded
    research grants. It is the intention of this program to focus on very
    high priority issues each year and reflect major concerns under the
    Food Safety Initiative. The Request for Proposals (RFP) for fiscal year
    1998 is planned to have a focus on major issues related to safety of
    fresh and minimally processed fruits and vegetables which are of
    increasing concern to the public. As a part of the needed research
    effort under the President's Food Safety Initiative, this program will
    address gaps in information available to support control measures in
    food safety. Several agencies have combined to establish priorities for
    research in support of regulatory actions in food safety and the RFP
    will reflect these priorities. The goal of this research program is to
    provide needed information about sources of contamination of food
    products, develop rapid sampling and detection systems, and provide
    support for various interventions to reduce contamination of food with
    human pathogens. Because this is new program and no awards have yet
    been made, there are no accomplishments to report at this time. The
    work supported by this grant begins in fiscal year 1998 and the
    appropriation for fiscal year 1998 is $2,000,000.
        Research projects will be funded at several land-grant universities
    after the proposals have been reviewed for scientific merit and
    responsiveness to the RFP. This program has been proposed for one year
    at this time but additional funds are being requested for fiscal year
    1999 to support this important area. Because no projects are in
    progress as yet, no review of the program has been scheduled at this
    time. It is anticipated that reviews of progress on funded projects
    will be performed at regular intervals of 6-12 months.
                     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, and
    technological changes. Research is needed to determine the effects of
    these changes on the system's organization and performance, and to
    ascertain needed adjustments in public policies based upon sound
    research. There is a national need to assess and evaluate the
    organization and performance of the Nation's food industry to ensure
    that it continues to satisfy performance expectations of farmers and
    consumers and adheres to acceptable standards of conduct.
        The original goal was 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. Alterative
    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 1995-1998, $221,000 per year. A total of
    $4,247,000 has been appropriated. The non-federal funds and sources
    provided for this grant are as follows: State appropriations of
    $120,304 in 1991; $119,448 in 1992; $85,188 in 1993; $96,838 in 1994;
    $59,435 in 1995; $50,636 in 1966; $56,421 in 1997; and $69,626 in 1998.
        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 2001. CSREES
    performed a merit review of the project in January 1997, as it
    evaluated the 1997 project proposal, and concluded that the project's
    researchers have done unique work 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 peer
    reviewed professional journals and the popular press, and researchers
    have ongoing dialog with private and public decision makers.
                          forestry research, arkansas
        The Arkansas Forest Resources Center offers programs of teaching
    and research to the landowners of Arkansas and the surrounding region.
    This has been done through continuing education workshops for
    landowners, the development of a series of educational distance-
    learning tutorials, and the funding of 10 graduate assistantships for
    the first class in the new forest resources master's program. A partial
    list of workshops includes: Uneven-aged Silviculture of Loblolly and
    Shortleaf Pine Forest Types, Environmental Law & Policy, Timber Income
    Tax Update, Thinning Methods and Operations, Introduction to ArcView
    3.0, Estate Planning, Forest Finance Applications: Basic Tools for
    Daily Practice, and Opportunities in Forest Regeneration. The
    educational thrust has combined Center and private dollars to establish
    one of only three ArcView Learning Centers for natural resources. To
    better provide the highly educated professionals needed to meet the
    challenges of natural resources, new educational tutorials are being
    developed in dendrology, tree ID, plant morphology, silvics, that aid
    in the (1) transitioning of transfers to institutions with forest
    resources offerings and (2) forest resources education of non-majors at
    institutions without forest resources faculty. Furthermore, Arkansas
    will activate a new Master's-level graduate program in the Fall 1998.
    Research projects address issues of species diversity, richness,
    redundance, and the resilience of disturbed and undisturbed hardwood
    stands of the Delta. Furthermore, evidence exists that neo-tropical
    migratory birds are indicators of ecosystem health. Factors implicated
    as influencing their breeding range include habitat destruction/
    alteration, forest fragmentation, etc. Thus, issues of re-establishment
    and structure of regenerated hardwood stands are important for timber,
    nontimber values, and the quality of life enjoyed regionally,
    nationally, and internationally. Also, other projects are contributing
    to the development of (1) a biological control agent for the southern
    pine beetle, (2) alternative forest crops for the economically
    oppressed Delta region, and (3) technologies for enhanced fiber and
    wood production from nonindustrial and industrial lands. These issues
    will grow in importance as southern forests assume greater proportions
    of the national demand for 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 producing 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.
        The thrust of goal one is developing alternative forest management
    strategies of 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 pubic
    forest lands. Significant progress has been made in several areas. Some
    examples include: developing intensive fiber farming systems as
    alternatives to soybeans for Mississippi Delta 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 studies in artificial cultures, delivery systems for
    introduction of the bait, and conducting the first survey of
    nonindustrial landowners in Arkansas for 15 years. The survey show some
    areas for concern, such as the fact that the average age of 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 institutions for
    transitions and to design more effect 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, stream-
    side buffer zone effectiveness, effects of winter logging, and
    secondary processing efficiency.
        The work supported by this grant began in fiscal year 1994. The
    appropriation for fiscal year 1994 was $470,000, and for fiscal years
    1995-1998, $523,000 each year. A total of $2,562,000 has been
    appropriated. The non-federal funding and its source provided to this
    grant in 1994 was $411,726 State appropriations and $380,000 industry
    for a total of $791,726; $491,301 State appropriations and $785,262
    industry for a total of $1,276,563 for 1995; a total of $695,204 from
    State and industry sources for 1996; a total of $1,115,341 from these
    sources in 1997; and an estimated total of $1,000,000 for 1998.
        The Arkansas Forest Resources Center is administered from the
    School of Forest Resources on the campus of the University of Arkansas
    at Monticello. Grants were received in 1994-1998 with funds distributed
    for use over the 5 years following the activation year. This means
    projects initiated in 1994 will commonly mature in 1999, 1995 projects
    in 2000, 1996 projects in 2001, and so on. Projects are on schedule.
    Projects from 1994 funding are nearing completion. Forestry research is
    long term. Center objectives and selected projects will be continued
    using the infrastructure and capacity developed with these Special
    Research Grants. In 1991, an agency 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; however, the agency is planning one in fiscal
    year 1998, pending fund availability.
        The objectives outlined for fiscal year 1997 were to develop and
    evaluate alternative forest management strategies for achieving multi-
    resource objectives on private industrial and non-industrial forest
    land and to evaluate the environmental implications of forest
    management alternatives. Ongoing work addresses these issues.
        Presently, the only criteria used to assess the projects would be
    the scientific review process, prior to publication. Since some of this
    research funding is used for extension and education, there are no
    commonly used assessment criteria other than attendance at courses and
    workshops. This makes an outside review by the agency extremely
    important in evaluation, since review team members will be selected
    with expertise in all these areas.
           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 such as environmental, trade, labor, and food
    safety. 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 policy makers,
    industry organizations, producers, and other users. Proposals have been
    submitted that outline long-range plans and specific projects for
    funding. Models have been developed for 17 major (as measured in
    production, consumption, and trade) U.S. fruits and vegetables with one
    additional crop model, strawberries, to be completed in the coming
    year. Trade models for those commodities with a significant import and/
    or export sector have also been 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
    1995-1998, $296,000 each year. A total of $1,513,000 has been
    appropriated. The non-federal funding and its source provided to this
    grant in 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 1995; a total of $62,400 from State and
    industry sources for 1996; $50,000 from these sources in 1997; and an
    estimated $50,000 for 1998.
        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.
        We have conducted no formal evaluation. However each annual budget
    proposal is carefully reviewed and work progress is compared with prior
    year's objectives. Informal discussions with congressional staff, USDA
    officials and industry representatives indicate that these analyses are
    extremely useful.
                     generic commodity promotion, new york
        The grant supports, in part, the National Institute on Commodity
    Promotion Research and Evaluation which provides objective analysis of
    national and state commodity checkoff programs designed to enhance
    domestic and export demand. The overall project proposal was merit
    reviewed at the university level; a competitive peer review process was
    used to select specific research projects. 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. The 1996 FAIR Act requires all Federally-constituted research and
    promotion boards to evaluate their programs at least every five years.
    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;
    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
    1995-1998, $212,000 each year. A total of $1,083,000 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 1994-96; $125,650 for 1997; and $130,430 for
    1998. Collaborating institutions performing work under subcontract also
    contribute non-federal matching funds.
        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 need to
    evaluate the benefits of commodity promotion and research programs is a
    growing regional and national concern, as producers take on greater
    responsibility for marketing their products. An increasing number of
    promotion and research programs are being evaluated. The current phase
    of the program will be completed in 1999. CSREES performed a merit
    review of the project in January 1997, as it evaluated the 1997 project
    proposal, 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 peer reviewed
    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 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, 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. 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 Inter-
    agency 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 twenty-six monitoring sites across the United States,
    including Hawaii. The researchers plan to have additional sites in
    Florida, Alaska, Puerto Rico, Southern California, Oregon, North
    Carolina, Tennessee, and Oklahoma operational by the summer of 1998.
    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 resulted in a much
    larger and more difficult instrument to deploy has been developed. The
    first two advanced instruments will be deployed at two test sites
    during the spring or summer of 1998.
        To gain experience in network operation, broadband instruments
    along with ancillary instruments were installed at ten sites and have
    been in operation for the last 40-48 months. These sites are now
    equipped with a full compliment of instruments including the new multi-
    band instrument. Additional sites developed during the last 12 months
    are similarly equipped with broadband and the new multi-band UV
    instrument. Data from each site is transmitted daily to Colorado State
    University for preliminary 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 at Department of Commerce facilities in Boulder, Colorado. The
    purpose of the central calibration facility is 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; fiscal year 1997 was $1,567,000; and
    fiscal year 1998 is $1,000,000. A total of $10,982,000 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 four years, and twenty-six sites are now operational with new
    generation instruments. The research level network will begin with the
    first instrument to be installed at the Table Mountain, Colorado
    instrument intercomparison site and the second possibly 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 be an ongoing
    need for the predictable future. These measurements will provide
    information 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 project has now met its first
    objective of the establishment of a climatological network to monitor
    UV-B radiation at the surface of the earth. Years of operation will be
    required to measure trends in UV-B radiation and to develop models to
    predict the climatology of UV-B radiation.
        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 is in contact with program management
    on a weekly basis and has visited the program headquarters six times
    during the last year. A review of the UV-B Monitoring Program by a
    panel of technical experts from outside the Department is planned for
    1998.
                  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 worldwide present unprecedented opportunities for
    cooperative public-private-university research to develop expertise in
    world markets. 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; for 1995 through 1997,
    $92,000 a year; and for 1998, $127,000. A total of $450,000 has been
    appropriated. The non-federal funds and sources provided for this grant
    were $90,000 per year in State appropriations for 1994 through 1996;
    $51,700 for 1997; and $80,000 for 1998. State appropriations to date
    total $401,700.
        This research is being conducted at the University of Arkansas,
    Fayetteville. The original proposal in 1994 was for a period of 12
    months, but the objective of expanding the export capacity of small to
    medium-sized agribusiness firms will not be met until 2000. CSREES
    performed a merit review of the project in January 1997 as it evaluated
    the project proposal that year. The proposal was sent back to the
    university for revision because two of the three objectives did not
    adequately reflect the kind of work being done and the project was
    falling behind in the initiation of new research and the distribution
    of results. The project proposal was subsequently revised by the
    university and approved by CSREES. The main purpose of this project has
    been to encourage global business expansion as a means of economic
    development in Arkansas. To accomplish this purpose, the project
    leadership discovered that most of their effort had to be focused on
    the development of educational materials, training, and technical
    assistance to get firms ready for and involved in exporting. The
    initial objectives focused only on the development of primary research
    data and analysis of demand in international markets and lacked the
    emphasis on education. A February 1998 review of the project documented
    continued progress with the educational component.
                             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. These funds are awarded by the institutions to scientists at
    Kansas State University working on sorghum. 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. 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. Studies conducted
    this past year have made progress toward identifying genetic
    characteristics controlling grain yield under a range of climatic
    conditions. Fiscal year 1998 request for proposal has been issued.
        The work supported by this grant began in fiscal year 1997 and the
    appropriation for fiscal years 1997 and 1998 is $106,000 per year.
    Total appropriations to date are $212,000. 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. The research
    proposal will be peer reviewed prior to awarding of funds. Preliminary
    results contribute toward the understanding of factors controlling
    grains yield and the development of higher yielding sorghum cultivars
    for Kansas. The project is subjected to the institutional review and
    approval process as well as CSREES review.
            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. Funds from this grant
    are awarded competitively to scientists at Oregon State University, the
    University of Idaho, and Washington State University engaged in
    research on grass seed production. Each award has been merit reviewed
    by a peer scientist. 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. 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
    1995-1998, $423,000 each year. A total of $2,162,000 has been. The
    nonfederal support for this project in fiscal year 1994 was $266,055,
    $298,052 for fiscal year 1995, $282,053 in 1996, and $301,650 in 1997.
        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. 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. Considerable progress has
    been made toward identifying the consequences of phased out field
    burning of straw residue on grass seed production. Current and future
    efforts are directed toward development of sustainable systems without
    field burning. This program is subject to annual comprehensive
    evaluation by a team of scientist, industry representatives and
    farmers. The results are used to guide research for the next year.
                             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 1997
    grant supports research efforts of 25 investigators from six
    disciplines through June 1998. 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. The
    principal researcher believes this research to be of national,
    regional, or local need.
        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 results indicate 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,
    and human feeding trials demonstrated lowered blood cholesterol in
    people fed the modified pork. The isoflavone daidzein, a novel health-
    protective component of soybeans, was demonstrated to lower circulating
    cholesterol in a mouse feeding study. Studies of isoflavone
    bioavailability suggested different human phenotypes in the intestinal
    breakdown of isoflavones. Ongoing studies are assessing the ability of
    soybean isoflavones during menopause to maintain bone density and
    reduce menopausal symptoms. Further evidence has been found that
    oxygenated carotenoids potentially found in processed fruits and
    vegetables have greater antioxidant ability and would 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 1998. A total of $3,662,000 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; $613,770 university
    and $207,811 private in 1996; and $690,736 university and $1,024,196
    private in 1997.
        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 2000. The
    grant proposal for fiscal year 1996 was subjected to extensive peer
    review. In 1997 comprehensive merit review conducted by the university
    lead to major revisions proposed for fiscal year 1998.
                           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. Will reducing dietary fat reduce the risk for obesity? Do
    lean and obese subjects respond differently to changes in dietary fat
    intake and how is this influenced by exercise and weight loss? And
    finally, how do specific dietary fats affect the response to insulin
    and the development of insulin resistence? The fiscal year 1997 grant
    supports research through July 1998. CSREES requested that the
    university submit a revised comprehensive grant proposal for fiscal
    year 1998 which is now being reviewed.
        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. They have identified a
    taste system which responds selectively to some fatty acids. The
    importance of this system in humans and its relation to obesity are
    under study. In the second experiment they have shown that carbohydrate
    intake is well regulated, but fat intake is not. In the third set of
    experiments the relation between basic genetic make-up and the response
    to dietary fat and insulin is being evaluated.
        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 1994-1998 was $752,000 per year. A total of $6,160,000 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; $1,471,000 state
    appropriations and $2,488,000 private in 1996; and $1,998,000 state
    appropriations and $2,104,000 private in 1997.
        Research will be conducted at the Pennington Biomedical Research
    Center, Louisiana State University. The anticipated completion date for
    the original objectives is fiscal 2000. The grant proposal for fiscal
    year 1996 was subjected to extensive peer review, and in January 1998
    an on-site panel of researchers evaluated the proposed objectives and
    experimental protocols. On the basis of the critiques from the
    reviewers, the proposal for fiscal year 1998 was revised.
                           human nutrition, new york
        The general objective is improving the knowledge base needed to
    evaluate and, when appropriate, implement, the increased reliance of
    plant-based foods that is at the core of current Federal dietary
    guidelines. Current dietary guidelines use this approach as a principal
    strategy to control energy consumption, reduce fat intake, modify the
    composition of ingested lipids, enhance the consumption of foods
    associated with reduced cancer risk, and simultaneously insure that
    macro-and micronutrient needs are met. The work brings together
    investigators whose expertise ranges from basic nutritional molecular
    biology to the behavioral sciences that are key in enabling consumers
    to adopt newly discovered knowledge easily and effectively. The fiscal
    year 1997 grant supports research through September 1998. CSREES has
    requested that the university submit a comprehensive grant proposal for
    fiscal year 1998.
        Inappropriate diets and physical activity patterns are the second
    leading etiology of preventable morbidities and mortality in this
    country. As greater emphasis is given to strategies that permit
    individuals to take increasing responsibility for their health and that
    are designed to achieve goals related to health promotion and disease
    prevention, the knowledge gained by work sponsored by this grant
    becomes increasingly valuable. This knowledge is expected to be of use
    to consumers in making informed food choices and to food producers and
    processors in anticipating consumer demands. 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 molecular, behavioral 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 identified in the promoter of lipoprotein lipase a
    silencing element that may play a major role in accounting for the
    tissue-specific expression of the enzyme and for its regulation. Using
    band shift assays it was demonstrated that the inhibitory factor is
    much more abundant in liver nuclear extracts that in fat or heart
    tissue.
        The amount of essential sulfur amino acids is also altered by
    shifting to more plant-based foods. A researcher found that the
    cellular signal for the dramatic changes in rates of sulfur amino acid
    metabolism that occur in response to changes in dietary protein levels
    is the amino acid cysteine itself, not methionine or a metabolite of
    methionine or cysteine, and not an indirect response to the cellular
    redox state.
        Work also has been done on strategies for improving food security
    by encouraging community-based initiatives linking research and
    extension. Approximately 300 food system stakeholders, from producers
    to consumers, were mobilized to develop community-based initiatives.
    These stakeholders are forming into 30 working groups across the region
    to implement their plans.
        Another portion of the work focuses on the interrelationships among
    the behavioral factors that influence food choice at the community,
    family and individual levels. The approach involves a unique
    integration of research and intervention. They developed a model for
    understanding the development of trajectories for fruit and vegetable
    choice over the life course, and a conceptual framework for
    understanding the influence of ethnic identity on fruit and vegetable
    choice.
        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 1995-1998, $622,000 each year. A total of $6,211,000 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; $348,127 in state appropriations and $39,593
    private in 1996; and $133,162 state appropriations in 1997.
        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 new related objectives
    was submitted in 1997 and will be the research focus for the next three
    years. The grant proposal for fiscal year 1997 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 1997 the Alliance awarded five
    research grants at three institutions totaling $1,012,859. The Alliance
    also issued a third call for proposals and received 20 proposals from
    10 different universities. The proposals are being reviewed for
    awarding of fiscal year 1998 funds.
        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 is critical
    to domestic food security and United States competitiveness in global
    agricultural markets. Alliance grants are awarded on a regional basis
    to advance corn and soybean production in the Midwest. 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.
    Alliance grants are awarded to projects with a clearly defined
    marketable product or service derived from biotechnology research.
        Fiscal year 1997 was the third 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 bio-technology 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
    1997 include efforts to: (1) obtain greater control of cell death in
    plants with a molecular suppressor of cell death from maize, (2)
    enhance the use of core technologies for genome based food analysis,
    (3) develop soybean varieties resistant to nematode infection, (4)
    reduce the environmental impact of higher corn yields, and (5) study
    industrial networks in biotechnological structure and significance.
        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. In fiscal year 1998,
    $1,184,000 was appropriated, bringing the total appropriations to date
    to $5,214,000.
        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 years 1995
    through 1997 are being conducted at the University of Illinois, the
    University of Missouri, Iowa State University, Northwestern University,
    and Southern Illinois 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.
        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. The
    supplemental information was received and we are satisfied that the
    program is being administered in compliance with the purpose of the
    grant. A peer review panel of government and academic scientists will
    re-evaluate the project for scientific merit in 1998.
               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. Individual research projects funded
    by the grant are determined by a competitive peer review process
    administered by the Institution using peers from other Institutions
    located primarily in other States. 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.
        The original goal of this research 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 1995-1998. A total of $2,183,000 has been appropriated.
    During fiscal year 1992, $354,917 were from State funds, and $16,000
    from Industry, for a total of $370,917. 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 1994-1997.
        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 1998 appropriation will
    be complete in September, 2000. 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 has conducted on-site review 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 Integrated Management System
    as well as to aspects of animal production systems on animal well-being
    and impact on the environment.
                       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. 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
    1995-1998, $445,000 each year. A total of $2,274,000 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. The nonfederal funds for 1997 totaled $752,500.
        Research will be conducted at Michigan State University. The
    Principal Investigators have reported significant progress toward
    improved cultural practices for these speciality crops which is
    expected to reduce the need for chemical pesticides. This project has
    not been subjected to a comprehensive review. The annual proposals
    including all of its sub projects are subjected to CSREES before they
    are approved. The project has progressed toward the objective of
    developing management practices and strategies for economical
    production of speciality crops in Michigan with reduced chemical
    pesticide use. This program is evaluated at the end of each research
    cycle and priorities adjusted for the next years funding. The
    evaluation is performed by scientist at Michigan State University.
              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 thirty-seven 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, four additional research projects have been approved
    but are awaiting funding from industry. The next request for proposals
    by the Institute will be issued in February 1998. 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,
    was activated on January 1, 1997. Fiscal year 1997 funds are supporting
    research from March 1, 1997 through February 28, 1998. CSREES has
    requested and received a proposal in support of the fiscal year 1998
    appropriation. Projects included for funding in the proposal submitted
    to CSREES have been reviewed by industry representatives for relevance
    and by scientists at the recipient institution for scientific merit.
        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
    and a high multiplier effect from the research. The Institute will
    develop and disseminate scientific information and provide educational
    programs related to value-added further processing, storage and
    marketing of food products. These efforts will assure food safety,
    improve the sensory and nutritional quality of food and meet the
    nutritional requirements and food preferences of a changing society.
        The original goal of this research is to establish an Institute of
    Food Science and Engineering at the University of Arkansas-
    Fayetteville. Research helped determine the cause of post-millage
    breakage of rice kernels and subsequent effects on quality and end use
    functionalities of rice products. A patent has been filed for a machine
    that uses new defect recognition methods and algorithms for high-speed
    accurate sorting of fruits and vegetables. Research has shown that
    bacteria, including Salmonella typhimurium and Campylobacter jejuni, in
    salt solutions and poultry processing water, either chiller water or
    scalding water, could be reduced or eliminated using low voltage pulsed
    electricity in a treatment tank or a flow-through system with a food
    grade electrolyte. A commercial brine chiller will be designed with the
    electrical pasteurization system, flow-through type, first for lab-
    scale tests and then for pilot-plant tests. Other research produced an
    enzymatic method to produce rice bran protein from non-heat treated,
    defatted rice bran and determining the effects of processing and
    storage on flavor of dill pickles. The initiative to provide technical
    support to new food entrepreneurs has generated 13 requests for
    assistance. Individuals interested in starting a food processing
    business were provided with information on such topics as regulations,
    safety, labeling, ingredients and packaging. In addition, information
    was provided on financial aspects of starting a business and on
    marketing products. Also, improvement in product quality and safety was
    provided. 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. An introductory
    publication and a comprehensive volume on ``Starting a Food Business''
    were published. An Institute Newsletter is prepared quarterly.
        The work supported by this grant began in fiscal year 1996. The
    appropriation for fiscal years 1996 and 1997 was $750,000 each year and
    $950,000 for fiscal year 1998. A total of $2,450,000 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 $320,403 industry funds in
    fiscal year 1997. Thus far in fiscal year 1998, industry has provided
    $93,599, with firm commitments of an additional $55,000. In just over
    two years, industry has donated new equipment valued at $360,000. The
    state has also provided facilities and administrative and clerical
    support estimated at $303,694 through June 30, 1998. The Institute
    received, as a donation worth $200,000 from industry, a trained sensory
    panel to qualify and quantify sensory properties of foods.
        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 2001. The goals of this
    project related to establishing the centers of the Institute are
    sequential and have not been fully met. The Center for Food Processing
    and Engineering is fully operational and successful, the Center for
    Food Safety and Quality is operating well, and the activation of the
    Center for Human Nutrition is scheduled for 1999. The objectives
    related to research and service to industry, food entrepreneurs, and
    the general public would continue to be ongoing.
        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 8, 1998. The
    assessment was that satisfactory progress was demonstrated in meeting
    the goals of the Institute. The progress report submitted as part of
    the proposal is compared with stated objectives. If all goals are not
    met, then the reviewer considers issues that may have hindered
    completion of expected goals which may include equipment failure and
    methodology problems that were not anticipated.
                           integrated pest management
        This special research grant develops new pest management tools to
    address critical pest problems identified by farmers and others in a
    crop production region, and to find new approaches to managing pests
    without some of the most widely used pesticides. Farmers have
    identified the lack of effective alternative pest management tactics as
    a primary reason for not implementing IPM on their farms. Where
    effective alternative tactics have been developed, they are widely and
    rapidly implemented by farmers. These projects are a key element of
    USDA's goal of helping U.S. agriculture implement IPM practices on 75
    percent of U.S. crop acreage, and will help the Nation's farmers adjust
    to changes in pesticide availability resulting from implementation of
    the Food Quality Protection Act of 1996.
        The goal of this research is to provide farmers with options that
    allow them to shift from sole dependence on pesticides to a greater
    reliance on natural control methods. At the core of the integrated pest
    management approach is a dual focus on improving profitability and
    protecting vital natural resources. The research supported by this
    special grant has made an important contribution to increasing
    knowledge about new approaches to pest management, but the need for
    continued investment in this area of research is greater than ever.
        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 1989, $2,940,000 per year; 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 1995-98, $2,731,000 each year. A total of $55,399,000 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 currently being carried out by State Agricultural
    Experiment Stations in more than 40 states. The economic and
    environmental pressures facing U.S. agriculture today are at least as
    great today as they were in 1981 when Federal funds were first
    appropriated for this special research grant. There will be a need for
    continued investment in research to develop new approaches to managing
    pests for the foreseeable future. Proposals are evaluated by multi
    disciplinary panels. The projects supported by this special research
    grant have consistently provided key knowledge needed in developing new
    approaches to pest management.
                    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 request for proposal has been issued, the grant will be
    competitively awarded to scientists working at the West Watkins
    Agricultural Research and Extension Center based on a merit review
    conducted by Oklahoma State University personnel. 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. 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 1995-1998, $161,000 each year. A total of $2,830,000 has
    been appropriated. The nonfederal 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, for 1996 were
    $146,000, and for 1997 were $152,000.
        This research is being done at the West 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 a production system for alternative
    crops with economic potential for southeastern Oklahoma. Each year's
    funding cycle addresses 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 have not been completed.
        Each of the annual project proposals has been put through the
    institutions review and is 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.
    This project is evaluated internally at the end of each year in order
    to set priorities for the next year.
                      international arid lands consortium
        Fiscal year 1997 was the fourth 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 arid and semiarid lands.
    Projects that began in 1994-1997 will continue to be funded to address
    issues of land reclamation, land use, water resources development and
    conservation, water quality, and inventory technology, and remote
    sensing. All proposals are peer reviewed and awarded competitively,
    whereby the principal investigator must be from a Consortium member
    institution. The principal researcher believes the consortium is
    devoted to the development, management, and reclamation of arid and
    semi-arid lands in the United States, Israel, and elsewhere in the
    world. The International Arid Lands Consortium will work 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, and Nevada's Desert Research Institute. 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 Consortium's affiliate members
    include Egypt's Ministry of Agriculture and Land Reclamation Under
    secretarial for Afforestation and Jordan's Higher Council for Science
    and Technology.
        The original goal of the Consortium was and continues to be
    acknowledged as the leading international organization supporting
    ecological sustainability of arid and semi-arid lands. To date, 45
    projects have been funded, 31 of which are to conduct research and
    development, 12 for demonstration projects, and 5 for international
    workshops. Funds approximating $2.68 million have been used to fund
    these projects.
        The 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 1998 for total
    appropriations of $1,645,000 for the 5-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 in fiscal years 1993 and 1995,
    respectively. Additional funds of $34,000 were received during 1996
    from the Egyptian affiliate member to enhance future collaboration.
    Amounts for fiscal year 1998 will be available during March 1998.
        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. Almost all research and demonstration
    projects that started during 1993 and 1994 have been completed. The
    projects started in 1995-1997 are expected to be completed within 6
    months to 2 years depending upon the nature of the research. Several
    demonstration projects were completed and 5 international workshops
    were held during 1994 through 1997. The International Arid Lands
    Consortium is an organization with long-term goals that will require
    research and development for many years. All projects are evaluated
    every 6 months and require progress reports that are peer reviewed by
    scientists identified by the Consortium. The completed projects have
    met all proposed key objectives. The cognizant staff scientist has
    reviewed the project and determined that the research is conducted is
    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.
    Whenever possible, efforts will be made to convert by-product materials
    in agricultural wastes into useful new products. Both fundamental and
    applied research studies will be conducted with the goal of enhancing
    the recovery and utilization of byproduct materials through studies
    involving fermentation, enzyme catalysis and bioprocessing. The
    expectation is that new and improved technologies will be developed
    from the research to reduce the burden of agricultural bioprocessing
    wastes on municipal waste management systems and to transform
    components of these agricultural wastes into commercially viable
    products. This overall project involves a coordinated approach by a
    diverse group of investigators, and funding decisions within each
    participating institution for individual studies are based on a
    competitive process with a peer panel review and evaluation. In
    addition, the project proposal submitted to CSREES, which combines the
    selected individual studies, is also peer reviewed for scientific merit
    by a biotechnology panel designated by the Agency.
        Developments in biotechnology have added to the national need for
    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. The principal
    investigators consider this research to be of national, regional, and
    local importance.
        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. A cadre of scientists has
    been established by the Consortium to assist them in finding uses for
    the by-product waste streams generated by agricultural processing. The
    Consortium is also making important progress in bioconversion,
    biocatalysis, membrane concentration, and bioseparation of by-products.
    In fiscal year 1998, new studies are being initiated on value-added
    products related to culture of polysaccharide-producing bacteria,
    screening of agricultural seed processing fractions for biocatalysts,
    conversion of lignocellulose to lactic acid, and the use of waste by-
    products as feeds for livestock and aquacultural species.
        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; fiscal year 1997, $1,738,000; and $1,564,000 in fiscal year 1998.
    A total of $17,293,000 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. More recently, the diversified
    economic base of the Cedar Rapids area has attracted new biotechnology
    industries, which have added greatly to the volume of industrial waste
    streams. No firm date was established to complete this research at the
    beginning of the project. The researchers have worked closely with the
    City and the industries generating these agricultural wastes since
    1989, and the nature of the studies have evolved as significant
    progress has been made 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. Thus, several years will be needed for these tests and to
    refine the existing separation technologies.
        The Iowa Biotechnology Consortium proposal for fiscal year 1998
    will be evaluated for scientific merit by a biotechnology peer review
    panel on January 29, 1998. The panel recommendations related to past
    progress and proposed future experiments will be used in the approval
    process for the project. The Consortium was also featured in a
    biotechnology special grant seminar hosted by the Agency at which the
    principal investigators presented research progress and highlights to
    an audience of agency scientists, administrators, and awards management
    staff as a part of the program's post-award management. A site visit to
    the research facilities by the Program Manager for an assessment is
    anticipated during next year.
                               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.
        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, noninfested 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, $346,0000 was appropriated in fiscal
    year 1998, bringing total appropriations to $1,563,000. 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 each fiscal
    year 1996 and 1997, 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. Each year the grant is peer reviewed and reviewed by
    CSREES's senior scientific staff. Grants are awarded on a competitive
    basis using a peer review process. An external review is being planned
    for 1998.
                     landscaping for water quality, georgia
        The project is a comprehensive, multi-disciplinary, multi-
    institution, 5 phase, 5-year study directed by the University of
    Georgia, in partnership with private producers and other agencies. The
    researchers believe it will lead to development of management
    guidelines for animal-based agriculture based on landscape-scale
    environmental quality considerations. Participating institutions and
    agencies include: the University of Georgia; the Joseph W. Jones
    Ecological Research Center; the Middle South Georgia Soil and Water
    Conservation District; the U.S. Department of Agriculture's
    Agricultural Research Service, Natural Resources Conservation Service,
    and Cooperative State Research, Education, and Extension Service; and
    the Georgia Department of Natural Resources. Key partners in this
    project include growers from Brooks and Thomas counties in Georgia.
    This project undergoes merit review by the Cooperative State Research,
    Education, and Extension Service.
        The economies of scale associated with modern animal production and
    processing have led to concentration of livestock operations within a
    very small geographic area. This has often led to problems of regional
    water quality degradation. In the southeastern United States, these
    water quality problems have often been exacerbated by location of
    livestock confinement facilities on sites lacking adequate good
    cropland for proper management of manure and waste management. One such
    region experiencing rapid growth in poultry production is the Gulf-
    Atlantic Coastal Plain of Georgia. Research is needed to create the
    information necessary to develop land management strategies to prevent
    environmental degradation, while maintaining profitability, with the
    intensification of animal-based agriculture in this region and similar
    regions of the country.
        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 5 years.
    The planned research is on schedule. Since the project began on
    February 1, 1996, progress has been made on three of the five
    objectives and work on the final two objectives was initiated during
    fiscal year 1997. 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.
        4. Installation of stream sampling sites is now in progress in the
    Ichawaynochaway Creek Drainage Basin--the final of the three study
    watersheds.
        5. One year of chemical and biological water quality data has now
    been collected from the Piscola Creek Watershed and 2 years of data
    from the Little River Research Watershed.
        6. Preliminary macroinvertebrate samplings were conducted in the
    Piscola Creek Watershed during 1997. Regular sampling is to begin in
    1998. These samples will provide a good indicator of how non-point
    source pollution is affecting the streams' ability to support aquatic
    life.
        The work supported by this grant began in fiscal year 1996 and the
    appropriation for fiscal years 1996, 1997, and 1998 was $300,000 per
    year. A total of $900,000 has been appropriated. Information provided
    by the University indicates that $202,000 in state funds was 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 non-federal
    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 of the entire project
    is February 2002. Each of the project's five objectives will be
    completed by preset deadlines. The first deadline is January 31, 1998.
    The $900,000 in Federal funds appropriated for this project will
    provide a good foundation for completing the objectives. Good progress
    has been made on the five objectives of this project, as determined by
    the agency's review of the progress reports and meetings with the
    principal researcher. We are working with the principal researcher to
    schedule a peer evaluation of the project during 1998.
                 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 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 sector-
    level dairy policies, and Texas A&M focuses on policies affecting
    livestock and dairy at the farm level.
        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. 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 policymakers promptly of possible outcomes. This goal has been
    achieved and the program continues to provide timely 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
    integrally involved in several current studies relating to dairy
    provisions in the 1996 farm legislation. These studies have contributed
    to the development of regulations called for in this legislation. Both
    institutions maintain extensive outreach programs to disseminate
    results of their analyses throughout the United States. They have
    organized a National Dairy Markets and Policy Extension Committee to
    advise and assist them in this effort.
        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
    1995-1998, $445,000 each year. A total of $4,817,000 has been
    appropriated. The non-federal funds and sources provided for this grant
    are as follows: $37,420 State appropriations in 1991; $162,086 State
    appropriations and $133,278 product sales for a total of $295,364 in
    1992; and $301,817 State appropriations, $1,412 industry, and $7,121
    miscellaneous for a total of $310,350 in 1993; $24,702 State
    appropriations, and $5,961 industry for a total of $30,663 in 1994;
    $235,526 State appropriations for 1995; $250,000 in State
    appropriations for 1996; and approximately $245,000 in State funding
    for each of the years 1997 and 1998.
        The research is being conducted at Cornell University and Texas A&M
    University. This program is of a continuing nature for the purpose of
    assessing existing issues and proposed policy changes affecting the
    livestock and dairy industries. We have conducted no formal evaluations
    of this project. Annual proposals for funding, however, are carefully
    reviewed and work progress is noted.
                       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.
        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 non-chemical 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, 1997, and 1998 at $220,000 each year. A total of $1,830,000
    has been appropriated. Direct industry support from blueberry tax funds
    has been about $65,000 in 1996 and 1997.
        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 and have requested that funding be continued until
    then. 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 is designed to increase understanding of how water
    moves from the soil into and through the maple trees affecting tree
    growth and sap production. It also examines the relationships of maple
    decline to acid precipitation. Moreover, the research measures the
    effectiveness of various fertilizer combinations in improving the
    health of declining maple trees. Lastly, the project is designed to
    identify sources of lead contamination in maple products and to begin
    testing lead-free equipment and possible commercial methods for
    removing lead from maple syrup. The project is annually subjected to
    the University's merit review process.
        Maple products are an important cultural heritage, and a source of
    seasonal income in maple growing areas of rural America. Identifying
    source(s) of contaminants during processing and commercial methods to
    remove contaminants from products is important to assuring consumers
    that these food products are not harmful. The goal of this research is
    to conduct research on maple tree physiology, management of sugar maple
    stands, and related aspects of the maple syrup industry in Vermont and
    the Northeast. The U.S. Department of Agriculture approved an amendment
    to these goals to permit research on lead in maple syrup products.
        Work under this project began in fiscal year 1985. Annual
    appropriations in support of this project are 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; fiscal years 1995-1997--$84,000 each year;
    and fiscal year 1998--$100,000. This sums $1,331,000. Non-federal
    fiscal support for this project is provided by two primary sources and
    one secondary source. The primary sources are state appropriations and
    product sales. The secondary source is local support, but that support
    is not available each year. The total non-federal contribution from
    these sources provides an average ratio of .86 to 1. The low ratio was
    .6 to 1 early in the project. More recently, the ratio has been 1.1 to
    1.
        This research is being conducted at the Vermont Agricultural
    Experiment Station. The work, from this project, relative to maple tree
    physiology and management of maple stands has been completed. The new
    objective of identifying sources of heavy metals in maple syrup
    products and, subsequently, reducing them is underway. The anticipated
    completion date is 1999. Project proposals and progress reports are
    reviewed and evaluated annually by the U.S. Department of Agriculture.
    Satisfactory progress has been made on tree physiology and maple tree
    management. Progressive work on identifying sources and controlling
    maple syrup contaminants is in place and is being monitored by the
    Department.
                       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, and to reduce the need to import foreign petroleum.
    Using the tools of bioprocessing, agricultural resources can be
    transformed into products equal in function and value to those
    currently made from petroleum. Bioprocessing may include fermentation,
    an enzymatic step, chemical catalysis, or physical modification of
    agricultural raw materials. The 1998 grant proposal will be peer
    reviewed for scientific merit. The principal researcher believes the
    results from the research will help to develop bioprocessing
    technologies to manufacture value-added products from agricultural raw
    materials, which increases their utilization, reduces commodity
    surpluses, reduces environmental costs, decreases the need for foreign
    petroleum, and will contribute to regional and national priorities.
        Besides increasing utilization, reducing surpluses and
    environmental costs, the goals of this research remain to select and
    develop market-viable technologies that form the basis for new
    companies, new jobs, and additional tax revenues for state, local and
    Federal governments. The Consortium has succeeded in developing
    numerous technologies that are now in the marketplace. Examples include
    the following: Production of lactic acid through fermentation using
    corn as the feedstock resulting in a polymer for biodegradable plastics
    and a disinfectant. A $200 million plant has been built in Nebraska to
    produce lactic acid by this process for domestic and foreign markets.
    Corn was used as a feedstock to develop plant growth formulations to
    enhance plant growth and productivity and to reduce nitrogen fertilizer
    requirements. These growth promoters have shown productivity increases
    of greater than 15 percent with a reduction in nitrogen fertilizer use
    greater than 25 percent in a variety of crops. Biodegradable plastic
    resins developed from cornstarch were made to produce compostable films
    for lawn and leaf litter bags, agricultural mulch films, and other
    soluble films. Compostable bags are used widely throughout the United
    States. Biodegradable plastic resins from cornstarch were also
    developed for moldable products such as disposable cutlery, plastic
    containers, and 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-flavored compound
    that can replace monosodium glutamate in low sodium foods.
        Low-cost, readily-available carbohydrates--from whey--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 farms was developed to cost-effectively
    separate manure from sand and recycle both components. Biodegradable
    adhesives have been developed from agricultural resources. Numerous
    enzymes have been characterized and are now in use to provide value
    added modifications in the processing of agricultural products. A
    stabilized phytase has been developed to improve digestibility of
    forage-based animal feeds and reduce animal wastes. Improved methods to
    clean up herbicides, pesticides and other agriculturally important
    materials have been developed.
        Many of these products have been commercialized through licensing
    agreements with industrial partners or new company start-ups. In
    addition, there are many agri-based industral products under
    development including: natural succinate-based green chemicals for
    surfactants and detergents; paint removers; green solvents from corn-
    derived materials; plant stress promoters; natural food preservatives;
    biobased membrane polymers for liquid crystal, medical device coatings,
    metals recovery and other uses; improved enzymes for processing starch
    and fructose production; food flavors and pigments; and production of
    animal feed additives from agricultural wastes.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1989, $1,750,000; 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; fiscal years 1996 and
    1997, $750,000 per year, and fiscal year 1998, $675,000. A total of
    $17,259,000 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;
    $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 and $6,000,000 from miscellaneous in 1996; and
    $402,500 from industry and $10,000,000 from miscellaneous in 1997. A
    total of $29,947,500 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 International.
    Demonstrations of technology occur throughout the United States. The
    Consortium reports specific milestones for technology development over
    a five year period. Specific milestones for technologies which will be
    commercialized in fiscal year 1998 were established in fiscal year 1994
    and updated annually. Historically, work under this grant has shown
    that it requires five years to successfully move commercially-promising
    technologies from the bench scale to the marketplace. The Consortium
    has been successful in effectively closing the gap between research and
    commercialization in the five year period. Each year, new projects are
    initiated that require five years to complete. The principal researcher
    believes that continued funding is necessary to successfully transfer
    new technologies under development to the marketplace. 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. A peer panel of government and
    academic scientists re-evaluated the scientific merit of the project in
    1998.
             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. Specific research
    projects are awarded on a competitive basis to university scientists
    with matching funds from non-federal sources for research involving the
    processing, packaging, storage, and transportation of food products.
    Projects selected for funding are merit reviewed by non-participating
    university scientists, industry scientists and scientists from
    professional organizations. 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 are supporting research from June 1, 1997 through May 31,
    1998. CSREES has requested and received a proposal in support of the
    fiscal year 1998 appropriation. 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 Alliance is positioned to fill the void in longer range research
    and development for the food industry.
        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 a research proposal competition among
    faculty from the 12 participating universities to fund research
    projects where matching funds are available from industry. Fourteen
    projects were funded from fiscal year 1994 funds with completion and
    final reports due by May 1, 1996. Ten projects were funded from fiscal
    year 1995 funds with anticipated completion and final reports due by
    August 31, 1997. Ten projects were also funded from fiscal year 1996
    funds with anticipated completion and final reports due by May 31,
    1998. Eleven projects were funded from fiscal year 1997 funds with
    anticipated completion and final reports due by May 31, 1999. Proposals
    are reviewed for scientific merit by independent scientists, and final
    selection of projects includes consideration of industrial interest and
    commitment on 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
    1995-1998, $423,000 each year. A total of $2,162,000 has been
    appropriated. Industry matching funds were $823,148 in fiscal year
    1994, $414,164 in fiscal year 1995, $576,600 in fiscal year 1996, and
    $429,579 in fiscal year 1997.
        The work is being coordinated by the Nebraska Agricultural
    Experiment Station at Lincoln. Specific research projects are also
    being conducted at ten other universities that are part of the
    Alliance. The overall objectives of the Alliance are ongoing. Funding
    supports the continuing and evolving needs and opportunities for foods
    manufactured and processed from U.S. produced crops and livestock. 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 12, 1998. The principal
    investigator has provided descriptions of projects funded by this
    grant. Scientifically-sound, industry-relevant projects appear to be
    the basis of the project, with impactful results expected.
                      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; development of new/improved U.S. products to meet
    foreign needs. The overall project proposal received a merit review at
    the university level and individual research activities are reviewed by
    the principal investigator and other faculty. 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 the Pacific Rim and in emerging 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. This project meets the needs of
    these firms at the local, regional , and national level.
        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. 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; 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 1995-1998, $592,000 per year. A
    total of $4,426,000 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 1992;
    $183,192 State appropriations and $318,966 industry for a total of
    $502,158 in 1993; $127,948 State appropriations and $500,394 industry
    for a total of $628,342 in 1994; $258,053 State appropriations and
    $389,834 industry for a total of $647,887 for 1995; $165,425 State
    appropriations for 1996; $162,883 State appropriations for 1997; and
    $165,000 State appropriations for 1998. Industry contributions continue
    but were not reported for 1996-1998.
        The program is carried out by Iowa State University. The original
    proposal in 1992 was for a period of 24 months, however, the objective
    of 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 2000.
        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 an impressive record of producing high quality, useful research and
    trade information for agribusinesses in the Midwest and other states.
    Research results appear in several peer-reviewed professional journals
    and the 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. Projects are selected for funding
    each year based on competitive, peer reviews by scientists outside the
    recipient institution. The fiscal year 1997 grant will support research
    through June 30, 1999. CSREES has requested the University to submit a
    proposal in support of fiscal year 1998 funds, but the proposal has not
    yet been received due to the University's merit review process to
    select projects for funding. The principal researcher believes that the
    question of microbial safety is of paramount interest to the milk/dairy
    industry at all levels-national, regional and local. 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. Ensuring safety of
    dairy products impacts not only consumer health and confidence in the
    safety of the food supply, but economic viability as well.
        The research is aimed at minimizing or eliminating future foodborne
    disease outbreaks from milk and dairy products. Researchers
    demonstrated that when subjected to a sublethal heat shock prior to
    pasteurization, Listeria monocytogenes becomes much more heat-resistant
    than previously thought, likely requiring the design of new
    pasteurization guidelines that will ensure the safety of dairy
    products. In addition, they developed a simple, fast, sensitive,
    specific and inexpensive method for the detection of Listeria
    monocytogenes in dairy products that will allow dairy processors to
    rapidly and easily screen for the presence of this pathogen both in
    their products and in the processing environment. 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. Another 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. 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
    1994-1998, $268,000 per year. A total of $3,512,000 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. Continuing and evolving needs
    related to the safety of milk and dairy products are expected to reveal
    new related objectives. 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 1998 appropriation, the review of the
    proposal supporting the fiscal year 1997 appropriation was conducted on
    March 13, 1997. At that time, the agency science specialist believed
    that the projects addressed important issues related 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 the Food and Drug
    Administration (FDA) approval of animal drugs intended for use in minor
    species and for minor uses in major species. The objectives of the
    program are to identify the animal drug needs for minor species and
    minor uses in major species, generate and disseminate data for the
    safe, effective, and legal use of drugs used primarily in therapy or
    reproductive management of minor animal species, and facilitate the
    Food and Drug Administration in obtaining approvals for minor uses.
    Studies are conducted to determine efficacy, target animal safety,
    human food safety, and environmental safety. 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 approval program. The NRSP-7 funds are being
    utilized by the State Agricultural Experiment Stations where the
    regional animal drug coordinators are located as well as by other
    stations to develop data required for meeting approval requirements.
    Participants in the research program consist of the regional
    coordinators, State Agricultural Experiment Stations, USDA's
    Agricultural Research Service, the U.S. Department of Interior, schools
    of veterinary medicine, and the pharmaceutical industry. Research
    priorities are continually updated through workshops and meetings with
    producer groups representing species categories such as small
    ruminants, game birds, fur-bearing animals, and aquaculture species.
    Each request for drug approval is evaluated by the technical committee
    according to established criteria which include significance to the
    animal industry, cost of developing the necessary data, availability of
    a pharmaceutical sponsor, and food safety implications. The fiscal year
    1997 research grants terminate in April 1999. The 1998 grant proposals
    have been requested by the agency. All grants are reviewed by the
    university and the agency for relevance to industry needs and
    scientific merit.
        Animal agriculture throughout the U.S. has relied on chemical and
    pharmaceutical companies to provide their industry safe and efficacious
    drugs to combat diseases and parasites. The high cost incurred to
    obtain data to approve these drugs, when coupled with limited economic
    returns, has limited the availability of approved drugs for minor uses
    and minor species. The economic losses due to the unavailability of
    drugs to producers for minor species and minor uses threatens the
    economic viability of some segments of the animal industry. The need
    for FDA/Center for Veterinary Medicine approved 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 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, certain
    aquaculture and the game bird industries are concentrated in specific
    geographic sections of the country. The administration believes this
    research to be of national, regional or local need.
        The original NRSP-7 goal to obtain approval by the Food and Drug
    Administration for 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 were recently received from the game bird. 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, 286
    drug requests have been submitted to the Minor Use Animal Drug Program
    for approval. Working in conjunction with many universities. Twenty
    five public master files have been published in the Federal Register
    providing approval for drug use in minor species and 30 active research
    projects are being conducted in 15 states involving 18 animal species
    and 17 different drugs. Therefore, whereas a total of 286 animal drug
    requests have been submitted to the program since 1983, program funding
    has been available for only about one out of every five requests. In
    1997, a Public Master File was prepared and published in the Federal
    Register for the use of clorsulon for control of liver flukes in goats.
    The research for this project was conducted in Florida. It is also
    anticipated that in the next year, ivermectin will be approved for use
    in bison.
        The Center for Veterinary Medicine of the Food and Drug
    Administration 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 commodity 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 1995-1998.
    A total of $6,291,000 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; $191,835 non-federal support in 1996, and
    $357,099 non-federal support in 1997.
        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,
    the Agricultural Research Service, 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 FDA 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 presenting new challenges to
    agriculture. Especially with the new sensitivities about food safety
    and environment protection, 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 1997. An external review team of experts representing animal
    drug research and development, the veterinary profession, the
    pharmaceutical industry, and academia, found the program to be very
    productive. Recommendations from the review included a) improve the
    visibility of the Minor Use Animal Drug Program, b) improve working
    relationships with the veterinary and pharmaceutical communities, c)
    and acquire additional support for the program by pharmaceutical
    companies, universities, and the federal government to meet the
    identified national needs with emphasis on responsiveness to industry
    needs and food and environmental safety. Annually, grant proposals are
    peer reviewed and twice a year the agency and representatives of the
    program meet with representatives from the Food and Drug Administration
    to evaluate progress and to prioritize research requests. Workshops are
    held periodically to identify priorities for the program whereby
    producers, pharmaceutical companies, FDA, and researchers participate.
    GAO also conducted a review in 1991 and recommended additional support
    for the program.
                          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. Researchers are currently evaluating selected
    families in cooperation with the industry. The proposal is put though
    the university's peer review process and is reviewed by the CSREES
    Program Manager. 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.
        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 U.S. and abroad. During the first two years
    of the program an oyster broodstock selection program was implemented
    in partnership with industry. Performance trials of selected stocks
    will continue at commercial sites.
        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 and 1998 is $400,000. A total of $1,350,000 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 and 1997 no cost sharing was provided.
        Research will be conducted at Oregon State University. 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 2002.
        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 1997
    review, indicated that the researchers were well qualified to conduct
    the research, the research complements other research being funded
    though USDA, the research does address an important opportunity for the
    industry and that the research is being conducted in close cooperation
    with the private sector. The 1998 CSREES review will be completed
    within three weeks of submission of the proposal. The researchers are
    asked to develop a research proposal consistent with the NSTC's
    Strategic Plans for Aquaculture Research and Development.
                        multi-commodity research, oregon
        The purpose of this research 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 by Pacific Northwest
    agriculture through improvements in food production, processing, and
    trade by assisting decision makers in developing economic and business
    strategies. The grant is not competitively awarded at the state or
    regional level, but the proposal is merit reviewed at the Experiment
    Station and the departmental levels. The principal researcher believes
    that Oregon and the other Pacific Northwest States produce a wide
    variety of agricultural commodities and products with commercial
    potential to 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 strategics tailored to specific Pacific Rim
    markets. The principal researcher believes this research to be of
    national, regional and local need.
        This goal of this research is to gain better specific 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. This project will
    investigate and develop innovations in value-added agriculture to
    improve the economic performance of the agricultural and food
    manufacturing sectors in the Pacific North-west. The current research
    plan will examine economic variables that underlie competition in food
    production, processing and marketing in the Pacific Rim; address
    technological challenges in transport, storage, and quality
    maintenance; assist in testing and evaluating new product ideas; and,
    monitor the economic performance of the Oregon value-added agricultural
    industry.
        Work in progress has resulted in research output in 4 topic areas:
    market research, packaging research, sensory research, and food
    processing industry strategic planning. Research output includes
    development of a pilot World Wide Web site for Pacific Northwest
    exports, data bases, survey work, and collaborative research activity
    with industry and with institute and university researchers in selected
    Asian countries. Manuscripts, working papers, journal articles, and
    several Masters of Science theses are outputs to date.
        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 1998 appropriations were $364,000 for each year. The
    total amount appropriated is $2,038,000. Non-federal funding for this
    grant was $168,824 in State appropriations in fiscal year 1991,
    $177,574 in State appropriations in 1993, and $162,394 in State
    appropriations in fiscal year 1994. Due to a change in university
    policy regarding indirect costs, the university has not reported the
    amount of non-federal funds appropriated for fiscal years 1995-1998.
        The research program is carried out at Oregon State University in
    Corvallis and at the Northwest Food Innovation Center in Portland,
    Oregon. This Special Grant is awarded on a year-by-year basis. Oregon
    State University traditionally requests funds for this project on an
    annual basis and has budgeted the funds to individual sub-projects on
    that basis. Progress on the original objectives is as follows: baseline
    data have been accumulated; an economic growth assessment model is
    being formulated and refined; 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 in industries to meet the demands for noodle production for Asian
    markets. Anticipated complection date is currently 1998. A CSREES merit
    review was dated July 1997. The work was found to be scientifically
    sound and of high priority to the region.
               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 water quality characterization to accelerate permitting
    of aquaculture systems. Field testing of alternative species is
    underway. The proposal is placed through the university's peer review
    process and is reviewed by the CSREES Program Manager. 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.
        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. Researchers are
    currently characterizing differences in water quality in fish ponds to
    establish criteria for fish pond permitting and management.
        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 1995-1998, each year. A
    total of $1,705,000 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 1995-1996 and $116,730 in
    fiscal year 1997. 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 1999. 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 1997
    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. The
    researchers are asked to develop a research proposal consistent with
    the NSTC's Strategic Plan for Aquaculture Research and Development.
                 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 scientist 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 agency
    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
    1995-1998, $254,000 per year. A total of $2,446,000 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
    his 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.
              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 plants which will shorten the time
    frame to produce transgenic plants. This project was not awarded
    competitively but has undergone peer review at the university level and
    merit review at CSREES. The principal researcher believes that the
    successful development of these techniques and subsequence transfer of
    nematode resistant genes into agronomic plants will provide an
    environmentally sound system for all plants susceptible to plant
    parasitic nematodes. The principal researcher believes that project has
    the potential for both regional and national application.
        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 resistance
    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 trails on potato and eggplants.
        The work supported by this grant began in fiscal year 1991 and the
    appropriations for fiscal years 1991-1993 were $150,000 per year;
    $141,000 was appropriated in 1994; and $127,000 in fiscal years 1995-
    1998, each year. A total of $1,099,000 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 state appropriations 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
    were no matching non-federal funds. In 1998, $48,000 state appropriated
    funds were provided.
        Research is being conducted at the New Mexico State University, and
    at collaborating universities in the region. The completion date for
    this project is estimated to be in 2001.
        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 technology to develop pesticide capability in plants of
    agronomic importance. A plant transformation system was developed to
    improve the historically difficult transformation efficiently of
    monocots. In field trails of transformed eggplants and potatoes, high
    levels of effectiveness against insects have been found. Several potato
    and alfalfa lines have been transformed and established in field plots
    and are being tested at this time. Other constructs are being used in
    many crops to determine resistance to nematodes and other crop pests.
                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. Projects are merit
    reviewed internally at the University of Nebraska. 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.
        The objectives 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. We are currently negotiating a licensing agreement
    with Biofoam for the commercial use of this technology. 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. Bruning Grain
    Company is currently working with us on a Drip Oil II product that they
    hope to market in the summer of 1998. 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. More recent studies have improved the
    process for converting tallow to esters for fuel use. Starch has been
    converted to levulinic acid using acid hydrolysis and an extruder. A
    patent is pending and commercialization efforts are underway. A patent
    application has been prepared on our micro-crystalline cellulose
    production technologies. CSREES is currently working with M.C.C.
    Technologies on commercialization. Their goal is to commercially
    produce microcrystalline cellulose in 1998.
        The work supported by this grant began in 1990 and the
    appropriation for fiscal year 1990 was $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 1996-1998 per year. A
    total of $827,000 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;
    fiscal year 1996, $251,000; fiscal year 1997, $250,000; and fiscal year
    1998, $340,000. 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, Bioplastics, Inc., Biofoam, Inc. and M.C.C. Technologies,
    Inc.
        This work is being conducted at the Industrial Agricultural
    Products Center, L.W. Chase Hall, 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. This project is evaluated annually based on an annual progress
    report. The cognizant staff scientist has reviewed the project and
    determined that the research is conducted in accordance with the
    mission of this agency.
                  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. A peer panel of government and academic scientists is
    expected to re-evaluate the scientific merit of the project on January
    29, 1998.
        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.
        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 years 1997 and 1998, $175,000 per year. A total of $1,724,000
    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 to 4 years. The application of this research
    for improved management of natural resources will evolve and expand as
    technology in the area advances. 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. A peer panel of government and academic
    scientists is expected to re-evaluate the scientific merit of the
    project on January 29, 1998.
                     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 medium. 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 tool for the industrial sectors dealing with
    potash and paper waste. The principal investigator believes this
    research to be of local, regional and national importance.
        The original goal of the research was and continues to determine
    the feasibility of simultaneously composting 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 I, to determine the feasibility of simultaneous
    composting dairy waste with available high carbon wastes from
    agriculture and industry, has been completed. Phase II, to determine
    the appropriate ratios of waste to carbon substrate for successful
    composting, is almost completed.
        The work supported by this grant began in fiscal year 1996 and the
    appropriation for fiscal year 1996 was $150,000, and for fiscal years
    1997 and 1998 $100,000 per year. A total of $350,000 has been
    appropriated. The non-federal funds for the duration of this grant from
    the state appropriation is $75,000. There is another $50,000 in-kind
    support from the industrial partners. Additionally, a sum of $15,000
    from the New Mexico State Highway Department has been leveraged by this
    project.
        This work is being carried out in New Mexico under the direction of
    the Waste-Management Education and 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 March 1999. Objectives are being met as the project
    continues. The project has been progressing according to the specified
    targets. Phase 1 of the projects has been completed and phases 2 and 3
    are being completed according to the identified targets. This project
    has been evaluated based on the semi-annual progress report and
    research findings presented at the annual Composting Council
    Conference. The cognizant staff scientist has reviewed the project and
    determined that this research is conducted in accordance with the
    mission of this agency.
                        pasture & forage research, utah
        This research is designed to develop and evaluate management
    systems for grazing-based livestock production systems appropriate to
    the needs and conditions faced by Utah producers. Utah State University
    will conduct field research to determine optimal forage, appropriate
    nutrition and management for cattle and sheep in a forage-based
    production that will optimize returns with minimum environmental
    impact. Results from simulated intensive grazing management studies
    indicate six harvest cycles between May 15 and October 1. Orchard
    grass, meadow bromegrass and tall fescue were most promising forage
    plants. Future work will address weed control, stocking rate, animal
    performance and economic returns. This information will be incorporated
    into production in Utah.
        The work supported by this grant in fiscal year 1997 was $200,000
    and appropriation for 1998 is $225,000. A total of $425,000 has been
    appropriated. Non Federal funds in support of this work for fiscal year
    1997 was $360,200.
        The research is being conducted at the Utah Agricultural Experiment
    Station. The principle investigators anticipate the completion date for
    these objectives to be in 2002, at which time the pasture management
    guides using these results are anticipated. The initial proposal for
    fiscal year 1997 received a complete peer review through the
    institution's project approval process and was reviewed by CSREES
    scientists. The fiscal year 1998 proposal and those for each year
    thereafter, will be subjected to the same level of review.
            peach tree short life in south carolina, south carolina
        Progress continued in 1997 with focus on the evaluation and
    longevity and productivity of Guardian rootstocks on peach tree short
    life sites in the southeast and replant sites throughout North America.
    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 bacteria. This project was not awarded
    competitively but has undergone peer review at the university level and
    merit review at CSREES.
        According to the principal researcher the problem of 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. Research continued in 1997 on the improvement of
    rootstocks and the use of the cultivar Guardian BY520-9 has potential
    to benefit the entire peach rootstock industry including California,
    New Jersey and Michigan where bacterial canker is a problem. The goal
    of this research was the continued evaluation of productivity of peach
    Guardian BY520-9 rootstocks on peach tree short life and investigations
    into novel management for ring nematodes by bacteria. Recent
    accomplishments include the increase in bulk commercial production of
    Guardian seed while two new Guardian selections have had very good
    nursery trails. Guardian rootstock continues to be tested in 22 states
    and is performing well. A marker for a gene for rootstock resistance to
    two root-knot nematode species was sequenced and successfully use to
    correctly sort current commercial rootstocks according to their known
    nematode resistance or susceptibility. A major find is that the egg-
    kill factor produced by the bacteria kill root-knot nematode eggs as
    well as ring nematode eggs.
        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; fiscal years 1995-1998, $162,000 per year. A total
    of $3,203,000 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 appropriations in 1994; $193,976 in state
    appropriations in 1995; $169,806 in state appropriations in 1996 and
    1997; and $150,693 state appropriations in 1998.
        This research is being conducted at South Carolina Agricultural
    Experiment Station. The researchers anticipate that the work may be
    completed in fiscal year 1999. Adequate progress has been made to
    assure that the objectives will be met before the completion date. The
    last agency evaluation of this project 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 area of
    research in that it can enhance disease management by protecting the
    peach rootstocks. Progress was made in all the objectives in 1997. Some
    accomplishments were the increased production and release of commercial
    Guardian seed and continued evaluation of rootstock in 22 states and
    provinces. A molecular techniques that separates resistant and
    susceptible peach rootstocks was validated.
                   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.
    Contributions from the South Carolina work are projected by South
    Carolina to impact vegetable production in the Southern region and
    consumers of vegetable production from the Southern region.
        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.
        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 1998, $106,000. A total of $792,000 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 as
    we reported to you last year. Objective A: Develop and evaluate
    microbial pest control agents for control of plant pathogens and insect
    pests of vegetables, is defuse and non-conclusive. It would be far
    superior for continued work in this area to 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. Objective B: Determine the efficacy of innovative
    cultural practices for vegetable production systems in South Carolina.
    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 and has been cited in the
    accomplishments in my response to your earlier question. We feel that
    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. Objectives D: Evaluate and develop
    germplasm, breeding lines and cultivars for resistance to major
    pathogens of commercially important vegetables. Objective E: Transfer
    new technology to user groups, has not demonstrated any progress that
    would not be anticipated from ongoing conventional sources of funds. We
    evaluate this project annually when we process the grant. An on-site
    comprehensive merit review of this project is scheduled by CSREES for
    June of 1998.
                          pest management alternatives
        This special research grant supports projects that help farmers
    respond to the environmental and regulatory issues confronting
    agriculture. These special grant funds support research that provides
    farmers with replacement technologies for pesticides that are under
    consideration for regulatory action by EPA and for which producers do
    not have effective alternatives. The passage of the Food Quality
    Protection Act of 1996--FQPA--makes this special research grant of
    critical importance to the Nation's farmers.
        New pest management tools are being developed to address critical
    pest problems identified by farmers and others in a crop production
    region, and to identify new approaches to managing pests without some
    of the most widely used pesticides. Farmers have identified the lack of
    effective alternative pest management tactics as a primary reason for
    not implementing IPM on their farms. Where effective alternative
    tactics have been developed, they are widely and rapidly implemented by
    farmers. These special research grant funds are awarded on a
    competitive basis to all eligible research institutions through the
    Pest Management Alternatives Program or PMAP. Research priorities for
    PMAP are established with the help of a database analysis system, which
    draws upon the expertise of the land-grant university system, commodity
    groups, and others.
        The ability of the Nation's agricultural production system to keep
    pace with domestic and global demand for food and fiber is dependant on
    access to safe, profitable and reliable pest management systems. For a
    variety of factors, farmers and other pest managers have fewer chemical
    control options available to them than they did at the beginning of the
    decade, and this trend is likely to continue at an accelerated rate.
    The Food Quality Protection Act of 1996 (FQPA) will have significant
    impacts on pest management systems in the United States over the next
    decade, and the ``minor use''--high value crops grown on relatively few
    acres--will be particularly hard hit. For these reasons and others, it
    is essential that farmers be provided with new pest management tools
    and better information so they can remain competitive in today's global
    marketplace.
        This research is conducted to help farmers respond to the
    environmental and regulatory issues confronting agriculture by
    providing them with new options for managing pests. The research
    supported by this special grant is identifying new ways to manage pests
    without key pesticides that may no longer be available as FQPA is
    implemented. Some highlights of the research funded through PMAP
    include progress on surface amendment to reduce air pollution by
    Telone, a fumigant; latent infection assessment and fungicide mixtures
    for brown rot control; development of a pesticide use/pesticide
    recommendation database; implementation of alternatives to carbofuran
    for control of rice water weevil; substitution of behavavioral control
    for organophospate sprays against apple maggot; pheromone mating
    disruption in orchards; biodegradable fiber barriers for root maggot
    control; pesticide risk mitigation by improved application technology;
    and integration of natural enemy thresholds for greenbug management in
    wheat. Progress on additional research has been made to collect data on
    alternatives for pest management in watermelon insects and diseases of
    cucurbit crops in the South Central States; on developing IPM and
    monitoring networks in Northeastern vegetable crops; assessment of
    insecticide and IPM usage in alfalfa and small grains; and alternative
    management practices for minor tree fruit crops.
        Grants have been awarded from funds appropriated as follows: fiscal
    years 1996 through 1998, $1,623,000 per year. A total of $4,869,000 has
    been appropriated. Non-federal funds are not required by this grants
    program. All states are eligible to compete for this funding. This
    research is currently being carried out by State Agricultural
    Experiment Stations and other research institutions located in 23
    states.
        The economic and environmental pressures facing U.S. agriculture
    today are at least as great today as they were in 1996 when federal
    funds were first appropriated for this special research grant. There
    will be a need for continued investment in research to develop new
    approaches to managing pests for the foreseeable future as the Food
    Quality Protection Act of 1996 is implemented.
        Proposals are evaluated by multi disciplinary panels. The projects
    supported by this special research grant have consistently provided key
    knowledge needed in developing new approaches to pest management.
          pesticide clearance (pest management for minor crops--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 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. In many cases, the agricultural chemical industries cannot
    economically justify the time and expense required to conduct the
    necessary research for pesticides with small market potential. With
    assistance from IR-4 registration-related costs are manageable, and
    producers of a large number of small acreage crops such as vegetables,
    fruits, nuts, spices and other specialized crops have access to
    necessary pest control products. 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. The research program then assimilates the data
    from all the participating experiment stations, 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 corp
    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 and regional as well as
    local needs. The goal is to obtain minor use and specialty us pesticide
    registrations and assist in the maintenance of current registrations
    and to assist with the development and registration of biopesticides
    and safer pesticide produce useful in IPM systems for minor corps.
    During the past five year period, over 1600 new minor food use
    clearance requests were submitted to IR-4 from growers, state and
    federal scientists and extension specialists. After evaluation and
    prioritization, nearly 1300 studies were conducted involving 2610 field
    reports and 2230 laboratory reports. Accomplishments included the
    registration of a fungicide to control eastern filbert blight on
    filberts resulting in an economic benefit of $4 million per year.
    Without the availability of this product, it is estimated that one-
    third of the filbert orchards in the producing states of Idaho, Oregon
    and Washington would have gone out of business. IR-4 recently provided
    data for a national registration for a new herbicide on cucumbers for
    broadleaf weed control. It is estimated by Washington scientists that
    growers will realize a savings of $1,000,000 in herbicide and labor
    costs on 2500 acres of the crop grown in that state alone. With more
    than 130,000 acres of cucumbers produced nationally, the potential
    savings are enormous.
        IR-4 provided residue data to support the FIFRA 88-mandated
    reregistration of more than 600 minor uses identified by growers as
    critical needs. One of these was streptomycin for the treatment of
    edible dry beans grown for seed on 15,000 acres in California and
    valued at $4 million annually. California seed is sold to growers in
    Colorado, Nebraska, Minnesota, the Dakotas, Wisconsin, Michigan and New
    York where a disease known as halo blight can devastate untreated bean
    plantings. For this reason, growers will not purchase seed that is not
    treated with streptomycin.
        Registrations for the control of insect disease and weed pests of
    commercially grown ornamental crops continues to be an important
    objective of the IR-4 Project. Since 1977, IR-4 has assisted with the
    registration of over 5000 pesticides and biological pest control agents
    on woody nursery stock, flowers and turf grass. During the past two
    years, IR-4 has developed data to allow the use of a herbicide for the
    control of yellow nutsedge and other grassy weeds in woody and
    perennial ornamental crops. In California alone, over 100,000 acres are
    treated with this herbicide, thereby saving growers $1.6 million
    compared to hand weeding. IR-4 also continues to work closely with
    nurserymen and growers to develop pesticides such as azadirachtin, a
    naturally occurring insecticide, for integrated pest management
    systems.
        Biopesticides have been an important IR-4 thrust since 1982. IR-4
    conducts a competitive grants program to develop research data to
    support the registration of microbial and biochemical pest control
    products on minor crops. Equally important, IR-4 interacts with public
    sector and venture capital registrants to assist with Experiment Use
    Permits and provide guidance on EPA registration procedures. The
    Pesticide Clearance program continues to have a high productivity
    which, according to EPA, supports 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
    years 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; fiscal year 1995 through 1997,
    $5,711,000 per year and fiscal year 1998, $8,990,000. A total of
    $61,519,000 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 each year of 1996 and
    1997.
        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 analyzes.
        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
    and also IR-4, 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, and the eventual
    loss of a large number of conventional pesticide registrations for
    minor crops because of the 1996 Food Quality Protection Act. 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 1997, IR-4's updated its strategic plan to
    focus on the registration of biopesticides and safer pest control
    technology for minor crops in addressing the Food Quality Protection
    Act. That Act calls for more extensive residue data requirements which
    would take into account an additional safety factor for infants and
    children. The IR-4 program thrust will be carried out along with the
    traditional minor crop pesticide clearance program.
        Each year the program is peer reviewed and reviewed by CSREES'
    senior scientific staff. A summary of those reviews indicate excellent
    progress in the achieving the objective of providing safe pest controls
    for minor users.. In December, 1997, CSREES sponsored a nine-member
    peer panel review of the IR-4 program, conducting an on-site review at
    Rutgers University. A final report is expected in early 1998. In
    addition to the yearly evaluations, the program received an on-site
    external review sponsored by CSREES in December 1990, and a GAO review.
    These previous reviews have resulted in significant improvement in the
    IR-4 programs productivity and quality of research. Additionally, the
    customers served by IR-4 have provided input to the program to enhance
    its effectiveness.
                      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 or availability of key pesticides through voluntary
    cancellations or regulatory action. NAPIAP data augments National
    Agricultural Statistic Service (NASS) data by conducting commodity
    based assessments and crop profiles on minor-use or small acreage
    crops. All projects are peer reviewed through a regional competitive
    process.
        This program provides the Environmental Protection Agency (EPA) and
    the USDA with information on the use, importance and effectiveness of
    pest management alternatives essential to U.S. agricultural crops and
    livestock production. NAPIAP, in responding to the information needs of
    EPA for implementation of the Food Quality Protection Act, has focused
    its studies on minor crop production systems. To insure relevance and
    focus, minor crop producers provide input to NAPIAP, thus permitting
    coordination of studies and information gathering with NASS, the
    Environmental Protection Agency, and the United States Department of
    Agriculture's Office of Pest Management. Nationally, EPA uses these
    data in making environmentally sound regulatory decisions within the
    regulatory framework of the Food Quality Protection Act 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 interactions with
    scientists in all State Agricultural Experiment Stations and
    Cooperative Extension Services. Through this cooperative interaction,
    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 1995-1998, $1,327,000 per year. A total of $43,571,000 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 remaining program expenses, beyond the federal
    program funds, of program participant salaries, facility costs,
    clerical support expenditures, supplies and program costs of the
    program's State Liaison Representative have been born by each state and
    these costs are considered the state funding provided to support this
    program. State estimates of their matching support for 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
    50 states and 5 Territories. The distribution of competitively awarded
    regional research grants is coordinated through a lead state in each of
    the four regions of the United States: namely, California--West; Ohio--
    North Central; Pennsylvania--Northeast; and Florida-South. The National
    Agricultural Pesticide Impact Assessment Program has been an on-going
    research effort to gather relevant pest management information
    necessary for changing. A federally coordinated network of state
    scientist contacts was developed in the intervening years to address
    the information needs of the regulatory agency. NAPIAP is a multi-
    agency on-going program which attempts to address the increasing needs
    for pest management information by EPA. The combined data needs of the
    Food Quality Protection Act, IPM implementation documentation, and
    Government Performance and Results Act will is resulting in an even
    greater need for pest management information. Thus the original
    objectives have been met but data needs continue to change and grow.
        A comprehensive evaluation and review of the National Agricultural
    Pesticide Impact Assessment Program 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, commodity groups, the
    federal government, and the Land Grant System. A recurring theme which
    emerged from the 1995 review was a directive to focus the NAPIAP
    program on data collection on the benefits of pest management
    alternatives. In response to this recommendation, CSREES brought
    together the programmatic and budgetary components of the program into
    a single coordinated NAPIAP effort. Each of the 14 recommendations
    provided by the review panel were addressed and implemented. In 1997,
    the USDA Office of Pest Management policy assumed programmatic
    leadership for NAPIAP to direct the program's activities to the
    informational needs of FQPA.
                       phytophthora root rot, new mexico
        Work has continued to focus in general on the 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 tolerant genes,
    investigation on irrigation modification as a means to manage root rot,
    and soil bed temperature control as a means to manage disease. This
    project was not awarded competitively but has undergone peer review at
    the university level and merit review at CSREES. The principal
    researcher believes that since Phytophthora disease threatens chili
    production in west Texas, New Mexico, and Eastern Arizona, this problem
    is of state-and regional significance. 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 field.
        The work supported by this grant began in fiscal year 1991 with an
    appropriation of $125,000 for that year. The fiscal years 1992-1993
    appropriation was $150,000 per year; $141,000 in fiscal year 1994; and
    $127,000 in fiscal years 1995-1998, each year. A total of $1,074,000
    has been appropriated. Non-federal funds from state appropriations and
    the California Pepper Commission were $255,614 in 1997; and $253,614 in
    1998.
        Research is being conducted at New Mexico State University. The
    anticipated completion date for the original objectives was 1995. These
    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 objectives of these programs should be met by 2002.
        The last agency evaluation was made in December, 1996. In summary,
    the development of resistant cultivars and research on interactions of
    Capsicum and Phytophthora for developing strategies for irrigated crop
    growers to be competitive in the international economic arena
    continued. More than 26,564 seedlings were screened for resistance to
    root rot and/or foliar blight in the greenhouse. This technique allows
    the resistant plants to be saved and used in the breeding program.
    Field evaluations of advanced lines continued with 11 green chile lines
    and 18 paprika lines tested for release. Two jalapeno lines were
    released by this program.
           plant, drought, and disease resistance gene cataloging, nm
        The objective of this work will be to identify important genes in
    crop plants that result in the ability to resist stress caused by
    drought and disease organisms. CSREES has requested the university to
    submit a grant proposal that has not yet been received. The focus of
    this research will be to improve plant resistant to drought and disease
    for New Mexico crops. However this information can have application
    through out the nation especially in the arid/semi arids.
        The goal of this research is to produce better adapted crops for
    New Mexico. The work will be started in 1998 and therefore no results
    have been obtained at this time. The work supported by this grant
    begins in fiscal year 1998 and the appropriation for fiscal year 1998
    is $150,000. The project has not yet started and the availability of
    nonfederal funds has not been determined.
        The research will be conducted at New Mexico State University and
    is anticipated to require four years to meet the major objectives. The
    project is anticipated to be reviewed annually by the project approval
    process of the institution.
                       postharvest rice straw, california
        The postharvest rice straw special grant was initiated in May 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. Although this special research grant is
    awarded noncompetitively, the proposal is reviewed for merit by the
    university before submission to CSREES and reviewed by CSREES for
    technical merit and allowable costs and procedures. 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. 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. This project is only
    recently initiated and is fully organized, including outreach to the
    rice industry.
        The work supported by this grant began in fiscal year 1997. The
    appropriation for fiscal year 1997 was $100,000 and fiscal year 1998 is
    $300,000. A total of $400,000 has been appropriated. 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. Since 1997 was the first year for the
    postharvest rice straw project, no evaluation has been conducted.
                                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.
    CSREES published a request for proposals in the Federal Register and
    awarded eight grants competitively based on a scientific peer review.
        The principal researcher believes this research effort addresses
    needs of the potato producers and processors. 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. 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
    1998, $1,214,000. A total of $16,652,000 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 each of 1996 and 1997.
        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 is developing new potato varieties takes from 5
    to 10 years. Beginning in fiscal year 1997, these funds have been
    awarded on a competitive basis using a scientific peer review. In
    addition, the agency has at least one formal meeting with
    representatives from the potato industry to review research needs.
                        poultry carcass removal, alabama
        This is a new grant which is being funded for the first time in
    fiscal year 1998. This project is intended to examine the problem of
    disposal of dead chickens using alternative procedures. The procedure
    to be investigated is to pelletize and dehydrate the chicken carcasses
    so that they can then be used as a safe and high quality animal feed
    product. The disposal of dead chickens is an increasing problem due to
    refusal by most land fill operations which take solid waste to continue
    to accept animal carcasses. This is a need that is being recognized at
    all levels, national, regional and local. The goal of this research is
    to develop an economically-feasible procedure for disposal of chicken
    carcasses using a process that pelletizes and dehydrates the carcasses
    and produces a safe and high quality animal feed. Because it is a new
    project there is no progress to report at this time.
        Fiscal year 1998 is the first year of funding for this project and
    $300,000 has been appropriated. Information is not available on non-
    Federal funding support. The research work will be carried out at the
    University of West Alabama and Alabama Protein Recycling. The
    anticipated completion date is March 15, 1999. Because the work is just
    now being initiated, there has been no evaluation.
                         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 is designed to provide information about small and
    large cow-calf operations in Kansas. This project was reviewed for
    merit by three scientists in CSREES prior to the initial award and for
    the renewal in fiscal year 1997. 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. Other organizations such as the National Cattlemen's
    Beef Association and the Livestock Conservation Institute have given
    strong support for increased numbers of projects on topics related to
    preharvest food safety such as this one. The principal researcher
    believes this research to be of national and regional need.
        The original goal of this research was to determine the relative
    incidence of shedding of E. coli 0157: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 utilizing nested PCR and enriched culture systems for
    identifying the E. coli organism in feces of cattle. They have
    demonstrated significant increases in recovery of E. coli from feces
    using these methods when compared to prior culture systems that were in
    use. The cooperating herds have been identified and sampling is in
    progress. 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''. Data
    collected to this time supports the concept that stressful incidents
    such as calving caused a marked increase in shedding of E. coli in
    feces of cows. 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, 1997, and 1998 was $212,000 per
    year. A total of $636,000 has been appropriated. Non-Federal funds have
    been contributed to this project as follows: In fiscal year 1996 non-
    federal funds provided to this project were $150,000 in state
    appropriations and $91,450 in contributed indirect costs; 1997 non-
    federal funds provided to this project were $90,300 in contributed
    indirect costs and $165,000 in state appropriated funds.
        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 01 and Year 02 of the grant and
    are working on the objectives for Year 03. Because of a slight delay in
    the start of the funding, it is anticipated that the other original
    objectives will be completed by March 1999 and the project should be
    finished by September, 1999.
        The project was evaluated on October 28-29, 1997 during a site
    visit by W. C. Wagner on the Kansas State University campus. The group
    has excellent collaborative activities in place and they are proceeding
    very well. It was impressive to see how they have utilized this
    approach to be successful in meeting their objectives. There are
    multiple units involved in the project and they are coordinating this
    work with the Food Safety Consortium which includes Kansas State
    University, Iowa State University and the University of Arkansas. They
    have met their objectives as listed in the original proposal for the
    first two years of the project. Their results to date suggest that the
    infection of cattle with E. coli is probably a rather transient event
    and may not establish the true carrier state as one normally thinks of
    it. While certain events such as calving increase the rate of shedding
    in the feces and was thought to be a response to stress at that time,
    other types of stress such as trucking for 150 miles do not result in
    an increase in shedding of E. coli by the animals.
                 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 being finalized to develop a fruit orienting
    mechanism for incorporation 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 are supporting research through June
    30, 1999. CSREES has requested, but not yet received, a proposal in
    support of the fiscal year 1998 appropriation.
        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. New
    environmentally friendly processing systems have been developed and are
    being commercialized in Oklahoma which have broad application to
    numerous crops with international marketing potential. 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. New extraction
    facilities will also have a positive impact on local economies,
    incorporating a new value added processing industry and providing local
    employment opportunities.
        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. Funding has been secured for construction of a commercial
    extraction facility in Oklahoma, pending successful pilot testing which
    is underway. 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 2000. Research from this
    project provided the basis for commercial high relative humidity
    storage of peaches and to attract companies to the state to construct
    new value added food processing facilities.
        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 1995-1998, $226,000 each year. A total of $3,251,000 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;
    fiscal year 1996, $366,570; and fiscal year 1997, $397,881; for a total
    of $1,858,287 in state funds. An additional $16,100,000 was 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. The Oklahoma State University
    Division of Agriculture Sciences and Natural Resources appropriated
    approximately $2 million dollars in recurring funds 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 1997
    grant would support work through June 1999. It is expected that ongoing
    research will be completed in 2002. Additional related objectives
    beyond this date would address further opportunities for horticulture
    industry growth and economic development. 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 supporting
    the fiscal year 1997 appropriation 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.
                      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 1998 grant proposal has been requested but
    not yet received. All funds are awarded on a competitive basis.
        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. 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
    1995-1998, $348,000 each year. A total of $3,018,000 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. Nonfederal funds
    were $163,000 for 1996 and $178,240 in 1997.
        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.
    Agronomically-important barley genes identified through this work is
    being used in barley breeding across the nation to improve yield and
    quality of the crop. Additions to this map are expected to aid future
    breeding efforts. This project is made up of many competitively awarded
    sub projects 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 multi institutional-
    multi disciplinary competitively awarded research project.
                   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. There is
    a national 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.
        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.
        Approximately 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., land tenure arrangements for program crops in connection
    with the implementation of the 1996 FAIR Act, conservation reserve
    program impacts on farms west of the Mississippi river, 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. Various
    income and estate tax options, including capital gains proposals, for
    the 1997 tax legislation were analyzed for their impacts on
    representative United States farms.
        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 1998. A
    total of $2,893,000 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 1991;
    $45,661 State appropriations in 1992; $33,979 State appropriations in
    1993; $40,967 State appropriations in 1994; $161,876 State
    appropriations in 1995; $187,717 State appropriations for 1996;
    $137,100 in 1997; and $161,400 for 1998.
        Research is being conducted by the Texas A&M University and
    University of Missouri at Columbia. 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. No formal evaluation of this project has been carried out;
    however, the CSREES representative is in frequent communication with
    the principal investigator concerning policy analyses procedures and
    studies.
                                 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. It has been, and is being used to analyze the impacts
    of farm policy proposals on the U.S. rice industry, to analyze the
    impact of World Trade Organization (WTO) and the Uruguay Round
    agreements on U.S. trade, and to analyze the impact of emerging rice
    importing and exporting countries on U.S. rice exports. The principal
    researcher believes this research addresses national, regional, and
    local needs. The original goal of this research was to develop improved
    global, national and regional models to analyze the impact of foreign
    and domestic policy changes, and forecast changes in production, trade,
    stocks, prices of substitute crops, farm prices, and consumption.
        The work actually began about four years ago and federal research
    grants from various sources have totaled roughly $2 million prior to
    this year. The work supported by this grant began in fiscal year 1996.
    The appropriation for fiscal years 1996 and 1997 was $395,000; for
    1998, the appropriation is $296,000, for a total of $1,086,000. The
    non-federal funds over the 4 years prior to this year totaled
    approximately $500,000. For the 1996 fiscal year, state appropriations
    were $178,000; for 1997, $150,000; and for 1998, are estimated to be
    roughly $150,000 as well.
        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. The purpose of constructing the models, however, is to
    provide on-going analyses of the impact of various policy proposals on
    the U.S. rice industry.
        We have conducted no formal evaluation of this project. However,
    each annual budget 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. These projects have
    undergone a merit review. The number of research faculty who are
    addressing broader rural issues id declining in many places. The multi-
    disciplinary, 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 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 of rural
    clients.
        The Rural Development Center mission is to strengthen rural
    families, communities, and businesses by facilitating collaborative
    socioeconomic research and extension through higher education
    institutions in the various regions. 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 research study funded by the Northeast Rural Development Center
    assessed the consumer credit knowledge of rural poor and ethnic
    minorities and determined their use and management practices. An
    educational program that focuses on the wise use of consumer credit was
    developed and offered to a diverse extension audience. In-service
    workshops also were offered to extension educators in several states in
    the Northeast. Two additional Northeastern states, New York and New
    Jersey, have duplicated the curriculum for distribution to all
    counties. This program was coordinated with and contributed to the
    development of a short video that promotes the Money 2000 program, a
    program that encourages participants to save and/or reduce debt by
    $2,000 by the end of the year 2000. The video was distributed widely to
    extension personnel within the region and nation, and to financial
    counselors at several military bases.
        The Southern Rural Development Center partially funded and provided
    all logistical support for a National Conference, ``Linking Family and
    Community Strengths.'' The conference was also supported by CSREES, W.
    K. Kellogg Foundation, Farm Foundation, National 4-H Council and the
    other regional rural development centers. The conference was funded to
    support 12 mini-grant ($1,000) projects that would transform learning
    at the conference to action.
        Using a Western Rural Development Center supported Business R&E
    (retention and expansion) program, New Mexico State University
    Extension has assisted seven communities expand their economic base by
    saving and creating local jobs. Seven jobs were saved in Silver City
    when task force members facilitated a propane company's move to a new
    location. The Clovis task force intervened with city officials to save
    a $1 million business complex. The R&E staff in Torrance County created
    75 jobs by helping a commercial greenhouse find suitable land. BC Hydro
    in Burnaby, British Columbia recently requested and received permission
    to adapt the Business R&E program materials for use in rural Canada.
        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 1995-1998, $423,000 per year. A total
    of 10,118,000 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
    land-grant 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 1998.
        The Centers enlist the help of academic and private/public
    foundations personnel on advisory committees and boards of directors to
    help establish operating rules and provide professional, technical
    counsel and peer evaluation of Center projects and the principal
    investigators. The projects are evaluated annually by the advisory
    committees and the boards of directors against the five key issue areas
    and the objectives of each project for relevance, achievement, and
    initial impacts. Follow-up evaluation is carried out by the Center
    staffs in order to assess long-term impacts of these projects on local
    communities.
                            rural policies institute
        The Rural Policy Research Institute 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. The principal research believes this
    research to be of national, regional, or local need.
        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 expert panels and other collaborative
    research have, over the life of RUPRI, involved 150 scientists
    representing 16 different disciplines in 60 universities, 40 states,
    and three foreign countries have participated in RUPRI projects.
    Currently 50 nationally recognized scientists and policy practioners
    from 38 institutions and organizations serve on RUPRI panels, task
    forces or work groups.
        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 1995-1998, $644,000 each
    year. A total of $4,662,000 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; and $584,516 in
    fiscal year 1995, for fiscal year 1996, $576,782; and $186,859 in 1997.
    Total 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
    1999; however the original objectives were directed at building a
    permanent, on-going, policy analytical capability. We have conducted no
    formal evaluation, however, annual project proposals are carefully
    reviewed.
                         russian wheat aphid, colorado
        Funding will support two key areas of research that are needed to
    assure long-term and sustainable Russian wheat aphid management. These
    are: 1) Discovering new crop genes which provide resistance to the
    Russian wheat aphid and incorporating them into commercially acceptable
    wheat varieties, and 2) Integrating the available control tactics into
    the most effective, efficient, and environmentally sound production
    systems for the Great Plains.
        The Russian wheat aphid is an exotic pest that entered the western
    United States without its normal complement of biological control
    agents. This insect was first discovered in North America in 1986 and
    rapidly became the most important insect pest of wheat in the western
    United States. From 1986-1991 the total economic impact was estimated
    to be in excess of $657 million. In the same period, some 17.5 million
    pounds of insecticides were used nationally for Russian wheat aphid
    control. The cost to American farmers of insecticide treatments was
    over $70 million. In addition, the intense use of insecticides on a
    crop that previously received little insecticide treatment raised
    concerns about the impact on water quality, human health, food safety,
    non-target organisms, and general environmental quality. Since the
    onset of the infestation, Colorado has lead all states in economic
    losses due to the pest. Direct losses in Colorado have been as high as
    $27 million in a single year with an average direct loss of above $11
    million per year, since 1987. The goals of the research are to: (1)
    discover new crop genes which provide resistance to the Russian wheat
    aphid and incorporate them into commercially acceptable wheat
    varieties, and (2) integrate the available control tactics into the
    most effective, efficient, and environmentally sound production systems
    for the Great Plains.
        The work supported by this grant begins in fiscal year 1998 and the
    appropriation for fiscal year 1998 is $200,000. State appropriations
    and the Colorado Wheat Administrative Committee have demonstrated
    strong support for this effort. Research will be conducted on the
    campus of Colorado State University, at Colorado State University
    research stations, and on the farms of cooperators throughout Colorado.
    Outreach and extension activities will be focused on wheat growers in
    Colorado, Nebraska, Wyoming, Kansas, New Mexico, Texas, and Oklahoma.
    This is a new project and has not been evaluated by CSREES.
           seafood harvesting, processing, and marketing, mississippi
        Research related to seafood safety, quality and by-product
    utilization has been supported by this grant. Funds from the fiscal
    year 1997 grant are supporting research through September 30, 1998.
    CSREES has requested the University to submit a proposal, which has not
    yet been received, in support of fiscal year 1998 funds. It is expected
    that funds from the fiscal year 1998 appropriation will support
    research to screen domestic and foreign aquaculture products for the
    presence of bacteria resistant to currently used antibiotics, to
    develop and evaluate a rapid method to detect histamine in seafood, to
    evaluate processes for the recovery of value-added flavor extracts from
    shrimp processing by-products, and to determine impact of
    implementation of HACCP regulations on microbial quality of seafood
    products.
        The principal researcher believes that national 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 over
    exploitation. Other national needs addressed in this project include
    reducing pollution during seafood and aquaculture food processing by
    converting byproducts into value-added food ingredients or materials.
    Regionally, much is unknown about the short and long-term effects of
    the new seafood HACCP regulations on the livelihood of Mississippi
    seafood and aquaculture food producers and processors who are typically
    small and lack sufficient resources to remain competitive. Continuation
    of this project will provide continued assistance to Gulf-Coast seafood
    processors in meeting new U.S. regulations as well as new international
    regulations that are important for Mississippi export products.
    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. 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. FDA has
    passed rulings affecting the potential viability of Mississippi seafood
    and aquaculture harvesters and processors; emphasis is thus being
    placed on addressing possible adverse consequences resulting from these
    changes.
        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 1995-1998, $305,000 each year. A total of
    $3,010,000 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. Continuing needs by
    Mississippi seafood and aquaculture harvesters and processors related
    to improved quality, safety and utilization will require research and
    development of new technologies to expand this industry.
        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 1998 proposal, the last review of the proposal was
    conducted on March 7, 1997. 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. Proposals are selected after examination of their
    relevance to priorities identified within the region.
        The principal researchers believes 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. 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 fiscal 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 1995-1998 are $212,000 each year. A total of
    $1,582,000 has been appropriated. The nonfederal 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. A complete accounting of 1996 funds is not yet available from the
    states involved.
        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 are still
    valid. Therefore, this is a continuing process with some priorities
    changing somewhat but still within the objectives. The project
    proposals are evaluated through a peer review mechanism and the
    adherence to the research priorities.
          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 multi-disciplinary 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. All grants
    made to the participating Institutions are awarded competitively by a
    scientific peer review process.
        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. This research is
    highly significant to national, regional and local needs. The original
    goals of this Consortium remains 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. Since its inception in 1985, the Southwest
    Consortium has provided essential support for the establishment of
    baseline data on new, forward thinking research relevant to the
    improvement of arid lands agriculture. Several area of accomplishment
    are noted. One are is the identification of chromosome regions
    conferring water use and transpiration efficiency in wheat; another the
    impact of water stress on host plant resistance to aphids and
    whiteflies on melon; a third, the genetic variation for deposition and
    demobilization of stem water-soluble carbohydrates in spring wheat; and
    the biochemical and molecular mechanisms of salt-tolerance.
        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 1995-1998 $338,000 each year. A
    total of $4,748,000 has been appropriated. The Consortium's host
    institution, New Mexico State University, reports matching non-federal
    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 each of the fiscal years of 1996 and 1997. 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. 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. An external review is
    being planned for 1998.
     soybean cyst nematode, missouri (biology and management of heterodera
                                   glycines)
        The research being funded by this grant is crucial to the
    development of effective management strategies to understand host
    parasite relationships of the pathosystems and each of its components.
    Work has dealt mainly with identifying Heterodera glycines-resistant
    genes and incorporating them into agronomically superior cultivars.
    Basic studies elucidate the fundamental biology of the cyst nematode in
    regard to new management strategies. Applied work dealt with evaluating
    production systems and to new management strategies. This project was
    not awarded competitively but has undergone peer review at the
    university level and merit review at CSREES. The principal researcher
    believes that although this research is focused on the soybean cyst
    nematodes in Missouri, the problems is of regional and national
    significance. 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. The original goal of this research was managing
    soybean cyst nematode through the development of new resistant soybean
    varieties and the use of biological and cultural management strategies.
    To date, several nematode resistant soybean line have been or will be
    released. 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.
    Accomplishments in these areas include use of a fungal pathogen of
    nematode eggs and the use of trap crops to reduce nematodes and
    improved soil health.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1979, $150,000; fiscal years 1980-1981, $250,000 per year; fiscal
    year 1982, $240,000; fiscal years 1983-1985, $300,000 per year; fiscal
    years 1986-1989, $285,000 per year; fiscal year 1990, $281,000, fiscal
    year 1991, $330,000; fiscal years 1992-1993, $359,000, fiscal year
    1994, $337,000; fiscal years 1995-1997, $303,000 per year and fiscal
    year 1998, $450,000. A total of $5,955,000 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 in 1995 and 1996; $33,723 in state
    appropriations in 1997; and $37,445 in state appropriations in 1998.
        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 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 in 1999. The last evaluation of this project was a merit
    review in December, 1996 and the renewal project will be evaluated in
    1998. In summary, continued development of new management strategies
    for the soybean cyst nematode is extremely important. Progress in
    meeting the objectives in each goal continues with new varieties with
    nematode resistance being released yearly as well as excellent progress
    in other management strategies. Two new soybean strains were developed
    with resistance to soybean cyst nematodes and root-knot nematodes. A
    Plant Variety Protection has been applied for the cultivar Maverick
    that is nematode and root rot resistant. A chitinase gene was
    successfully cloned in Rhizobium that may protect soybean plants from
    soybean cyst nematodes.
               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 site-specific farming as precision farming to improve the
    level of Crop Management and thereby improve farm income and while
    avoiding advise 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 project is composed of sub projects representing the contribution
    disciplines. The sub projects are selected using a competitive peer
    review process from proposal from scientist within the institution.
        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
    every site-specific or precision farming systems are used. 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 was $350,000, and fiscal year
    1998 is $600,000. A total of $950,000 has been appropriated. The
    estimated state support for this project in 1997 was $297,000.
        Research will be conducted at the Mississippi Agricultural
    Experiment Station. The principal investigators anticipate the
    completion date for these objectives to be in 2002. The project is
    evaluated by a coordinating committee at the end of each year in
    preparation for the next cycle of field work. To date research studies
    have been initiated for all of the objectives. These are designed as
    multi-year studies and definitive results are not yet available. These
    initial results are being used to refine and focus the research for
    subsequent cycles.
                 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. An open call for research
    proposals is held by each of the three states, Idaho, Oregon, and
    Washington. Awards are made competitively after both internal and
    external peer reviews within the states, and merit review by the
    agency. 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.
        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 that growers of wheat, barley, and other
    alternative crops 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 conservation
    compliance requirements in managing crop residues on agricultural lands
    for soil and water management purposes.
        STEEP programs have helped position farmers with new conservation
    technologies, such as direct seeding management systems, 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 1996-1998, $500,000 per year. A total of $6,190,000 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, $169,628
    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 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. In 1997, Washington received $197,234
    state appropriations; Oregon continues to have Measure 5 as law and
    continues to be unable to provide non-federal cost-sharing or matching
    funds; and Idaho contributed $27,235 state support and $24,525 in
    estimated non-federal grant support for a total non-federal
    contribution of $51,760.
        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, and the
    results were compiled in a final, 5-year report in January 1997. The
    STEEP III project started in 1996 and will continue through the year
    2000 as a 5-year project.
        The agency's program manager annually reviews progress reports,
    proposes new research on the STEEP Program, and attends the annual
    meetings to assess progress. The program is evaluated within the states
    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. The most recent annual meeting
    held in January 1998, highlighted direct-seeding technology, and
    attracted over 950 attendees, of which 70 percent were growers from the
    tri-state region. Farmer surveys are distributed at each annual
    meeting, and results are compiled to assess the extent to which the
    objectives are being successfully achieved.
                       sustainable agriculture, michigan
        This project is intended to develop agricultural production systems
    that are 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 grant is
    allocated, by the Michigan Agricultural Experiment Station, to priority
    areas within the general area of sustainable agriculture. Within each
    of those areas grants are awarded based on research merit and proposal
    submission. The projects and proposals undergo annual formal review
    within the Michigan system prior to submission to CSREES, and then
    review within CSREES.
        The principal researcher believes there is a need to understand the
    biological processes occurring 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.
        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
    trails 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 1998, bringing total appropriations to $2,274,000.
    Matching funds were provided at the state level for $511,900 in fiscal
    year 1994, $372,319 for fiscal year 1995, and $359,679 in fiscal year
    1996. 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.
        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.
        A formal evaluation of the Principal Investigator's program was
    concluded in 1997, commissioned by the C.S. Mott Foundation through an
    independent consultant. The project continues to have annual peer
    review.
          sustainable agriculture and natural resources, pennsylvania
        This project studies the cycling of nutrients in soil and crops
    with special emphasis on the development of indices for measurement of
    soil health. This project is awarded on the basis of peer evaluation to
    scientists working in the Northeast U.S. on indices for soil health
    especially with regard to animal waste application to soil. The project
    undergoes regular internal evaluation and assessment as part of Penn
    State's major effort in soil quality and nutrient management research.
    Degradation of soil health/quality by excessive application of animal
    waste is a most serious problem for agriculture both in the mid-
    Atlantic region and throughout the nation. State governments both
    regionally and nationally are attempting to address the issue of soil
    and water degradation by intensive animal agriculture. Traditional soil
    test results are not providing the needed answers for effective
    nutrient--manure--management.
        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.
        With continued growth in numbers and size of concentrated animal
    operations (CAO's) and the increasing number and severity of water
    related problems (Pfisteria) in the region, it is apparent that our
    understanding of nutrient cycling is not sufficient to prevent such
    outbreaks. Research in 1996 and 1997 has indicated that many factors
    not usually considered in manure management may influence the amount
    and kinds of soil organic matter (SOM) and associated microbial
    populations. SOM and its associated microbial biota plans a major role
    in nutrient accumulation and release from soils. This research has now
    elucidated at least one SOM indicator of soil health that will be
    useful in more effectively managing manure application to soils. It is
    hoped that in the next year others will be identified.
        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 1998 for a total
    of $570,000. A total of $369,574 in matching support from university,
    state and private industry sources was provided in fiscal year 1997.
        Research is be conducted by the Pennsylvania State University with
    cooperators throughout the state. The anticipated completion date for
    the overall original project objectives is in June 30, 1999. The
    project is meeting the key objectives set forth in 1996. A significant
    indicator for soil health has been identified. Further work is
    continuing to determine if it will be useful as a guideline for manure
    management especially with regard to the high end soil loading problems
    associated with CAO's. Interim evaluation of this project will be done
    prior to June 30, 1998. Criteria used to assess the quality of the
    science will be peer reviewed throughout the northeast region. 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. The grant was awarded competitively within the University of
    Nebraska, and the integrated farm project has been reviewed annually
    for technical merit and progress toward goals by the internal review
    process of the university.
        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 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 necessary to provide recommendations to farmers for how to
    manage fragile lands.
        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 1998. Total appropriations to date are $442,000. 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; $36,091 in fiscal year 1995 and fiscal year 1996
    $24,267.
        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.
        Findings from this project have shown that young cattle can be fed
    with lower costs it cornstalks are used as part of their rotation. 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. The
    proposal addresses pest management issues under cropping sequences and
    tillage practices utilized in the region for wheat production.
        Objectives of the research are to evaluate the sustainability of
    pest management using four cropping sequences and two tillage systems
    on large experimental blocks representing different farming regions in
    Montana and to investigate the interaction of crop rotation, tillage
    systems, and pest management. In addition, the researchers will analyze
    physical and biological properties of soil as affected by cropping
    sequence and tillage systems and evaluate weed species composition as
    affected by cropping sequence, tillage system, and weed management
    decisions. Presence and impact of plant pathogens as affected by
    cropping sequence and tillage systems will be determined. Part of the
    study will also be to ascertain the arthropod community within each
    cropping system and determine the impact of tillage on species
    composition. Profitability, marketing, and environmental benefits of
    diversified cropping systems will be examined. Study results will be
    assimilated and transferred into practical solutions to farmers'
    problems relative to confines of dryland wheat production. Study sites
    were surveyed in fall of 1997, baseline soil samples were taken, and
    replicates measured. Winter wheat was seeded in designated treatment
    rows in each replicate. To facilitate seeding under no-till conditions,
    a Conservation Pak air seeder was purchased with funds awarded in
    fiscal year 1997 to this project. The remaining crop treatments will be
    seeded in spring 1998.
        This work supported by this grant began in fiscal year 1997 and the
    appropriation for fiscal year 1997 was $200,000 and fiscal year 1998 is
    $400,000. A total of $600,000 has been appropriated. Non-federal funds
    of $42,000 from the Montana Wheat and Barley Committee were provided
    for project support during 1997.
        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. 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.
    Yearly progress reports will be used to track the effectiveness of the
    program of research.
                     swine waste management, north carolina
        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 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.
    This project was funded following merit review of the proposal by
    scientists within CSREES with expertise in animal waste research. The
    principal researcher has stated that North Carolina now ranks second in
    the US in both pork and poultry production. The problem of waste
    management has become critical because adequate land for application of
    waste is 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.
        The original goal of this research was to enhance the design,
    development, and implementation of alternative swine waste management
    strategies and treatment systems. The institution also is enhancing the
    capability of an Environmental Analysis Laboratory which supports this
    project as well as other projects on animal waste management. The work
    supported by this grant began in fiscal year 1997 and the appropriation
    for fiscal year 1997 was $215,000 and fiscal year 1998 is $300,000. A
    total of $515,000 has been appropriated.
        During fiscal year 1997 there were $114,000 in state funds and
    $82,389 for in kind support from industry (donated equipment) that were
    provided from non-federal sources in support of this work. This
    research is being conducted at North Carolina State University in
    Raleigh, North Carolina.
        The original anticipated completion date was October 1, 1997. Due
    to funding not starting until March 1, 1997, the original objectives
    are now approaching completion and should be done by March, 1998.
    Additional objectives have been proposed which will have a completion
    date of March, 1999. CSREES conducted an evaluation of the progress of
    this work during January 26-28, 1998.
             tillage, silviculture, and waste management, louisiana
        This research has five components: Rice and Cotton Tillage, Bald
    Cypress and Water Tupelo Silviculture, and Dairy and Poultry Waste
    Management. More specifically, the Rice Scientists are looking for ways
    to improve stand establishment; the Cotton Scientists are focusing on
    the use of tillage systems 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 on
    factors affecting Bald Cypress and Water Tupelo regeneration. The
    project is annually subjected to the university's merit review process.
    The principal researchers hypothesize that since the crops, forests,
    and waste issues addressed by this project extend beyond the state
    borders this research has, at a minimum, multi-state to regional
    application.
        The original goals were to: improve conservation tillage in rice
    and cotton farming, to determine the effectiveness of no-discharge
    dairy waste treatment facilities, to determine acceptable land
    treatment levels for poultry waste disposal, and to evaluate wetland
    forest regeneration processes. All components of the project have
    established research studies and monitoring progress. Each year the
    principal investigator initiates a review of the sub-projects. In this
    fashion, he promotes good dialogue and cooperation among the sub-
    project investigators and their respective departments.
        The work began in fiscal year 1994. The appropriation for fiscal
    year 1994 was $235,000. For fiscal years 1995-1998, the appropriation
    was $212,000 per year. This sums $1,083,000. 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, Louisiana. The original work was scheduled for
    completion in 1999. Early term objectives have been met. Most of the
    added experiments are scheduled for closure in 1999 as well.
        The last field evaluation was completed on December 12, 1995. The
    evaluation summary complimented the scientists on the interdisciplinary
    components associated with this project, along with their investigative
    procedures, report writing, and external networking. A 1998 field
    review is tentatively scheduled for March 9-10.
                       tropical and subtropical research
        The Tropical and Subtropical Research--T STAR--Program is operating
    in coordination with the T STAR Caribbean and the T STAR Pacific
    Administrative Groups. 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. The
    proposals are peer reviewed and are then selected for funding by the
    administrative groups.
        Non-member institutional interests are represented by the Executive
    Director of the Southern Region Agricultural 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 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 1998 proposals
    have been requested. The principal researcher believes 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.
        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 years 1997 and 1998. A
    total of $49,270,000 has been appropriated.
        For fiscal year 1997, 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.
        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 This project has been evaluated annually by CSREES.
    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 ingredients 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.
        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. Additionally, an objective is to improve the
    management of subterranean termites through studies of the termite
    genome, cuticular chemistry, morphometric characteristics and termite
    behavior. Specific accomplishments in the termite research are as
    follows: Collection of three full years of data on over 80 different
    subterranean termite colonies in four of the major soil provinces in
    Georgia was completed in early 1997. Research with conventional
    termiticide chemistry has demonstrated the interaction between soil
    type and termite tunneling activity and the potential role these
    interactions play in the incidence of reported termite treatment
    failures using these currently registered materials. The past years
    research also involved investigations of a naturally occurring fungus
    as a potential control agent. Research on the concept of baits as a
    termite control tactic have raised concerns about the practical
    application of this recently registered technology.
        This work 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
    through 1998 the appropriation was $64,000 each year. A total of
    $555,000 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, 1995--$59,539, 1996--
    $30,000, 1997--$80,000.
        This research and technology transfer program is being conducted at
    the University of Georgia, Department of Entomology, Athens, 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.
        This project has been evaluated on an annual basis by CSREES
    through the progress reports. This year a site visit by CSREES has been
    scheduled by CSREES on February 10. This is a new project and has not
    been evaluated by CSREES. The project will be evaluated by review of
    the proposal and the annual project reports.
                                 vidalia onions
        This is the first year that the research on Vidalia onions is
    funded. CSREES has requested the university to submit a grant proposal
    that has not yet been received. This research is important to the State
    of Georgia and is directed to improving the quality of Vidalia onions.
    The proposed goal of this research is to investigate production
    practices to improve Vidalia onion culture. The specific objective is
    to improve onion quality and enhance competitiveness of the product.
        The work supported by this grant begins in fiscal year 1998 and the
    appropriation for fiscal year 1998 is $84,000. Since this is the first
    year funding was provided for this project, non-federal funding
    information is not available. Research will be conducted in Georgia and
    the anticipated completion date for the original objectives is five
    years based on objectives reachable within a year time frame. As this
    is the first year of funding for this project, an evaluation has not
    yet been done.
                       viticulture consortium, ny and ca
        The University of California and Cornell University in New York
    conducted research on varietal responses of grapes, modeling of water
    requirements, management of diseases including phyloxera and other
    cultural aspects of grape production. Funds were used by the lead
    institutions to fund projects in the various grape producing states
    within their region. Grants were made based on peer reviewed proposals
    and selected competitively by regional groups based on priorities
    developed by researchers, extension, and industry personnel.
        The research being carried out is designed to help the viticulture
    and wine industries remain competitive in the U.S. and in the global
    market. Both these industries have a positive effect on the U.S.
    balance of payments. The original goal of this research is to maintain
    or enhance the competitiveness of the U.S. viticulture and wine
    industry in the global market.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1996, $500,000; fiscal year 1997, $500,000; and fiscal year 1998,
    $800,000. A total of $1,800,000 has been appropriated. In 1997, the
    viticulture industry provided $500,000 for projects following the same
    criteria and priorities as in the federally funded ones. In effect,
    this is an industry match of funds. Research is being conducted in
    various states which include California, Washington, New York, and
    Pennsylvania.
        The research priorities set by the guidance group were not all
    addressed nor will they be in the near future. No evaluation has been
    made yet. However, proposals for continued funding are evaluated for
    progress by a guidance group made up of research, extension, and
    industry persons.
                           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 sixth 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 13 years of operating pressures and
    flow rates;
        2. Evaluate utilization of livestock effluent with subsurface drip
    irrigation and its effect on water redistribution and corn water use
    patterns;
        3. Develop best management practices for nitrogen fertigation using
    subsurface drip irrigation systems for corn;
        4. Estimate the long run economic impacts of irrigation efficiency
    improvements for irrigated corn, wheat, and grain sorghum in the farm
    sector and affiliated sectors of the High Plains economy;
        5. Disseminate irrigation research information and best management
    practice recommendations to Kansas irrigators through a series of
    extension bulletins and updates based on research-based information.
        Results from a 4-year study were summarized into a Best Management
    Practice for nitrogen fertigation for corn using subsurface drip
    irrigation on deep, well-drained, loessial silt loams in western
    Kansas. Corn yield, crop nitrogen uptake, and water use efficiency all
    plateaued at the same level of total applied nitrogen, 160 pound per
    acre nitrogen fertigation rate, with an average yield of 213 bushels
    per acre. The results emphasize that high-yielding corn production also
    can be efficient in nutrient and water use. Using earlier studies as a
    guide, a new study was initiated in 1997 to use the best management
    practice of daily subsurface drip irrigation with periodic additions of
    nitrogen fertigation. Results from 1997 showed that reducing the
    irrigation capacity from full irrigation to 50 percent irrigation did
    not reduce yields. Corn yields averaged an extremely high 277 bushels
    per acre for these treatments. This sub-study was initiated as a result
    of the changes in the Federal farm program which allow greater planting
    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 sub-study along with economic
    and system longevity analyses will be continued in 1998.
        The principal researcher indicates that corn is the principal
    irrigated crop in Kansas and throughout the Great Plains. The principal
    researcher believes any realistic attempt to address overdraft of the
    High Plains Aquifer must address improvements in irrigation efficiency
    in corn production. The most common irrigation methods are furrow and
    sprinkler irrigation. The need to conserve water has focused attention
    on more efficient alternatives such as subsurface drip irrigation. This
    research will be of particular significance within the state and
    region. However, it also has national and international applications as
    advanced irrigation systems, such as subsurface drip irrigation, will
    be needed to improve irrigation water use efficiency in the next
    century.
        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. Subsurface drip irrigation acreage is increasing in Kansas and
    farmers are obtaining results on their own farms.
        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 1995-1998 each year. The total funds appropriated are
    $498,000. 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; $868,408 state
    appropriations, $37,543 product sales, $35,484 industry and
    miscellaneous in 1992; $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. The original objectives of the project appear to be on track
    for completion by that date. One of the most important objectives of
    the study is to evaluate longevity of the subsurface drip irrigation
    systems. These sites are unique to the region and very little
    information is available on system longevity. Pressing water quality
    problems of a regional and national scope has necessitated a change in
    the objectives to developing nutrient management practices under
    subsurface drip irrigation and utilization of livestock wastewater with
    subsurface drip irrigation. Additionally, changes in the federal farm
    program which allow greater planting flexibility has an effect on how
    irrigators make water/land allocation decisions. Field and economic
    studies related to allocation strategies, nutrient management and
    wastewater utilization should be completed in 3 years. The project has
    been peer reviewed. The reviewers felt the project concept to be valid
    and the timetable for accomplishments to be on target.
                                 water quality
        The agency continues support of the national, competitively-awarded
    grants program as part of the Department's Water Quality Initiative.
    This 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 projects
    as part of the Midwest Initiative on Water Quality to develop new
    farming systems that protect water quality, with research located at
    ten sites throughout the Corn Belt. This program is conducted jointly
    with the State Agricultural Experiment Stations, the U.S. Department of
    Agriculture'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 Management Systems Evaluation
    Areas 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.
        The public is concerned about the possible risks to the
    environment, to soil quality, and to water quality resulting from the
    use of agricultural chemicals. Improved methods of detection of very
    minor amounts of chemicals in water have made the public, farmers, and
    policymakers 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 groundwater quality, and to develop new
    and improved, cost effective agricultural systems that enhance ground
    water quality. During the past 3 years, focus and allocation of
    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. Ohio's Management System Evaluation Area project has identified
    agricultural systems components that maintain profitability and
    minimize groundwater impact of farming on the bottomlands of the Scioto
    Valley.
        2. Nebraska's Management System Evaluation Area indicates that
    irrigated corn can be produced profitability with less water and
    nitrogen than most farmers apply.
        3. Ohio's Lake Erie Agricultural Systems for Environmental Quality
    project, along with other State and Federal projects, is making
    excellent progress in reducing phosphorus loading in two major
    watersheds that discharge into Lake Erie. Watershed phosphorus budgets
    indicate that the net annual accumulation of phosphorus in the Maumee
    watershed has dropped from 23,000 metric tons to 2,600 metric tons.
    Farmers are no longer applying ``buildup'' levels of phosphorus to
    their fields--a major cultural change.
        4. In Indiana, the Indian Creek and the Little Pine Creek
    Agricultural Systems for Environmental Quality watersheds, located near
    West Lafayette, are providing data from 22 stations to test and
    calibrate models for water quality management.
        5. In North Carolina, a 7-acre wetland is effectively removing
    nitrates from the runoff and drainage of a 950-acre watershed during
    the warm season; a Site-Specific Farming workshop was held at
    Greensboro, North Carolina, and attracted some 200 participants and
    several industrial and educational displays have been developed for the
    Agricultural Systems for Environmental Quality project.
        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 1995-1997; and $2,461,000 in 1998. A
    total of $47,527,000 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 per year 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 Management System Evaluation Area
    projects of the Midwest Initiative on Water Quality areheadquartered 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 Department's Water Quality Research Plan
    were to: (1) assess the seriousness and extent of agriculture's impact
    on groundwater quality, and (2) develop new and improved agricultural
    systems that are cost effective and enhance ground water quality. These
    original goals have been met; however, water quality programs need to
    have a long-term focus. The physical processes that link production
    practices to water quality, and the socioeconomic processes that
    characterize adoption can both be of long duration. The adoption
    process, from first learning about a practice through implementation,
    can take years. While assistance is designed to speed up this process,
    overall progress can still be slow. Therefore, adequate resources must
    be made available for an extended period of time to ensure successful
    completion of the project.
        The original project was developed for 5 years with the expectation
    that it would be reviewed and possibly extended beyond the 5-year
    period if warranted. The 1995 review of the program identified a need
    for increased attention to surface water quality problems. In 1996 and
    1997, new water quality problems emerged--hypoxia, pfiesteria, etc.--
    which required renewed efforts. The research funded under the Special
    Research Grants Program has produced significant progress in
    understanding the impacts of agricultural practices on surface and
    groundwater 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 5 years will be on developing
    and implementing agricultural systems that reduce the nutrient and
    contaminant loadings in the waters and watersheds.
        An external review team evaluated the Management System Evaluation
    Areas and associated component projects in 1995. All Management System
    Evaluation Area projects have an impressive record of successfully
    implemented interdisciplinary teams to study water quality problems. A
    major conference on Management System Evaluation Area and Agricultural
    Systems for Environmental Quality results is being planned for 1999.
                           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 crop production practices; weed biology and
    herbicide resistance; and 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.
    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 per year in fiscal years
    1995 through 1998. A total of $3,162,000 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 each of the fiscal years of 1996 and 1997.
        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. Each year the grant is peer
    reviewed and reviewed by CSREES's senior scientific staff. The review
    indicated progress in 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 Nation's 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.
        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; fiscal years 1995-1997, $176,000
    each year, and $261,000 in fiscal year 1998. A total of $1,651,000 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, $457,840 of non-federal support for 1996 and $495,820 in 1997.
        This research is being conducted at Kansas State University by the
    Wheat Genetics Resource Center. The collection, evaluation and
    enhancement of Wheat germplasm is a continual process. Therefore this
    project does not have a defined completion date. 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 research includes: meeting environmental objectives in timber
    harvesting and forest products manufacturing; exploiting pesticides
    developed from forest trees; wood machining; reduced chemical needs for
    pulping and bleaching of paper; helping small and mid-sized wood
    products companies remain or become competitive in the global economy;
    assessing the impact of international standards adoption on the demand
    for certified wood products; and developing new products from wood and
    recycled materials. Each Center has a somewhat different procedure for
    awarding grant monies to individual projects.
        Four research centers conduct research to improve the utilization
    of species that grow in their regions; i.e., western conifers, southern
    pines, Lake States hardwoods, and northeastern forests. The other two
    research centers conduct research in machining of wood and incubator
    technology transfer. Wood industry incubator work contributes to rural
    development of local economies. The forest products industry ranks
    among the top ten manufacturing employers in 46 of the 50 States. Many
    local economies are dependent on these jobs.
        The goal is to generate new knowledge that will benefit the forest
    industry. Additional emphasis has been placed on environmental
    stewardship, resource extension, technology transfer, and scientist
    education. Extending the resource benefits forest ecosystems and
    increases the competitiveness of the forest products industry.
    Consumers benefit from more efficient production. Hand-held 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. Systems analysis of woodworking 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 a dielectric wood defect detection
    system to improve automated production systems. Research developed
    control of emission of volatile organic compounds into the atmosphere
    during drying and pressing of lumber through microbial degradation of
    contaminants in an air stream. Research has found ways to recycle used
    treated wood into usable commodities.
        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 years 1995 and 1996, $3,758,000 per year; and fiscal
    years 1997 and 1998, $3,536,000 per year. A total of $45,845,000 has
    been appropriated.
        Mississippi State University non-federal funds were: State
    appropriations, $2,498,800, $2,178,725, $2,353,225, $2,331,691,
    $2,650,230, $2,778,535, and $2,582,617 for 1991, 1992, 1993, 1994,
    1995, 1996, and 1997, respectively. In addition, industrial funds
    averaged $667,700 for the 5 years from 1993 to 1997 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, $1,117,000, and $1,100,000 for 1991, 1992, 1993, 1994,
    1995, 1996, and 1997, respectively. Estimated non-public support
    averages $500,000 per year. Michigan State University non-federal
    contributions for 1997 totaled $580,500. Three new locations were added
    in 1994: University of Minnesota-Duluth non-federal match was $590,000,
    $550,000, $560,000, and $371,930 for 1994, 1995, 1996, and 1997; North
    Carolina State University was $126,000, $165,000, $135,000, and
    $163,216 for 1994, 1995, 1996, and 1997; University of Maine was
    $600,000, $445,723, $459,100, and $477,464 for 1994, 1995, 1996, and
    1997.
        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 three strong
    regional centers of wood utilization research. These centers have been
    established and three more centers have been added. Projects begun in
    1998 will be completed by 2002.
        On site reviews of centers are conducted on a rotating basis. Each
    center's plans are reviewed yearly or more frequently. Progress reports
    are reviewed yearly. Center directors last met together for joint
    planning in June 1996. Centers all have advisory committees or research
    committees which meet periodically. We conduct informal on-site reviews
    periodically. The Minnesota and Oregon sites were visited in 1996. The
    North Carolina site was visited in 1997. A Departmental panel reviewed
    the original three centers in 1992 and 1993. At that time, the original
    objectives were broadened to include more consideration for
    environmental concerns. The centers have increased their focus on
    helping industry meet 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 to develop objective
    measures of wool, mohair, cashmere and other animal fibers to improve
    the quality of wool products while enhancing the profitability of the
    U.S. 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 fabrics
    made from these fibers.
        Collaboration exists among researchers in Texas, Wyoming, and
    Montana associated with this grant and other federal, university and
    industry scientists to assure responsiveness to the needs of those
    involved in wool and mohair production, marketing, and processing. The
    sheep and goat industries and the principal researchers believe that
    this research to be of national, regional and local need. The research
    on wool, conducted by means of this grant, represents the only research
    efforts in the U.S. focused on improving the efficiency of measuring
    and assuring wool, mohair and cashmere quality for garments made from
    these fibers.
        The overall goal for this research is to develop objective measures
    of wool, mohair, cashmere and other animal fibers with a focus on
    improving the efficiency of determining the quality of products made
    from these fibers while enhancing the profitability of the sheep and
    Angora goat industries. Computer software programs have been developed
    to provide an automatic image analysis system to make rapid and
    inexpensive measurements of the average diameter and distribution of
    animal fibers as well as other fiber properties including fiber length
    and color. Each of these properties are used for grading and processing
    to determine ultimate softness, durability, dye characteristics,
    comfort, and garment price.
        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 years 1992-1993; $235,000 for
    fiscal year 1994;, $212,000 per year for fiscal years 1995-1997, and
    $300,000 for fiscal year 1998. A total of $2,881,000 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 sales, $36,484 industry
    and $3,556 miscellaneous in 1994; and $67,345 state appropriations,
    $10,000 product sales; $34,325 industry contributions in 1995; $39,033
    non-federal support in 1996, and $174,486 non-federal support in 1997.
        The research is in progress at the Texas A&M University, Texas
    Agricultural Experiment Station at San Angelo, the University of
    Wyoming at Laramie, and Montana State University at Bozeman. 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 research priorities for the
    wool, mohair, and cashmere industries and to satisfy consumer demands
    for products from these fibers. It is anticipated that five years will
    be required to complete the current research.
        Each year grant proposals are peer reviewed. The principal
    investigators meet annually to evaluate progress and re-evaluate
    research priorities according to industry needs. Because the research
    encompassed in this grant is a component of a regional research
    project, accomplishments are reported annually to scientific peers and
    representatives from the sheep, goat, wool, mohair, and cashmere
    industries. In addition, the overall regional research project is peer
    reviewed every third year. Annually, an agency representative reviews
    grant proposals and periodically visits the research facilities and
    assesses progress. The most recent visit was in May of 1994 whereby it
    was determined that the stated objectives were being addressed and that
    they were consistent with industry needs. An external review of the
    overall program is being planned by the agency for May of 1998. Program
    effectiveness and relevance to industry needs will be assessed by
    experts representing the sheep and goat industries and peers from the
    scientific community.
                agricultural development in the american pacific
        The Agricultural Development in the American Pacific (ADAP) project
    is a primary means for 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 Pacific tropical agriculture and
    communities. ADAP is a mechanism to address common regional client-
    based issues while maintaining cultural, rural, economic and
    environmental integrity. This special research grant is awarded
    noncompetitively to a program planned and approved by the five involved
    land grant institutions.
        The principal researcher believes the five participating
    institutions are geographically dispersed yet facing many similar
    issues which can be served through extensive networking and
    communication. 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. In 1997, each ADAP institution self-
    determined their best means for electronic communications. ADAP brings
    together the five Deans/Directors to discuss agriculture and human
    resources issues facing isolated, tropical ecosystems in the Pacific,
    and to plan and implement activities to address those issues.
    Priorities are categorized in three areas: sustainable systems,
    collaborations/partnerships, communication systems. Activities range
    from joint/collaboration efforts to overcome taro leaf blight in the
    Pacific, to seeking recognition of Pacific tropical agriculture by
    NASULGC.
        ADAP's original goals are to develop human resources within the
    institutions, to more effectively manage agricultural programs within
    and among the institutions, and to focus resources available on
    agricultural issues of the Pacific. Projects include: animal health
    survey, livestock waste management, dietary guidelines for Pacific
    foods, 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 1996, 1997, and 1998 were $564,000
    each year. The appropriation total to CSREES is $2,300,000. 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.
        A formal review of the ADAP program was conducted July 1-10, 1997,
    and included visits by review team members to American Samoa Community
    College, College of Micronesia, Northern Marianas College, University
    of Guam and University of Hawaii. The review focused on the degree of
    achievement of goals set forth in the five-year 1992 strategic plan.
    Recommendations were made to improve the structure and effectiveness of
    delivery of programs to address Pacific tropical agriculture issues for
    island communities. At the conclusion of the review, ADAP incorporated
    review recommendations, and prepared and adopted the new, five year
    1997 strategic plan.
                 agricultural waste utilization, west virginia
        The Poultry Waste and Energy Recovery Project, commonly referred to
    as the POWER Project, applies American technology to a traditional
    European waste treatment technology. It is a documented demonstration
    of a high-rate resource recovery system that converts municipal and
    agricultural waste into valuable energy and odorless, pathogen-free
    products. The projects main research goal is to reduce the nutrient
    run-off to the Potomac River. The research will also assess the
    biological and environmental value of the fertilizer produced.
        The current need for this technology is local, national, and
    international. The beneficiaries of this technology will be both the
    people and the environment anywhere in the world where problems of
    food, fertilizer, and energy shortages are currently in conflict with
    the preservation of environmental quality. The direct benefits include
    enhanced and expanded waste water treatment capacity and municipal
    solid waste capacity, creation of new jobs, and revenue from by-
    products and water quality improvement.
        The research goal will go beyond the testing of waste materials in
    the digester and proceed with a program to compare the microbiological
    loading of rivers, where known environmental pollution is measurable,
    and where the total viable counts of the rivers could be determined in
    real-time with a bioprobe. Specific microbial analysis may be able to
    correlate specific microbial counts with either inorganic nutrient
    pollution or organic pollution from farming activities.
        The work supported by this grant begins in fiscal year 1998 and the
    appropriation for fiscal year 1998 is $360,000. This is a new project
    in fiscal year 1998 and specific information on the source and amount
    of non-federal funding for this project is not yet available.
        Research will be conducted at Moorefield, West Virginia. The
    anticipated completion date of the original objectives is approximately
    two years. Since this is a new project in fiscal year 1998, the agency
    will conduct the initial review of this project when the proposal is
    submitted to CSREES for funding.
                     national alternative fuels laboratory
        Research addressed the effects on fuel economy and power output of
    ethanol addition to petroleum blendstocks, environmental effects of
    ethanol addition to conventional and reformulated gasoline, and
    development and demonstration of an economical, ethanol-based,
    biodiesel-containing alternative to leaded aviation gasoline.
    Information dissemination activities included promoting ethanol fuels
    in the Red River Valley and the upper Midwest through speeches,
    presentations, and published articles.
        The researchers believe it is crucial to U.S. energy security that
    renewable domestic fuels are represented accurately in the marketplace
    by easily accessible unbiased scientific data on their performance and
    environmental effects. These data are generated and publicized through
    partnerships developed between the research organization and both
    public and private sectors. The regional need for the research is
    derived from recent and ongoing disease problems and world market
    demand trends with barley and wheat, in which North Dakota ranks first
    and second, respectively, in U.S. production. Current effort is focused
    on implementing a cooperative project to build a biomass-to-ethanol
    plant that would spur market-driven crop diversification based on the
    need for regionally-optimized feedstocks.
        The original goal was to develop a database of at-the-pump-sampled
    conventional, reformulated, and alternative transportation fuels sold
    in the upper Midwest and throughout the United States to enable current
    and historic comparisons of different gasolines. The database provides
    a means of diagnosing and tracking fuel performance and environmental
    effects resulting from different fuel formulations, additives, and
    contamination problems. The database is used in conjunction with
    another primary objective, which is to provide consumers and potential
    alternative fuels marketers with information on conversion of crop
    residues, agriculture processing wastes, high-cellulose-content
    municipal wastes, and other biomass materials to alternative fuels.
        The work began in fiscal year 1991 and was, in part, sponsored by
    this grant. Appropriations in fiscal years 1991-1993 were $250,000 per
    year. In fiscal year 1994, it was $235,000; $204,000 in fiscal year
    1995; and $218,000 per year in fiscal years 1996, 1997, and 1998. A
    total of $1,843,000 has been appropriated. In fiscal year 1997,
    approximately $140,000 in non-federal collaborative research funding
    was secured by project personnel. A total of $985,000 in non-federal
    funds have been allocated toward performance of program objectives over
    the duration of this grant. For fiscal year 1994, non-federal funding
    was $105,000. Fiscal year 1995 and 1996 totals were $50,000 and
    $60,000, respectively. Over fiscal years 1991-1993, non-federal funding
    was $630,000.
        The University of North Dakota Energy and Environmental Research
    Center located in Grand Forks conducts the work. The completion date
    for the original objectives was April 30, 1992. That work was
    completed, and its results published. In 1995, the program scope was
    expanded and industry collaborations increased. Development of an
    ethanol-from-biomass production facility and commercialization of bio-
    based vehicle and aviation fuels could be completed within five years,
    by fiscal year 2003.
        In July 1996, the U.S. Department of Agriculture conducted an on-
    site evaluation. Based on its ability to collaborate with industry and
    its performance of much needed biofuels development work, the program
    was given a favorable review. Research objectives, including those
    involving dissemination of research results to the public and
    performance of unbiased scientific research on energy and environmental
    issues impacting alternative fuel development and use, are being met. A
    summer 1998 evaluation is planned.
                       animal waste management, oklahoma
        This research project is designed to develop sustainable,
    environmentally-safe, and ecologically-sound best management principles
    and practices for beneficial animal waste applications for ``High
    Plains Agriculture'' in support of rural economic development through a
    Federal-state-local partnership. Emphasis will be placed on the rapidly
    expanding hog industry in the semiarid region, but information gained
    will also be applicable to the beef and dairy industries.
        The Oklahoma Panhandle is the most productive agricultural region
    in the state with agricultural receipts in excess of $800 million.
    Nationally, Texas County in the Panhandle ranks number one in the state
    and in the top 15 of all counties in the U.S. relative to cash
    receipts. The rapid expansion of the hog industry in this semiarid
    region will only strengthen that position. The rapidly expanding swine
    industry was projected to add $650 million in pork and value added
    products in Oklahoma in 1997 with the slaughter and processing of over
    4 million hogs per year. Information gained from this study will
    provide the data base to develop best management practices to maximize
    beneficial nutrient use and minimize nuisance odor in semiarid soil/
    cropping and rangeland production systems. Practices developed will
    have significant implications regionally, nationally, and
    internationally. The semiarid agro-ecosystem is unique with climatic
    conditions consisting of low rainfall that promotes both dryland and
    irrigated agricultural practices; extremes in high and low
    temperatures; soils characterized with alkaline pH, low in organic
    matter, and high in calcium carbonate. This unique agro-ecosystem makes
    information gained from more humid environments inapplicable.
        The original goal of this research is to develop best management
    practices that will: protect ground water supplies from pollution of
    nutrients, salts, and pathogens; maintain air quality; and minimize
    odors derived from the entire hog-house, lagoon, land-application,
    soil-cropping and or rangeland production system, thus maintaining the
    quality of life in the rural sector.
        The work supported by this grant begins in fiscal year 1998 and the
    appropriation for the fiscal year 1998 is $250,000. Specific
    information on the source and amount of non-federal funding for this
    project is not yet available.
        Research will be conducted at The Oklahoma Panhandle Research and
    Extension Center located in Goodwell, Oklahoma. The Center will provide
    the land area and a portion of the facilities and equipment necessary
    to conduct the major portion of the study. Other study sites will be
    developed on private land in cooperation with hog operations in the
    panhandle region. This is a new project and an application has not yet
    been submitted. The agency will conduct the initial review of this
    project when the proposal is submitted to CSREES for funding.
                  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 improved 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. The goal is 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. Theoretical studies and empirical and
    descriptive analyses of policy issues and technical problems pertaining
    to the Uruguay Round of negotiations were completed and provided to
    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 the Uruguay Round
    Agricultural Agreement (URAA).
        This grant supports six projects focusing on URAA and World Trade
    Organization (WTO) monitoring and implementation problems; implications
    of the URAA and WTO 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, $74l,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, for fiscal years 1997
    and 1998, $355,000 each year. A total of $6,414,000 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 1991; $113,779 State appropriations and $173,117
    miscellaneous for a total of $286,896 in 1992; $120,138 State
    appropriations and $164,707 miscellaneous for a total of $284,845 in
    1993; $161,673 State appropriations and $32,000 miscellaneous for a
    total of $193,673 in 1994; and $161,000 State and $30,000 miscellaneous
    for a total of $191,000 in 1995; $70,000 State appropriations and
    $44,000 for a total of $114,000 in 1996; and $60,325 in State
    appropriations and $61,500 in miscellaneous funds for a total of
    $121,825 in 1997. Information is not yet available on non-federal
    funding in 1998.
        The research program is carried out by the Center for Agriculture
    and Rural Development at Iowa State University and university
    researchers anticipate that the work should be completed in 1998 with
    analysis of the final agreement of the Uruguay Round and related trade
    agreements and dissemination of these results. An informal evaluation
    of this project takes place as a part of each annual project review and
    approval process.
                      center for human nutrition, maryland
        This research aims to assess the severity and causes of obesity
    among inner city, suburban, and rural school children in the state of
    Maryland. Specifically, the research will provide information on the
    role of food and physical activity as factors potentially leading to
    excess weight in children and adolescents. According to the latest
    national surveys, there are over 90 million overweight adults in the
    U.S. It is believed that weight gained during childhood and adolescence
    poses the greatest risk for an adult to become permanently overweight.
    Obesity, in turn, contributes to important chronic conditions such as
    diabetes, hypertension, and heart disease. It is acknowledged that the
    prevalence and causes of obesity vary in different social and
    geographic settings. Understanding this information is essential for
    the implementation of nutrition education programs and prevention
    activities.
        The goal of this research will be to determine the prevalence of
    obesity, and will attempt to identify risk factors in children
    attending public schools in Baltimore City, Baltimore County, and
    Washington County in Maryland. The study will provide information on
    dietary energy intake, food preferences, and physical activity in
    children and adolescents.
        The work supported by this grant began in fiscal year 1998 with an
    appropriation of $150,000. The projected non-federal funds and sources
    provided for this grant are as follows: $56,000 university, $23,000
    industry, and $7,000 miscellaneous.
        Research will be conducted at the Center for Human Nutrition, John
    Hopkins School of Public Health, in Baltimore, Maryland and the
    anticipated completion date is 2000. The grant proposal for fiscal year
    1998 will be subject to extensive peer review.
                    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 research proposal received a
    merit review at the university prior to submission to CSREES. 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 to
    resolve potential social, economic, and environmental conflicts.
        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 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 with an appropriation of $94,000
    in fiscal year 1994; $81,000 in 1995; and $87,000 per year for 1996
    through 1998. A total of $436,000 has been appropriated. The non-
    federal funds and sources provided for this grant are as follows:
    $39,000 State appropriations in fiscal year 1994; $54,000 in 1995;
    $60,000 in 1996 and 1997; and $84,500 in 1998.
        The program is being carried out at Texas A&M University through
    the Texas Agricultural Experiment Station in collaboration with other
    segments of the Texas A&M University System and Louisiana State
    University Agricultural Center. The original proposal in 1994 was for a
    period of 12 months. The current phase of the program will be completed
    in the year 2001.
        CSREES performed a merit review of the project in July 1997, as it
    evaluated the 1997 project proposal, and concluded that progress on all
    four objectives continued to be good: U.S.-Mexican linkages resulted in
    a successful conference on NAFTA and some new research projects;
    potential markets for U.S. dairy and other products in Mexico were
    completed; impact of eliminating the Canadian Grains Transportation Act
    was studied; and several training programs were conducted.
                       data information system questions
        Cooperative State Research, Education, and Extension Service--
    CSREES--has funded two major activities, both currently underway, that
    underlie the design and development of the Research, Education, and
    Economics Information System--REEIS. A cooperative agreement with the
    University of Arkansas has been funded to provide national leadership
    in coordinating the efforts of our university partners in helping us
    determine appropriate content for REEIS. The University of Arkansas is
    also providing essential services in managing and coordinating a
    national Steering Committee responsible for overseeing the overall
    design, development, testing, and implementation of the Research,
    Education, and Economics Information System--REEIS. The Steering
    Committee had its first meeting in June of 1997. It held its second
    meeting in February 1998 to review progress on REEIS developments to
    date and to formulate action plans and strategies for future tasks. In
    addition, work under a contract with a major private sector information
    technology firm is in progress. The contract calls for conducting a
    strategic information audit of databases and information practices
    within the Research, Education, and Economics mission agencies and
    State partner institutions. Deliverables from the first phase of the
    audit include an inventory of existing databases currently targeted for
    inclusion in REEIS, specifications for a comprehensive needs assessment
    that will identify gaps between current user needs for information, and
    the ability of exiting databases to satisfy those needs, and
    specifications for a retrieval language that will assist users in
    accessing and searching REEIS databases.
        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 access to 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 economic 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 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.
        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 analysis; 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.
        The first phase of a strategic information audit is underway. To
    date, a total of 36 REE mission area databases have been targeted as
    candidates for inclusion in REEIS. Detailed descriptions of each of the
    databases are the main components of a prototype REEIS database catalog
    that has been developed and which is intended to serve as an inventory
    and descriptive, interactive tool for locating information about
    databases in REEIS. World Wide Web access to the database catalog via
    the Internet has been demonstrated, and this feature is currently
    undergoing review and evaluation within the agency, by partner
    institutions, and by an outside expert as an appropriate, publicly-
    accessible user interface to REEIS. In addition, specifications for a
    comprehensive needs assessment as well as specifications for a
    controlled vocabulary for use in searching databases in REEIS have been
    prepared and are being submitted to the REEIS National Steering
    Committee, the REE mission agencies, and State partner institutions for
    review and comment.
        Congress first appropriated $0.4 million for REEIS in fiscal year
    1997 to begin planning its design and development. An additional
    $800,000 was appropriated in fiscal year 1998, for a total of $1.2
    million. In fiscal year 1997 the REEIS National Steering Committee was
    established to provide advice and guidance throughout the development
    and implementation process. Since its inception, the Committee has met
    twice, first recommending a plan of action and work specifications for
    conducting a strategic information audit and comprehensive needs
    assessment, and second to review and evaluate contract deliverables.
    The Committee is comprised of both users and producers of Research,
    Education, and Economics agencies' data and includes program officials,
    program leaders, and information system managers from USDA and other
    Federal agencies, and program/project leaders representing partner
    institutions. Also in fiscal year 1997 a private sector firm was
    engaged to conduct the first phase of a strategic information audit
    which is in progress. Specifications are being developed for conducting
    a comprehensive needs assessment in fiscal year 1998. Results of the
    needs assessment are expected to form the base of data on which
    detailed design specifications for a REEIS prototype are to be
    developed. Non-federal funding does not apply at this time.
        Leadership responsibility for REEIS resides within the CSREES's
    Science and Education Resources Development division. This provides for
    effective linkage within the REEIS platform of the Current Research
    Information System, the Food and Agricultural Education Information
    System, and appropriate extension databases. CSREES is working closely
    with all REE mission 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. A
    sizeable effort is currently underway through a contract with a major
    private sector information technology firm to design, develop, test,
    and implement REEIS. The first phase of a strategic information audit
    is presently being conducted by the firm and is expected to form the
    basis for system design specifications for REEIS. One staff person has
    been assigned full time to manage and coordinate agency contracting
    activities and serves as the REEIS technical information program
    manager.
        It is anticipated that REEIS can become operational during the year
    2000. The fiscal year 1997 appropriation of $400,000 covered start-up
    costs such as establishment of a National Steering Committee,
    preparation and specifications for contracting with an outside firm,
    contractor selection, pre-award negotiation and, subsequently, pre-
    design system analyses currently conducted under contract by a major
    private sector information technology firm. Contract efforts include
    preparation of an inventory and prototype catalog of REE mission agency
    databases, a World Wide Web user interface to the catalog,
    specifications for a comprehensive needs assessment, and specifications
    for a controlled vocabulary to assist user access to REEIS databases.
    The $800,000 increase for fiscal year 1998 will allow for implementing,
    testing, refining, and maintaining the catalog prototype and its World
    Wide Web interface, the conduct of the needs assessment, creation and
    maintenance of a comprehensive data dictionary, and development of
    detailed specifications for designing and developing the system,
    including recommendations for in-house hardware, operating system, and
    platform.
        The requested increase for fiscal year 1999 will allow for the
    development, testing, and refining of the REEIS prototype, and cover
    operating costs associated with updating and maintaining the REEIS
    database catalog and data dictionary. Based on the recommendations of
    the REEIS National Steering Committee, the first year effort included
    the objective of conducting a strategic information audit as a
    prerequisite for the development of design specifications. The first
    phase of the audit is nearing completion, as planned. The conduct of
    the comprehensive needs assessment comprises the second phase of the
    audit and is targeted to begin in April, 1998. Results of the
    assessment are to form the basis for the development of detailed design
    specifications.
        The Research, Education, and Economics Information System meets a
    high priority national need for an operational, up-to-date and
    continually responsive 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. To achieve
    effective response for its users, annual maintenance costs will be
    ongoing.
        Products generated from the first phase of the strategic
    information audit are currently undergoing review and evaluation by the
    REE mission agencies, the REEIS National Steering Committee, our State
    partner institutions, and outside sources. In August, 1997, prior to
    start of the information audit, a project management plan for
    conducting the first phase of the audit and specifications for the
    REEIS database catalog were reviewed internally by a REEIS team of
    information professionals and program leaders representing each of the
    four REE mission agencies. The Web-accessible interactive catalog
    prototype is being demonstrated this week for review and evaluation by
    the REEIS National Steering Committee, and action plans are being
    formulated by the Steering Committee to review drafts of additional
    contract deliverables. The most recent evaluations involved independent
    reviews by both the REEIS team and the National Steering Committee of
    draft specifications for a comprehensive needs assessment and a
    critique of the REEIS catalog prototype by a well-known and highly
    regarded information technology expert. At the REEIS National Steering
    Committee (February 25-26, 1998), these reviews will be reported.
    Evaluations of final specifications of the needs assessment, the REEIS
    database catalog, and specifications for a controlled vocabulary are
    scheduled to be completed by March 16, April 15, and May 15, 1998,
    respectively.
                         geographic information system
        The program is designed to transfer evolving geographic information
    systems technologies to state and local governments and others in the
    public and private sectors. The current program is being carried out by
    a non-profit corporation, The National Center for Resource Innovations.
    The directors and participants of the Center are the sub-contractors
    who are carrying out the program by working on agro-environmental
    problems at the national, regional, state and neighborhood levels. They
    represent a wide spectrum of site-based expertise including four
    academic institutions, one regional development authority, and one non-
    profit corporation. A new site at the Southwest Indian Polytechnic
    Institute has been added by Congress this year. This institutional
    arrangement has helped fill a role in linking some of the otherwise
    disparate efforts of agencies and academic institutions to apply them
    in the now seven regions of the country. This project is needed to
    transfer relevant technology to state and local governments whose
    limited training budgets and, sometimes, isolated location make it
    difficult to use the latest technology. This is particularly true for
    Native American communities.
        The technology developed in the Center program is useful in
    improving the management of 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, and makes it possible
    to use analyses at the state and local levels which were initiated at
    the federal level. While the early phases of the geographic information
    system concentrated on building information systems related to rural
    physical and natural resources, the current challenge is to integrate
    human economic, social and demographic information in order to better
    understand the relationship of human communities to the landscape. 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 is the subject of a current
    study group.
        The original goal of this work was to serve as a pilot project for
    the transfer of geographic information systems technology related to
    natural resources to local governments. The Center has carried out this
    function. Economic and biological data are being presented in maps and
    tabular formats to state and local governments and individuals. The
    Chesapeake Watershed project has linked national and regional programs
    with seven state conservation entities in an effort to develop better
    watershed models and decision support systems. This year, the Center
    will reach Native American communities using their own distance-
    learning networks originating at the Southwestern Indian Polytechnic
    Institute. It is anticipated that the fiscal year 1998 grant will
    support work under this program through March 1999.
        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 years 1997 and
    1998, $844,000 per year. A total of $7,756,000 has been appropriated
    since the beginning of the program.
        For fiscal year 1990 through fiscal year 1997, to date, the work in
    this program had $5,009,834 in non-federal support. In fiscal year
    1990, non-federal support was $714,940 consisting of equipment,
    databases, 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 was
    $456,582 in fiscal year 1997. In 1998, it is anticipated that non-
    federal dollars will exceed $1,000,000.
        The National Center for Resource Innovation-Chesapeake Bay is
    located in Rosslyn, Virginia. This group is working under a cooperative
    agreement with the U.S. Department of Agriculture's Natural Resources
    Conservation Service to work with 13 northeastern states. The
    southeastern center in Valdosta, Georgia, in affiliation with the South
    Georgia Regional Development Center, has developed a comprehensive plan
    of the City of Adel as a model for other urban centers in the 10-county
    region. The southwestern center, in Fayetteville, Arkansas, serves
    several local governments through its training facilities at the
    University of Arkansas, basing its technical approach on expertise and
    past experiences with the Federally-developed system known as GRASS.
    They have developed pilot projects for some local jurisdictions and
    state level databases which they have provided online. Central
    Washington University focuses on training for state planning and on
    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. 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. Native American
    communities will be reached through the Southwestern Indian Polytechnic
    Institute facilities in Albuquerque, New Mexico.
        The original objectives to build institutional frameworks for
    developing and disseminating geographic and related information to
    local decisionmakers is constantly evolving. Each site has developed
    approaches to addressing regional needs for modern technologies, and
    many innovative applications have been implemented. Technologies,
    including Internet-based educational and information exchange, have
    been developed to respond to the Center's customers. The Center has
    been asked to include these new technologies in order to bring its
    primarily rural users into new eras of public education and information
    management.
        Proposals have been internally reviewed by Departmental personnel
    in different agencies. Over the last 3 years, the program has also been
    externally reviewed by local advisory committees and qualified
    professionals inside and outside of government. Their various comments
    and suggestions are sent to the agency for the merit review.
                         gulf coast shrimp aquaculture
        Work under this program has addressed research needs 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 to
    viral infections that have impacted the U.S. shrimp farming industry.
    Researchers will intensify efforts aimed at preventing new
    introductions of exotic viral pathogens. In fiscal year 1998, emphasis
    will be placed on the industry seed supply, disease control,
    biosecurity in production systems and the evaluation of shrimp viruses
    moving through processing and commodity channels.
        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.
        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; and fiscal
    years 1992-1993, $3,500,000 per year; fiscal year 1994, $3,290,000; and
    fiscal year 1995, $2,852,000; fiscal year 1996, $3,054,000; and fiscal
    years 1997 and 1998, $3,354,000 per year. A total of $38,748,000 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 1991-1997. 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 1999.
        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 1998 review of the program
    indicates that the progress during the last twelve months has been well
    documented; the proposal is well written; the proposed research is
    consistent with the NSTC Strategic Plan for Aquaculture Research and
    Development; close linkage between the research and the U.S. shrimp
    farming industry has greatly enhanced the commercialization of research
    findings; and facilities and expertise are very good. The CSREES
    Program Manager met with the technical committee of the consortium
    during the proposal development for the fiscal year 1998 proposal.
                          mariculture, north carolina
        CSREES has requested the university to submit a grant proposal that
    has not yet been received. The proposal is reviewed by the university's
    peer review process and is reviewed by the CSREES Program Manager.
    Since this is the first year of this project, CSREES will send the
    proposal out for external peer review. The researchers indicate that
    there is a regional and national need to develop aquacultural
    production systems for a variety of marine finfish. The researchers
    also indicate that the proposed research is consistent with the NSTC's
    Strategic Plan for Aquaculture Research and Development. The goals of
    this research program is to develop sustainable aquaculture production
    systems for marine finfish. The researchers will develop culture
    technologies and evaluate marine finfish species that have some
    potential for commercial aquaculture production. Research is likely to
    focus on reproduction, growth and nutrition, and system design.
    Technologies developed may also have some application to stock
    enhancement programs to support restoration of depleted commercial
    stocks of fish.
        The work supported by this grant begins in fiscal year 1998 and the
    appropriation for fiscal year 1998 is $150,000. The university
    estimates a minimum of $90,000 of non-federal funding in fiscal year
    1998 primarily from state sources. As the program develops, additional
    non-federal funding is expected.
        The research will be conducted at the Center for Marine Science
    Research at the University of North Carolina at Wilmington. The
    anticipated completion date for the original objectives is fiscal year
    1999. The project will be initiated in fiscal year 1998.
        The agency will evaluate the progress of this project on an annual
    basis. The university will be required to submit an accomplishment
    report each year when the new proposal is submitted to CSREES for
    funding. Since this is the first year of the program, CSREES will
    conduct an external peer review of the proposal. The researchers have
    been asked to the develop a research proposal consistent with the
    NSTC's Strategic Plans for Aquaculture Research and Development.
                      mississippi valley state university
        Funds were used for curriculum development, and to generally
    strengthen academic programs, including accreditation and re-
    accreditation. 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 project has been merit
    reviewed.
        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 master's program in Elementary Education have
    been reinstated.
        The original goal was to provide funding to strengthen the academic
    programs of the university. The academic programs have been
    strengthened as evidence 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 benefitted 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, $593,000; fiscal year 1995,
    $544,000; and fiscal years 1996--1998, $583,000 per year. A total of
    $7,481,000 was appropriated.
        Mississippi Valley State University received State and private
    funding during the period of this grant. The State figures provided
    here are for enhancement funds gained above the University's standard
    formula generated funds. The sources and amounts are as listed:

    ----------------------------------------------------------------------------------------------------------------
                               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
    1997............................................................         309,717         755,629       1,065,346
    ----------------------------------------------------------------------------------------------------------------

        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, 1998.
        The program has been evaluated on an annual basis by the agency.
    The annual progress report for fiscal year 1997 revealed 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. The major objectives of this
    project have been met. The funds are now used to maintain the level
    attained since receiving these funds. The fiscal year 1998 proposal
    will be peer reviewed.
                   national center for peanut competitiveness
        This is a new research project initiated by the Congress in fiscal
    year 1998. CSREES has not received the grant proposal which was
    recently requested from the University of Georgia. The goal is to
    conduct economic, genetic, and biotechnological research to develop
    globally competitive production systems. The work supported by this
    grant begins in fiscal year 1998 and the appropriation is $150,000.
    This research is being conducted at the Griffin, Georgia research
    station of the University of Georgia. The anticipated completion date
    is September 2000. CSREES will review the project proposal when it is
    received and later evaluate the results of the research.
                     pm-10 study, california and washington
        The research on the effect of PM-10 particulate emissions from
    agricultural land on air quality is being conducted by scientists at
    the University of California-Davis and Washington State University.
    Also cooperating in these studies are: the Department of Agriculture's
    Agricultural Research Service and Natural Resources Conservation
    Service; State Cooperative Extension Services; U.S. Environmental
    Protection Agency; California Air Resources Board and Washington Air
    Quality Control District; Washington Department of Ecology; and farm
    and agricultural organizations; and private farmers, ranchers, and
    growers in both states. 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 California research has been
    expanded beyond the harvesting of crops to include emissions from
    cattle feedlots, dairies, and the poultry industry. This is in direct
    response to the monitoring data that shows that peak emissions occur in
    November through January, which do not coincide with crop production
    activities. 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 U.S., research on the role of
    agricultural operations in intensively cultivated soils in California
    and the Columbia River Basin, as sources of PM-10 pollution, will
    assist growers to develop alternative agricultural management practices
    to control PM-10 emissions.
        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 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. Plans have also been developed to
    study the impacts of land preparation techniques on emissions.
        A Light Detection and Ranging system has been developed at the
    University of California at Davis. This instrument allows a snapshot of
    the shape of an emission plume from a source such as a harvester. It
    will allow estimates on the amount of material emitted into the
    atmosphere and its subsequent transport.
        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, 1997, and 1998, $873,000 per year.
    A total of $4,374,000 has been appropriated. In California, the program
    is matched by State funds in the form of salaries, benefits, and
    operating costs. In Washington, there were no state or non-Federal
    funds in support of the PM-10 project in 1994 and 1995. In 1996, state
    support was $22,566, and in 1997, state support was $102,364.
        This work is being directed by participating scientists at the
    University of California-Davis, and at the Washington State University
    and 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 anticipated to be completed in 1999. The
    objectives on field control will continue. A manual of control
    practices is being developed for use by growers to reduce wind erosion
    on agricultural land. Implementation and development of these
    management practices will be a major role of this project in the
    future. Quarterly and annual reports on the entire project to date are
    available.
        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. Grower and
    public advisory committees are consulted for input on research progress
    and objectives. A formal on-site review by a panel of experts was
    conducted of the Washington program in November 1997, and a formal
    review report was prepared.
                            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 groundwater, 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 is to work toward providing a
    scientifically-valid basis upon which 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 concerns of the agencies charged with protection of
    environmental quality. Projects supported with Consortium funding are
    peer reviewed by researchers at 35 different universities and agencies
    from across the Nation, and results are presented and critiqued
    annually at the Consortium's Research Planning Conference. Examples of
    projects currently under study supported with Consortium funding
    include:
        1. The Role of Flooding and Land Use Practices on Erosion Rates and
    Agrichemical Loadings in the Southwestern Illinois Sinkhole Plain;
        2. Mechanism of Transport of Nutrients in Alluvial Aquifers During
    Normal and Flood Conditions;
        3. Dynamic Modeling of Sediment, Nutrient, and Pesticide Transport
    in Agricultural Watersheds During Severe Storm Events;
        4. A Community Based Sampling Program for Evaluating Long-Term
    Flood Impacts on Rural Well Water Quality;
        5. Management Strategies for Riparian Water Supply Wells;
        6. An Investigation of Temporal Changes in Soil Permeability Within
    the Vadose Zone of Areas Inundated by Floods;
        7. Effects of Flooding on Salamanders in the Horseshoe Lake
    Conservation Area;
        8. Developing a Geographic Information System Database to Monitor
    Plant Population Dynamics in the Floodplain: A Model Based on Boltonia
    Decurrens, a Threatened Species;
        9. Modeling Flood Flows in Flat, Tile Drained Watersheds; and
        10. The Effect of Flood Dynamics on Chemical Fate and Transport:
    Implications for Agricultural Management.
        The fiscal year 1998 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/groundwater, 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 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, strengthen the
    capabilities of the Consortium. The priorities of the Consortium are:
    (1) the funding of research upon which public policymakers working on
    land use or groundwater protection issues in flood plain areas can base
    decisions and (2) the broad dissemination of this information. The
    projects funded by the Consortium are providing researchers
    opportunities to obtain data upon which larger projects can be built.
    Without this initial data, funding from other competitive sources would
    be difficult to obtain.
        The Illinois Groundwater Consortium was established to coordinate
    and support research on agricultural chemicals in Illinois groundwater.
    The recent Midwest flood of the Mississippi, Missouri, and Illinois
    Rivers, and their tributaries, created devastating effects on farm
    lands that have major implications for agricultural practices and water
    quality in the region as well as effects in other states in the
    Midwest. The Consortium provides information to facilitate short-term
    and long-term systems studies of the effects of flooding on groundwater
    and surface water upon which to base policy management decisions.
    Research areas characterizing short-term and long-term projects
    completed, underway, or proposed for each research area include:
    Short-Term
      --Effect of extended inundation on soil productivity
      --Movement of chemicals (pesticides, herbicides, heavy metal, other
            chemicals) from flooded soils into surface and groundwater
      --Impacts on soil fertility and nutrient balance caused by flooding
      --Changes in nitrogen-fixing bacteria or pesticide microbic activity
            due to flooding
      --Impacts of flooding on plant and aquatic life, including endangered
            and dangerous species, and microbial communities
      --Effectiveness of riparian buffer strips under flooded conditions
      --Groundwater quality changes resulting from flood related land-use
            developments in both the bottomlands where farming practices
            change and in the uplands where new communities are being
            developed
    Long-Term
      --Effectiveness of methods of remediation for flooded soils
      --Changes in surface and groundwater quality over time with changes
            in flooding conditions
      --Changes in soil chemistry and productivity over time
      --Long-term effects and recovery of microbic activity
      --Effects of time on recovery (and eradication) of plant and aquatic
            life
      --Recommendations for long-term, systems-based planning and
            management for watershed and bottomland management
      --Examination of public policy decisions with implications for
            agriculture and water quality in light of flooding effects and
            recovery
      --Long-term implication for public policy decisions and management of
            the river systems
        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; fiscal year 1996, $468,000; and fiscal
    years 1997 and 1998, $492,000 per year. A total of $5,172,000 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
    1995-1997 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-Carbondale, the
    Southern Illinois University-Edwardsville, the Illinois State
    Geological Society and the Illinois State Water Survey at locations
    across the State of Illinois and in Missouri.
        This project was planned as a 5-year study of the impacts and
    recovery of flooding in the Midwest. In the original proposal and
    subsequent proposals, we identified both short-term objectives which
    are project goals that could be accomplished within 1-2 years and long-
    term objectives which are project goals that could be accomplished
    within 2-5 years. In calendar year 1997, we completed 3 years of
    studies involving 26 projects, and in calendar year 1998, we will begin
    4 new projects and continue 12 projects. 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. Results of projects completed in previous
    year and progress reports on projects underway are published each year
    as part of the Proceedings of the annual conference of the Illinois
    Groundwater Consortium and in the Illinois Groundwater Consortium's
    Groundwater Bulletin. Dissemination of both of these publications is
    broad-based, utilizing mailing lists to public and private institutions
    and individuals kept by the University of Illinois Cooperative
    Extension Service, the Illinois Groundwater Consortium, as well as
    dissemination through related conferences and workshops. 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. Due to waterborne contaminant problems within the
    Mississippi River Basin and sub-basins, it is anticipated that the
    projects will continue beyond the year 2000.
        From its beginning, the projects funded through the Illinois
    Groundwater Consortium involve reviews by at least three faculty/
    researchers drawn from 35 different universities, state, and federal
    labs and surveys, U.S. Department of Agriculture's research
    laboratories, and other research centers. The reviewers rate proposals
    on criteria pertaining to scientific merit, quality of the research
    team, likelihood of the work resulting in publications and grant
    support from other sources, and relatedness of the project to the key
    objectives of the Illinois Groundwater Consortium. This peer review
    system enables the Consortium's Advisory Committee to select projects
    with high scientific merit from the group of proposals submitted for
    funding consideration. The titles, principal investigators' names and
    affiliations, and budgets are submitted to the U.S. Department of
    Agriculture for review along with the Consortium's proposal for
    funding.
                          water quality--north dakota
        The original goal of this research was 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. In 1996, the scope of the program was expanded to
    include additional 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 Red
    River Water Management Consortium is to use results from the initial
    phases of this research program to find economical, practical, and
    timely technological solutions to water problems of the region. By
    providing cofunding for the program, Red River Water Management
    Consortium members become active stakeholders in the research and
    ensure the practicality of the work performed.
        The focus of current work is on: (1) the assessment, development,
    and implementation of new technologies for addressing water quality and
    quantity concerns within the basin; (2) water resource assessment and
    analysis, including the development of mechanisms for providing easy
    access to water-related information so proper water management
    decisions can be made; (3) the determination of agricultural,
    industrial, municipal, and recreational impacts on water resources,
    both current and potential, and the identification of potential
    solutions to water quality and quantity problems and needs; (4) water
    quality monitoring and coordination of monitoring activities; (5)
    education and information dissemination on water issues facing this
    region of the United States; and (6) the development of a watershed
    management strategy for the Red River of the North Basin focusing on
    water quality and quantity to ensure continued economic development of
    the area.
        The original focus of the work was on agricultural chemicals in
    groundwater which potentially presents both a public health and an
    environmental quality problem of significant short-and long-term
    importance. The goal of this work was to provide a scientifically valid
    basis upon which meaningful agricultural chemical management and
    regulatory decisions could be made. The establishment of the Red River
    Water Management Consortium provided a mechanism for transferring
    results of the initial research to vested stakeholders of the region
    and for addressing water quality and quantity issues resulting from
    agricultural practices and development. The overall goal of the Red
    River Water Management Consortium is the development of a long-term
    watershed management strategy focusing on water quality and quantity
    which can be used as a model for watershed management in other
    agricultural regions in the United States.
        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
    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 surficial aquifers under
    irrigated agriculture and to determine the source and trends for
    sulfate.
        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 quality and quantity problems resulting from
    agricultural practices and agricultural development.
        In 1989, $1.0 million was appropriated under the groundwater
    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 1996-1998. A total of
    $5,922,000 has been appropriated for this water quality research
    program.
        Red River Water Management Consortium members provide co-funding to
    support their participation in the program. Co-funding provided by Red
    River Water Management Consortium members for fiscal year 1996 totaled
    $59,700 and for fiscal year 1997 totaled $80,000. Interest in this
    program continues to grow, and it is expected that at least $100,000 in
    cost-share will be obtained during fiscal year 1998 through membership
    fees. These funds are provided directly to the program and do not
    include in-kind costs incurred by the participants which are estimated
    to be several hundred thousand dollars.
        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, which is
    providing an estimated cash equivalent funding in the amount of $33,660
    for sample analysis and approximately $12,000 for field
    instrumentation. Instrumentation of sites occurred in fiscal year 1997,
    and sampling and analysis will continue through fiscal year 1999.
        Consortium members' dues are also used to provide in-kind services
    for match in other projects being performed by the Red River Water
    Management Consortium. A major project sponsored by the U.S.
    Environmental Protection Agency and local contributors to restore
    riparian areas in the Red River of the North Basin has been funded and
    will provide $175,000 for consortium activities over the next 4 years.
    The amount of in-kind services provided from Consortium member fees is
    $9,000 per year.
        The U.S. Corps of Engineers has contracted through the Red River
    Water Management Consortium a $100,000 6-month effort to improve the
    decision-making capability regarding ongoing flooding within the Devils
    Lake Basin, a sub-basin of the Red River of the North Basin. This work
    is intended to produce decision support tools, forecasts, data, and
    forums that can be continued to be used by the Corps St. Paul district,
    the states of North Dakota and Minnesota, the International Joint
    Commission, and the people of the Devils Lake region after the project
    has been completed.
        Research is being conducted at the University of North Dakota
    through its Energy and Environmental Research Center and at field sites
    and agricultural product-processing facilities in North Dakota,
    Minnesota, 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 the 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 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.
        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. All project objectives were
    met for the first-year Consortium activities. A meeting of this group
    will occur in March 1998.
                           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 approach the Arkansas Beef Improvement Program is
    taking is conducting workshops presented at the county level. The
    Arkansas Beef Improvement Workshops are usually scheduled for three
    evenings for two hours each evening and teach producers techniques
    learned in the Arkansas Beef Improvement Program to enhance efficiency
    and profitability. Other than an annual CSREES review, the project has
    not undergone a merit review.
        Although local problems and situations are addressed, the decision-
    making process used to solve those problems is universal. Goal setting,
    evaluation of resources, and selection of management practices that
    complement those goals are foundations for the decision-making process.
    It is this process that is the backbone of the Arkansas Beef
    Improvement Program and Workshops.
        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. The average production cost per
    farm decreased 35.4 percent from 1993 to 1996. 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:
      --The break-even cost/pound of beef sold decreased from $0.54 to
            $0.37 ($0.17/pound).
      --Net calf crop percentage increased from 85.6 to 92.3 percent--an
            increase of 6.7 percent.
      --Total pounds of beef sold per animal unit had a net increase of 46
            lb., 451 to 507 lb.
      --Cow cost decreased from $246.70 to $159.36.
      --Supplemental feed costs decreased by $16.73 per animal unit
            resulting in a total farm saving of approximately $2,100.
      --Return over specified cost increased from $100.37 to $213.37 per
            cow--a 113 percent increase (based upon 1993 price per pound
            received).
        The sum of $200,000 per year has been devoted to this project from
    fiscal year 1993 through 1995. In fiscal year 1996 through 1998,
    $197,000 was appropriated per year for a total appropriated amount of
    $1,191,000. Non-federal state funds of $95,000 have been provided
    annually, from 1993 to 1997, for a total of $475,000.
        Six Arkansas demonstration farms were selected the first year of
    the Arkansas Beef Improvement Program, and four more were selected the
    second year. The first six farms have completed their fifth and final
    year of the program. Five new farms were added to the Arkansas Beef
    Improvement Program. Therefore, the program has used 15 farms--one in
    each of 15 counties to reflect the different types of cattle operations
    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 as well as an Arkansas
    Beef Improvement Program Producer Survey and County Agent Survey will
    be collected and summarized for evaluation. Arkansas Beef Improvement
    Program Workshops were developed and have been implemented at the
    county level. The next phase of the program is to introduce Arkansas
    Beef Improvement Projects. These projects--stocker cattle, cow herd
    performance, calving and breeding season, pasture renovation, and hay
    quality and supplementation--are designed to increase the number of
    county Extension agents and producers involved with the Arkansas Beef
    Improvement Program and to evaluate on a more in-depth level these
    important management situations. 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.
                             delta teachers academy
        The Delta Teachers Academy project is provides approximately 525
    teachers at 35 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. It is
    also supports the professional development of over 650 Academy
    graduates throughout the region. The subjects focused on during these
    training opportunities are English, geography, history, mathematics,
    and science. The Delta Teachers Academy grant is not awarded
    competitively; however, we require annual applications reporting the
    previous year's accomplishments and describing activities and
    expenditures planned for the upcoming year. These applications undergo
    merit review by at least three of our Ph.D. level staff before grant
    awards are made.
        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
    workforce 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 non-
    competitiveness.
        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 525 teachers at 35 new sites across the entire seven-state
    region. In addition, there are over 650 graduates of the program whose
    professional development is sustained through the Academy's Fellows
    Program and who are leading teacher in-service training back at their
    home schools.
        A total of $17.161 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, $3.850 million
    dollars in fiscal year 1997, and $3.500 million dollars in fiscal year
    1998. 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 35 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 and for the 15 additional teams
    established in 1995. One new team established in fiscal year 1996 has
    received two years of training, and 19 new teams established in fiscal
    year 1997 have received one year of training. As of the end of the
    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 1998 grant include providing
    training activities to 300 teachers at the 20 continuing sites,
    sustaining the professional development of the project's 650 graduates
    through the Academy's Fellows Program, and expanding professional
    development activities to 225 teachers at 15 new sites throughout the
    seven-state Delta region. The anticipated project completion date for
    the 20 current sites is September 30, 2000, while the completion for
    any new program sites established in fiscal year 1998 would be in the
    year 2001.
        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 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 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, arkansas
        This program develops, refines and validates technology for family
    farm production systems that enhance biological and economic
    efficiencies and product qualities of the Ozark Highlands in the south
    central United States. The applied research and extension programs help
    small farmers in the region to improve their production efficiency,
    minimize risk when no risk capital is available, combine enterprises on
    limited acres to make more efficient use of labor and equipment, and
    improve family record-keeping systems. The program promotes
    sustainability of small family farms in a whole farm context including
    land resources, labor resources and capital.
        The program addresses research and educational needs of limited
    resource hill-land family farmers producing forages, ruminant animals
    and horticultural crops. In many cases, technologies applicable to
    small farms have not been assembled into systems that these farmers can
    adopt with confidence and limited risk. The regional center conducts
    research to develop profitable systems and through the Extension
    programs, extends these systems to people who wish to improve
    productivity while remaining in rural areas. With the small/family farm
    focus, there is need to evaluate the economic applicability of various
    research projects; and to transfer research information that can be
    used by these farmers to evaluate alternative enterprises, improve
    efficiency for conventional and value-added products, and enhance their
    incomes.
        The goal of the project was to develop a small/family farm
    management and marketing education program for the area serviced by the
    South Central Family Farm Research Center located at Booneville,
    Arkansas. Currently, the general objective is to further develop and
    extend an educational program that transfers useful technology
    developed by the Center to small/family farmers in the Center's ten-
    State service area. This program provides support in alternative
    agriculture and marketing to county and state Extension personnel who
    assist local producers in evaluating these technologies and adopting
    those which are economically feasible. Within the past two years, a
    computerized farm management record keeping system has been developed
    and disseminated to assist producers in the region and nationwide to
    enchanted their profits. Scientifically-based data on enterprise
    planning, production and marketing of alternative crops and livestock
    has been provided directly to clientele in 15 states and two foreign
    countries to assist them with their operations. Sound credible
    information has been provided to over 10,250 stakeholders through
    direct contacts, meetings, mailings and telephone conversations.
    Program personnel have worked with commodity organizations and other
    groups to form a network that delivers comprehensive programs on
    sustainable agriculture to end-users.
        The project has been underway since 1992. Appropriations of
    $100,000 have been made in each of the fiscal years 1992 through 1995.
    Appropriations in fiscal year 1996 and fiscal year 1997 were $99,000
    for each year. The same amount, $99,000, has been appropriated for
    fiscal year 1998 bringing the total to $697,000. State matching funds
    have been provided through the Arkansas Cooperative Extension Service
    in fiscal year 1992 through fiscal year 1997. The amounts are $59,040
    in fiscal year 1992, $55,680 in fiscal year 1993, $54,250 in fiscal
    year 1994, $54,446 in fiscal year 1995, $54,446 in fiscal year 1996 and
    $46,346 in fiscal year 1997. The total is $324,200.
        The work is headquartered at the South Central Family Farm Research
    Center located at Booneville, Arkansas. It is being carried out
    primarily in Alabama, Arkansas, Georgia, Kentucky, Louisiana,
    Mississippi, Missouri, Oklahoma, Tennessee and Texas, the 10-state area
    served by the Center. The original proposal in 1992 was for a 12-month
    period. However, the program emphasis has changed over time with the
    educational needs of the target audience and as the research program of
    the Center has evolved. During the current year, the emphasis is on
    development, management and dissemination of whole-farm systems
    consistent with the farm enterprise mix that exists within the region.
    Current program objectives are to be met by February 1998.
        CSREES conducted a merit review of the program in January 1997 when
    the proposal for the current year was received. An Executive Summary of
    the previous year's activities indicated the objectives of developing
    and disseminating a computerized recordkeeping system had been met; and
    that direct assistance had been provided to clientele within 15 states
    and two foreign countries. Publications on alternative farming systems
    have been completed and educational materials were made available to
    county Extension agents, agency personnel and producers. Evaluation
    efforts during the current year include documentation of requests and
    the compilation of address lists that will be used by Extension agents
    in follow-up activities.
                       extension specialist, mississippi
        The Basic Weather Service and Extension project is designed to fill
    a void in weather data due to closure of the Ag Weather Service
    facility in Stoneville, Mississippi. The funding will be used to gather
    and disseminate critical agricultural weather data for producers and
    researchers in Mississippi and surrounding states to use to make
    management decisions and formulate research projects. The funds are not
    awarded competitively.
        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. The goal of the project is
    to collect, maintain, and disseminate weather information for producers
    and researchers in Mississippi and surrounding states. Electronic
    weather stations and links with other web sites to deliver weather data
    are being installed and developed.
        The funding for fiscal years 1997 and 1998 is $50,000 each year,
    for a total of $100,000. The State of Mississippi through the
    Mississippi Cooperative Extension Service and Delta Research and
    Extension Center is providing $41,350 in state appropriated funds to
    support this project in 1997 and 1998. The project will be conducted at
    the Delta Research and Extension Center in Stoneville, Mississippi, is
    expected to continue into a Phase II program It will be evaluated in
    Phase II.
                     income enhancement demonstration, ohio
        CSREES funds support the Agricultural Business Enhancement Center
    which plays a role in the development of the agricultural sector of
    Northwest Ohio. The Center provides a variety of management training
    programs, helps farmers and other agribusinesses develop comprehensive
    business plans, and facilitates business networking. CSREES performs an
    annual merit review of this project.
        The Center seeks to enhance economic opportunity and agricultural
    competitiveness Northwest Ohio. To be successful in business, 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 dealing with change.
        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
    workshops to improve the management and marketing capacity of local
    farms and agribusiness firms. Business planning has been a major topic
    at workshops and several firms have been assisted in completing plans.
    The Center completed its tomato processing plant feasibility study and
    accompanying business plan but was unsuccessful in finding a sufficient
    number of producers to invest in a cooperative or to find a private
    investor. At the close of the fourth annual workshop for women in
    agriculture, 65 percent said their participation would improve
    management of the family farm. A new study is underway to determine the
    feasibility of farmers markets at Ohio Turnpike plazas.
        The project began in 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 through 1998. Appropriations to
    date total $1,883,000. The State of Ohio has appropriated the following
    funds: $35,100 in fiscal year 1991; $72,368 in 1992; $56,930 in 1993;
    $30,547 in 1994; $49,935 in 1995; $51,432 in 1996; $48,664 in 1997; and
    $50,500 in 1998. Non-federal funding provided to date totals $395,476.
        The Agricultural Business Enhancement Center is located in Bowling
    Green, Ohio and serves eight counties in the Toledo Metropolitan Area.
    Project leadership and some 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 months,
    however, the ongoing needs of producers and agribusinesses to adjust to
    major changes in the agricultural sector continues to provide the
    Center with many challenges. The current phase of the program will be
    completed in September 1998.
        CSREES performed a merit review of the project in January 1997 as
    it evaluated the proposal for that year, and concluded that the project
    plays a 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 the area.
                      integrated cow/calf management--iowa
        The CHIPS program is an integrated cow-calf resource management
    (IRM) program that 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 that utilize highly erodible land
    (HEL), including land to be released in the CRP program. The
    geographical area where CHIPS services are offered has systematically
    expanded from the original target area, with services extended to over
    36 Iowa counties in 1997. Further expansion of the CHIPS program in
    area covered, services offered, and cooperators served is currently
    underway, with technical support being extended to an additional 14
    counties in central and northwest Iowa in 1998.
        The majority of Iowa's beef cow operations utilize extensive areas
    of marginal land that is 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. Fiscal year 1996 marked the beginning of the release of
    Conservation Reserve Program (CRP) contracts--with thousands of these
    acres categorized as HEL. The CHIPS program assists producers in making
    management decisions regarding these CRP acres. CHIPS's supports cow-
    calf production on this marginal ground and provides one-on-one
    assistance as economic and production decisions are made.
        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 Iowa about cow-calf production on highly erosive
            land and the IRM concept.
      --Provide CHIPS cooperators 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 farm program compliance. It is anticipated that
            200 cow-calf operations will be involved in this technical
            assistance program during 1998.
      --Help producers develop management skills to improve efficiency and
            reduce costs of production as CHIPS recommendations are
            implemented.
        During 1997, over 130 cooperators, involving approximately 11,000
    beef cows, participated in the CHIPS program. Four full-time
    technicians have conducted over 600 farm/office consultations during
    fiscal year 1997 to develop specific on-the-farm recommendations and to
    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 80
    cooperators have incorporated the Cow Herd Appraisal of Performance
    Software (CHAPS) and Standardized Performance Analysis (SPA) programs
    in their operations. During fiscal year 1997, 3,300 head of beef
    animals were permanently identified to facilitate record and data
    collection. More than 13,000 cattle were weighed and monitored to
    evaluate performance and production levels. Approximately 400 forage
    samples were collected and analyzed, with the information being
    utilized in over 200 individualized ration recommendations. CHIPS
    technicians on a monthly basis highlight selected management
    recommendations. These financial and/or performance impacts are
    summarized and reported to personnel associated with the program.
        `Networking' projects have been developed and initiated 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 ten CHIPS cooperators. The
    goal of this project was (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, EPD
    use, and nutritional management. Over 95 percent of the enrolled
    heifers were diagnosed pregnant at the end of the project, with
    approximately 65 percent bred by artificial insemination. These results
    are both above industry averages. A CHIPS Feedlot Program has also been
    developed and reviewed. The purpose of this effort would be to 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. Survey results indicate that
    cooperation with existing feedlot operations may be necessary to make
    this proposed program successful. Further review will occur at a later
    date. CHIPS personnel in conjunction with the Iowa Cattlemen's
    Association are also monitoring a statewide bull test evaluation.
        For fiscal years 1992 and 1993, $138,000 was approved; $276,000 for
    fiscal year 1994; $350,000 for fiscal year 1995; $345,000 for fiscal
    year 1996; $345,000 for fiscal year 1997; and $300,000 in fiscal year
    1998. Federal funding through fiscal year 1998 totals $1,892,000. 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 $75,000 have been collected from CHIPS cooperators.
        The CHIPS program is currently being operated in 16 counties in
    southeast Iowa, 7 counties in the south central area, and 14 counties
    in east central and southwest Iowa. The expansion effort currently
    underway will extend the CHIPS IRM concept to an additional 14 counties
    in Iowa, offering program services to northwest and central Iowa.
        The initial CHIPS program had a three year time period. Objectives
    and goals of the CHIPS program will continue to be modified and adapted
    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 `new' emerging
    objectives. These industry challenges strongly support the need for the
    CHIPS program. An example is the closing of the Monfort beef packing
    plant in Des Moines, Iowa. This closure depressed market prices and the
    profit potential of beef producers. To address this issue, CHIPS is
    expanding value-added services to its cooperators. A retained ownership
    demonstration in cooperation with Iowa State University and
    agribusiness partners is currently being finalized. This would support
    value-added ownership, incorporate the latest technologies, and provide
    birth-to-market information to the producer. A new projections program
    is also being incorporated into the CHIPS program that will utilize
    past production and financial records to analyze available resources
    and develop a systems approach to the operation's future direction.
    Discussions with representatives from Precision Beef Alliance, a value-
    added pasture-to-plate program, have also been initiated. These
    innovative program services combined with the one-on-one technical
    support, record systems, and available networking opportunities will
    assist CHIPS cooperators in being flexible and adaptive to the ever
    changing economic conditions which exist in today's cattle industry.
        A `Think Tank' of beef industry representatives will be assembled
    in 1998 to review the CHIPS program. The objective of this group will
    be to make recommendations regarding the focus, direction, and future
    of this IRM program. This is the initial step in determining how the
    program will be funded in the future, where CHIPS fits in the
    industry's service area, and what industry groups will be involved. The
    `Think Tank' process will help determine the services, technical
    assistance, and administrative structure of the CHIPS program in the
    future. This process should also improve the efficiency, flexibility,
    and impact potential of the services offered to participants. These
    recommendations will be incorporated with funding requests as other
    potential funding sources are investigated.
        Evaluation of the CHIPS program is currently underway. The intent
    of the evaluation process is to (1) determine the production and
    financial impact of the program to participating producers, (2) analyze
    the services and technical assistance being offered, and (3) determine
    which programs should continue to be supported. This evaluation effort
    was initiated in December, 1997 with an anticipated completion date of
    April, 1998. To determine if the project's key objectives are being
    met, three areas of the program are being reviewed. (1) The
    reproductive (CHAPS) and financial (SPA) records are currently being
    analyzed to evaluate both short-and long-term operation impacts, (2) a
    questionnaire is being prepared to determine the production changes
    that have been incorporated by cooperators, and (3) the future needs of
    the cooperators will be surveyed. Three Iowa State University Extension
    personnel are conducting the study with the assistance of the CHIPS
    technicians.
        The record evaluation process will analyze the production changes
    realized by incorporating the record keeping programs. This will
    compare production trends reflected by the record analyses, actual
    productivity changes, and financial impact. The questionnaire will
    summarize managerial changes that have occurred during the producer's
    involvement with the CHIPS program. If possible, economic impact
    associated with these changes will be reported.
                    national center for agricultural safety
        Fiscal year 1998 is the first year for funding this project. CSREES
    has requested the university to submit a grant proposal that has not
    yet been received. The project director believes this training center
    to be of national, regional and local need. Farming continues to be one
    of the most dangerous occupations in our nation. An estimated 800
    farmers, family members and farm employees die in work incidents
    annually. Most of these incidents are preventable if safe procedures
    are adopted while performing farm chores. The adoption of safe work
    habits is dependent upon the relevance of safety education to the at-
    risk agricultural audiences.
        The original goal of this center is to provide practical, hands-on
    training methods for reducing the level of preventable injuries,
    illnesses and deaths among farmers and ranchers in the United States.
    It has been surmised that trainees and students will respond more
    positively to real life scenarios and actual simulations of farming
    hazards. The National Education Center for Agricultural Safety (NECAS)
    is offering practical training initiatives concentrating on the hazards
    that negatively impact farm work, including hazardous work: with
    equipment and chemicals; around livestock; in confinement facilities;
    and while harvesting grain and forage crops.
        The work supported by this grant begins in fiscal year 1998 and the
    appropriation for fiscal year 1998 is $195,000. Specific information on
    the source and amount of non-federal funding for this project is not
    yet available.
        Training under this grant will be conducted at the National
    Education Center for Agricultural Safety, located on the campus of
    Northeast Iowa Community College in Peosta, Iowa. The anticipated
    completion date of the original objectives is approximately March 31,
    1999. The agency will conduct the initial review of this project when
    the proposal is submitted to CSREES for funding.
                      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 University of Wisconsin--
    Stout's Northwest Wisconsin Manufacturing Outreach Center (NWMOC) 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
    project also draws on many other state resources to add expertise and
    capacity to network facilitation and in-plant extension activities. The
    project has undergone a merit review.
        America'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 costs 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 of information and solve
    complex problems.
        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 new
    manufacturing technologies to support global competitiveness of
    manufacturers. Productivity improvements were reported by the companies
    showing economic impact to the region through implementation of:
        a. Client operations assessment/plant evaluation and strategy
    development.
        b. Opportunities for productivity improvements.
        c. Implement new organizational and operational methods.
        d. Investigate new manufacturing technologies.
        e. Establish quality assurance/total quality systems.
        f. Establish ongoing training programs.
        g. 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, fiscal
    year 1997, and fiscal year 1998 for a total of $1,149,000. No non-
    federal funds have been provided for this project.
        The work will be carried out by the University of Wisconsin-Stout
    and 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. 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 phase of the program will be completed in 1998.
        To measure the success of the project, a client evaluation process
    has been developed which includes an evaluation questionnaire.
    Evaluations indicate forward strides in job creation, new businesses,
    expanded productivity, and enhanced international competitiveness.
                      range policy development, new mexico
        The Range Policy Development project has collected local economic
    data throughout the State. Local data have been used to develop an
    economic model to help explain the relationships among local economies
    and primary industries. The model is intended to enable policymakers to
    better understand how local and State economies are tied to primary
    industries, especially those industries that use public lands. The
    initial focus of the project has been on the livestock grazing
    industry.
        In New Mexico and throughout the western states, many local
    economies are dependent on the use and management of public range and
    forest lands. However, there exists a great deal of disagreement about
    the true level of dependence of individual communities on these public
    land-based industries and, consequently, disagreement about the local,
    statewide, and regional impacts of public policies that alter the use
    and management of these lands. Through better understanding of how
    public lands impact local and regional economies, we may be better able
    to predict the outcomes of potential legislation or amended land use
    policies, resulting in policies that enhance, rather that detract from,
    local economies. Early results from this project have been encouraging
    and have spawned a six-state collaboration to design a regional
    economic model, based on the New Mexico prototype.
        New Mexico is in the process of developing detailed input-output
    models for each county, from local and state tax revenue data.
    Economists are following up with workshops across the state to present
    information from economic forecasts to local decisionmakers. Further,
    the project calls for increasing the utility of the models by expanding
    the scope of the database to include industries in addition to the
    grazing enterprises.
        This project was initiated in December 1994. In fiscal years 1994
    through 1998, $142,560 was appropriated each year for a total of
    $767,240. The $197,000 appropriated for fiscal year 1998 has yet to be
    awarded, as we have to receive and review a request from the
    institution. The project budget does not indicate any non-federal
    support. However, Agricultural Research Stations in five other States
    have economists currently working to expand upon the New Mexico
    project, ultimately to build a regional model.
        According to the project director, most of the original objectives
    have been accomplished. In this second phase of the project, the
    investigators are collecting data to allow incorporation of other
    industry and government sectors into the model. Objectives for this
    phase should be completed near the end of 1998.
        The proposal for continued funding underwent merit review by an
    agency team of National Program Staff in May 1997, and a review of
    progress to date was conducted by the project liaison in September
    1997. The reviews focused on criteria including the relevance of the
    project goals, the suitability of the proposed research methods, and
    the extent of progress made toward addressing the goals of the project.
    Both reviews found that phase one objectives had been met, and progress
    had been made toward the objectives of the second phase of the project.
                          rural development, oklahoma
        This program provides financial and technical assistance to small
    business to create and retain jobs in rural Oklahoma and to stimulate
    the local economies. The program is carried out through financial
    services, business incubators, problem-solving assistance to small and
    medium-sized manufacturers and technical assistance to rural small
    businesses. The program is expanding to include assistance to rural
    small businesses to enter international trade. The program continues to
    evaluate new products and processes that may result in new industries
    or be applied to improve existing manufacturing processes. The project
    has undergone a merit review.
        The increased demand for small business financing and technical
    assistance verifies the need for the program. Each year financing
    secured for small businesses has significantly increased. The demand
    for business incubators is also on the rise. Last year, Rural
    Enterprises (REI) agreed to manage two more business incubators
    bringing the total REI-managed facilities to thirteen. Also small
    businesses continue to need access to technical and business management
    assistance, worker training, and international trade assistance in
    order to stay competitive in domestic and world markets.
        The original goal of the program was to create jobs in rural
    Oklahoma by providing a systematic access to improved technology,
    training, financial and business management assistance. Many
    accomplishments have resulted included financial assistance. REI is a
    Certified Development Corporation for the Small Business Administration
    as well as a designated Certified Development Financial Institution. As
    a result, REI has been successful in obtaining financing for
    entrepreneurs and rural small businesses totaling $119,060,129. Special
    technical assistance efforts have included 1) problem-solving
    assistance to small manufacturers; 2) training and dissemination of
    information on ISO9000 to assist rural businesses compete with a global
    market; 3) providing manufacturers with a ``Quick View Assessment''
    program which enables manufacturers to compare their facilities and
    operations with other companies across the United States and 4) working
    one-one-one with small businesses providing on-site assistance with
    inventory control, cash flow management and marketing.
        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; $150,000 in 1998. Appropriations total
    $3,669,000. No non-federal funds have been provided for this project.
        The work is being carried out at Rural Enterprises, Inc., in
    Durant, Oklahoma and 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 phase of
    the program will be completed in 1998.
        REI itself conducts an on-going 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. Over 6,000 jobs have been created and retained for
    new and expanding businesses as a result of this program. The program
    has met its key objective of job creation in rural Oklahoma.
                 rural development through tourism, new mexico
        The Rural Economic Development Through Tourism Project involves
    applied research and outreach focused on locally-based tourism
    development strategies to enhance economic opportunity in small and
    rural communities in New Mexico. Components of the agenda support
    training of local leadership and tourism professionals, strategic
    planning and market development, and technical assistance to
    communities. The proposals submitted are submitted for internal review
    and evaluation within the agency. Recommendations are presented to
    enhance impact on regional and national agendas. This is an on-going
    pilot to demonstrate the effective development and implementation of
    applied research, training, education, and technical assistance related
    to rural tourism as a development strategy.
        The applied research and outreach project was designed by the State
    Cooperative Extension Organization to increase the ability of the
    public sector to enhance economic opportunity for rural communities
    through tourism development. A regional task force composed of
    Extension professionals and community leaders from business, industry,
    education, and local, state, and Federal government was developed to
    guide and advise the development and implementation of locally-based
    programming and research. The results include video training materials,
    a public relations package, image studies and profiles, regional
    tourism guides, development of tourism bus packages, festival planning
    workshops, development of regional tours, and a mini-grants program for
    tourism development.
        In fiscal years 1992 through 1996 the amount of $230,000 was
    appropriated per year. The fiscal year 1997 appropriation was $227,000
    and $247,000 was provided in 1998. Total appropriated funds to date are
    $1,624,000. Fiscal year 1992 included $38,764 in state matching funds.
    Fiscal years 1993,1994, 1995, and 1996 included $39,360 of state
    matching funds. Fiscal years 1997 and 1998 include $39,040 state
    matching funds.
        Applied research and outreach is being carried out through New
    Mexico State University. The original completion date was September 30,
    1993 and the original objectives of this research have been met. The
    additional objectives being presented for the current year will be
    completed by March 31, 1999.
        The agency evaluates the merit of research proposals as they are
    submitted. No formal evaluation of this project has been conducted. The
    principal investigators and project managers submit annual reports to
    the agency to document impact of the project. Impacts include increases
    in attendance of local festivals, increase in number of tour bus visits
    to New Mexico, training to over 700 tourism employees in the region,
    and establishment of a number of new businesses. Agency evaluation of
    the project includes peer review of accomplishments and proposal
    objectives and targeted outcomes.
                         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. Functional illiteracy is
    regarded in Georgia as a form of disability. The extent of adult
    functional illiteracy is similar throughout much of rural America. 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. Over the past nine years, test scores and attendance and
    completion rates of students in the satellite-based program have shown
    that distance learning 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 1998, appropriations for this program have been as follows:
    $129,000 in fiscal year 1989; $256,000 in fiscal years 1990, 1991, and
    1992; $250,000 in fiscal years 1993, 1994, and 1995; and $246,000 in
    fiscal years 1996, 1997, and 1998. Funds appropriated to date total
    $2,385,000. These Federal funds are typically used for program
    innovation and quality improvement.
        The fiscal year 1998 source of non-federal funds provided for this
    program are state appropriated funds 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 1998, the total amount of non-federal funds
    provided for the project has been $8,006,901. 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; $1,319,320 in fiscal year 1997; and $1,309,320 in fiscal year
    1998.
        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 Rehabilita-tion
    Technology, 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 has been provided.
        It was anticipated that it would take three years to demonstrate
    that distance learning 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, and to continually upgrade the quality of class
    programming and the technical capacities of the system. The fiscal year
    1997 technological upgrades expanded 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 made materials
    available as supplemental tools to all Georgia literacy classes. As of
    December 1997, the Georgia Tech Satellite Literacy Program is in a
    period of transition from that of providing literacy instruction via
    direct television broadcasts to classrooms to that of development and
    dissemination of technology-based instructional aids. The project has
    been renamed the Lifelong Learning Network, or LNN. This change is
    being made based upon the request of the major sponsor, The Georgia
    Department of Technical and Adult Education, Office of Adult Literacy.
    The LNN will develop and produce video-based instructional supplements,
    technology-based curriculum and training for adult literacy
    practitioners, and multi-media projects for literacy students.
        The agency receives annual reports on the project that are used,
    together with agency merit review, to assess its progress. 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 applied 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 involved the transfer of uncommercialized
    technologies from Federal laboratories and universities to rural
    businesses and communities. 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. This project has undergone a merit review.
        Manufacturing extension programs throughout the country have
    identified one-on-one engineering technology assistance as a need for
    small manufacturers as they attempt to become more competitive and
    profitable. 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 and 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, 1997 and 1998. Appropriations to
    date total $5,000,000. Oklahoma State University and Mississippi State
    University have provided considerable amounts of matching support from
    state funds over the life of the project. Over the past four years,
    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 Sate University. 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
    manufactures: (2) conduct joint workshops, client referral, and joint
    research and application projects; and (3) demonstrate a value of
    service to clients many times project operating costs. The current
    phase of the program will be completed in 1998.
        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 job creation, productivity enhancement, and
    local community economic activity. The Technology Transfer program has
    impacted the integration of emerging technologies that are benefitting
    the citizens, ranging from assisting small businesses and industries in
    integrating new computer hardware and software for conducting
    electronic commerce to providing extensive online information
    resources. The Technology Transfer Funds have served as a catalyst for
    the development of a long range telecommunications network plan for the
    total Extension Service to link all county extension offices and
    research centers directly to the Mississippi date/video backbone and
    provide access to the Internet.
                             wood biomass, new york
        The objective of this project is to expand, implement, and gain
    acceptance of wood biomass as a sustainable, renewable, and
    environmentally-affable fuel source. In addition, the project is deemed
    to support the promotion of alternative forest products for the
    Nation's Central and Northern Hardwood forests regions.
        The principal researchers hypothesize that the project is of
    national interest. Biomass research studies through the U.S.
    Departments of Agriculture and Energy span 20 or more years.
    Henceforth, the Nation is in a position to scientifically produce
    environmentally-affable fuels for power generation systems.
    Complementing the planned fuel supply are many sidebar benefits
    including carbon sequestration, rural economic development, wildlife
    habitat, and soil erosion and sedimentation associated with
    conventional agriculture.
        The goal of this project is to promote, through applied research
    and technology transfer, wood biomass as a sustainable wood supply for
    (1) power generation, (2) alternative farm products, (3) wise
    stewardship of land resources, and (4) enhanced farm profitability. To
    accommodate these goals, scientists at the State University of New York
    are planting willow trials on several sites and under several
    conditions. Site preparation and planting has occurred on several
    locations, and more are planned. Cornell University, a partner
    institution in the project, has hired a technology transfer specialist
    to coordinate educational activities resulting from this work. Common
    events include field days, news articles, videos, and exhibits.
        The original program began with an appropriation of $200,000 in
    fiscal year 1995. An additional $197,000 was appropriated by the
    Congress for fiscal years 1996, 1997, and 1998 for a total of $791,000.
    Four state partners and approximately 18 private partners contribute
    resources at a ratio of nearly 1.5 to 1 nonfederal funds for this
    project.
        The field work is being conducted on private and state land near
    Syracuse, New York. Electronic and print media allows Cornell
    University's technology transfer activities to extend far beyond that
    point. 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 March 31, 1999. Because of the timing of one of
    the fiscal awards, some weather-related problems, and some land-
    contract problems, all of the original objectives have not been met.
    Most of the unmet objectives should be completed by early spring 1999.
        A field review of the project was conducted on August 20-21, 1997.
    Excerpts from the review report include (1) positive accolades for
    their quarterly progress reports, (2) positive accolades for the
    outreach program being conducted by Cornell University, (3) praise for
    the scientific outreach by the principal investigators, (4) praise for
    connecting the willow biomass program to the poultry waste and riparian
    issues in New York State, and (5) praise for gaining the acceptance of
    willow biomass as an agricultural crop for state property tax purposes.
    On the concern side, the Agency's project administrator flagged the
    delay in establishing the demonstration farm and requested diligence in
    bringing this aspect of the project to fruition. This is a new project
    which will not begin until Spring 1998; therefore, no evaluation has
    been conducted.
                        csrees 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 below.

                                                                       CSREES BUILDINGS AND FACILITIES PROGRAM--STATUS OF PROJECTS
                                                                                         [Dollars in thousands]
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Total Federal                    Funds needed
          Name and locationof facility         Total cost of        funds       Match obtained    to complete    Plan to complete facility and source of               Status of facility
                                                  project     appropriated \1\        \2\           project                    funding \3\
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Poultry Science Facility, Auburn                 $15,000           $6,000           $2,652          $6,348  Total funds needed to complete the         Design work is underway.
     University (Auburn,  AL).                                                                                   facility will come from the State and
                                                                                                                 private sources.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Alternative Pest Control Containment/             38,118           10,921              265          26,932  Total funds needed to complete the         Design work has been completed at the
     Quarantine Facility, University of                                                                          facility will come from the State and      Riverside campus; some construction has
     California (Davis/Riverside).                                                                               private sources. As an option, they        been approved. There has been no
                                                                                                                 would reduce the size of the facility to   activity approved at the Davis campus.
                                                                                                                 meet the total amount raised.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Agricultural Biotechnology Laboratory,            20,000            3,915           10,000           6,085  Matching funds in the amount of $10M were  Programming and design work has been
     University of Connecticut (Storrs).                                                                         obtained from the State. Plans include     completed.
                                                                                                                 building the facility in 3 phases as
                                                                                                                 funds become available. Funds needed to
                                                                                                                 complete project will be sought from
                                                                                                                 private sources.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Center for Applied Aquaculture, Oceanic           11,450            6,375            1,350             100  Remaining funds needed will be coming      Design and construction work underway at
     Institute (Waimanolo, HI) \1\a.                                                                             from private sources.                      multiple sites.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Agricultural Biotechnology Facilities,            13,479            5,900            5,500           2,079  Funds needed to complete the facility      Design work is underway.
     University of Idaho (Moscow).                                                                               will be sought from a combination of
                                                                                                                 State and private sources.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Holmes Hall Renovation, University of          1,105,220          561,000   ..............         544,220  Funds needed to complete the facility      Efforts have been focused on obtaining
     Maine (Orono).                                                                                              will be sought from the State.             the required matching funds.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Institute for Natural Resources and               20,000           10,000            3,415           6,584  Funds needed to complete the facility      Design work is underway.
     Environmental Sciences, University of                                                                       will be sought from the State. Plan
     Maryland (Multiple locations).                                                                              includes reducing the number of project
                                                                                                                 components from 6 to 3.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Center on Hunger, Poverty and Nutrition           15,850            7,350            7,924  ..............  Not applicable. This project was included  Design work is underway.
     Policy, Tufts University (Boston, MA)                                                                       on this chart to show information in
     \1\b.                                                                                                       footnote 1b.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Center for Molecular Biology, Rutgers             47,200           17,836           27,200           2,164  Funds needed to complete the project will  Phase I has been completed. Design work
     University (New Brunswick, NJ).                                                                             be sought from public and private          is underway for Phase II.
                                                                                                                 sources.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Center for Research on Human                     108,607           18,108           50,607          39,892  Funds needed to complete the facility are  Construction ongoing.
     Nutritionand Chronic Disease                                                                                being sought from private donors. Plan
     Prevention, Wake Forest University                                                                          includes an option to change the scope
     (Winston-Salem, NC).                                                                                        of the facility if the campaign is
                                                                                                                 unsuccessful.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Animal Care Facility, North Dakota State          10,058            1,918            5,000           3,140  Facility will be completed in two phases.  Design work is underway.
     University (Fargo, ND).                                                                                     Funds in hand will build Phase I
                                                                                                                 (Livestock Care Research Facility).
                                                                                                                 Phase II will build a Laboratory Animal
                                                                                                                 Care Research Facility. No plan has been
                                                                                                                 offered to obtain funds needed to
                                                                                                                 complete Phase II.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Food Processing Pilot Plant, North                 1,478              750               15             713  Funds needed to complete the facility      Efforts have been focused on obtaining
     Dakota State University (Fargo, ND).                                                                        will be sought from a combination of in-   the matching funds needed.
                                                                                                                 kind contributions and contributions
                                                                                                                 from private sources.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Grain Storage Research and Extension                 975              495              240             240  Funds needed to complete the facility      Would like to begin the design phase of
     Center, Oklahoma State University                                                                           will be sought from private sources.       the project.
     (Stillwater).                                                                                               Plan to complete the facility are
                                                                                                                 unchanged.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Coastal Institute on Narragansett Bay,            41,194           12,500            1,990          26,704  Costs incurred for match purposes are      Design work is underway.
     University of Rhode Island (Kingston).                                                                      under review by CSREES. Plans to
                                                                                                                 complete the project include reducing
                                                                                                                 the number of the buildings to be built
                                                                                                                 from six to four.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Agricultural, Biological, and                     38,500           10,434            5,468          22,598  Funds needed to complete the facility are  Efforts have been focused on obtaining
     Environmental Research Complex,                                                                             being sought from the State.               the required matching funds.
     University of Tennessee (Knoxville).
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    \1\ All funds have been obligated except for the following:
        a. Oceanic Institute--Funds from fiscal years 1994 and 1995 in the amount of $3,581,000 pending receipt and approval of a proposal.
        b. Tufts University--Funds from fiscal year 1997 in the amount of $820,000 pending receipt and approval of a revised proposal.
    \2\ Matching funds are required equivalent to the total Federal funds appropriated less the 3 percent administration fee.
    \3\ All plans were submitted within the required time frame. Plans are under review but have not been approved by CSREES.

                             fund for rural america
        Question. Of the fiscal year 1997 funds made available from the
    Fund for Rural America for research, please provide a list of the
    projects approved, including a description of the project, where the
    center will be located/or research will be carried out, and the amount
    of the award.
        Answer. Fund awards have been made from fiscal year 1997 funds as
    part of two programs--the Planning Grant Program with awards made in
    September, 1997 and the Standard Grant Program with awards made in
    February and March, 1998. The Planning Grant awards totaled $881,000
    and are summarized in Table 1. Standard Grant awards are being made as
    the administrative work is completed. Awards totaling $19.2 million
    were made February 27, 1997 and the remaining standard grants will be
    made over the following 2-3 weeks. Standard Grants will ultimately
    total $32 million and exhaust fiscal year 1997 funds. Table 2
    summarizes the Standard Grant awards made as of March 2, l998.

                         Table 1.--Planning Grant Awards

            Principal investigator/institution/State/title            Amount
    Jonhannes, J., Montana State University, MT, Planning Grant:
        Rural Development System..................................   $25,000
    Simon, M., Kentucky State University, KY, Small Farm Center...    25,000
    Blase, M., University of Missouri, MO, Diversifying U.S.
        Cropping System...........................................    24,800
    Young, R., University of Missouri, MO, Farm/Environmental
        Policy Support System.....................................    24,000
    Skees, J, University of Kentucky Research Center, KY, Managing
        Catastrophic Risks in the Farm and Food System and Rural
        Communities...............................................    24,900
    Barrick, R., University of Illinois, IL, Virtual Center for
        Rural Community Development Planning Grant................    25,000
    Downing, J., Iowa State University of Science and Technology,
        IA, Agro-Oceanic Nutrient Flux Center.....................    25,000
    McKean, J., Iowa State University of Science and Technology,
        IA, National Corsortium for Pork Technology and Education.    25,000
    Olson, D., Iowa State University of Science and Technology,
        IA, Center for Sanitary Barriers to U.S. Meat Exports.....    25,000
    Smith, W., Louisiana State University of Agricultural Center,
        LA, FRA Gulf-States Forest Production International Trade
        Center....................................................    24,500
    Legg, L., University of Minnesota, MN, A Consortium for Site
        Specific Resource Management..............................    25,000
    Schoeneberger, M., USDA/FS-Colorado, CO, Acceptability for
        Conservation Buffers......................................    25,000
    Lemenager, R., Purdue University, IN, ``Center for Innovative,
        Coordinated Beef System in the Eastern Corn Belt''........    25,000
    Baughman, M., University of Minnesota, MN, Center for
        Nonindustrial Private Forestry Education..................    25,000
    Hoover, M., North Carolina State University, NC, International
        Center for Decentralized Wastewater Treatment Planning
        Grant.....................................................    25,000
    Harris, T., University of Nevada-Reno, NV, Policy for Western
        Public Lands..............................................    25,000
    Cropp, R., University of Wisconsin-Madison, WI, Center for
        Cooperative Enterprise....................................    25,000
    Rosson, C., Texas Agricultural and Experimental Station, TX,
        International Trade Extension to Rural Communities of the
        Mid-Conti-
        nent......................................................    25,000
    Carey, H., Forest Trust, NM, ``Developing the Research
        Capacity of Rural, Forest Dependent Communities''.........    25,000
    Shelton, A., Cornell University, NY, Center for Biologically-
        Based Pest Management: Identifying Opportuntites for Rural
        Agriculture...............................................    24,100
    Cannell, R., Virginia Polytechnical Institute, VA, Planning
        Grant for Establishing a Recirculating Aquaculture Center.    25,000
    Gilbert, J., University of Wisconsin-Madison, WI, Maintaining
        Land and Community: Planning Grant Proposal for a FRA
        Center on Minority Land Loss and Recovery.................    25,000
    Hamilton, T., USDA/Madison, WI, Value-Added Wood Products
        Consortium for Rural Economics............................    25,000
    Endter-Wada, J., Utah State University, UT, Proposal for An
        Intermountain West Center for Sustainable Agriculture and
        Environmental Stewardship.................................    24,600
    Beasley, D., North Carolina State University, NC, National
        Center for Manure and Animal Waste Management.............    25,000
    Desjarlais, J., Turtle Mountain Community College (1), ND,
        Planning for a Rural Development Center for the Turtle
        Mountain Band of Chippewa.................................     5,000
    McLellan, M., Cornell University, NY, Planning Grant: Food
        Venture and Process Technology Center.....................    25,000
    Rochin, R., Michigan State University, MI, Latino Population
        and Agro-Industrial Expansion: Implications for Community
        Development...............................................    25,000
    Andre, P., National Agricultural Library (1), MD, Increasing
        the Availability for Electronic Information in Rural
        America...................................................    25,000
    Jojola, M., Southwestern Indian Polytechnical Institute (1),
        NM, Southwest Indian Virtual Extension Center (SIVEC).....    25,000
    Nault, L., Ohio State University, OH, Cereal and Oilseed
        Quality Cen-
        ter.......................................................    25,000
    Berg, M., Little Hoop Community College, ND, Land Grant
        Relationships Between LHCC and North Dakota State
        University................................................     5,000
    Hoffman, M., Cornell University, NY, Center for Land
        Stewardship Focusing on Vegetable Production in the NE
        U.S.......................................................    25,000
    Carlson, C., ``Fort Kelnap College, MT (1)'', MT, Fort Kelnap
        College FRA Center Planning Proposal......................     5,000
    Maier, D., Purdue University (1), IN, Center for Value-Adding
        Rural Enterprise (CARE)...................................     5,000
    Seronde, J., ``Navajo Community College, AZ (1)'', AZ,
        Planning for Native American Rural Development............     5,000
    Godfrey, G., Haskell Foundation/Haskell Indian Nations
        University (1), ``International Extension, Education, and
        Research Center''.........................................    25,000
    Lee, J., Mississippi State University, MS, Center for Policy
        Devolution and the Rural South............................    25,000
    Wissman, D., ``Grain Industry Alliance, KS (1)'', KS, Planning
        Grant for Center Grain-Based Rural Enterprise.............     5,000
    Bonsi, W., Tuskegee University, AL, Planning Grant for
        Integrated Study of Food Animal and Plant Systems
        (CISFAPS).................................................    25,000

               Table 2.--Standard Grants Made as of March 2, 1998

            Proposal No./PI last name/institution/State/title Amount awarded
    9704746, Jones, University of Arizona, AZ, Food Losses from
        the Farm to the Consumer..................................  $540,000
    9704750, Glenn, USDA-ARS, MD, Integrated Manure Management on
        Dairy Farms for Conservation of Natural Resources and
        Profitabil-
        ity.......................................................   380,000
    9704752, Krissoff, U.S. Department of Agriculture Economic
        Research Service, DC, Market Development for Organic
        Agricultural Products.....................................   200,000
    9704763, Peeples, ``Peeples Consulting Associates, Inc.'', VA,
        ``Premium Diesel''--Evaluating U.S. Market Opportunities
        for Biodiesel as a Motor Fuel Additive''..................    31,000
    9704765, Daniel, ``Boehringer Ingelheim/NOBL Laboratories,
        Inc.'', IA, Implementation of a Food Safety Improvement
        System For Sustaining the Competitiveness of the
        Independent Pork Producer and Packer......................   340,000
    9704777, Rochin, Michigan State University, MI, Latinos in the
        Rural Midwest: Community Development Implications.........   185,000
    9704783, Swallow, University of Rhode Island, RI, Decision
        Information and Support Structures to Sustain Farm Forest
        and Open Space in Rural Communities of Southern New
        England...................................................   400,000
    9704785, Paustian, Colorado State University, CO, Developing
        Soil C Sequestration as a Commodity for Co2 Emission
        Mitigation in U.S. Agriculture............................   400,000
    9704796, Humenik, North Carolina State University, NC,
        Advanced Waste Treatment for Environmentally Sound and
        Sustainable Swine Production..............................   350,000
    9704808, Rice, Kansas State University, KS, Implementation of
        Best Management Practices in the Blue River Basin of KS
        and NE....................................................   400,000
    9704812, Moser, Michigan State University, MI, ``Enhancing
        Rural Economies Through Comprehensive Extension, Research,
        and Partnering Approaches Using Multi-county Clusters in
        Michigan with''...........................................   450,000
    9704827, Halbrendt, University of Vermont and State
        Agricultural College, VT, Balancing Economics and
        Environmental Impacts of Phosphorus Management............   395,000
    9704830, Wyman, University of Wisconsin, WI, Leveraging
        Community and Industry wide Resources to Foster
        Biointensive IPM..........................................    50,000
    9704844, Goldman, University of Wisconsin, WI, Are Value Added
        CV Health Claims Valid for Vegetables? Onion-induced
        Antiplatlet Activity......................................   378,918
    9704852, Kastner, Kansas State University, KS, HACCP
        Implementation and Evaluation in Small and Very Small
        Meat/Poultry Plants.......................................   440,000
    9704879, Jones, Washington State University, WA, Development
        and feasibility of perennial wheat for highly erodable
        lands.....................................................   370,000
    9704882, Gillespie, Cornell University, NY, ``Retail Farmers'
        Markets and Rural Development: Entrepreneurship,
        Incubation, and Job Creation''............................   325,000
    9704889, Hall, ``Michael Fields Agricultural Institute,
        Inc.'', WI, Diversifying Corn-Soybean Rotations for Profit
        and Environment in Upper Midwest..........................   420,000
    9704916, Klonsky, University of California, CA, Increasing
        Adoption of Sustainable Agriculture and Positive Community
        Impacts...................................................   400,000
    9704922, Spittler, Cornell University, NY, Safe Practice
        Assessments for Gleaned Fresh Produce in Food Rescue......   447,826
    9704928, Camazine, Pennsylvania State University, PA,
        Improving the Health and Productivity of Honey Bee
        Colonies..................................................   450,000
    9704950, Swan, Pennsylvania State University, PA, Economic and
        Environmental Benefits of Watershed Restoration in Rural
        Communities...............................................   365,000
    9704985, Emara, University of Delaware, DE, DNA Marker
        Technology in Commercial Broiler Breeder Selection
        Programs..................................................   300,000
    9704986, DiMaio, Tri-Community Action Agency, NJ, New Jersey
        Cooperative Gleaning Program..............................   574,591
    9704998, Souza, University of Idaho, ID, Improved
        Marketability for Wheat Grown in the Pacific Northwest....   400,000
    9705019, Fauth, ``Land O'Lakes, Inc.'', MN, Community Food
        Sourcing to Facilitate Rural Economic Development.........   400,000
    9705048, Grohn, Cornell University, NY, Optimizing and
        Delivering Dairy Herd Health and Management Decisions.....   300,000
    9705078, Ray, University of Arizona, AZ, Development of
        Guayule as New Crop for the Production of Hypoallergenic
        Latex.....................................................   500,000
    9705126, Hedrich, Iowa State University, IA, Legume Phyto
        Chemicals: Improving Utilization..........................   490,000
    9705135, Grauke, USDA-ARS Pecan Breeding & Genetics, TX,
        Conservation and Utilization of Pecan Genetic Resources...   310,000
    9705157, Etter, University of Arizona, AZ, Revitalizing the
        Navajo Wool and Mohair Industry...........................    25,000
    9705162, Sapers, ``USDA, ARS, NAA, ERRC'', PA, Ensuring the
        Microbiological Safety of Fresh Apples....................   420,000
    9705205, Milner, Pennsylvania State University, PA, Inhibitory
        Effects of Allium Foods...................................   300,000
    9705216, Akridge, Purdue University, IN, Distance Delivered
        Master of Business Administration Degree in Food/
        Agriculture...............................................   400,000
    9705218, Parker, University of Vermont, VT, Improved
        Greenhouse Technologies Supporting New England Family
        Farms.....................................................   140,000
    9705247, Vaillancourt, North Carolina State University, NC,
        Mobilizing National Resources to Combat Emerging Food
        Animal Diseases...........................................   450,000
    9705301, Miles, Center for Public Interest Research, MA,
        National Student Food Salvage Program.....................    64,440
    9705364, Baker, Purdue University, IN, A Comprehensive Risk
        Management Education Program for Corn Belt Agriculture....   300,000
    9705407, Hagan, Manomet Center for Conservation Sciences, MA,
        Integrating Economic and Ecological Goals on Private
        Industrial Forestland in Maine............................   425,000
    9705412, Kimmerer, Suny College of Environmental Science and
        Forestry, NY, Native American Model of Ecological
        Restoration and Community Enhancement.....................   300,000
    9705450, Shackelford, USDA-ARS, CO, Consumer evaluation of
        beef classified for tenderness............................   400,000
    9705513, Henkel, Jr., University of New Mexico, NM, Rural
        Agricultural Enterprise Network...........................    330,00
    9705546, Smith, Tuskegee University, AL, A Biotechnical
        Experimental Learning Program for Rural Alabama...........   193,800
    9705570, Swan, Washington State University, WA, Distance
        Delivery of a B.S. Degree in General Agriculture in a Tri-
        State Region..............................................   450,000
    9705599, Johnson, 228 Cheatham Hall, VA, The Forest Bank:
        Concept to Reality........................................   420,000
    9705633, Punches, Oregon State University, OR, Evaluation of
        Small-Diameter timber for Value-Added manufacturing.......   435,000
    9705634, Bundy, Iowa State University, IA, Development of
        Standard Method of Odor Quantification using Olfactory and
        Chemical Analy-
        sis.......................................................   375,000
    9705645, Schmidt, University of Vermont and State Agricultural
        College, VT, CyberSkills: A Prototype for Regeneration in
        Rural Communi-
        ties......................................................   300,000
    9705682, Fluharty, University of Missouri-Columbia, MO,
        Innovations for Increasing Equity Capital in Rural
        Communities...............................................   435,000
    9800477, Bomash, University of Minnesota, MN, Enhancing Rural
        Development Agribusiness Through Electronic Commerce......   250,000
    9800499, Griegio, Northern New Mexico Community College, NM,
        Northern New Mexico Distance Education Project............   204,427
    9800503, Travis, Pennsylvania State University, PA, Improving
        Farmer's Access to Pest Management Tools Through
        Integration with the NII..................................   219,645
    9800507, Crawford, Iowa State University, IA,
        Telecommunications Education Partnership Program for Rural
        Development in Southwest
        Iowa......................................................   175,000
    9800516, Medeiros, Ohio State University, OH, Using Technology
        to Provide Nutrition Education for High Risk Students.....   150,832
    9800527, Carlascio, United Tribes Technical College, ND, 1994
        Tribal Land-Grant Colleges Information Infrastructure
        Development...............................................   199,712
    9800537, Michaelson, Eastern Washington University, WA,
        ``Rural Schools, Careers, and Community Development''.....   161,539
    9800545, Civille, Center for Civic Networking, MA, Public
        WebMarket Expansion Project...............................   112,000
    9800550, Dunham, University of Minnesota, MN, Integrating
        World Wide Web Technology into Our Teaching and Learning
        Environ-
        ment......................................................   227,827
    9800552, Gallagher, Oregon State University, OR, Rural West
        Internet Masters Project..................................   123,121
    9800554, Stark, National Center for Small Communities, DC, An
        Off-System Road to the Information Superhighway...........    75,539
    9800555, Smith, University of Georgia, GA, Internet and
        Computer Technology of Transfer of Information to Dairy
        Producers.................................................   212,358
                        --------------------------------------------------------------
                        ____________________________________________________

          Grand Total of 1997 Standard and Telecommunications
          Grants..................................................19,267,575

        Question. Please explain in detail the review and selection process
    for center and research proposals. How were the peer panels selected
    and who served on these panels? What criteria were used to evaluate the
    proposals within the three broad areas of: (1) international
    competitiveness, profitability, and efficiency; (2) environmental
    stewardship; and (3) rural community enhancement?
        Answer. The proposal review and award selection process was based
    on a competitive, peer evaluation of applications submitted in response
    to an open solicitation. The selection of peer panel members was made
    by Fund staff working with: the university, client, and stakeholder
    communities; professional associations; federal, state, and local
    governments; private industry and not-for-profit organizations; and the
    Research, Education, Extension, and Economics Advisory Board. Peer
    evaluators were organized into subject panels, with the panels chaired
    by a university principal assisted by a Fund program manager. The
    panels followed the same general guidelines of primary, secondary, and
    tertiary review and open panel discussion of each proposal that is used
    by the National Research Initiative and the National Science
    Foundation. However, the concept of ``peer'' was expanded to include
    experts drawn from across disciplines (e.g., the biological, physical,
    and social sciences) and functions (e.g., research, education, and
    extension).
        All proposals were evaluated initially by a subject-specific panel.
    Approximately 30 of these panels made the first round of funding
    recommendations for Planning Grants in the summer of 1997 and Standard
    Grants in the fall of 1997. In both cases, the results of these first
    level panels were evaluated by a second-level overview panel designed
    to integrate results across crop and livestock science, environment,
    rural development, etc. to ensure Fund dollars were allocated to
    maximize their problem-solving impact.
        The criteria used in the subject and overview panels are summarized
    below in Table 3. The subject panels focused most heavily on merit and
    relevance but also considered potential contribution to the Fund's
    broader program goals. The overview panels focused more on the third
    criterion and generally assumed that the first level panels had covered
    merit and relevance questions. The same criteria were applied across
    the three broad areas identified in the Fund's mandate: agriculture,
    environment, and rural development. However, the panel chairperson and
    members were asked to draw on their expertise, the FAIR Act language
    establishing the Fund, and the language included in the USDA Request
    For Proposals to make the more specific judgements regarding the
    substantive content of the proposals necessary to make a final rating
    and recommendation for funding.
    Table 3. Fund Grant Selection Criteria
      --Scientific and Technical Merit.
      --Relevance
        --Relevance to agriculture, the environment, the rural development
                and USDA activities in these areas; priority given to
                proposals that address activities in two or more of these
                areas
        --Involvement of appropriate agriculture, environment, and rural
                development ``communities of interest'' in problem
                prioritization i.e., addressing user-identified/community-
                problems agendas.
      --Contributions to Broader Fund Goals
        --practical, multidimensional problem solving with measurable short
                to intermediate term (2-5 and 5-10 year) impact
        --leveraging previous public and private investment in research,
                education and extension; targeting ``break through''
                activities
        --forging research, education, and extension partnerships; building
                inter-institutional and interdisciplinary physical,
                biological, and social science teams that foster ``system''
                approaches;
        --establishing partnerships with clients and stakeholders to
                address crosscutting problems and strengthens
                dissemination/adoption
        --potential for replication--i.e., duplication, adoption, or
                adaption in other problem areas or different locals
        --facilitating the transition from ``a program-based agriculture to
                a science and technology-based'' agriculture; comparable
                shifts for environmental and rural development activities.
        Question. How many proposal were received? How many were approved?
    Please breakdown this data by the three broad areas above for which
    proposals were solicited.
        Answer. Statistics on Fund applications and awards follow.

    ------------------------------------------------------------------------
                                                 Planning        Standard
                                                  grants        grants \1\
    ------------------------------------------------------------------------
    Proposals Received......................             461           1,181
        Primarily Agriculture...............             184             459
        Primarily Environment...............              62             223
        Primarily Rural Development.........             121             161
        Primarily Food......................  ..............             111
        Other \2\...........................              84             227
    Proposals Awarded/Pending Award.........              36         115-120
        Primarily Agriculture...............              19              47
        Primarily Environment...............               6              23
        Primarily Rural Development.........               7              29
        Primarily Food......................  ..............              14
        Other \2\...........................               4               7
    ------------------------------------------------------------------------
    \1\ As of 3/1/98, 61 Standard Grants had been awarded and another 59
      were in final administrative review. Hence, the range of 115 to 120;
      subject area subtotals add to 120 although a final decision on as many
      as 3 to 5 awards is pending the outcome of administrative review.
    \2\ Includes proposals focusing on education, information systems, etc.,
      topics applicable to all subject areas.

        Question. How were project applications screened to prevent
    projects funded through special research or administrative grants or
    other competitive grant programs from also receiving funds under this
    program?
        Answer. Two approaches were taken. First, applicants were required
    to submit to CSREES information on other funding sources. The Fund
    staff and CSREES administrative staff reviewed this information on
    support from other sources--both support already in hand and applied
    for. Second, reviewers were asked and Fund staff focused on the
    relevance of a proposal to the Fund's particular program goals. This
    entailed determining if a proposal was eligible for support from
    another, possibly more appropriate, funding source. This consideration
    lead to the elimination of several excellent proposals when the work
    was judged more appropriately supported through the National Research
    Initiative Program or the Small Business Innovation Research Program.
                   government and performance and results act
        Question. How are the agency's annual performance goals linked to
    the agency's mission, strategic goals, and program activities in its
    budget request?
        Answer. The Cooperative State Research, Education, and Extension
    Service (CSREES) has developed an annual Performance Plan that links to
    that of the Research, Education, and Economics (REE) Mission Area. The
    Plan relates program activities to the mission and goals of the agency
    (as described in the Agency strategic plan) to the budget request
    submitted in support of research, extension and education activities.
    More importantly, it reflects the role of CSREES in enabling land-grant
    universities and other partners who carry out the research and
    extension activities authorized in the CSREES budget.
        Question. Could you describe the process used to link your
    performance goals to your budget activities? What difficulties, if any,
    did you encounter, and what lessons did you learn?
        Answer. In framing the agency strategic plan, a number of forums
    were utilized to focus on goals and objectives that would direct the
    use of budget resources toward shared national priorities. This
    included the establishment of a Partnerships Working Group, comprised
    of CSREES administrators and partner university administrators to link
    program activities with outputs and outcomes; planning and hosting
    regional orientation sessions to share the strategic planning concept
    with agricultural research, extension, and education administrators and
    evaluation staff; the development of electronic planning and reporting
    software to facilitate planning and reporting by partner institutions;
    and the appointment of a joint agency-university task force to consider
    alternative planning and reporting and insure that GPRA accountability
    standards are met through the preparation of performance plans and
    reports.
        Question. Does the agency's Performance Plan link performance
    measures to its budget? Does each account have performance measures?
        Answer. The agency performance plan is linked to performance
    measures that relate to the President's budget. Because of the
    complexity of the agency budget and the large number of components in
    its accounts, individual components were aggregated around five agency
    goals for more efficient planning and reporting. Using the five goals
    gives a national focus to programming that is planned and conducted in
    a dynamic process in the states by partner institutions and other award
    recipients. In this process, all program activities relate to the
    following goals: an agricultural production system that is highly
    competitive in the global economy; a safe and secure food and fiber
    system; a healthier, more well-nourished population; greater harmony
    between agriculture and the environment; and enhanced economic
    opportunities and the quality of life among families and communities.
        Question. To what extent does your performance planning structure
    differ from the account and activity structure in your budget
    justification?
        Answer. Because of the complexity of the agency budget and the
    large number of components in its accounts, activities were aggregated
    in the performance plan around the five agency goals for more efficient
    planning and reporting. This means that the individual components in
    the account and activity structure do not have performance measures
    that are specifically linked to those accounts.
        Question. Do you plan to propose any changes to your account
    structure for fiscal year 2000?
        Answer. CSREES does not plan to propose any changes to its account
    structure for fiscal year 2000.
        Question. How were performance measures chosen?
        Answer. Performance measures were chosen to reflect critical
    actions necessary to achieve shared and national priorities in
    agriculture and which describe the purposes and impact of the federal
    investment in research, extension, and education.
        Question. How did the agency balance the cost of data collection
    and verification with the need for reliable and valid performance data?
        Answer. The agency response to data collection and verification
    under GPRA relies on existing data sources--enhanced Current Research
    Information System (CRIS), Food and Agricultural Education Information
    System (FAEIS), and university information systems, new joint data and
    analysis activities and collaborative efforts to collect data from
    states. Strategies were developed to solicit input from our university
    partners in the design of an electronic planning and reporting system.
    Under this strategy the partner universities provide data collection
    and verification as program plans and reports made to USDA. In
    addition, the agency is developing an integrated management information
    system, Research, Education, and Economics Information System (REEIS),
    to link databases and provide improved analytical capacity.
        Question. Does your plan include performance measures for which
    reliable data are not likely to be available in time for your first
    performance report in March 2000?
        Answer. No. The agency plan includes performance measures for which
    reliable data will be available for the first performance report.
        Question. What are the key performance goals from your fiscal year
    1999 Annual Performance Plan that you recommend this subcommittee use
    to track program results?
        Answer. In the development of our performance plan, we included
    critical program goals that can be used to track short and intermediate
    program results. These include research and education in food safety,
    pesticide clearance and other pest management initiatives, and expanded
    competitive grants to enhance the nation's agricultural knowledge base,
    to name a selected few.
        Question. In developing your Annual Performance Plan, what efforts
    did your agency undertake to ensure that the goals in the plan include
    a significant number of outcome measures?
        Answer. The agency plan reflects substantial internal and
    partnership discussions to identify outcome/output measures which
    demonstrate that the goals in the plan have been met, including those
    noted in the previous answer.
        Question. Do you believe your program managers understand the
    difference between goals that measure workload (output) and goals that
    measure effectiveness (outcome)?
        Answer. Yes, the plan specifies agency and collective program
    activities as outputs and university partnership and grantees' work as
    the outcomes which address objectives.
        Question. What are some examples of customer satisfaction measures
    that you intend to use? Please include examples of both internal and
    external customers?
        Answer. Customer satisfaction measures for the agency will include,
    but not be limited to expert assessments (such as would be needed to
    assess impacts of genome research and discovery), customer surveys
    (such as would be needed to measure scope and effectiveness of selected
    extension programs), economic data or social survey data, and physical
    monitoring (such as would be valuable to determine effects of research-
    based changes in best management practices affecting environmental
    quality or public health indicators). Examples of customers would
    include Federal agencies (e.g. Agricultural Research Service,
    Department of Energy, National Science Foundation, Environmental
    Protection Agency, etc.), land-grant universities, agricultural
    producers and consumers of information related to the food and
    agricultural sciences.
        Question. How were the measurable goals of your fiscal year 1999
    Annual Performance Plan used to develop your fiscal year 1999 budget?
        Answer. The agency identified approaches to addressing relevant
    national issues (e.g. food safety, water quality, waste management,
    youth and families at risk, food genome initiative, small farms, etc.)
    in the formation of the budget. The measurable goals--and budget
    necessary to achieve the goals--contribute to achieving the strategic
    plan of CSREES.
        Question. If a proposed budget number is changed, up or down, by
    this committee, will you be able to indicate to us the likely impact
    the change would have on the level of program performance and the
    achievement of various goals?
        Answer. In collaboration with university partners, we will be able
    to describe the likely impact on programs and achievement of goals.
        Question. Do you have the technological capability of measuring and
    reporting program performance throughout the year on a regular basis,
    so that the agency can be properly managed to achieve the desired
    results?
        Answer. We are working to develop the technological capability to
    measure and report performance throughout the year. We have completed
    modernization of CRIS, are developing REEIS, and are in the final
    phases of a three-year project to establish integrated grants tracking
    and financial management. With university partners, we have developed a
    National Impact Database and are updating the form and format of state
    plans and reports so that they can be submitted and updated through a
    World Wide Web-based system.
        Question. The Government Performance and Results Act requires that
    your agency's Annual Performance Plan establish performance goals to
    define the level of performance to be achieved by each program activity
    set forth in your budget. Many agencies have indicated that their
    present budget account structure makes it difficult to link dollars to
    results in a clear and meaningful way. Have you faced such difficulty?
        Answer. Because of the complexity of the agency budget and its many
    lines, individual programs were aggregated around five general agency
    goals for more efficient planning and reporting. While the current
    account structure has offered a challenge in the way we respond to the
    requirements of GPRA, we feel we have been successful in using the five
    goals to give a national focus to programming that is planned and
    conducted in a dynamic process in the states by partner institutions
    and grantees.
        Question. Would the linkages be clearer if your budget account
    structure were modified?
        Answer. Although changes in the budget account structure might
    clarify linkage of dollars to results in a meaningful way, that is not
    the solution to the challenges CSREES faces in responding to GPRA.
    Through a partnership with the system of State Agricultural Experiment
    Stations, land-grant and other colleges and universities, and other
    public and private research and education organizations, CSREES is
    USDA's principal link to the university systems for the initiation and
    development of agricultural research and education programs.
    Additionally, CSREES is the Federal partner in the Cooperative
    Extension system, a nationwide non-formal educational network. The
    challenge CSREES faces is capturing and reporting research and
    education results of our partners who conduct and deliver activities
    supported in the CSREES Budget. We are currently engaging our Partners
    in dialogue to help them understand the role of the Federal partner in
    response to GPRA. This will allow CSREES to be more responsive to the
    GPRA mandate. In concert with our Partners, we have prepared impact
    statements highlighting research, education, and extension
    accomplishments supported by the Federal investment.
        Question. If so, how would you propose to modify it and why do you
    believe such modification would be more useful both to your agency and
    to this committee that the present structure?
        Answer. CSREES does not propose to modify its budget account
    structure at this time.
        Question. How would such modification strengthen accountability for
    program performance in the use of budgeted dollars?
        Answer. CSREES does not propose to modify its budget account
    structure.
        Question. Does your fiscal year 1999 performance plan--briefly or
    by reference to your strategic plan--identify any external factors that
    could influence goal achievement?
        Answer. The Strategic plan includes this information in detail, but
    it is not included in the performance plan.
        Question. If so, what steps have you identified to prepare,
    anticipate, and plan for such influences?
        Answer. CSREES funding, in concert with State and other sources of
    funding, encourages and assists State and other public and private
    institutions in the conduct of agricultural research and education
    activities. These activities contribute to the five goals of the
    agency. CSREES will work with its university partners, other Federal
    agencies, and private sector organizations to address external factors
    that could influence goal achievement.
        Question. What impact might external factors have on your resource
    estimates?
        Answer. The achievement of national priorities and shared goals
    related to agricultural knowledge is dependent not only on Federal
    funding, but also state and private dollars. In addition, advances in
    related sciences have substantial impact on technology development and
    adoption in agriculture.
        Question. Through the development of the Performance Plan, has the
    agency identified overlapping functions or program duplication? If so,
    does the Performance Plan identify the overlap or duplication?
        Answer. There are no overlapping functions or program duplication
    in the plan, however there is substantial ongoing need for coordination
    with the Agricultural Research Service and among institutions.
        Question. Future funding decisions will take into consideration
    actual performance compared to expected or target performance. Given
    that: To what extent are your performance measures sufficiently mature
    to allow for these kinds of uses?
        Answer. The questions raised under the Results Act are new in terms
    of its accountability measures. Initially, there will be deficiencies.
    However, over time, the measures will mature and provide the desired
    responses.
        Question. Are there any factors, such as inexperience in making
    estimates for certain activities or lack of data, that might affect the
    accuracy of resource estimates?
        Answer. Although we strive for accurate resource estimates,
    externalities, including program leveraging, unanticipated costs of
    conducting research and extension, and breakthroughs or problems in
    research may influence resources.
        Question. Based on your fiscal year 1999 performance plan, do you
    see any need for any substantive revisions in your strategic plan
    issued on September 30, 1997?
        Answer. No, we do not see a need to make substantive revisions in
    our strategic plan.
                                     ______

                     Questions Submitted by Senator Gorton
                            special research grants
        Question. The regional research grants are all but zeroed out in
    CSREES's budget. Does USDA understand the importance of regional
    research? For example, rice research cannot be conducted in Washington
    state just as apple research cannot be conducted in Arkansas. Does
    CSREES understand the importance of NOT nationalizing research
    programs?
        Answer. As a part of the Administration's efforts to balance the
    budget and direct spending to higher priority areas, projects earmarked
    for specific institutions were proposed for elimination. Funding
    distributed by formula under the Hatch Act could be used to continue
    aspects of these projects if they are deemed to be of high priority at
    State or local levels. Additionally, researchers could apply for
    funding under the National Research Initiative competitive research
    grants program or obtain funding from State and local governments and/
    or private sources, such as industry, to continue these projects.
                               regional research
        Question. I am seriously concerned about the fact that smart,
    experienced agriculture scientists are being frightened away from doing
    any public related research. Does the USDA understand the breakdown of
    morale in the agricultural research community as a result of continued
    elimination of regional research?
        Answer. Regional research is part of the formula funding mechanism
    authorized by the Hatch and Evans-Allen Acts. Over the last several
    years funding for these programs, both regional research and state-
    specific research, has remained constant, but resulted in an erosion of
    real dollars because of inflation. Most federally-funded research
    programs have increased the availability of competitive funding for
    research relative to formula funding. Recently, the National Science
    Foundation, members of the US Congress, and others have urged USDA to
    increase competitive research funding relative to formula funding as a
    way to improve the quality of research. We agree with that
    recommendation. In fiscal year 1999 the budget includes, for the first
    time, a small, $15 million reduction in Hatch funding to be offset by
    about a $40 million increase in competitive funding. This proposed
    change in federal policy is causing some concern among scientists and
    administrators at land grant universities because formula funding has
    provided a substantial support base for agricultural researchers. That
    base provides a foundation for on-going basic and exploratory research;
    it provides support for new researchers and others less capable of
    acquiring competitive grants. Overall, we believe the change will
    improve the effectiveness of agricultural research.
        Question. Does USDA realize that if all regional funding is
    privatized there could be a serious breakdown in the varieties of
    commodities produced in this country?
        Answer. Large amounts of public and private research and
    cooperation between the public and private sectors have made US
    agriculture the marvel of the world. We intend to continue that
    effective research partnership by investing public research dollars in
    critical areas where there is a significant public interest and where
    private industry is unlikely to take the risk. We have no intention of
    privatizing regional research. In fact, many regional research
    activities provide a critical mass of researchers working together to
    solve complex problems. However, the mix of formula funding and
    competitive funding is likely to shift in the years ahead, as explained
    in the answer to the above question. USDA is very concerned about
    having a very broad genetic base from which to create new varieties and
    is proposing a $10 million Food Genome Competitive Research Grants
    Program as part of the fiscal year 1999 budget proposal for CSREES. The
    proposed program will enable USDA to cooperate with similar programs of
    the National Science Foundation and the National Institutes of Health
    on plant and animal genetics.
                                     ______

                     Questions Submitted by Senator Bumpers
                    decreases in csrees aquaculture centers
        Question. Aquaculture is rapidly being recognized as one of the
    great growth potential industries in U.S. agriculture. Yet, the budget
    proposal recommends a decrease for the Aquaculture Centers program. How
    do you justify this decrease at a time when the industry is most at
    need for more research and development?
        Answer. Funding for the Aquaculture Centers program would be
    reduced so that other high priority National issues can be addressed in
    keeping with the Administration's goal to reduce the Federal deficit.
    The reduction is not expected to have a negative impact on the program,
    as alternate funding from formula programs, State and local
    governments, and private sources could be used to support projects that
    are deemed to be of a high priority.
        Question. What other actions might the agency be taking to ensure
    U.S. aquaculture remains competitive?
        Answer. The agency has taken steps to assure that aquaculture
    research and development can be addressed through the various funding
    authorities used to support other sectors of agriculture including
    formula funds, the National Research Initiative (NRI), and the Fund for
    Rural America. The agency has also provided leadership for coordination
    of all Federal programs in support of aquaculture development through
    the Joint Subcommittee on Aquaculture, under the National Science and
    Technology Council, Office of Science and Technology Policy. In
    addition the Joint Subcommittee on Aquaculture is currently revising
    the National Aquaculture Development Plan.
                             delta teachers academy
        Question. Please provide an update on activities of the Delta
    Teachers Academy.
        Answer. The Delta Teachers Academy is a 100 percent USDA-funded
    program of The National Faculty. The Delta Teachers Academy is
    administered from The National Faculty's regional office in New
    Orleans, Louisiana. In addition to USDA funds, the project sometimes
    realizes cost savings when participating school districts do not bill
    The National Faculty for their incurred released time costs, choosing
    instead to absorb those expenses themselves.
        The Delta Teachers Academy continues to serve the Lower Mississippi
    Delta Region, which is comprised of 219 counties and parishes clustered
    around the Mississippi River and encompassing portions of Arkansas,
    Illinois, Kentucky, Louisiana, Mississippi, Missouri, and Tennessee.
    The project focuses on educational improvement in the core subject
    areas of English, geography, history, mathematics, and science by
    providing long-term academic enrichment to approximately 525 elementary
    and secondary school teachers at 35 sites by teaming them with
    university scholars for in-service training sessions during the school
    year and continuing with summer institutes. Through its Fellows
    Program, the Delta Teachers Academy is also sustaining the professional
    development of over 650 Academy graduates throughout the region.
        The fiscal year 1998 project is providing orientation sessions at
    15 sites established in fiscal year 1997 and is training 225 new
    participants. The 1998 project is also conducting 125 academic sessions
    to 35 continuing teacher teams and will conduct 15 two-week summer
    institutes for 525 school teachers in the Delta Region. The project is
    also conducting 10 one-day seminars for 90 Delta Teachers Academy
    Fellows and is planning the first conference for Academy graduates. As
    part of the fiscal year 1998 project, the Delta Teachers Academy will
    also publish three issues each of its newsletters entitled ``Currents''
    and ``Fellows Exchange.''
        Question. Please provide an evaluation of the accomplishments of
    the Delta Teachers Academy in terms of educational improvement and the
    socio-economic implications of the program.
        Answer. This project addresses the problem of insufficient
    professional development opportunities for K-12 teachers in a region of
    pervasive poverty and depressed economic conditions. Over the past six
    years of its operation, the Delta Teachers Academy has demonstrated
    proven benefits for participating teachers including increased content
    mastery, revitalized classroom teaching, and enhanced ability to
    initiate curricular and instructional change. In addition, this project
    potentially could have a significant regional impact by helping to
    achieve long-range goals for economic development through improved
    educational performance. Past project evaluations conducted by USDA,
    the General Accounting Office, and by private firms, have documented a
    positive impact on student learning and motivation resulting from
    increased enthusiasm and improved effectiveness of teachers involved in
    the project.
        Results of a recent survey of 144 Delta Teachers Academy
    participants conducted by Westat, Inc., using a stratified random
    sample methodology, indicate that 89 percent of the teachers agree that
    the program provides useful information that strengthens their subject
    matter competency and the content of their classroom work, 92 percent
    reported developing challenging new teaching skills and strategies as a
    result of the program, and 90 percent felt more prepared to assume a
    leadership role in their schools and school systems as a result of
    their experience. Analysis of program impacts indicate that the longer
    a teacher is in the program, the greater and more positive the impact.
    In addition, the analysis found that teachers who increased their
    knowledge of the tools and procedures used in their subject area had
    exceptionally strong impacts on student performance measures such as
    student work habits, attitudes, interests, aspirations, and
    achievement.
        Question. Would you agree that a well educated population is an
    important goal for the revitalization of rural areas and if so, do you
    think the Delta Teachers Academy is working toward that goal?
        Answer. Yes, a well educated population and a work force equipped
    with modern technological, scientific, and communications skills are
    vital components for rural revitalization and economic competitiveness.
    The Delta Teachers Academy, through its teacher development programs
    and activities, is providing a very real service and helping to build a
    solid foundation toward the goal of rural revitalization in the Lower
    Mississippi Delta Region.
                                     ______

                      Questions Submitted by Senator Kohl
    sustainable agriculture research and education professional development
                                    program
        Question. I continue to follow with interest the sustainable
    agriculture extension funding known as the Professional Development
    Program. The program provides for competitive grants for training and
    outreach activities to promote sustainable agriculture practices. Can
    you tell us what the program has accomplished to date? How many
    projects have been funded? How many training events have been held?
    Nationwide, what percentage of Extension agents and NRCS field staff
    have participated to date?
        Answer. In the four years since the Professional Development
    Program was first funded, 125 projects have been funded through a
    regional competitive grants process. In addition, small grants of
    approximately $10,000 per year have been made to each state and island
    protectorate to conduct state-level programming complementary to the
    regionally funded projects.
        To date, 226 training events have been held, involving 11,541
    participants. Of those, 6,720 were Extension faculty and 875 were NRCS
    staff. Thus virtually 100 percent of the approximately 2,500 Extension
    agents nationwide who have agriculture and natural resources
    responsibilities--the primary audience for the program--have been
    exposed to sustainable agriculture concepts and information sources
    through one or more SARE-funded events. In addition to this
    accomplishment, our state extension leaders for SARE report that a
    smaller proportion, which varies greatly from state to state, are at an
    advanced stage where they are experienced at applying sustainable
    agriculture concepts in their day-to-day work and are able to teach
    others. In most states, NRCS field staff are participants, but no more
    than one-third of those field staff have participated to date. Farm
    Services Agency field personnel have also expressed interest in SARE's
    Professional Development Program in some states, and represent another
    high-priority audience that has barely been tapped.
        Question. The budget request for this program is for level funding
    at $3.3 million. What funding level would be necessary to fulfill the
    Farm Bill mandate for this program, including comprehensive curricula
    development, complete field staff training, and innovative outreach
    projects in each region of the country?
        Answer. The SARE Professional Development Program, authorized as
    the Sustainable Agriculture Technology Development and Transfer
    Program, was authorized up to $20 million per year. If fully funded,
    comprehensive curriculum could be developed and extended to all
    agricultural professionals in Extension, Natural Resources Conservation
    Service, Farm Services Agency, and other interested agencies, as well
    as reaching a critical mass of private-sector professionals, for
    example, crop consultants, pest consultants, and agricultural lenders
    whom our agency staff tell us also influence producers' decisions.
        Question. Why does the budget request not include an increase to
    begin to reach those program mandates?
        Answer. The budget request does not include an increase for this
    program because other competing priorities were judged more critical in
    the current environment of very limited budgets.
                                     ______

                      Questions Submitted by Senator Leahy
             sustainable agriculture research and education (sare)
        Question. I was pleased to hear the President give such strong
    support for research programs in his State of the Union Address and in
    the fiscal year 1999 budget proposal. However I am concerned about
    several areas of research which I believe did not receive the funding
    they need in the Administration's budget. In particular, while the
    Department did increase funding for the SARE program by $2 million,
    this increase is inadequate to meet the increasing demand for this
    critical program. The President's Council on Sustainable Development
    concluded that ``sustainable U.S. agriculture will require research
    that focuses on integrating productivity, profitably, and environmental
    stewardship.'' I appreciate that the Department did increase funding in
    the ATTRA program to $2 million. However, $15 million is also needed to
    fund the SARE program. In addition to the current heavy demand for the
    program, implementation of the Food Quality Protection Act and the
    Organic Foods Production Act will leave many producers desperately
    seeking information on alternative practices. What impact is the
    Department expecting implementation of the Food Quality Protection Act
    and the Organic Foods Production Act to have on the SARE and ATTRA
    programs, and how will the funding increases in these programs be used
    to address it?
        Answer. The Food Quality Protection Act requires EPA to establish
    new risk-based standards for a very large number of pesticides. USDA's
    Office of Pest Management Policy has been created to more fully engage
    EPA as it implements FQPA. USDA and EPA have signed a Memorandum of
    Understanding that commits the two agencies to work together when
    regulatory action by EPA would reduce farmer competitiveness, limit
    producers ability to adopt practices such as IPM, and ensure consumers
    a safe, abundant, high quality of food and other agricultural products.
    It is likely, however, that a number of pesticides, including some
    commonly used chemicals, will be restricted or even unavailable.
    Producers who rely on these materials for effective pest control will
    be looking for alternatives from SARE, ATTRA and other sources. SARE-
    funded research will contribute to the CSREES and department-wide
    effort to provide producers with research-based alternatives. Eighteen
    percent of SARE projects funded over the past ten years have dealt
    primarily with pest management, and many others have included pest
    management in the study of crop and livestock production systems.
        CSREES and its land-grant university partners have been directing
    resources from several programs to begin providing science-based
    solutions to the challenges presented by FQPA: the Minor Crop Pest
    Management Program, IR-4; the National Agricultural Pesticide Impact
    Assessment Program, NAPIAP; the Pest Management Information Decision
    Support System; the Pesticide Applicator Training Program; the Pest
    Management Alternatives Program; and the Integrated Pest Management
    (IPM) Program. SARE will coordinate its efforts in pest management with
    these other programs through interaction with national program leaders
    and through interaction at the regional level such as through service
    on SARE technical review committees. One of SARE's particular strengths
    in pest management is that it includes research and extension of pest
    management alternatives in the context of whole farming systems,
    including such factors as soil and crop management, water management
    and marketing. Another great strength of SARE is that producers are
    directly involved at all levels of the program: they serve on the
    Administrative Councils that set program direction and recommend
    projects to fund and they are active participants in SARE projects.
    These characteristics help ensure that SARE findings are useful to
    farmers and therefore aid greatly in their rapid adoption.
        The Organic Foods Production Act will stimulate greatly increased
    interest by producers, processors and marketers who want to take
    advantage of this emerging market which has been expanding by about 20
    percent per year. SARE has funded dozens of research and education
    projects on organic production and marketing in its ten-year history.
    An increased communications effort will be required to ensure that the
    public has the information it needs from these projects, and new
    research and education projects will be needed to find answers to the
    many questions that organic producers will face as they take advantage
    of the organic market.
        The Appropriate Technology Transfer for Rural Areas (ATTRA) is the
    national sustainable farming information center that links people
    involved in full-or part-time farming to information and resources on
    sustainable agriculture. ATTRA program service are available to
    farmers, Extension agents, researchers, farm organizations, and others
    involved in commercial agriculture, including market gardeners and
    small farmers. ATTRA is funded through a cooperative agreement between
    the private nonprofit National Center for Appropriate Technology (NCAT)
    and the USDA Rural Business--Cooperative Service (USDA-RBS). Congress
    must annually approve ATTRA's funding because is is included as part of
    USDA's budget proposal.
        Question. How could additional funding for the SARE program, over
    the $10 million recommended by the Department, be used to further aid
    producers?
        Answer. Additional SARE funds could be used to aid producers who
    are eager for new information on a variety of sustainable agriculture
    topics such as improving soil quality, reducing nutrient run-off into
    surface and groundwater, managing pests effectively with reduced
    reliance on pesticides, diversifying cropping systems in ways that
    improve profits as well as protect the environment, taking advantage of
    new marketing opportunities, and enhancing communities through locally-
    owned value-added production and marketing. These benefits would come
    from increased communication of results from the more than 1,000
    projects that SARE has funded over the past ten years, plus new
    research findings from an increased number of SARE grants. An increased
    communications effort could tailor packages of information to specific
    types of producers who have different needs and interests, for example,
    limited-resource producers, ranchers, market gardeners, organic
    producers, large conventional grain producers, and so forth. Increased
    funding would also develop new information on production and marketing
    alternatives that are both scientifically sound and of practical use to
    farmers and ranchers in the short term, and would allow additional
    investments in longer-term trials that are critical to our
    understanding of long-term impacts of farming methods.
              hatch act/mc intire-stennis cooperative forestry act
        Question. In light of the Administration's support of research
    programs, I cannot understand the Department's dramatic reduction in
    funding for the basic land grant research funding programs. The Hatch
    Act, the McIntire-Stennis Cooperative Forestry Act, and the Smith-Lever
    Act form the basis of Land Grant College research programs. The kinds
    of cuts the Department is proposing would be devastating, certainly to
    the University of Vermont, and I am sure to other Land Grants around
    the country. Over the last ten years base funds for Land Grant research
    has declined sixteen percent even while other research program budgets
    were increasing. The National Association of State Universities and
    Land-Grant Colleges recommended $178,352,000 for the Hatch Act,
    $21,665,000 for the McIntire-Stennis program, and $283,797,000 for the
    Smith-Lever program---all modest increases, well below the increases
    provided for other research areas. Instead, the Department has proposed
    $153,672,000 for the Hatch Act, $19,882,000 for McIntire-Stennis, and
    $257,753 for Smith Lever almost $50 million below the NASULGC request.
    For Vermont alone this would mean a reduction of $355,000. Has the
    Department identified the areas of research which would be affected by
    this dramatic decline in funding for the basic Land Grant Research?
        Answer. The laws authorizing Federal formula programs enable the
    States to determine how to use their formula allocations to address
    critical issues facing agriculture in their States, region, and the
    Nation. The Department has not identified the areas of research which
    would be affected by the proposed reductions in the Hatch Act and
    McIntire-Stennis Cooperative Forestry formula programs because such
    decisions will be made by the States according to priorities at the
    State, regional, or local levels. Extension activities affected by the
    proposed reductions in the Smith-Lever formula program will also be
    made by the States according to priorities at the State, regional, or
    local levels.
        Question. What are those areas of research?
        Answer. The areas of research affected by the proposed reductions
    in the Hatch Act Act and McIntire-Stennis Cooperative Forestry formula
    programs will be determined by the States. Extension activities
    affected by the proposed reductions in the Smith-Lever formula program
    will also be made by the States according to priorities at the State,
    regional, or local levels.
        Question. What are the fiscal year 1998 funding levels through
    these three programs to each of the Land Grant Colleges, and what would
    those institutions receive if the cuts recommended by the Department
    were adopted?
        Answer. The information follows:

           HATCH ACT FORMULA DISTRIBUTION, FISCAL YEARS 1998 AND 1999
    ------------------------------------------------------------------------
                                                       Fiscal year--
                    Recipient                -------------------------------
                                                   1998            1999
    ------------------------------------------------------------------------
    Auburn University.......................      $3,554,184      $3,269,684
    University of Alaska....................         887,889         827,373
    American Samoa Community College........         651,903         610,913
    University of Arizona...................       1,740,990       1,599,741
    University of Arkansas..................       3,076,640       2,821,266
    University of California................       4,567,954       4,144,190
    Colorado State University...............       2,313,753       2,212,237
    Connecticut Agricultural Experiment              719,210         663,751
     Station................................
    University of Connecticut...............         922,295         844,775
    University of Delaware..................       1,160,606       1,072,459
    University of District of Columbia......         611,810         565,100
    University of Florida...................       2,616,878       2,361,333
    University of Georgia...................       4,241,530       3,849,347
    University of Guam......................         766,901         714,266
    University of Hawaii....................       1,163,101       1,080,424
    University of Idaho.....................       1,881,933       1,713,749
    University of Illinois..................       5,023,952       4,426,547
    Purdue University.......................       4,432,430       3,978,822
    Iowa State University...................       5,436,781       4,875,947
    Kansas State University.................       3,041,700       2,755,126
    University of Kentucky..................       4,447,022       4,027,825
    Louisiana State University..............       2,854,321       2,620,624
    University of Maine.....................       1,637,451       1,500,825
    University of Maryland..................       2,202,469       2,014,626
    University of Massachusetts.............       1,984,927       1,818,457
    Michigan State University...............       4,581,853       4,137,827
    College of Micronesia...................         665,539         620,933
    University of Minnesota.................       4,408,023       3,966,039
    Mississippi State University............       3,646,818       3,379,946
    University of Missouri..................       4,203,065       3,779,792
    Montana State University................       1,872,053       1,707,550
    University of Nebraska..................       2,982,940       2,694,402
    University of Nevada....................       1,085,480       1,004,493
    University of New Hampshire.............       1,284,440       1,176,522
    Rutgers University......................       2,550,764       2,357,458
    New Mexico State University.............       1,447,638       1,335,273
    Cornell University......................       4,073,261       1,160,533
    Geneva Agricultural Experiment Station,          844,749       3,303,057
     New York...............................
    North Carolina State University.........       5,832,192       5,336,874
    North Dakota State University...........       2,140,714       1,953,390
    Northern Marianas College...............         618,931         578,649
    Ohio Agricultural Research and                 5,239,762       4,713,040
     Development Center.....................
    Oklahoma State University...............       2,769,030       2,514,850
    Oregon State University.................       2,534,798       2,296,891
    Pennsylvania State University...........       5,478,414       4,955,275
    University of Puerto Rico...............       3,732,045       3,528,403
    University of Rhode Island..............       1,105,048       1,023,684
    Clemson University......................       3,054,848       2,811,649
    South Dakota State University...........       2,191,946       1,991,904
    University of Tennessee.................       4,297,820       3,929,481
    Texas A&M University....................       5,796,678       5,232,730
    Utah State University...................       1,663,792       1,532,426
    University of Vermont...................       1,296,705       1,192,929
    College of the Virgin Islands...........         750,754         698,789
    Virginia Polytechnic Institute..........       3,716,142       3,397,715
    Washington State University.............       3,282,091       2,909,660
    West Virginia University................       2,390,045       2,197,781
    University of Wisconsin.................       4,528,655       4,082,223
    University of Wyoming...................       1,380,124       1,270,939
                                             -------------------------------
          Subtotal..........................     159,380,193     145,142,514
    Biotechnology Risk Assessment...........         203,600         203,600
    Current Research Information System.....         219,318         218,900
    Federal Administration..................       4,826,409       4,374,549
    Small Business Innovation Research......       4,097,690       3,732,437
    Undistributed...........................           6,790  ..............
                                             -------------------------------
          Total.............................      168,734,00     153,672,000
    ------------------------------------------------------------------------

       MC INTIRE-STENNIS FORESTRY DISTRIBUTION, FISCAL YEARS 1998 AND 1999
    ------------------------------------------------------------------------
                                                       Fiscal year--
                    Recipient                -------------------------------
                                                   1998            1999
    ------------------------------------------------------------------------
    University, Alabama.....................        $668,802        $648,208
    University of Alaska, Fairbanks.........         441,352         427,762
    Northern Arizona University.............         151,177         146,522
    University of Arizona...................         151,177         146,522
    Agricultural Experiment Station,                 567,713         550,232
     University of Arkansas.................
    California Polytechnic State University.          30,281          29,349
    California State University, Humbolt....          90,843          88,046
    University of California................         484,497         469,578
    Colorado State University...............         277,083         268,551
    Connecticut Agricultural Experiment              160,427         155,486
     Station................................
    Storrs Agricultural Experiment Station..          53,475          51,829
    University of Delaware, Agricultural              74,905          72,599
     Experiment Station.....................
    University of Florida Agricultural               529,805         513,491
     Experiment Station.....................
    University of Georgia School of Forest           694,074         672,702
     Resources..............................
    University of Guam......................          36,996          35,857
    University of Hawaii....................         125,449         121,586
    University of Idaho.....................         428,716         415,515
    Southern Illinois University............         163,813         158,769
    University of Illinois..................         163,813         158,769
    Purdue University.......................         352,899         342,032
    Iowa State University, Agriculture and           239,174         231,809
     Home Economics Experiment Sta-  tion...
    Kansas State University.................         163,358         158,328
    University of Kentucky Agricultural              390,808         378,774
     Experiment Station.....................
    Louisiana State University, School of            406,244         393,735
     Forestry...............................
    Louisiana Technological University,              174,105         168,744
     School of Forestry.....................
    University of Maine.....................         542,441         525,738
    University of Maryland..................         226,538         219,562
    University of Massachusetts.............         251,810         244,056
    Michigan State University...............         197,662         191,576
    Michigan Technological University.......         197,662         191,576
    University of Michigan..................         197,662         191,576
    University of Minnesota.................         491,896         476,749
    Mississippi State University............         618,257         599,220
    University of Missouri, School of                403,444         391,021
     Forestry...............................
    University of Montana, Forestry and              416,080         403,268
     Conservation Experiment Station........
    University of Nebraska..................         175,994         170,575
    University of Nevada, Mac C. Fleischmann         112,813         109,339
     College of Agriculture.................
    University of New Hampshire.............         314,991         305,292
    Rutgers State University, Agricultural           188,630         182,822
     Experiment Station.....................
    New Mexico State University, Las Cruces.         264,446         256,303
    Cornell University New York College of           157,723         152,866
     Agriculture & Life Sciences............
    State University of New York, College of         473,170         458,599
     Environmental Science and Forestry.....
    North Carolina State University.........         656,166         635,961
    North Dakota State University of                  87,541          84,845
     Agriculture and Applied Sciences.......
    Ohio Agricultural Research and                   365,535         354,279
     Development Center.....................
    Oklahoma State University...............         340,263         329,786
    Oregon State University.................         681,438         660,455
    Pennsylvania State University,                   479,260         464,503
     Agricultural Experiment Station........
    University of Puerto Rico, Agricultural          100,177          97,092
     Experiment Station.....................
    University of Rhode Island..............          62,269          60,352
    Clemson University College of Forestry           504,533         488,997
     and Recreation Resources...............
    South Dakota State University...........         150,721         146,080
    University of Tennessee.................         453,988         440,009
    Stephen F. Austin State University,              277,538         268,992
     Texas..................................
    Texas A&M University Agricultural                277,538         268,992
     Experiment Station.....................
    Utah State Agricultural Experiment               138,085         133,833
     Station................................
    University of Vermont...................         289,719         280,798
    College of the Virgin Islands...........          49,633          48,105
    Virginia Polytechnic Institute and State         517,169         501,244
     University.............................
    University of Washington, Seattle.......         353,941         343,042
    University of Washington, Pullman.......         289,588         280,671
    West Virginia State University..........         378,171         366,526
    University of Wisconsin, Agricultural            466,624         452,256
     Experiment Station.....................
    University of Wyoming, Laramie..........         201,266         195,069
                                             -------------------------------
          Subtotal..........................      19,373,368      18,776,820
    Biotechnology Risk Assessment...........          10,560          11,670
    Federal Administration..................         614,910         596,460
    Small Business Innovation Research......         497,052         497,050
    Undistributed...........................           1,110  ..............
                                             -------------------------------
          Total.............................      20,497,000      19,882,000
    ------------------------------------------------------------------------

        SMITH-LEVER ACT FORMULA DISTRIBUTION, FISCAL YEARS 1998 and 1999
    ------------------------------------------------------------------------
                                                       Fiscal year--
                    Recipient                -------------------------------
                                                   1998            1999
    ------------------------------------------------------------------------
    Auburn University, Alabama..............      $5,738,475      $5,562,676
    University of Alaska, Fairbanks.........         870,391         828,156
    American Samoa Community College........         736,517         703,019
    University of Arizona...................       1,513,585       1,449,471
    University of Arkansas..................       4,850,041       4,696,680
    University of California................       6,064,473       5,779,244
    Colorado State University...............       2,373,372       2,269,074
    University of Connecticut...............       1,781,924       1,707,114
    University of Delaware..................       1,025,832         978,127
    University of the District of Columbia..         969,600         930,816
    University of Florida...................       3,558,379       3,378,724
    University of Georgia...................       6,493,544       6,257,748
    University of Guam......................         777,947         741,084
    University of Hawaii....................       1,074,339       1,030,628
    University of Idaho.....................       2,153,613       2,056,420
    University of Illinois..................       7,905,234       7,582,368
    Purdue University.......................       7,150,565       6,837,316
    Iowa State University...................       7,598,038       7,267,756
    Kansas State University.................       4,409,772       4,234,361
    University of Kentucky..................       7,466,040       7,176,537
    Louisiana State University..............       4,307,994       4,163,916
    University of Maine.....................       1,790,309       1,711,553
    University of Maryland, College Park....       2,697,447       2,586,754
    University of Massachusetts.............       2,225,754       2,132,773
    Michigan State University...............       7,194,178       6,898,070
    College of Micronesia...................         803,547         766,721
    University of Minnesota.................       7,086,676       6,789,427
    Mississippi State University............       5,909,404       5,749,625
    University of Missouri..................       7,004,428       6,716,369
    Montana State University................       2,014,211       1,920,762
    University of Nebraska..................       4,010,637       3,840,410
    University of Nevada, Reno..............         880,746         837,279
    University of New Hampshire.............       1,295,027       1,229,026
    Rutgers State University................       2,190,333       2,097,562
    New Mexico State University.............       1,619,830       1,552,146
    Cornell University......................       6,745,302       6,480,044
    North Carolina State University.........       9,737,913       9,414,296
    North Dakota State University...........       2,759,959       2,654,162
    Northern Marianas College...............         715,969         678,974
    Ohio State University...................       8,698,850       8,329,015
    Oklahoma State University...............       4,424,317       4,258,973
    Oregon State University.................       2,847,258       2,708,483
    Pennsylvania State University...........       8,460,245       8,115,338
    University of Puerto Rico...............       5,924,226       5,816,432
    University of Rhode Island..............         868,752         828,474
    Clemson University......................       4,733,086       4,571,842
    South Dakota State University...........       2,867,580       2,746,539
    University of Tennessee.................       7,111,332       6,869,667
    Texas A&M University....................       9,966,767       9,577,519
    Utah State University...................       1,323,262       1,268,151
    University of Vermont...................       1,422,167       1,358,636
    Virginia Polytechnic Institute and State       5,910,496         722,398
     University.............................
    College of the Virgin Islands...........         757,647       5,699,938
    University of Washington................       3,352,109       3,202,163
    West Virginia State University..........       3,430,810       3,312,357
    University of Wisconsin.................       7,086,051       6,781,845
    University of Wyoming...................       1,202,245       1,147,478
                                             -------------------------------
          Subtotal..........................     225,888,545     217,002,436
    Special Needs Formula...................       1,043,883       1,002,128
    Special Needs Projects..................         477,852         458,738
    CSRS Retirement \1\.....................      15,023,000      14,422,080
    FERS Retirement.........................       3,841,500       3,687,838
    Penalty Mail............................      15,221,000      14,612,160
    Federal Administration..................       6,997,220       6,567,620
                                             -------------------------------
          Total.............................     268,493,000     257,753,000
    ------------------------------------------------------------------------
    \1\ Estimated based on fiscal year 1997 actual.

        Question. Why did the Department choose to cut funding for these
    basic research programs even as the Administration was promoting the
    need for increased funding for research?
        Answer. The Administration advocates a broad range of funding
    mechanisms in support of university-based agricultural research,
    education, and extension. These mechanisms, including formula programs,
    competitive grants, special grants and projects, and other programs--
    such as Smith-Lever 3(d)--are interdependent and jointly contribute to
    the success of our knowledge-based system of agriculture. The
    priorities which define Federal support for programs in agricultural
    science and education are developed through a collaborative, State/
    Federal process of consultation with stakeholders, mutual planning, and
    in almost all cases, joint investment. Due to budget constraints, we
    have proposed decreases for Hatch Act, McIntire-Stennis Cooperative
    Forestry, and Smith-Lever formula funding to generate the resources
    needed to address issues of broad public concern that cut across State
    lines or other boundaries.
                             fund for rural america
        Question. I am a strong supporter of the Fund for Rural America and
    was especially pleased with the innovative approach the research office
    took to implementing its portion of the program. However, I am growing
    increasingly concerned about the results of the first round of funding.
    I wrote to the Department in support of several Vermont applications to
    the Fund almost a year ago. Decision dates on the awards have slipped
    continually from an original target date of October I believe. To this
    day, to my knowledge no announcements have been made regarding funding
    awards. In addition, I have heard from a number of organizations which
    had applied for funding, voicing confusion about calls they had
    received from the Department which appeared to award them grants on one
    hand, and then warn them that they might not actually receive the
    funding. When will the Department be making Fund for Rural America
    research awards?
        Answer. The first round of Fund Planning Grants was made in
    September, 1997. The second round of Fund Standard Grants is being made
    in two increments; the first half was made in late February, 1998 and
    the second half will be made in March, 1998 after completion of final
    programmatic and administrative review.
        Question. Will Congressional offices receive early notification as
    is standard with grant awards? What caused the delay in making grant
    awards?
        Answer. Congressional Offices are being notified as is standard,
    but with the lead time slightly reduced to get the Fund awards out
    sooner. The USDA Congressional Relations Staff has been in contact with
    their counter parts in the Members' Offices and notifications have been
    hand delivered to expedite the process.
        Delays in the first round of Fund awards relate to several factors.
    Initial delays involved in designing and starting-up a new program.
    These delays will be substantially reduced in the future. Secondly,
    innovative design of the first round of Fund grants. The January, 1997
    Request For Proposals included provision for two simultaneous proposal
    submission, evaluation, and award tracks--one for Planning and Center
    Grants and the other for Standard Grants. We plan to streamline
    processes in round two by combining scientific and technical review
    activities for all types of proposals related to similar problems,
    issues, or scientific disciplines. In addition, the competitive grants
    program of the Fund did not allocate dollars to issues prior to
    receiving and reviewing proposals. This decision to support the best
    proposals across a wide range of disciplines and functions required new
    processes to support award recommendations. An overview panel to
    evaluate the merit of grant recommendations across subject areas was
    conducted to guide final award recommendations. The Fund legislation
    also calls for a ``relevance review'' by the Research, Education,
    Extension, and Economics Advisory Board. Together these factors worked
    to delay awards 2-3 months beyond our plans.
        Question. What problems led to the confusion with potential
    recipients about awards, and what steps is the Department taking to
    ensure that these problems do not recur?
        Answer. In an effort to fund as many high quality proposals as
    possible, Fund staff entered into discussions with investigators about
    focusing proposed work on specific objectives and possible budget
    savings. Many applicants interpreted budget negotiations and poorly-
    worded staff correspondence as a commitment prior to final award. The
    Department decided to postpone Center Grant awards. This allowed Fund
    staff to expand the number of grants funded, but also entailed changing
    signals to grant applications who otherwise would not have been funded.
        Given the number of proposals received and the dollars available
    for award, the Fund success rate is about 10 percent. This means there
    are substantial numbers of excellent proposals which cannot be
    supported by the program this year.
        Question. I am also very concerned about the gap in funding for the
    Fund. A drafting error in the Farm Bill inadvertently eliminated
    funding for the initiative in fiscal year 1998. I have been working
    with my colleagues on the Agriculture Committee to restore this funding
    in a agriculture research authorization bill. However, I have been
    disappointed by the lack of active support from the Department for
    efforts to resolve this problem and restore the Fund in fiscal year
    1998. If funding for the program is restored for fiscal year 1998, will
    the Department be ready to publish a request for proposals and
    administer a competition in fiscal year 1998, and when would that RFP
    be published?
        Answer. The Department will move expeditiously to announce a fiscal
    year 1998 competition should the language in question be passed. Even
    if the language remains as in the original enabling legislation, we
    plan to release the second Fund Request For Proposals later in fiscal
    year 1998 in order to make the second round of grants as early in
    fiscal year 1999 as possible.
        Question. The fiscal year 1997 competition focused on several
    specific areas of research. What areas of research, education, or
    extension will the Department focus on in an fiscal year 1998
    competition?
        Answer. The first program description and request for proposals
    (RFP) for the FRA competitive grants program emphasized integrated
    research, education, and extension activities designed to address
    practical, short to intermediate term problems that cut across
    agriculture, environment, and rural development. This first RFP was
    designed to solicit a broad range of proposals in which the importance
    of problems would be established through community relevance as
    described in the proposal. The second Request For Proposals will
    address these same concerns, but with a significant tightening in award
    criteria and more program explanation designed to reduce the number,
    while maintaining the quality, of the proposals submitted.
        For example, we will clarify integration, client/stakeholder
    linkage, and evaluation criteria. We also plan to include extensive
    reporting of award examples in the RFP text in an effort to improve
    guidance to the research, education, and extension communities.
    Hopefully, these efforts will allow us to continue funding an unusually
    strong, balanced portfolio of grants, while reducing the cost of
    competition to the community and program managers.
        Question. Will the Department consult with the authorizing and
    appropriation committees when deciding on the focus of a potential
    fiscal year 1998 competition?
        Answer. The Department is considering authorizing and appropriating
    committee concerns about the next RFP as expressed though vehicles such
    as these hearings and other communications. We also are prepared to
    brief committee and member staff in greater detail on the awards made
    from fiscal year 1997 funds and regarding plans for the next round of
    Fund activities.
                                     ______

                           Economic Research Service
                     Questions Submitted by Senator Cochran
                      food and nutrition program research
        Question. The President when signing the fiscal year 1998
    Appropriations Act last November, noted in his statement his concern
    about the provision in the bill transferring funding for research on
    nutrition programs from the programs' administration to the Economic
    Research Service (ERS). The President's fiscal year 1999 budget
    proposes to transfer this funding back to the Food and Nutrition
    Service (FNS). Would you please explain how the ERS is executing the
    nutrition research and evaluation program transferred to it from the
    Food and Nutrition Service for fiscal year 1998 and why the
    Administration believes that ERS is not the appropriate agency to
    oversee and administer these research funds?
        Answer. The Economic Research Service has developed a comprehensive
    research program for addressing the needs of the Nation's food
    assistance and nutrition programs. The ERS food and nutrition
    assistance research program includes three broad areas of research: (1)
    dietary and nutrition outcomes, (2) program targeting and delivery, and
    (3) program forecasting and budget analysis. The dietary and
    nutritional outcomes area includes studies of program impacts on
    enhancing the access and choice of palatable, nutritious, and healthy
    diets of program participants. The program targeting and delivery area
    addresses how successful the programs are at targeting and reaching
    needy, at-risk population groups; program gaps and overlap; difference
    between rural and urban program delivery; outreach; waste, fraud and
    abuse; commodity procurement and distribution; public and private
    partnerships; and alternative benefit delivery mechanisms. The third
    area, program forecasting and budget analysis, focuses on how program
    needs change with local labor market conditions, economic growth,
    recession, food price inflation and general inflation; how changing
    State welfare programs interact with food and nutrition programs; and
    projections of program participation, benefit levels, and overall
    budgetary needs.
        ERS has consulted with many government agencies, private and
    nonprofit organizations, universities, and the Food and Nutrition
    Service to solicit input for program development. A recent conference
    conducted under the auspices of the National Academy of Sciences was
    sponsored by ERS to help design and focus the program. ERS plans to
    operate a nationally diverse program which draws on the research
    capabilities of the public and private sectors, including the nation's
    academic institutions.
        Despite the excellent work that ERS has done, the Administration
    believes this research and evaluation program should be administered by
    the Food and Nutrition Service. FNS has detailed knowledge of the
    country's food programs and, because they administer and have oversight
    responsibility for the programs, they understand their research and
    evaluation needs.
        Question. How has shifting the $18.5 million for evaluations of
    food stamp, child nutrition, and WIC programs to the ERS from FNS
    affected full-time equivalent (FTE) personnel requirements?
        Answer. ERS has not used any of the $18.5 million allocation to
    hire new staff nor has any of this money been used to support existing
    staff. ERS has, however, reallocated existing resources to address this
    important activity and has assigned some of the most senior management
    and research staff to this. A new position, Deputy Director for Food
    Assistance Research, was created to help administer the program. Nearly
    20 researchers have been directed to focus on food assistance issues.
    These researchers will help implement our extramural research program.
    ERS's senior administrative officer has also been detailed to this
    project to manage the business side of the operation and the
    Agriculture Research Service's Contracts Office that supports this
    project has also given this activity its highest priority.
        Question. What FTE reductions, if any, are associated with the
    fiscal year 1999 budget proposal to transfer funding for the research
    program from ERS back to the FNS?
        Answer. Since ERS has reallocated and detailed existing staff to
    support this project, we do not foresee any need for FTE reductions
    associated with the transfer of funding back to FNS in the fiscal year
    1999 budget proposal.
                         situation and outlook reports
        Question. There was concern earlier this year among some commodity
    groups regarding the possible reduction in frequency of the publication
    of certain Situation and Outlook Reports. Please summarize for the
    Committee which groups expressed concern and the nature of their
    concern. What change was made in the distribution of these reports and
    why? Has ERS now reassured the concerned commodity groups that they
    will have continued access to all necessary information provided in the
    Situation and Outlook Reports?
        Answer. Field crop and livestock reporting has been reduced in most
    cases from 12 monthly reports to 6 reports annually. Annual yearbooks
    for these commodities continue to be produced. Specialty crop reports
    have been reduced by 1 issue each year.
        Report frequency has been reduced in order to free a small amount
    of additional time for ERS analysts to pay more attention to
    maintaining and improving the quality of ERS and USDA forecasts and
    market analysis. In past years, short-term outlook reporting has been
    maintained and even expanded as staff has declined, at the expense of
    research and analysis to support USDA forecasts and commodity analysis.
    In the judgement of Agency management, this could not continue without
    compromising the quality of Departmental analysis. ERS continues to
    fully participate in the monthly Departmental estimates process, and
    the additional research will improve the quality of these estimates and
    commodity analysis support for the Department and other clients.
        ERS has heard directly from: the American Sugar Alliance; the
    National Cotton Council; a number of firms and associations concerned
    with cottonseed production and marketing; and several private purveyors
    of livestock information, news, or newsletters. Members of the American
    Sugar Alliance (ASA) expressed an overall concern about the quantity of
    ERS resources devoted to sugar market analysis and reporting, as well
    as specific concerns about frequency and accessibility of sugar market
    information reporting, and of ERS's role in the Department's
    interagency commodity estimation committee process. They were greatly
    relieved to learn that ERS is not planning any modification of its role
    in the interagency process, at least for the short run. But ASA appears
    to remain concerned about ERS levels of resource allocation to sugar
    market analysis.
        The National Cotton Council's (NCC) communication with ERS took the
    form of a request for more information about and explanation of planned
    changes, rather than a particular complaint. ERS staff briefed an NCC
    official, with apparent success.
        Cottonseed interests were dismayed by ERS cancellation of a
    monthly, autoFAXed fact sheet on the forecasted supply of and demand
    for cottonseed. As a consequence of feedback from the industry, that
    cottonseed data series has been reestablished and now appears in the
    agency's Oilseeds Situation and Outlook Report, although it is now
    available 6 rather than 11 times per year.
        The private firms that make their livelihood by repackaging,
    summarizing, or interpreting periodic information released by ERS on
    livestock market indicators remain concerned that they will have less
    frequent access to the information that acts as a feedstock for their
    own services. ERS plans to help direct these firms to the original
    sources (such as the Commerce Department) of some of that ERS-reported
    information, and will continue to make the full set of information
    available at a reduced frequency of reporting.
        ERS is expanding its electronic distribution of material through
    developing commodity briefing rooms on our Web site, through continued
    monthly e-mail dissemination of critical data, and through some
    increase in the content of tables in Agricultural Outlook magazine. We
    have also been meeting and talking with commodity and industry groups,
    and listening to their needs and concerns. We have accommodated most of
    the concerns expressed by our clients and are convinced that we will be
    delivering products that are better and more useful for most of them.
                         electric utility deregulation
        Question. ERS is requesting an increase of $200,000 for an
    interagency research activity with USDA's Rural Utilities Service (RUS)
    and the Department of Energy (DOE) to expand REE's capacity to assess
    the potential impacts of electric utility deregulation. Will this
    project be completed in fiscal year 1999, or do you anticipate funding
    request in future fiscal years? Will RUS and DOE fund any portion of
    the research project? If so, how much is being provided by each agency?
    If not, why? What will be the role of each agency in this project?
        Answer. We expect that ERS will be asked to extend its research on
    issues associated with electric utility deregulation for one additional
    fiscal year beyond fiscal year 1999.
        DOE is not funding any portion of the research project beyond its
    commitment to provide a series of model runs, using its Policy Office
    Energy Modeling System, (POEMS), to provide input into the analytic
    framework being developed by ERS. RUS has agreed to provide $100,000 in
    fiscal 1998 to partially support ERS analysis of electric utility
    deregulation issues of interest to them. In addition, RUS has indicated
    a willingness to fund necessary POEMS model runs required to support
    the ERS analysis, in the event DOE does not provide ERS the needed
    model runs.
        Using ERS developed scenario assumptions, DOE has committed to
    provide ERS with the output of several model runs of its POEMS model.
    DOE has not yet provided the requested model runs because it is still
    calibrating its POEMS model. RUS has made operational and trade area
    data on rural electric cooperatives available to ERS. ERS is making
    available its rural economic and farm cost and returns survey data
    bases, certain modeling capability, and providing primary support to
    persons who are conducting analyses on the effects of electric utility
    deregulation on rural consumers, businesses, farmers and on the
    competitiveness of rural regions.
                             food safety initiative
        Question. ERS is requesting an increase of $906,000, for a total
    budget request of $1,391,000, for an interagency research effort to
    understand the benefits and costs of programs and policies to improve
    the safety of the Nation's food supply. Considering that this is a
    collaborative effort, please provide the Committee with a prioritized
    account of how the ERS funds will be spent, and what other agency
    funding will be contributed to this effort, by agency. How will the
    research being conducted by ERS differ from that conducted by other
    USDA agencies, the Food and Drug Administration, and the Centers for
    Disease Control? What measures are being taken to ensure there is no
    duplication of research efforts?
        Answer. Our funding request falls into three categories. The first
    is surveillance activity--ERS is asking for $253,000 (an increase of
    $253,000 from fiscal year 1998). Other agencies contributing to this
    effort include the USDA Food Safety and Inspection Service (FSIS)--
    $1,500,000 (no change from 1998), Food and Drug Administration (FDA)--
    $6,038,000 ($2,200,000 increase from 1998), and the Centers for Disease
    Control and Prevention (CDC)--$19,000,000 ($4,500,000 increase from
    1998).
        The second category is for risk assessment and cost/benefit
    analysis--ERS is asking for $686,000 (an increase of $653,000 from
    fiscal year 1998). Other agencies contributing to this effort are USDA
    Agricultural Research Service (ARS)--$4,818,000 (increase of $320,000
    from 1998), USDA Cooperative State Research, Education, and Extension
    Service (CSREES)--$1,962,000 (increase of $1,812,000 from 1998), FSIS--
    $1,000,000 (increase of $1,000,000 from 1998), USDA Office of the Chief
    Economist (OCE)--$158,000 (increase of $98,000 from 1998), and FDA--
    $13,532,000 (increase of $7,200,000 from 1998).
        The third category is for educational efforts to promote food
    safety. ERS is asking for $420,000 (no increase from fiscal year 1998).
    Other agencies contributing to this effort are CSREES--$7,365,000
    (increase of $5,000,000 from 1998), FSIS--$2,500,000 (increase of
    $2,500,000 from 1998), USDA Food and Nutrition Service (FNS)--
    $2,000,000 ($2,000,000 increase from 1998), and OCE--$420,000 (no
    increase from fiscal year 1998).
        ERS plans to use the increased appropriation to support
    collaborative research in food safety economics. We plan to fund
    extramural research with cooperators in the land grant university
    system, and to work cooperatively with economists from the Centers for
    Disease Control and Prevention, Food Safety and Inspection Service, and
    the Food and Drug Administration. Working collaboratively in this
    manner will allow us to leverage our resources to support expanded
    research without adversely affecting other components of the ERS
    program.
        ERS is the only USDA agency conducting research on the economics of
    improved food safety--the benefits of safer food and the economic
    consequences of interventions in the food system to reduce or prevent
    microbial contamination of the food supply. We are collaborating with
    economists from CDC and FDA in the ``FoodNet'' surveillance program to
    develop better national-level estimates of the benefits of improving
    food safety. We are also conducting research on how providing
    information on food safety through education, outreach, and food
    labeling can help influence consumer behavior and encourage safer food
    handling and preparation practices. We will be working with FSIS to
    provide guidance on how consumers make choices regarding safe food
    handling and preparation. This will enable USDA to more effectively
    target educational efforts under the Food Safety Initiative to promote
    awareness of food safety and help consumers protect themselves from
    foodborne health risks.
        ERS is represented on multiple committees charged with the
    development of research plans under both the National Food Safety
    Initiative and the Initiative to Ensure the Safety of Imported and
    Domestic Fruits and Vegetables. We are actively coordinating with
    economists from CDC and FDA to ensure that our research efforts
    represent true inter-agency collaboration and to ensure that we are not
    duplicating efforts. The National Food Safety Initiative established
    the Risk Assessment Consortium, as part of the Joint Institute for Food
    Safety and Applied Nutrition, a collaborative activity of the FDA's
    Center for Food Safety and Applied Nutrition and Center for Veterinary
    Medicine and the University of Maryland. ERS is a member of this
    Consortium, which includes scientists from many Federal agencies, as
    well as from the academic community and the private sector. ERS will
    work collaboratively with consortium members to provide economic
    assessment of food safety risk management and risk reduction
    strategies, with an emphasis on food safety risks from microbial
    pathogens.
                                 small farmers
        Question. ERS is requesting an increase of $350,000 to organize and
    lead an interagency research activity to assess whether or not USDA is
    meeting the information needs of small farmers, niche marketers, and
    other casualties of an industrializing agricultural sector. Will this
    project be completed in fiscal year 1999, or do you anticipate funding
    requests in future fiscal years? Please provide the Committee with an
    account of how the $350,000 will be spent. How will ERS' involvement in
    this initiative relate, for example, to the CSREES $4 million request
    to support integrated research and education activities to address the
    resource constraints on small farmers?
        Answer. The request is for a one-year, one-time budget increase.
    The full funding will be obligated in fiscal year 1999, although the
    project may not be completed until sometime in fiscal year 2000. We do
    not anticipate the need for funding beyond fiscal year 1999.
        The vast majority of the funding will spent on focus group and
    survey methodology, the development of survey instruments, and the
    implementation, editing, and analysis of a broad scale survey
    questionnaire. We expect that most of that work will be obtained
    through cooperative research agreements and/or contracts. The only in-
    house expenditure foreseen is to hire a full-time but temporary
    research assistant to act as project officer and liaison between ERS
    project managers and the Agency's cooperators in carrying out the
    project.
        The proposed ERS project is unique in that it investigates the
    commodity market, marketing, financial, and other economic information
    needs of small and socially disadvantaged farmers. Its findings should
    serve as a guide to public data collection and economic reporting
    programs, as distinct from extension information programs focused on
    dissemination and customization of related data and information.
    Certainly, though, this project's findings should be complementary to
    CSREES efforts.
        Question. Regarding the research project to assess the information
    needs of small farmers, you state in your prepared testimony that
    subsequent plans would be designed to reform and modify USDA programs
    in the manner suggested by the assessment. What role will ERS play in
    monitoring the implementation of any recommended changes?
        Answer. The implementation of recommended changes in the ERS market
    analysis and information program will be monitored in-house in order to
    provide documented input into the Agency's GPRA assessments.
                               county-based study
        Question. The Secretary indicated when he testified before this
    Committee that USDA now has an outside consulting firm conducting a
    workload study of the farm and rural program delivery system of
    country-based agencies. Did the ERS contract out for this study? If so,
    what is the cost of this study and from where were those funds taken?
    What has the consulting firm been told to look at specifically?
        Answer. The Department has contracted with Coopers and Lybrand, the
    accounting and consulting firm, for a study concerning the operation of
    the USDA county-based agency operations. The goal of the study is the
    identification of alternative approaches to organizing and staffing
    these offices in delivering services that are: (1) clearly linked to
    Federal policy and program priorities and (2) transparently managed to
    meet Federal budget targets. Although the ERS Administrator has
    responsibility for the project's management, no ERS appropriations were
    used to support the $800,000 contract, which is funded by CCC, FSA,
    NRCS, and RD. ERS participates only to the extent that it responds to
    requests for data or analyses in accordance with its usual
    responsibilities. A detailed statement of work for the county study has
    been prepared, and if requested, could be provided to the Committee.
                            ers reimbursement policy
        Question. In the fiscal year 1998 Appropriations Act, the committee
    encouraged the Department to consider the relationship between the core
    analytical program of the ERS and the short-term and longer-term needs
    of other USDA program agencies, including the circumstances under which
    reimbursement to the ERS would be appropriate. Has the Department
    carried out this Committee directive? How has ERS' core analytical
    program been defined and under what circumstances will ERS be able to
    charge USDA agencies for research more specific to their short and
    longer-term needs?
        Answer. ERS has adopted a reimbursement policy which broadly
    defines the agency's core analytical program and the circumstances
    under which full or partial reimbursement will be sought as a condition
    for providing services to other agencies. When reimbursement is
    determined to be appropriate, the level of reimbursement is negotiated
    between ERS and the requesting agency. Since most program agencies have
    a staff of economists, ERS seeks to design its assistance so as to
    emphasize development of the program agency's capacity to perform its
    own short-term, program-oriented analyses.
        The ERS reimbursement policy is as follows: The ERS core program of
    research and analysis is aimed at understanding key relationships and
    causal factors underlying economic behavior, trends and resource
    management decisions in the food, agricultural, and rural sectors. This
    body of work is informed by the longer run analytical needs of USDA
    program agencies, as identified in a collaborative process with ERS,
    and changes to accommodate shifts in their research requirements. When
    program agencies seek assistance that is not a component of this core
    research program (for example, risk assessments, cost-benefit analyses,
    or program evaluations), such work should be performed by ERS only on a
    reimbursable basis. Recognizing that the program agencies employ half
    of the Department's economists, ERS assistance should emphasize
    development of the program agency's capability to perform its own short
    term, program-oriented analyses.
        Question. How much ERS research is conducted in-house and how much
    is contracted out?
        Answer. In fiscal year 1997, 4 percent of ERS research was
    contracted out.
        Question. Please explain the increased funding for the following
    object classifications from the fiscal year 1997 to the fiscal year
    1998 level: (1) travel, (2) printing and reproduction, and (3) research
    and development contracts and agreements.
        Answer. All of these projected increases are due to the fiscal year
    1998 appropriation increase to evaluate food stamp, child nutrition,
    and WIC programs.
                         prioritizing research projects
        Question. How does ERS prioritize the research projects it conducts
    for other USDA agencies and other organizations with the agency's
    normal workload? Please provide the Committee with a prioritized list
    of projects planned for fiscal year 1998.
        Answer. ERS develops and maintains an integrated set of division
    plans of work (a part of the GPRA process). Each division conducts an
    intensive review and planning process annually, but the work plans are
    considered living documents that are continually reviewed and revised
    as problems, issues and conditions change. The work plans are developed
    taking into account the analytical needs of the Department and its
    program agencies. These needs are communicated to ERS in a number of
    ways. Some come in the form of specific requests for short-or long-term
    assistance and studies but, more frequently, needs are jointly
    identified though continuing exchange of information and discussion.
    For example, FAS and ERS have formed a Senior Coordination Task Force,
    co-chaired by the agencies' Associate Administrators which has a
    standing monthly meeting scheduled for exchange of information on
    program status and communication of needs and requests. Also, ERS
    participates regularly in the weekly staff meeting held by the Chief
    Economist. Similar but usually less formal exchange takes place with
    other agencies. The ERS Administrator has also initiated a series of
    briefings for senior managers of the Department's Mission Areas. The
    purpose of these briefings is to discuss analytical work ERS has done
    and is doing in support of that Mission Area and to elicit comments on
    the degree to which this work is meeting needs. Thus, many of the
    projects ERS does for other agencies are totally integrated into and
    are considered a part of the core program of the agency. Projects that
    are less closely related to our core program and for which
    reimbursement is received are considered of lower priority but, since
    reimbursement is received, additional resources are available so that
    these projects do not substitute for higher priority projects. Normally
    work plans do not rank order projects other than to identify those that
    are congressionally mandated and a selected few, usually inter-
    divisional projects, that have been identified as especially time or
    policy sensitive.
        As an indication of the extent and variety of analytical work done
    in support of other agencies the latest compilation of such projects is
    attached. If the Committee would also like copies of current division
    work plans, these can be provided.
        [The information follows:]
                     ERS Research Supporting USDA Agencies
                      agricultural marketing service (ams)
        Analysis of the Effectiveness of the Dairy Promotion Programs.--
    USDA is required to submit an annual report on the producer and
    processor dairy promotion programs to the Congress by July 1 of each
    year. ERS prepares an independent evaluation of both programs to ensure
    program funds are properly accounted for and that the programs are
    administered in accordance with the respective acts and orders.
        Regulatory Flexibility Act (RFA) Analysis.--The RFA requires that
    AMS make initial and final regulatory analyses available to the public
    whenever a proposed rule or rule change under a federal marketing order
    would have an economic effect on small handlers of products under the
    marketing order. ERS has developed a spreadsheet-based modeling
    structure for AMS use in analyzing the effect of marketing rule changes
    on small handlers.
                      agricultural research service (ars)
        Evaluation of Agricultural New Uses Research.--The ERS Office of
    Energy is working with ARS and the University of California-Davis to
    develop technical information on soyink and wheat starch as a concrete
    substitute. ERS will help develop a specific set of economic procedures
    for setting priorities for new uses research.
                center for nutrition policy and promotion (cnpp)
        Technical Assistance on the USDA Thrifty Food Plan.--ERS provided
    technical assistance and price data to assist CNPP in making revisions
    to the thrifty food plan. The project is completed.
     cooperative state research, education, and extension service (csrees)
        Sustainable Agriculture Economic Impact Study.--The objective of
    this study led by CSREES and the Environmental Protection Agency is to
    determine the implications of widespread adoption of more sustainable
    production systems in the United States. ERS is coordinating six
    cooperative agreements with the Universities of Maryland, Montana
    State, Nebraska, Ohio State, Tennessee, and Washington State. ERS will
    submit cooperator reports with an overview and summary to CSREES.
        National Environmental Monitoring.--ERS helps CSREES by being a
    reviewer of environmental monitoring research efforts.
                           farm service agency (fsa)
        Implementation of the Conservation Reserve Program.--ERS provides
    economic analysis of alternative program levels, analyzes environmental
    impacts of the Conservation Reserve program, and evaluates long-run
    scenarios for establishment of minimum environmental benefit index
    levels for sign up acceptance. ERS has assembled data and developed air
    and water quality scoring look-up tables for use by local FSA and NRCS
    offices for EBI scoring of offers.
        Evaluation of Commodity Procurement Procedures.--ERS conducted a
    case study for peanuts and flour to identify any commodity procurement
    practices that could prevent FSA from making efficient use of funds and
    to examine the cost effectiveness of alternative procurement practices.
        Annual Cotton Transportation Cost Study.--ERS estimates the cost of
    marketing U.S. cotton in northern Europe which is determined in part by
    transportation costs. This cost estimate is need by FSA to calculate
    the adjusted world price (AWP).
                       food and nutrition services (fns)
        Household Food Insecurity and Hunger Validation Studies.--ERS is
    analyzing the extent to which household's reporting food insufficiency
    have lower nutrient intakes. Data from the 1989-91 Continuing Survey of
    Food Intake by Individuals (CSFII) will be used to assess the
    relationship between the ``USDA food sufficiency'' question and
    nutrient intake of all household members.
        Determinants of Food Behaviors.--ERS is developing a concept paper
    to identify issues, problems, data, and alternative modeling approaches
    for developing comprehensive food and agriculture policy models.
    Emphasis is being directed to linkages and relationships among low
    income populations, food and nutrition programs, farm programs and
    policies, and the food production, processing, and marketing system.
    The concept paper will be the basis for future program developments.
        Impacts of Household Resource Constraints on Food Sufficiency.--ERS
    will analyze the determinants of food insufficiency using data from the
    Survey of Income and Program Participation (SIPP). The survey provides
    information on proximal causes of food insufficiency including a lack
    of money or food stamps to buy food, a lack of working kitchen
    facilities, a lack of transportation, and nonparticipation in available
    food programs.
                   food safety and inspection service (fsis)
        User Fees for Meat and Poultry Inspection.--ERS is conducting a
    broad-based evaluation of the issue of charging user fees for meat and
    poultry inspection. The study includes reviewing economic literature
    dealing with user fees and other charges levied against the private
    sector in support of public health and safety. Use of fees elsewhere in
    Government and in other countries will also be included.
        Economic Support for Food Safety Regulations.--ERS is responding to
    a FSIS request in three areas. The research includes providing
    methodology for estimating the costs of illness from bacterial
    foodborne diseases, developing a common methodology for valuing loss of
    life, and developing a shared data system to facilitate analysis of
    entry and exit and efficient plant scale in the meat industry. The
    effort includes helping FSIS in doing cost/benefit analyses of proposed
    FSIS regulations. Foreign Agricultural Service (FAS)
        Analysis of Trade Agreement Snapback Provisions.--The tariff
    snapback provision of the Canada-U.S. Trade Agreement requires
    monitoring acreage and market prices for fresh market fruits and
    vegetables. ERS maintains a spreadsheet acreage database with the
    acreage data and formulas required to determine acreage-based snapback
    eligibility. This information is regularly provided to FAS.
        Analysis of Chile's Policies and NAFTA Accession.--ERS has an
    ongoing project to assess economic implications of an expansion of
    NAFTA to include Chile in support of a Free Trade Area of the Americas
    (FTAA).
        Analysis of Trade Promotion Programs.--ERS is working with FAS and
    the Trade Promotion Coordinating Council (TPCC). The TPCC is
    coordinated by OMB. The ERS role is to provide government agencies
    participating in the TPCC with technical assistance to analyze the
    costs and benefits of trade promotion ERS was specifically asked to
    assist in the process by using Computable General Equilibrium modeling
    capabilities.
        Federal Interagency World Food Summit Working Group.--ERS is
    inventorying existing research and determining the need for additional
    research in support of USDA World Food Summit follow-up Activities.
        Ukrainian Emerging Democracies Project.--ERS is working with
    Ukrainian analysts to establish an on-going Ukrainian capability of
    producing a series of commodity reports and to develop the capability
    to analyze policy issues. The project includes help in establishing
    dissemination procedures and training of analysts in preparing and
    delivering briefings for agricultural decisionmakers.
        China Technical Assistance Project.--ERS is providing technical
    assistance to Chinese analysts for the purpose of establishing
    commodity supply and demand balance sheets with short-term forecasts
    for major commodities.
        Bulgarian Policy Analysis.--ERS initially provided a resident
    advisor to the Bulgarian Ministry of Agriculture in addition to
    training Bulgarian analysts to conduct analysis of agricultural and
    trade policy issues. Additional training of new analysts will be
    conducted in cooperation with analysts from the Polish Institute of
    Agriculture and Food Economics.
        Agricultural Information in Transition Economies.--Transition
    economies face difficulties in establishing agricultural information
    systems. A conference was arranged for countries implementing
    agricultural information systems. Follow up work has involved
    establishment of Internet procedures and facilitating country to
    country information exchanges.
        Mexican Emerging Market Project.--ERS is collaborating with Mexico
    to strengthen its market information and analysis system. This project
    will significantly improve USDA's ability to serve the information
    needs of the wide range of U.S. producer groups affected by
    developments in Mexican agriculture.
        Romania Emerging Democracies Project.--ERS is working with Romanian
    analysts to establish an on-going series of commodity and policy issue
    reports and to establish regular dissemination mechanisms to make the
    information available to agricultural decisionmakers.
        Taiwan Technical Assistance Project.--ERS provided assistance
    through the American Institute in Taiwan to help develop a production
    and marketing information system in Taiwan. This involved developing
    commodity situation and outlook reports, quantitative models, and
    database and survey methods. ERS provided training to help Taiwanese
    analysts conduct policy alternative analyses. The project has been
    completed.
        Slovakia Policy Analysis ERS analysts helped the Slovaks to prepare
    short analytical pieces on current policy issues.--The ERS role was to
    help identify the problem, provided training in the methodological
    tools needed to conduct analysis and review the final product. The
    project has been completed.
                              forest service (fs)
        Noxious Weeds.--The USDA Forest Service and the Bureau of Land
    Management in the Department of Interior head up a Federal Interagency
    Committee for Management of Noxious and Exotic Weeds. ERS is assisting
    this committee by providing economic input to assess noxious weeds
    issues. One of the ERS tasks is to manage a cooperative agreement with
    the University of Maryland to develop methodology to assess the cost
    effectiveness of management strategies to control noxious weeds.
        grain inspection, packers and stockyards administration (gipsa)
        Regional Hog Procurement Study.--ERS and NASS are analyzing hog
    transaction data from four hog packers. The study is aimed at
    developing better information regarding hog pricing and procurement in
    the western cornbelt.
        Assessment of Western Organization of Resource Council Petition.--
    The Western Organization of Resource Councils has petitioned GIPSA to
    make rules prohibiting certain procurement practices by meat packers. A
    GIPSA team is tasked with making recommendation regarding GIPSA's
    response to the petition. ERS is assisting the team to evaluate
    economic arguments made in public comments.
                 natural resources conservation service (nrcs)
        Florida Everglades.--ERS is assisting in developing the USDA action
    plan for Federal-State Florida Everglades restoration efforts.
          office of risk assessment and cost-benefit analysis (oracba)
        Economic Support for HACCP Benefit/Cost Analysis.--ERS participated
    in the Food Safety Working Group chaired by ORACBA and collaborated on
    the development of a fault tree model for E. Coli 0157:h7 in hamburger.
    ERS also provided assistance in the review of benefit/cost analyses
    associated with Hazard Analysis at Critical Control Point (HACCP)
    systems and other Departmental proposals for reducing pathogens in
    meat, eggs, and poultry. This project has been completed.
                         office of the secretary, usda
        Economic Impact of the Methyl Bromide Scheduled Phaseout.--USDA
    policymakers need information about the economic impacts of the
    scheduled phaseout of methyl bromide (MB) and the economic viability of
    alternatives to MB. ERS is estimating economic impacts of the phaseout
    of the use MB on important crops; including impacts on producers,
    consumers, production, prices, and international trade. As part of this
    effort, ERS is organizing workshops involving agricultural scientists,
    grower groups, and the pesticide industry in an effort to assess and
    share information.
                    office of the usda chief economist (oce)
        NAFTA Monitoring Task Force.--ERS has a continuing effort to
    monitor the impacts of the North American Free Trade Agreement (NAFTA).
    ERS prepares periodic reports that cover agricultural commodity trade,
    employment, environmental effects, and policy actions in the United
    States, Mexico, and Canada.
        Climate Change and Agriculture.--ERS took the lead in writing white
    papers on the impact of climate change on agriculture and possible
    impacts of climate change mitigation policies. The assignment included
    preparing briefings in response to questions from the Senate on the
    above issues. ERS provided ongoing support and analysis for the
    Framework Convention on Climate Change.
                    office of the usda general counsel (ogc)
        Assessment of IBP Trade Practices Case.--ERS assisted OGC critique
    an industry analysis of IBP marketing practices and reviewed hearing
    exhibits for economic relevance and analytic soundness.
                          risk management agency (rma)
        An Examination of How Farm-Level Decisionmaking Affects Insurance
    Decisions.--ERS is using time series farm business records from
    Illinois and Kansas to examine how crop yield and revenue risk affect
    the whole farm risk portfolio.
        Development of a Dynamic Multi-Year Aggregate Risk Model to Assess
    Policy Decisions.--ERS is developing a model to determine the
    relationship between farm-level yield impacts and aggregate effects at
    the national level. The assessment includes focusing on risk within the
    year and also year-to-year interrelationships.
        Yield Forecasting for Crop Insurance Premium Rate Setting.--ERS is
    analyzing whether the estimates of means and variabilities of
    individual farm yields can be improved by taking account of additional
    county or nearby farm yield data
        Analysis of Actuarial and Economic Issues Underlying Crop Insurance
    Rate Setting.--ERS is examining whether premium rate discounts should
    vary by unit size and if so, how the magnitudes of the discount would
    vary by crop and region. Another area of work deals with factors used
    to adjust the base county rate to farms with yields above and below the
    base county yield. A third area focuses on premium rate variation
    relating to length of continuous participation and crop and region.
        Evaluation of Existing Crop Insurance Programs.--ERS is examining
    the actuarial aspects of underwriting and other issues associated with
    crop insurance for peanuts, potatoes, and peaches.
        Feasibility Studies on Insuring Various Commodities.--ERS has
    undertaken feasibility studies on insuring approximately 51
    agricultural commodities.
        Review of Alternative Revenue Insurance Products.--ERS has analyzed
    various revenue insurance and market value protection products. Work is
    now underway to assess the potential for producers to adversely select
    among insurance products.
        Risk Management Strategies Under the 1996 Farm Act.--Risk
    management options being analyzed in this area of work include various
    risk management tools such as crop insurance, revenue insurance, price
    futures and options, and yield futures.
                   rural business-cooperative services (rbcs)
        EZ/EC Background Assistance.--ERS is preparing economic information
    packages for the use of local leaders to help them understand aspects
    of community development and economic growth. The resource books are
    based in part on community interviews. The resource book for the
    Mississippi Delta is complete, the book for the Texas Rio Grande Valley
    is nearly complete, and the interviewing stage in the Kentucky
    Highlands has been completed.
                          rural housing service (rhs)
        Rural Housing Service Research Initiative.--ERS is exploring the
    feasibility of conducting surveys on the characteristics of
    participants in the RHS single family and multifamily housing programs.
    The surveys would provide a data base and analysis to help RHS assess
    the match between RHS assisted housing and the demographic needs of
    rural areas, develop performance indicators to measure program
    effectiveness, and explore the effects of changing Federal policies on
    RHS housing programs and their participants.
                         rural utilities service (rus)
        Rural Electric Utility Deregulation.--The ERS Office of Energy is
    exploring the issues involved in deregulating the electric utility
    industry. The objective is to analyze the potential impact on
    agriculture, rural areas, and rural development.
                      usda working group on water quality
        Water Quality Program.--The USDA Working Group on Water Quality is
    a multi-agency group. ERS meets regularly with representatives of this
    group to discuss issues and progress of the USDA Water Quality Program
    and develop plans of work and to identify economic issues.
                     government performance and results act
        Question. How are the agency's annual performance goals linked to
    the agency's mission, strategic goals, and program activities in its
    budget request?
        Answer. ERS's annual performance goals of enhanced understanding of
    economic issues by policy makers, regulators, program managers, and
    those shaping the public debates directly flow from ERS's mission to
    provide economic analysis on efficiency, efficacy, and equity issues
    related to agriculture, food, natural resources, and rural development
    to improve public and private decision making. The annual performance
    goals parallel ERS's strategic goals. ERS program activities--research,
    development of economic indicators, and dissemination of research
    results and economic information--directly support the strategic and
    annual performance plan goals.
        Question. Could you describe the process used to link your
    performance goals to your budget activities? What difficulties, if any,
    did you encounter, and what lessons did you learn?
        Answer. ERS research, development of economic indicators, and
    information dissemination activities are focused on topics that ensure
    ERS can meet its performance goals of enhanced understanding of
    economic issues by policy makers, regulators, program managers, and
    those concerned with agricultural competitiveness, food safety, good
    nutrition, environmental quality, and rural prosperity. The link
    between the goals and the activities needed to attain them was an easy
    one for ERS to make.
        Question. Does the agency's Performance Plan link performance
    measures to its budget? Does each account have performance measures?
        Answer. ERS's budget has one appropriation item, economic analysis
    and research. The Performance Plan's five goals are linked and
    dependent on funding levels allocated within the agency.
        Question. To what extent does your performance planning structure
    differ from the account and activity structure in your budget
    justification?
        Answer. ERS performance planning structure does not differ from its
    account and activity structure.
        Question. Do you plan to propose any changes to your account
    structure for fiscal year 2000?
        Answer. ERS does not propose any changes to its account structure
    for fiscal year 2000.
        Question. How were performance measures chosen?
        Answer. ERS has always been concerned with its performance and
    maintained information on its analytical outputs, their use, and their
    impacts on decisions about U.S. agriculture, food, natural resources,
    and rural development. ERS began a review of its planning and
    performance measurement systems in fiscal year 1995 when it provided
    all managers training on the Government Performance and Results Act
    (GPRA) and results oriented management approaches. At that time, a
    group of middle managers reviewed and redrafted ERS performance
    measures. Subsequent mission area-wide activities in 1996-97 provided
    senior and middle ERS managers additional opportunities to test and
    refine ERS's performance measures including exchanges with staff at
    other government research agencies that were engaged in pilot GPRA
    projects and staff at private research oriented companies. The
    performance plans external reviews included meetings convened by the
    National Agricultural Research, Extension, Education, and Economics
    Advisory Board and included individuals from agri-business, public
    interest groups, and universities. The measures have also been
    critiqued extensively within USDA. Lessons reinforced were: do not make
    performance measurement so difficult that no one has time to work on
    achieving goals; good planning is an ongoing process and assessments
    will lead to further refinements; staff will perform to indicators--
    make sure measures lead to correct outcomes; and research agencies face
    special difficulties in tying research results to broader outcomes.
        Question. How did the agency balance the cost of data collection
    and verification with the need for reliable and valid performance
    measures?
        Answer. ERS will be able to produce and verify the data needed to
    underpin measures specified in its performance plan. ERS would like to
    get more feedback from users outside the federal government, but is
    carefully considering the costs of doing so, not just to ERS, but
    government wide and to society. The present requirements that must be
    completed before contacting non federal users (including the 60 day
    advertisement of intention in the Federal Register and the lengthy time
    involved in clearing any questionnaire/focus group/survey instruments)
    involve considerable costs to the government. Furthermore, this
    extensive clearance process regarding such contacts reflects
    legislative and executive concern about respondent burden--even for
    voluntary responses.
        Question. Does your plan include performance measures for which
    reliable data are not likely to be available in time for your first
    performance report in March 2000?
        Answer. ERS will have sufficient and reliable data to complete its
    March 2000 performance report.
        Question. What are the key performance goals from your fiscal year
    1999 Annual Performance Plan that you recommend this subcommittee use
    to track program results?
        Answer. The performance goals for each major goal specify
    quantitative goals for research outputs and qualitative goals with
    regard to enhancing understanding of important economic issues.
    Simplistic reliance on quantitative output measurements, however, can
    inhibit rather than contribute to successful outcomes. Care must be
    taken in setting and measuring against quantity output goals to ensure
    that quality is not sacrificed for quantity. Quantitatively and
    definitively establishing the link that decision makers make particular
    decisions because of the provision of analyses is widely acknowledged
    as extremely difficult. ERS narratives will be essential to demonstrate
    that ERS ensured policy makers, regulators, program managers, and
    organizations shaping public debate had high quality, objective,
    relevant, timely, and accessible analyses. The narratives will cover
    ERS anticipation of issues and the timeliness of output, review prior
    to release, customer views on relevance and accessibility of ERS
    analyses, and how ERS analyses contributed to informed decision making
    on economic issues related to agriculture, food safety and nutrition,
    natural resources, and rural development. The narratives will provide
    perspective on ERS success in bridging customer satisfaction
    measurement--e.g., responsiveness and courtesy shown to customers--with
    basic outcomes goals--e.g., improving the efficiency and effectiveness
    of policies and programs that meet societal equity standards.
        Question. In developing your Annual Performance Plan, what efforts
    did your agency undertake to ensure the goals in the plan include a
    significant number of outcome measures?
        Answer. Interpreting outcome measurements is not a straightforward
    process for research organizations. The cause and effect relationship
    between research outputs and eventual outcomes is complex. The
    challenges facing those interpreting performance measures for a public
    information and analytical organization such as ERS are even greater.
    Public information can be freely used without attribution. Its
    widespread use and effects may be difficult to fully measure. Delays
    between when research results are presented and when their effects are
    fully assimilated are variable and can be long. Specific outcomes are
    influenced by quality research results, as well as other factors. If
    ERS analysis is objective, analysis on the efficacy, efficiency, and
    equity impacts of specific policies, programs, and regulations will at
    any one time support some customers' proposals but not others. Analysis
    may show that an export promotion program helps corn exporters at the
    expense of beef exporters. Research may show that a water allocation
    proposal costs farmers but benefits recreation interests. Corn
    exporters and farmers in such cases may not fully appreciate the
    relevancy, accessibility, and objectivity of ERS analysis. Rigorous
    adherence to standards of disciplinary excellence contributes greatly
    to the quality and objectivity of ERS analyses and their defensibility
    in the face of politically-motivated criticism. The narratives that ERS
    will include in its performance reports will be key to showing how ERS
    analysis enhanced understanding by policy makers, regulators, program
    managers, and others of key economic issues relating to
    competitiveness, food safety, good nutrition, environmental quality,
    and rural prosperity.
        Question. Do you believe your program managers understand the
    difference between goals that measure workload (output) and goals that
    measure effectiveness (outcome)?
        Answer. ERS has a head start in making sure that program managers
    understand the difference between workload and effectiveness measures.
    Most ERS employees are economists with substantial interest, training,
    and experience in understanding efficacy, efficiency, and equity
    concepts. In addition, ERS has augmented program managers training
    specific to GPRA requirements beginning in fiscal year 1995 and
    provided all managers training on GPRA and results oriented management
    approaches.
        Question. What are some examples of customer satisfaction measures
    that you intend to use? Please include examples of both internal and
    external customers?
        Answer. ERS will include a variety of qualitative indicators to
    help measure the relevance, productivity, and quality of its program
    and outputs, and to understand how ERS research results are used by
    decision makers and thus affect outcomes. Indicators will include: (1)
    call backs for follow up information/analysis from policy makers; (2)
    requests for ERS staff as primary speakers at important meetings and
    conferences; (3) articles in major public media that correctly and
    effectively use ERS analysis and data; and (4) changes in legislation,
    regulation, and designs of social science programs related to
    agriculture, food, natural resources, and rural areas. To ensure that
    the outputs present data and analyses that are high quality,
    comprehensive, objective, relevant and accessible, ERS routinely
    provides its customers many opportunities for feedback, conducts
    rigorous peer reviews before analysis is released, and uses a wide
    variety of proven and innovative dissemination systems.
        Question. How were the measurable goals of your fiscal year 1999
    Annual Performance Plan used to develop your fiscal year 1999 budget?
        Answer. The interaction between goals and budget developed is not
    unidirectional. The allocation of resources across goals reflects
    efforts to balance economic information needs among competitiveness,
    food safety, nutrition, environmental, and rural development issues.
    The level of funding affects ERS ability to produce and disseminate
    research results and economic indicators and thus the particular
    targets that can be set and met.
        Question. If a proposed budget number is changed, up or down, by
    this committee, will you be able to indicate to us the likely impact
    the change would have on the level of program performance and
    achievement of various goals?
        Answer. ERS will be able to indicate the likely impact on the level
    of program performance and achievement of various goals due to
    increases or decreases in its funding.
        Question. Do you have technological capability of measuring and
    reporting program performance throughout the year on a regular basis,
    so the agency can be properly managed to achieve the desired results?
        Answer. ERS could prepare program performance reports at anytime
    during the year. However, the nature of research outcomes, including
    the often long evolution between provision of economic analysis and any
    particular public and private decisions, means that more frequent
    detailed measurement and reporting may not be cost-effective.
        Question. The Government Performance and Results Act requires that
    your agency's Annual Performance Plan establish performance goals to
    define the level of performance to be achieved by each program activity
    set forth in your budget. Many agencies have indicated that their
    present budget account structure makes it difficult to link dollars to
    results in a clear meaningful way. Have you faced that difficulty?
    Would the linkages be clearer if your budget account structure were
    modified? If so, how would you propose to modify it and why do you
    believe such modification would be more useful both to your agency and
    to this committee than the present structure? How would such
    modification strengthen accountability for program performance in the
    use of budgeted dollars?
        Answer. Because ERS's budget has one appropriation item, economic
    analysis and research, ERS does not face difficulties in linking
    performance across various accounting and reporting structures and
    presenting its budget by performance goals.
        Question. Does your fiscal year 1999 performance plan--briefly or
    by reference to your strategic plan--identify any external factors that
    could influence goal achievement? If so, what steps have you identified
    to prepare, anticipate and plan for such influences? What impact might
    external factors have on resource estimates?
        Answer. ERS's fiscal year 1999 performance plan discusses external
    factors that influence goal setting and achievement. ERS's future
    depends on its ability to achieve national prominence as a center of
    excellence for economic analysis on agriculture, food, environmental,
    and rural issues. Policy makers and program managers in program
    implementation agencies increasingly will be called to defend the
    efficiency and equity consequences of public policies, regulations, and
    programs. Tighter budgets in other USDA mission areas will decrease
    their already limited internal ability to anticipate the economic
    effects of policies and programs. ERS must clearly identify its role as
    the intramural social science research agency at USDA, with a focus on
    maintaining its core analytical activities while remaining responsive
    to short-term information demands.
        ERS will continue to be asked to do more with declining real
    resources as demand for information grows in a knowledge-based and
    increasingly complex society. The agency will continue to pursue and
    integrate useful new information technologies into agency operations to
    help improve staff productivity and meet ERS performance goals despite
    fewer staff resources.
        ERS will adjust its research program to the changes in the larger
    policy context. Changing perceptions about the role of government
    regulation is accelerating the search for more voluntary and market-
    based measures to promote public good. The agricultural policies and
    programs in the 1996 Farm Bill raised new issues regarding the
    structure and geographic location of agricultural production, as well
    as the volatility of prices in response to international shocks and
    weather. Increasing scale and concentration of agricultural activities
    raise environmental and economic issues pertaining to waste management.
    Rapidly changing economic, social, and medical environments raise
    challenging questions about the nutritional quality and costs of good
    diets and their implications for individuals, society, and the food
    industry. International trade agreements are shifting the focus of
    trade barriers away from tariffs toward issues relating to food safety
    and environmental quality. Continued evolution of the social, economic,
    and industrial structure of rural areas will change policy debates
    regarding the well-being of rural people and communities.
        Question. Through the development of the Performance Plan, has the
    agency identified overlapping functions or program duplication? If so
    does the Performance Plan identify the overlap or duplication?
        Answer. Because ERS's economic analyses cover all aspects of USDA's
    mission, the crosscuts between ERS research and the missions and goals
    of other USDA agencies is extensive and complicated. ERS, even before
    new GPRA requirements, was cognizant that its unique contribution is
    provision of external economic analysis and took care not to duplicate
    or overlap with program functions in other agencies.
        Question. Future funding decisions will take into consideration
    actual performance compared to expected or target performance. Given
    that: To what extent are your performance measures sufficiently mature
    to allow for these kinds of uses? Are there any factors, such as
    inexperience in making estimates for certain activities or lack of
    data, that might affect the accuracy of resource estimates?
        Answer. ERS performance measures are sufficiently mature to allow
    funding decisions to consider actual performance compared to target
    with the caveats about the complexity of measuring performance for a
    public research organization given in answers to prior questions.
        Question. Based on your fiscal year 1999 performance plan, do you
    see any need for any substantive revisions in your strategic plan
    issued on September 30, 1997.
        Answer. ERS will not need to revise it strategic plan based on its
    fiscal year 1999 performance plan.
                                     ______

                      Question Submitted by Senator Craig
        Question. I am troubled by a recent ERS decision to cutback in its
    work on short-term commodity supply-demand analysis. It is my
    understanding that ERS has reduced its situation and outlook reporting
    by 50 percent. Yet ERS officials have told us that American producers
    will not pay the price for these cutbacks--that all previously
    available date will continue to be readily accessible through other
    means. Can you elaborate on this and show where this information will
    be published and in what form?
        Answer. Much of the data provided in ERS outlook reports will
    continue to be available from the originating agency--the National
    Agricultural Statistical Service, the Foreign Agricultural Service, and
    the Bureau of the Census, for example. Our Situation and Outlook
    reports will continue to contain the data they have always contained.
    In months when they are not published, critical data and data that are
    unique ERS products will be available, in most cases, through a
    combination of commodity briefing rooms on the ERS Web site, through
    monthly E-mail distributions of critical commodity data, and through
    some increase in the content of tabular material in Agricultural
    Outlook magazine.
                                     ______

                    National Agricultural Statistics Service
                     Questions Submitted by Senator Cochran
                       aquaculture census data collection
        Question. NASS has requested a one-year increase of $500,000 and 2
    staff-years to conduct an aquaculture census, which would provide for
    the first time detailed State and national data about aquaculture
    production. Please explain the importance of the census, what data will
    be collected, and who will use this data. Is this a one-time cost or
    will it be necessary to conduct this census every so many years? What
    future year funds will be required for this census?
        Answer. The NASS request of $500,000 would fund a census of all
    farms participating in the 1997 Census of Agriculture that produced and
    sold $1,000 or more of aquaculture or aquaculture products. Under this
    proposal, NASS would conduct an extensive aquaculture census every 5
    years following the census of agriculture. The $500,000 funding would
    be for fiscal year 1999 only and would be dropped from the NASS budget
    base in fiscal year 2000.
        The aquaculture census would provide, for the first time, national
    and State level detailed data about aquaculture production, and would
    be the only source of nationally consistent data for all types of
    aquaculture. The current NASS aquaculture program is limited to
    providing statistics for catfish and trout production in major States.
    This census would provide periodic statistics related to the production
    of finfish, shellfish, and animal aquaculture, which is one of the most
    rapidly changing segments of agriculture.
        Aquaculture is an emerging industry and therefore does not have the
    infrastructure to collect, compile, and publish industry statistics.
    The aquaculture census would provide improved information on the
    present and possible future supply of aquaculture and aquaculture
    products for a broad range of data users, including industry
    representatives, producers, marketing and trade groups, Federal and
    State organizations, policy makers, and colleges and universities.
    Accurate and timely data are needed in order for aquaculture to be
    recognized as a significant sector of the agricultural industry. The
    aquaculture industry needs data to competitively compete for research
    and development funds, to efficiently plan and market aquaculture
    products, and to develop new products. Aquaculture data are necessary
    in order for the industry to receive higher priority in the
    certification and re-certification process for obtaining
    pharmaceuticals for use in aquaculture production. Aquaculture
    production is expanding in response to the problem of declining
    fisheries worldwide. Marine aquaculture can provide new employment
    opportunities through jobs that are near towns formerly dependent on
    fishing.
                      census of agriculture--new research
        Question. In your prepared statement, you mention that the growing
    diversity and specialization of the Nation's farm operations have
    greatly complicated procedures for producing accurate agricultural
    statistics. You further state that considerable new research will be
    directed at improving the census of agriculture to be conducted in
    2003. Has funding for the new research been included in the fiscal year
    1999 budget? If so, where is it included? If not, do you anticipate a
    need for additional funding in future fiscal years?
        Answer. Yes, funding for on-going research related to new sampling
    and survey methodology, improved data collection techniques, and
    increased use of enhanced computer technology is included in the NASS
    budget under each budget activity. This research is integrated with
    NASS's on-going programs and is therefore not identified as a separate
    item. Requests for additional research funds are not anticipated in
    future fiscal years.
                agricultural economics and land ownership survey
        Question. NASS has requested an increase of $100,000 and 1 staff-
    year to begin preparatory work needed to conduct the Agricultural
    Economics and Land Ownership Survey. Why is the Agricultural Economics
    and Land Ownership data collection done through a separate survey and
    not included in the census of agriculture?
        Answer. The Agricultural Economics and Land Ownership Survey
    (AELOS), historically conducted every 10 years following the census of
    agriculture, is a survey of farm and ranch operators that participated
    in the census of agriculture, and the landlords of those operators.
    AELOS provides the only comprehensive source of data on agricultural
    land ownership, financing, and inputs by farm operators and landlords
    for each State. Separate questionnaires are used to collect data on
    farm operating expenditures, capital improvements, assets, and debts
    for agricultural production from operators and their landlords. AELOS
    is conducted as an independent survey from the census of agriculture
    for two major reasons. First, a separate survey is required because
    AELOS is based on a sample of farmers and ranchers who participated in
    the census who meet certain criteria for size and type of operation,
    along with their corresponding landlords. Second, because the AELOS
    questionnaire is quite detailed it would not be feasible to include
    those questions on the census form.
                         pesticide use data collection
        Question. The NASS budget includes funds to collect data on
    pesticide use in nursery and greenhouse crops where farm worker
    exposure is potentially high. Will this effort in any way relate to
    that carried out under the Agriculture Marketing Service (AMS)
    Pesticide Data Program (PDP)? If not, why?
        Answer. AMS's responsibility in the Pesticide Data Program is to
    collect pesticide residue data on fruits and vegetables. AMS does not
    collect pesticide use data.
                               research projects
        Question. How does NASS prioritize the research projects it
    conducts for other USDA agencies and international organizations with
    the agency's normal workload? Please provide the Committee with a
    prioritized list of projects for fiscal year 1998.
        Answer. NASS places a high priority on providing statistical
    services to all USDA agencies and international organizations. Because
    each year the total requested projects has remained fairly constant,
    NASS has been able to maintain the staff and infrastructure to complete
    all requested projects without significantly impacting the agency's
    core program.
        The following is a list of all the surveys done on a reimbursable
    basis in fiscal year 1997.
        [The information follows:]

                     NATIONAL AGRICULTURAL STATISTICS SERVICE REIMBURSABLE SURVEYS, FISCAL YEAR 1997
    ----------------------------------------------------------------------------------------------------------------
                        Source                                                   Project
    ----------------------------------------------------------------------------------------------------------------
    Agricultural Marketing Service................  Cheese Price Data.
                                                    Milk Price Data.
                                                    Pesticide Data Program.
                                                    Pesticide Recordkeeping.
    Agricultural Research Service.................  Assistance on Food Consumption Survey Data.
                                                    Cotton Model Survey.
                                                    Employee Climate Survey.
    Animal Plant Health Inspection Service........  National Animal Health Monitoring System.
                                                    Animal Damage Control.
                                                    Agricultural Quarantine Inspection.
    Economic Research Service.....................  Agricultural Resource Management Survey.
    Farm Service Agency...........................  Employee Climate Survey.
                                                    County Estimates.
                                                    Farm Operating Loan Program.
                                                    Feed Grain County Estimates.
    Forest Service................................  Grazing Fees.
    Rural Development.............................  Cash Flow Models.
    Department of Interior........................  Grazing Fees.
    State Departments of Agriculture..............  Crop Reporting Services.
    ----------------------------------------------------------------------------------------------------------------

                              nass reimbursements
        Question. Do other USDA agencies requesting work from NASS
    reimburse NASS for the work requested? If not, when is reimbursement
    required?
        Answer. If the requested work can be accomplished in two days or
    less, reimbursement is not requested. Otherwise, NASS negotiates a
    reimbursable agreement with the requesting agency to provide funding
    that covers NASS's costs for the project.
                                 nass research
        Question. How much NASS research (both in dollars and in number of
    studies) is conducted in-house and how much is contracted out?
        Answer. The majority of NASS research dollars are for intramural
    activities. Only a small amount is expended for extramural research.

                                  RESEARCH DOLLARS AND NUMBER OF STUDIES BY FISCAL YEAR
    ----------------------------------------------------------------------------------------------------------------
                                       Fiscal year     No. of     Fiscal year     No. of     Fiscal year     No. of
                  Item                 1997 actual    studies    1998 estimate   studies    1999 estimate   studies
    ----------------------------------------------------------------------------------------------------------------
    Intramural.....................      $3,182,000         37      $3,276,000         40      $3,220,000         40
    Extramural.....................         190,000          7         205,000          6         229,000          6
                                    --------------------------------------------------------------------------------
          Total....................       3,372,000         44       3,481,000         46       3,449,000         46
    ----------------------------------------------------------------------------------------------------------------

                             object classifications
        Question. Please explain the increased funding for the following
    object classifications from the fiscal year 1997 to the fiscal year
    1998 level: communications, utilities, and miscellaneous charges;
    printing and reproduction; advisory and assistance services; other
    services; and purchases of goods and services from Government Accounts.
        Answer. Most of the increase from fiscal year 1997 to fiscal year
    1998 in the cited object classes is attributable to data collection and
    processing activities associated with the 1997 Census of Agriculture,
    which peaks in fiscal year 1998.
        [The information follows:]

                                        NATIONAL AGRICULTURAL STATISTICS SERVICE
                                                 [Dollars in thousands]
    ----------------------------------------------------------------------------------------------------------------
                                                Fiscal year--
            Selected object classes        ----------------------  Increase          Explanation of increase
                                               1997       1998
    ----------------------------------------------------------------------------------------------------------------
    Communications, utilities, and             $3,467     $6,210     $2,743  Postage for census questionnaires
     miscellaneous charges (23.3).
    Printing and reproduction (24.0)......        345        625        280  Printing of questionnaires for
                                                                              irrigation and horticulture surveys
    Advisory and assistance services              132        339        207  Consultants for the Agricultural
     (25.1).                                                                  Statistics Board archives
    Other services (25.2).................     19,762     24,206      4,444  Data collection activities for the
                                                                              census
    Purchases of goods and services from       11,066     14,868      3,802  Contract with the Census Bureau for the
     Government Accounts (25.3).                                              census mail-out and ADP
    ----------------------------------------------------------------------------------------------------------------

                     government performance and results act
        Question. How are the agency's annual performance goals linked to
    the agency's mission, strategic goals, and program activities in its
    budget request?
        Answer. The NASS annual performance plan parallels the NASS
    strategic plan. Both plans are framed by the NASS mission statement,
    the five REE general outcomes which are the NASS general goals in both
    plans, and the NASS objectives under each of the five general goals. In
    addition, the strategies for achievement of the objectives are
    contained in both plans, and the performance measures outlined in the
    strategic plan are part of the Performance Goals and Indicators table
    in the performance plan for each of the general goals. The applicable
    budget program activities are indicated for each general goal in the
    performance plan, and for the fiscal year 1999 budget request, the
    dollars and FTE's for each of the three NASS budget activities are
    cross-walked to the five general goals. The corresponding funding
    levels and FTE's for fiscal years 1997-99 are also shown under each of
    the general goals of the performance plan.
        Question. Could you describe the process used to link your
    performance goals to your budget activities? What difficulties, if any,
    did you encounter, and what lessons did you learn?
        Answer. NASS maintains cost data for all major program activities
    under each of NASS's budget categories: agricultural estimates,
    statistical research and service, and the census of agriculture. These
    cost data include Agency administrative and infrastructure costs. These
    major activities and associated costs were then categorized into the
    five general goals which frame both the strategic plan and the annual
    performance plan. Sometimes it is difficult to determine where a given
    statistics program best fits under the five broad general goals. In
    this case, categorization is determined by which goal is most supported
    by the statistical data generated by that program.
        Question. Does the agency's Performance Plan link performance
    measures to its budget? Does each account have performance measures?
        Answer. The NASS performance plan is linked to the budget. The
    three program budget accounts have been aggregated as they apply to the
    performance measures. Each goal and corresponding objectives list the
    applicable budget activities and the funding and FTE levels. Also, the
    resource table at the end of the annual performance plan provides an
    even more detailed breakdown by individual budget program activity for
    each of the five general goals.
        Question. To what extent does your performance planning structure
    differ from the account and activity structure in your budget
    justification?
        Answer. The annual performance plan is framed by the five general
    goals, but each goal is cross-walked to the applicable budget
    activities; funding and FTE levels are shown by general goal as well as
    by individual budget activity. NASS's program activities are
    agricultural estimates, statistical research and service, and census of
    agriculture.
        Question. Do you plan to propose any changes to your account
    structure for fiscal year 2000?
        Answer. Not at this time.
        Question. How were performance measures chosen?
        Answer. The measures in NASS's annual performance plan were chosen
    because they are indicators of performance for key core NASS
    activities, representing each budget category, under each of the five
    REE general goals. NASS also wanted a mix of measures based on external
    customer input and internal evaluations. NASS held several meetings to
    obtain input from both field and Headquarters employees on the measures
    that would best gauge NASS's performance.
        Question. How did the agency balance the cost of data collection
    and verification with the need for reliable and valid performance data?
        Answer. NASS carefully examined each performance goal to determine
    which would benefit most from measures based on customer input, in
    order to limit costs and the respondent burden on NASS customers and
    data users.
        Question. Does your plan include performance measures for which
    reliable data are not likely to be available in time for your first
    performance report in March 2000?
        Answer. No. NASS anticipates having performance data available for
    each measure in time for the first performance report.
        Question. What are the key performance goals from your fiscal year
    1999 Annual Performance Plan that you recommend this subcommittee use
    to track program results?
        Answer. NASS recommends tracking the performance goal listed under
    general goal 1, since this represents the largest part of NASS's
    agricultural statistics program. The other key performance goal for
    NASS is listed under goal 5, which contains the measures for the census
    of agriculture.
        Question. In developing your Annual Performance Plan, what efforts
    did your agency undertake to ensure that the goals in the plan include
    a significant number of outcome measures?
        Answer. Developing meaningful outcome measures for an agency which
    doesn't deliver a program, but instead supplies information such as
    agricultural statistics is extremely difficult. NASS took the approach
    of formulating meaningful outcome measures which assess NASS's ability
    to provide accurate, unbiased, meaningful, useful data on time with no
    errors. Assessing these attributes requires a mix of internal measures
    and surveys of NASS customers and data users.
        Question. Do you believe your program managers understand the
    difference between goals that measure workload (output) and goals that
    measure effectiveness (outcome)?
        Answer. NASS program managers are knowledgeable about the
    distinction between output and outcome measures. NASS first began
    strategic planning efforts in 1994, and all levels of NASS employees
    have been involved in the development of internal agency performance
    measures down to the Branch level since 1996.
        Question. What are some examples of customer satisfaction measures
    that you intend to use? Please include examples of both internal and
    external customers.
        Answer. Each of the NASS customer satisfaction measures included
    under the five general goals require surveys of both internal and
    external customers, since there is a mix of both for every statistical
    product and data series produced by NASS. Some of the measures included
    under the three management initiatives in the fiscal year 1999 Annual
    Performance Plan are obtained from periodic surveys of NASS employees.
        Examples of customer satisfaction measures included the performance
    plan are: percent of data users who rate NASS data as important or
    essential to the orderly marketing of agricultural products; percent of
    agricultural leaders surveyed who rate NASS chemical use data as
    important or essential to analysis and risk assessment; and percent of
    stakeholders who rate NASS census and economic data as important to
    their work.
        Question. How were the measurable goals of your fiscal year 1999
    Annual Performance Plan used to develop your fiscal year 1999 budget?
        Answer. NASS did consider the level of support for each of the five
    REE general goals and corresponding performance goals and measures in
    decisions related to the development of the fiscal year 1999 budget,
    particularly the new initiatives.
        Question. If a proposed budget number is changed, up or down, by
    this committee, will you be able to indicate to us the likely impact
    the change would have on the level of program performance and the
    achievement of various goals?
        Answer. Yes, particularly since adjustments would most likely be
    made to new budget initiatives, each of which have a unique performance
    indicator in the annual performance plan. Significant downward
    adjustments to NASS's core programs could have significant effects on
    program coverage, accuracy, and timeliness measures as well as
    customers' evaluation of the agricultural statistics program.
        Question. Do you have the technological capability of measuring and
    reporting program performance throughout the year on a regular basis,
    so that the agency can be properly managed to achieve the desired
    results?
        Answer. Some of the internal performance measures related to
    accuracy and timeliness can be monitored throughout the year. Others,
    especially those reliant on external customer surveys, are more
    conducive to annual reporting. However, customer surveys could be
    staggered during the year if the customer and data users for a
    particular data series or product were unique.
        Question. The Government Performance and Results Act requires that
    your agency's Annual Performance Plan establish performance goals to
    define the level of performance to be achieved by each program activity
    set forth in your budget. Many agencies have indicated that their
    present budget account structure makes it difficult to link dollars to
    results in a clear and meaningful way. Have you faced such difficulty?
    Would the linkages be clearer if your budget account structure were
    modified? If so, how would you propose to modify it and why do you
    believe such modification would be more useful both to your agency and
    to this committee than the present structure? How would such
    modification strengthen accountability for program performance in the
    use of budgeted dollars?
        Answer. NASS's present budget accounting structure cross-walked
    with the REE general goals allows for the development of meaningful
    performance indicators and resource allocations. The only weakness in
    this design may be that the REE general goals which each agency in the
    REE Mission Area adhere to, are quite general, which makes it difficult
    to make specific budget decisions about NASS program activities.
        Question. Does your fiscal year 1999 performance plan--briefly or
    by reference to your strategic plan--identify any external factors that
    could influence goal achievement? If so, what steps have you identified
    to prepare, anticipate and plan for such influences? What impact might
    external factors have on your resource estimates?
        Answer. The NASS performance plan alludes to key external factors
    which are explicitly listed in the strategic plan. For example, one key
    external factor influencing NASS is the increasing demand among data
    users for new kinds of information provided in different forms. These
    pressing needs always require an assessment of NASS resources and
    priorities. The demand for increased coverage in the 1997 Census of
    Agriculture for minority farm operators, including American Indians,
    prompted NASS to initiate additional steps in the census mail list
    building process and to introduce new procedures to collect census
    information on American Indian reservations. Rapid changes and
    continued concentration in the agricultural industry has required NASS
    to modify procedures for collecting and publishing information for
    certain sectors. The need to sustain, and even increase, NASS standards
    for accuracy, timeliness, and relevancy in order to meet rising public
    expectations requires constant technology upgrades, training, and
    improved survey technology. Changes in priority can result in shifts in
    resource allocations.
        Question. Through the development of the Performance Plan, has the
    agency identified overlapping functions or program duplication? If so,
    does the Performance Plan identify the overlap or duplication?
        Answer. The development of the NASS performance plan has not
    identified any overlapping functions or program duplication. However,
    duplication related to NASS merging responsibility for the census of
    agriculture with the current agricultural statistics program have been
    identified and are being eliminated.
        Question. Future funding decisions will take into consideration
    actual performance compared to expected or target performance. Given
    that, to what extent are your performance measures sufficiently mature
    to allow for these kinds of uses? Are there any factors, such as
    inexperience in making estimates for certain activities or lack of
    data, that might affect the accuracy of resource estimates?
        Answer. Available resources could heavily influence the attainment
    of performance measures. In addition, the customer service performance
    measures for fiscal year 1998 are targets which were set without the
    use of baseline data, so actual survey data acquired starting this
    fiscal year could potentially be much different than these targets.
        Question. Based on your fiscal year 1999 performance plan, do you
    see any need for any substantive revisions in your strategic plan
    issued on September 30, 1997?
        Answer. No substantive revisions are necessary at this time.
                                     ______

                     Question Submitted by Senator Bumpers
                       census of agriculture improvements
        Question. Explain why you think USDA will do a better job
    conducting the Census of Agriculture than previously done by the U.S.
    Census Bureau. When will the current Census be available?
        Answer. The consolidation of the agricultural census and the
    existing NASS agricultural estimates program benefits the government,
    census respondents, and data users. The government realizes improved
    efficiencies in both census programs and NASS current surveys. In
    fiscal year 1998, NASS realized a budget decrease of $1 million in list
    frame development and costs due to efficiencies gained from NASS
    conducting the census of agriculture. Additional decreases are proposed
    in the fiscal year 1999 budget. Census respondents incur less burden
    because they are no longer reporting information to two different
    Federal agencies. Data users will enjoy a ``one-stop shop'' for
    agricultural data, with earlier release of census data and improved
    coverage and accuracy. Many of these efficiencies and improvements in
    timeliness and accuracy are directly attributable to the involvement of
    NASS's 45 field offices in the conduct of the census.
        Results of the 1997 Census of Agriculture will be available
    starting in February 1999.
                                     ______

                      Question Submitted by Senator Craig
                                census transfer
        Question. What effect would current Congressional proposals to move
    the annual Agricultural Census from the Department of Commerce to the
    Department of Agriculture have on this important survey? Does NASS
    support these changes?
        Answer. NASS was appropriated funding to conduct the census of
    agriculture starting with the fiscal year 1997 budget. Legislation to
    transfer the authority to conduct the census of agriculture from the
    Department of Commerce to the Department of Agriculture, Public Law
    105-113, the Census of Agriculture Act of 1997, was signed by the
    President on November 21, 1997. NASS supported the change and is
    committed to conducting a census of agriculture that will equal or
    exceed the quality formerly produced by the Bureau of the Census,
    Department of Commerce.

                              Subcommittee Recess

        Senator Cochran. We are going to continue our hearings. Our
    next hearing is going to be on Thursday of this week in this
    room. We will review the Department's budget request for
    natural resources and environment programs at that time.
        I again want to thank Dr. Gonzalez and all of our witnesses
    who have been here today for your assistance in understanding
    the budget request and the implications of it.
        Until then, the subcommittee stands in recess.
        [Whereupon, at 11:05 a.m., Tuesday, February 24, the
    subcommittee was recessed, to reconvene at 10:06 a.m.,
    Thursday, February 26.]

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 1999

                                  ----------

                          THURSDAY, FEBRUARY 26, 1998

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 10:06 a.m., in room SD-138, Dirksen
    Senate Office Building, Hon. Thad Cochran (chairman) presiding.
        Present: Senators Cochran, Burns, Bumpers, and Kohl.

                           DEPARTMENT OF AGRICULTURE

    STATEMENT OF JAMES R. LYONS, UNDER SECRETARY, NATURAL
                RESOURCES AND ENVIRONMENT

                     Natural Resources Conservation Service

    STATEMENT OF THOMAS A. WEBER, ACTING CHIEF

                                Opening Remarks

        Senator Cochran. The subcommittee will please come to
    order. Today we continue our hearings reviewing the budget
    request submitted by the President for Agriculture, Rural
    Development, and related agencies. This morning we are
    specifically reviewing the budget requests of the Natural
    Resources Conservation Service.
        We are pleased to have with us Under Secretary for Natural
    Resources and Environment James Lyons. He is accompanied by a
    number of individuals from the Natural Resources Conservation
    Service, including the Acting Chief Thomas Weber.
        We appreciate the presence of all of you this morning to
    help us understand the proposals of the administration with
    respect to the accounts funded under this agency.
        We are a little concerned about the proposal submitted by
    the administration insofar as it contains assumptions that the
    Congress is going to authorize user fees to be imposed on
    landowners and others who have the benefit of some of the
    services provided by this agency.
        It is unlikely that Congress is going to approve this
    request. And so the assumption, insofar as it takes into
    account additional funding from these sources, is probably
    flawed and unrealistic.
        We are also concerned about the proposal to consolidate
    watershed and some of the other programs in the operations
    accounts and wonder what the practical consequences would be
    for watershed and flood prevention efforts. This is an area
    that has been very important, particularly in the part of the
    country that I represent. We worry that the watershed activity
    might very well disappear and not be available to landowners
    and local areas if this request is approved as it is submitted
    by the administration.
        So these are some concerns that I hope the witnesses can
    address, and explain, as you see it, what the practical
    consequences of the proposals will be.
        In all other respects though, we hope that we can continue
    to support the important work to protect our land and water
    resources. This is a very important area. Conservation is
    essential if we are to maintain a capacity to produce
    agriculture commodities that are important for our Nation's
    well-being and our economic well-being as well.
        We are also interested in some of the initiatives that the
    Congress has passed in recent years establishing new ways to
    encourage conservation activity on private lands. There is just
    no way for the Government to obtain fee title to enough land to
    provide wildlife habitat and resource conservation to do the
    job.
        We have to have the cooperation of private landowners. We
    have to respect their property rights. We have to respect their
    goal to use their land to make a living. And this all has to be
    worked out in a compatible way.
        We think there are some important new initiatives that we
    should fund to try to encourage and do a better job of soil and
    water conservation in this process.
        So having said that, I am prepared now to yield to other
    members of the committee for any opening comments that they
    would care to make. And then we will hear the testimony of our
    witnesses.
        Senator Bumpers.

                          STATEMENT OF SENATOR BUMPERS

        Senator Bumpers. Thank you, Mr. Chairman. Mr. Chairman, I
    will submit my prepared remarks for the record and just simply
    echo some of the things you said; and that is that user fees--
    this subcommittee has never been very friendly toward the
    proposals for user fees, not likely to be this year either.
        Second, in visiting with the Secretary the other day, I was
    very pleased to know that they have a goal of 2 million miles
    of buffer zones along streams in this country. And I think that
    is of critical importance.
        Third, there is in my State a critical problem, which the
    President is helping us address. And it deals with the rapidly
    depleting underground aquifers in east Arkansas, the
    Mississippi River alluvial aquifer.
        And the President, in the Energy and Water Subcommittee,
    has asked for $11.5 million to start helping us divert water
    from service streams to the rice fields. Rice is of critical
    importance to us. We raise 43 percent of it. And it is fairly
    critical to Mississippi, too. They raise a lot of rice.
        And incidently, Mr. Chairman, Mississippi is also a part of
    that Mississippi River alluvial aquifer. You have heard me say
    these things before, I know, but it is of such critical
    importance I have to keep talking about it until we really know
    that we are on our way.
        We are talking about probably $1 billion overall to divert
    enough water on the Mississippi and the Arkansas and the White
    and the other rivers of east Arkansas to make up for the loss
    of the aquifer.
        It is estimated that by the year 2015 the 200-foot aquifer
    will be virtually depleted. We use such tremendous amounts of
    it for rice growing. So we don't have an awful lot of time to
    deal with that.
        But while that is energy and water and the Corps of
    Engineers will be called upon to start that project, I wanted
    to just say that ties in with this subcommittee's
    responsibilities and this particular agency's responsibilities.
        I think that pretty well summarizes. I am pretty well
    pleased with this budget. We will obviously have to make some
    changes in it, probably have to make some cuts in it. But
    generally, I think it is a pretty good budget, Mr. Chairman.

                               Prepared Statement

        Senator Cochran. Thank you, Senator. Your complete
    statement will be made part of the record.
        [The statement follows:]

                     Prepared Statement of Senator Bumpers

        I would like to welcome Secretary Lyons, Mr. Weber, and
    other officials from USDA to our hearing this morning. The work
    of the Natural Resources Conservation Service (NRCS) has long
    been important to my state. Arkansas is known as the Natural
    State and I see the role of NRCS, in a large measure, as an
    agency friendly to the purpose of keeping Arkansas a ``Natural
    State''.
        That is not to say that my state, and the entire country,
    do not face serious conservation challenges. Water and wind
    erosion still cause problems and water pollution in spite of
    the dramatic improvements since the 1970's remain serious
    threats to the health and safety of the American people. We
    made great progress since the Dust Bowl days of the Depression
    largely due to the predecessor agency of NRCS. But we still
    have a long way to go.
        Water pollution problems from point sources have been
    greatly reduced since the first Clean Water Act. As a result,
    more and more attention is given to non-point source pollution,
    which means farms. The American farmer is a world leader in
    conservation. His livelihood is tied to protection of his land
    and water resources. Any farmer who is willing to watch his
    farm wash into gullies and downstream will not be a farmer for
    long. It is the role of NRCS to assist the American farmer in
    doing what he does naturally.
        In my own state of Arkansas, we face some serious
    conservation problems. The ground water supplies in East
    Arkansas are being depleted at an alarming rate and we have no
    choice but to start making use of our abundant surface water
    supplies. In the western part of my state, the incredible
    growth in the livestock industry poses serious challenges to
    watersheds in the form of waste management. Similar challenges
    are heard from coast to coast and NRCS remains the single
    agency at USDA, and perhaps in government, best suited to rise
    to the call.
        The budget submission for NRCS appears as an improvement
    from the previous year. Increases are found in important
    accounts and would go far in helping the cause of conservation.
    I hope we can accommodate them. Unfortunately, the NRCS budget
    is only a part of the larger budget submission which does
    present major challenges for this subcommittee. I notice,
    however, that even the NRCS budget contains proposed user fees
    which have never been popular with this subcommittee and are a
    dangerous foundation on which to build a budget.
        I note that the prepared statements of Mr. Lyons and Mr.
    Weber provide a good overview and I look forward to their
    comments. Let me simply end my remarks by restating my
    commitment to conservation and I will work with Senator Cochran
    to develop a bill for the coming fiscal year that will do all
    we can to give USDA, and America's farmers, the tools they
    need.

                           STATEMENT OF SENATOR BURNS

        Senator Cochran. Senator Burns.
        Senator Burns. Thank you, Mr. Chairman, and thank you for
    holding this hearing this morning. Of course, I would imagine
    the Secretary down here understands what our problems are with
    this.
        I am glad to hear that Arkansas would like to divert some
    water. We would, too. And we will----
        Senator Bumpers. We will sell it to you.
        Senator Burns. We will take all that in consideration
    whenever that time comes. I think the Senator from Arkansas
    understands what I am talking about. We have not had a lot of
    luck in storing water way upstream from where he is for use
    later. And I am still a big proponent of that, and I will
    probably be a proponent of what he is trying to do down in
    Arkansas.
        But that great river system is in the center of our
    country, and it supplies a lifeline to a lot of things. We
    continually have this administration usurping the process of
    getting some things done. And I think the moratorium on the
    roads in the West and the roadless areas of this country is one
    of those.
        We have talked with Secretary Glickman, and we want to
    resolve that problem as soon as we can. One wonders about this
    whole business of providing food and fiber for this Nation and
    then put all the restrictions on the people who are responsible
    for those provisions to get it done. And I am very concerned
    about that.
        I am concerned about user fees. I am concerned about this
    business of counties that depend on public lands for economic
    livelihood, the receipts that are derived from those lands of
    harvesting and providing for America from a renewable resource,
    not a finite resource. And I am concerned about public safety
    that money provides.
        I am concerned about schools and roads that are provided by
    those dollars, that renewable crop that we have there, and will
    continue to be concerned about that and the approach this
    administration has taken to deal with some of those problems.
        I need not go into this business, that Mr. Lyons and I
    disagree on many things, although we agree on some. I still say
    I made my greatest mistake 2 years ago. I capitulated, and I
    should not have done that. But nonetheless, that is water under
    the bridge, and that is my mistake, and I will live with it
    forever, I think.
        But I am concerned about their approach to public lands and
    how they are managed, especially from a renewable resource
    standpoint, and denying, absolutely denying, the people that
    live in those neighborhoods any kind of an opportunity to do
    what they do best. And that is they manage those lands and move
    this decision process out of this 17 square miles of logic-free
    environment where we get our eyes glazed over and our brain
    completely becomes dead.
        So with that, I appreciate this hearing. And as we move
    through this process, I am satisfied there is going to be a lot
    of changes in the budget, as it has been presented to this
    Appropriations Committee.
        Thank you, Mr. Chairman.
        Senator Cochran. Thank you, Senator.
        Senator Kohl.
        Senator Kohl. Thank you, Mr. Chairman.
        Mr. Under Secretary----

                               Prepared Statement

        Senator Burns. I would like to submit my--I am sorry.
    Senator, if I might, I would submit my full statement for the
    record.
        Senator Cochran. Without objection, it is so ordered.
        Senator Burns. I am sorry. Thank you.
        [The statement follows:]

                      Prepared Statement of Senator Burns

        Thank you, Mr. Chairman. I appreciate you calling this
    hearing this morning so we learn more about what the
    Administration plans for the budget for the Department of
    Agriculture for fiscal year 1999. I appreciate seeing this
    particular portion of the Agriculture budget come before the
    subcommittee this early in the year. With our expedited
    appropriations process this year I thank you having some of the
    more controversial agencies come before the committee early.
        As we are all well aware one of the primary agencies in
    this Subcabinet level position is that of the Forest Service.
    We are all also very aware of the fact that this subcommittee
    does not fund that portion of the Department, instead that
    funding comes from the Interior Appropriations Subcommittee.
    With this in mind, I know and understand that this is not the
    place to bring up decisions regarding the Forest Service.
    However, Mr. Chairman I would be totally negligent to my duty
    to my constituency if I did not bring up my utter
    disappointment in the Forest Service, this level of management
    and the Department if I did not take a moment to discuss the
    recent decision on the construction of roads in our national
    forest system.
        In early January it came to our attention that the Forest
    Service was preparing some sort of plan to deal with the
    construction of roads in national forests. Soon there after,
    myself and several members of the Energy and Natural Resources
    Committee sent a letter to Secretary Glickman outlining our
    desire to work with the Department and the Forest Service to
    come up with a plan to address this issue. Approximately a week
    after that letter we were informed by the Forest Service that
    they were developing a plan and would be informing us of it as
    soon as it was prepared and signed off on by the higher ranking
    officials in the Administration.
        So any thought of working in a cooperative manner had
    slipped out the door without so much as even an official reply
    to our letter. Another opportunity to work out a plan in due
    process to benefit all the people had escaped. Instead the
    Administration took this opportunity to once again issue an
    executive proposal to implement what they know will be a
    controversial plan. I am so disgusted by this Administration
    taking every opportunity to circumvent process when they do not
    see it going the way that they like to see. Instead of a
    process which we could all participate in, this Administration
    forces upon people the will of the special interest groups
    which support them.
        Then just a little over two weeks ago, prior to the hearing
    with Secretary Glickman, we found out that there were plans to
    circumvent the process even further. The Forest Service was
    prepared to cancel the public meetings they had previously
    announced and just move forward with their plan. Thankfully
    this week, the Forest Service announced that they were
    extending the comment period on this very issue, and would host
    a series of public forums throughout the west. This due only to
    fact that Senator Craig and I caught the Secretary and voiced
    our complaints in person.
        I never realized it would be so very difficult to defend
    the interests and rights of my constituents in this town. I
    never dreamed that the Forest Service and the Department of
    Agriculture were so prepared to totally disregard the voices
    and concerns of the citizens of rural forested America. As I
    stated to Secretary Glickman, I am severely disappointed and
    alarmed by this action taken by himself, the Chief of the
    Forest Service, Under Secretary Lyons.
        I have said my piece on this issue now, and I thank the
    Chairman for his indulgence on this matter, since as I stated
    this is not an agency issue funded by this committee but it is
    one of vital importance to the people of rural Montana. I will
    go into this further this year during hearings before the
    Interior Appropriations Subcommittee and the Energy and Natural
    Resources Committee.
        I have stated in the previous hearings before this
    committee I am displeased, shocked and somewhat stunned to see
    the budget that the Administration has proposed for the
    Department of Agriculture. Times are difficult enough on the
    farm and ranch in rural America at this today, and the federal
    government is doing nothing to ease the pressure on these hard
    working people. Additional rules and regulations are
    continually being proposed forcing these people research and
    respond in order to deal with the Federal government.
        This past year, for an example, people applying to place
    land in the Conservation Reserve Program (CRP) were forced to
    rewrite and reapply every time an additional sign up was
    announced for additional acreage to be included in the program.
    It is not the issue that they should have to reapply, but
    instead the concern arises from the rules governing each sign
    up period. Rules which changed not only prior to the sign up,
    but after the sign up had begun, and even again after the sign
    up had closed. Basically, Mr. Chairman, the rules were changing
    daily if not hourly on the ground.
        The results of this confusion led to some of the best
    producing land in the state of Montana being placed in CRP.
    Excluding those marginal lands which the program was originally
    designed to protect. It was my understanding that the
    Conservation Reserve Program was a program developed to take
    marginal, environmentally sensitive lands out of production and
    allow them to be reseeded in grasses. This then would serve to
    protect those lands, the environment and enhance wildlife
    opportunities in areas of a sensitive nature.
        Instead in Montana what has occurred, by the development of
    the indexes used to judge the fields was the exact opposite of
    what the program was intended to do. We have large sections of
    good solid producing land coming out of production, and those
    areas with highly sensitive land will continue to see the
    plowshare breaking the soil. This just does not make sense to
    me or to the people trying to protect the lands on which they
    plant.
        Furthermore, during the sign up periods, people were
    provided with certain sets of rules and standards by which
    their land was judged for suitability for inclusion in the
    program. Only to find out afterwards, that during the process
    the rules and standards had changed. Ultimately these people
    found that what they thought they were applying to put into CRP
    was not eligible for the program under the rules which were
    finally implemented.
        In a large operation it might be possible to overcome this
    type of realignment of seed purchase for cover forage, but on
    many of the smaller operations who count on this land for
    stable income, well it completely wipes out their cash reserve
    for the coming planting season. Making nearly impossible to
    either continue their enrollment in the program or plan for
    planting costs for the upcoming year. Much of this confusion
    was due to a lack of communication between the officials from
    the Natural Resource Conservation Service (NRCS) and the Farm
    Services Agency.
        For the past several years I have supported funding for the
    Grazing Lands Conservation Initiative, the grassroots
    organization working on behalf of private landowners. This
    organization combines the efforts of conservation based
    organizations and the private land owner to work with NRCS for
    technical assistance on the private property owners pasture and
    grazing land. However, it appears that NRCS is not willing to
    provide an accounting of where the funding is being used to the
    people directly involved.
        If the agency is not willing to provide this information to
    the participants, I will seek assistance from this committee to
    have them provide it. This is again another indication of the
    unwillingness of this agency to work with the public in the
    role of technical assistance instead they exert pressure in the
    role of a regulator.
        I have read with interest your side of the story as it
    relates to the funding and actions during the recent
    implementation of the Environmental Quality Incentives Program
    (EQIP). Unfortunately what you detailed did not occur in my
    state of Montana. Instead of local districts selecting the
    priority areas of concern, it was the state Director doing so
    on his own initiative. I appreciate the work of your staff here
    in Washington in working with my state staff to make sure this
    was straightened out before the program became a catastrophe in
    Montana.
        However it is my concern that we are taking funding to
    assist our producer on the world market to pay for this
    program. At a time when we are being out marketed and out
    traded on the world market forcing our domestic grain supply to
    continue to build to the detriment of the market price.
        The farmers and ranchers are having a difficult enough time
    this year, with grain and livestock prices being so low.
    Brought on, in part at least, by the unwillingness of this
    Administration and the Secretary to use all the marketing tools
    at their disposal to make gains on the world market stage.
    American agriculture is always one of the first issues taken
    off the table at trade negotiations, in favor of the hi-tech
    industry, of which I am very supportive, for which the United
    States is famous. Forsaking our ability to continue to produce
    our own supply of safe, reliable and cost effective food and
    fiber.
        As we move into the next century, I am afraid for the
    future of American Agriculture. As due to over regulation,
    misguided approaches to land management and the lack of a solid
    and effective trade policy that our American farmer and rancher
    will become an endangered species in their own rights. Forcing
    us to import our food supply and pay additional costs
    associated with the lack of our own production. The land as we
    once knew it will revert to what many believe the pioneers
    first saw as they crossed this country. However, this will not
    be the case as the land will continue to feed upon itself and
    so make itself unsuitable for the wildlife that now flourishes
    with sound and meaningful management practices.
        I ask you to work with these great people to allow them to
    compete with the rest of the world in trade for our
    agricultural commodities. Do not overburden them with
    regulations which the rest of the world does not impose for
    production purposes. Give them the opportunity to make a decent
    living off the land, and they will provide you with excellence
    in land management and protection.
        Mr. Chairman, the Secretary, in his position has the
    opportunity and the tools available to secure and assure the
    future of the American farmer and rancher on the land. All he
    needs is to use those tools to assist and not over regulate the
    producer, instead provide them guidance and technical
    assistance. Instead the Department and the agencies use those
    same tools to overburden the producer with rules and
    regulations, making it difficult, if not in many cases
    impossible, for the producer to work with you and your
    agencies.
        The time has come for the leadership in this Department to
    come out swinging for the future of American agriculture. Take
    on the fight for the producer and not for those groups which do
    not either understand or care about the farmer and rancher. The
    producer has placed their faith in you as sworn officials of
    their government to work with them and for them be it in
    Washington or in any other capitol in the world.
        Don't turn your back on them, work for them and they will
    provide you with a healthy, clean, and reusable food and fiber
    supply. One which will provide not only for the health and well
    being of the consumer but also for the land and the environment
    in which they live. Remember they are the ones living on the
    land. They are the people who must work the land to make a
    living. It is the producer who must face the land on a daily
    basis, knowing that it is only from the land that their future
    is secure.
        Thank you, Mr. Chairman.

                           STATEMENT OF SENATOR KOHL

        Senator Kohl. Mr. Under Secretary, we appreciate your
    willingness to testify before the subcommittee today regarding
    the Natural Resource Conservation Service's proposed budget.
    These conservation programs were created to protect water
    quality and improve wildlife habitat.
        In Wisconsin we have many farmers who take advantage of
    these programs and support them. However, we have heard serious
    concerns about your agency's ability to administer these
    programs, especially when you have full participation, as we do
    in Wisconsin.
        For example, the Wisconsin NRCS office was so short of help
    that the Wisconsin Department of Natural Resources had to
    donate 100 staffers to help with the most recent conservation
    reserve program signup.
        Because in Wisconsin we probably have as many miles of lake
    shore and river property as we do dairy cows, we are most
    interested in your agency's programs that protect and promote
    water quality, the Wetland Reserve Program and the
    Environmental Quality Incentives Program.
        In fact, Wisconsin has one of the largest WRP programs
    success stories, Duffy's Marsh. Twelve local landowners worked
    with the county, State, and Federal agencies to restore a
    1,700-acre wetland to its natural state.
        Both the tourism and the dairy industries can and have
    coexisted in the past. But both are undergoing tremendous
    change and stress. We are counting on the NRCS to help us meet
    these challenges, and we hope to hear from you today how your
    agency will operate the environmental programs upon which many
    States depend.
        Senator Cochran. Thank you, Senator.
        Secretary Lyons, we appreciate very much your being here
    and submitting your statement for the record. We will print it
    in the record in full and the other statements that we receive
    from the witnesses.
        You may proceed with any comments that you think would be
    helpful to the committee.

                          Statement of James R. Lyons

        Mr. Lyons. Thank you very much, Mr. Chairman. And I, too,
    appreciate the opportunity to be able to appear before the
    subcommittee today to discuss our proposed fiscal year 1999
    budget for the Natural Resources Conservation Service.
        If you had a chance to review the testimony, I think you
    can see it is an excellent discussion of all the programs that
    we administer and the rationale for the 1999 budget. I will
    spare you the details of that and ask that it be submitted as a
    part of the record.
        Before I begin, Mr. Chairman, I want to commend you for
    your outstanding conservation leadership over the years, both
    in your role on the authorizing committee in effecting the
    creation of many of the conservation tools that we have to work
    with today, as well as obviously your outstanding leadership in
    the creation of the WHIP Program. And I hope you are going to
    join us, Friday to make an announcement related to that
    program.
        Senator Cochran. I have submitted a statement with some
    quotes for you. I do not think I will personally be able to be
    at the news conference. I regret that I cannot----
        Mr. Lyons. Well, that is unfortunate.
        Senator Cochran. But I will be there in spirit anyway.
        Mr. Lyons. You will be well recognized for the leadership
    role you have played. We appreciate it, as well as the role
    that Senator Bumpers has played over the years as a strong
    supporter of conservation, helping to put together the
    framework that now constitutes the conservation programs that
    we have here in the United States, which I think represent
    really the most outstanding set of tools for achieving the
    conservation goals of this Nation, as well as the leadership of
    your colleagues, Senator Burns and Senator Kohl, for their
    efforts in helping to promote good land stewardship across the
    United States.
        With me today are a number of people who really play the
    key leadership roles in NRCS and in my office. If I could, I
    would just briefly introduce them for the record.
        Tom Weber is our Acting Chief for the Natural Resources
    Conservation Service to my immediate left. Tom has served in an
    outstanding capacity since Paul Johnson elected to go back to
    his farm in Iowa.
        He sends his regards. I saw him just last week, and he is
    having a wonderful time. And he does not miss the beltway at
    all, I can assure you, Senator Burns.
        Senator Burns. He probably does not like the hog market
    either, does he?
        Mr. Lyons. Well, I think he is growing Christmas trees
    these days.
        Senator Burns. That figures. [Laughter.]
        Mr. Lyons. But Tom has done an outstanding job, and I am
    sure that the committee is aware that the Secretary has
    announced the appointment of Pearlie Reed to become the next
    Chief of NRCS effective March 1.
        Pearlie did an outstanding job as the Acting Assistant
    Secretary for Administration and helped us tremendously in
    working both on an administrative convergence and in addressing
    the civil rights concerns that have been raised in the
    Department. And we look forward to Pearlie's outstanding
    leadership as the next Chief of NRCS.
        Also with me are Dr. Gary Margheim, Acting Associate Chief;
    Larry Clark, Deputy Chief for Programs; Carole Jett, who is
    Acting Deputy Chief for Soil Survey and Resource Assessment;
    Fee Busby, who is Deputy Chief for Science and Technology;
    Dwight Holman, Acting Deputy Chief for Management; and Ann
    Dubey, who is the Director of the Budget, Planning, and
    Analysis Division, who put our budget together for us.
        If I could, I also want to introduce a new member of my
    staff. His name is Craig Cox. He is sitting behind me. You may
    be aware that Tom Hebert, formerly of the Senate Agriculture
    Committee staff and then my Deputy for Conservation Programs,
    elected to retire. All I can tell you is that he is taking 6
    weeks off and collecting his breath before he engages in a new
    career in conservation.
        We certainly miss Tom's assistance, but Craig, who also
    served on the Senate Agriculture Committee staff at one time
    will do an outstanding job as Tom's successor.
        What I would like to do very briefly, Mr. Chairman, is talk
    a bit about the successes we have realized over the past decade
    in conservation, obviously focusing on the 1999 initiatives and
    what that budget does for us in furthering our efforts to
    achieve good land stewardship and promote sound conservation
    and talk a little bit about the opportunities that lie ahead.
        I know, Mr. Chairman, that you and the members of the
    committee have seen over the past year this document,
    ``Geography of Hope,'' which was constructed by NRCS under
    Paul's leadership to help to document some of the successful
    accomplishments in conservation we have realized, the
    tremendous achievements in reducing soil loss across the United
    States and improving water quality, in repairing damage to
    riparian habitat and promoting wildlife habitat across the
    Nation.
        The legacy, particularly of the last 10 years in
    conservation, is an outstanding one in improving, as I said,
    wildlife habitat, in restoring wetlands, and in promoting a
    sound land stewardship based on the principle of voluntary
    commitment to conservation.
        America's farmers and ranchers have shown their dedication
    to conservation, and through the assistance provided by NRCS
    over the last 60 years, as well as the assistance provided in
    partnership with the conservation districts, America's farmers
    and ranchers have done an outstanding job in achieving much of
    the conservation achievements we recognize today and are
    documented in ``Geography of Hope.''
        This budget is built upon that foundation of conservation
    achievements in a number of ways. You will see in our proposed
    budget that probably the largest proposed increase in funding
    is in the conservation operations area. In essence, Mr.
    Chairman, these are the funds that provide the support for the
    people who go out on the ground and provide conservation
    technical assistance and administer the programs that have been
    authorized by the farm bill.
        The bottom line for us in conservation is people. People
    are conservation. And the work that is done one-on-one between
    landowners, conservation districts, and our conservationists is
    really critical to achieving what we have achieved in the past
    and critical to a successful continuation of those achievements
    in the future.
        It is critical that we have the people and the resources,
    the financial resources, to continue with our conservation
    efforts. This budget places an emphasis on trying to achieve
    additional funding for that element of the program.
        You will see, however, in the budget that we do call for a
    reduction in FTE's in personnel, as a result of some
    difficulties we have had in providing additional support for
    funding programs, for funding the technical assistance that is
    a part of the programs that are funded out of CCC.
        And I know the committee is aware of some of the concerns
    we have there and the need to address these issues. And I
    welcome a dialog on the internal debate we have or how to
    provide support for those people and those programs.
        I would also highlight that the budget, as we have
    submitted it, includes a number of increases in funding for
    programs that were authorized by the 1996 farm bill and are
    funded out of the CCC program.
        For example, we proposed an increase of $100 million for
    the Environmental Quality Incentives Program [EQIP]. This
    additional funding for EQIP is critical to continuing our
    achievements in conservation and is an integral part of the
    President's clean water action plan, which the President
    announced just last week at a meeting up in Baltimore.
        What is exciting about the opportunities associated with
    this clean water action plan--and we will be sure to get a copy
    of the document to you, Mr. Chairman, and the members of the
    committee--is the focus it places on natural resource
    stewardship and land conservation as the key to accomplishing
    future gains in clean water.
        Much of the success in clean water that we have realized
    over the last 25 years has really focused on what I would call
    the easy tasks. I am sure the industries that are impacted do
    not consider it easy.
        The larger challenge is dealing with the pollution that
    comes from nonpoint sources, which includes both urban and
    suburban runoff, as well as the runoff that occurs across rural
    landscapes from agricultural activities and forestry activities
    and the like.
        This plan calls for a continuation of the voluntary
    approaches to dealing with those challenges through increased
    technical assistance and cost-share assistance, through using
    tools like EQIP to get the job done, and calls for a continued
    partnership between America's private landowners, primarily
    farmers and ranchers, and the conservation agents and agencies
    at the State and Federal level to achieve these goals.
        I think it is a remarkable accomplishment. And I think in
    many respects, Mr. Chairman, it exemplifies what we have been
    achieving in conservation over the last 10 years. The
    recognition on the part of our partner in this report, the
    Environmental Protection Agency, that voluntary stewardship and
    technical assistance and conservation services is a key
    ingredient to achieving our long-term clean water goals, is, I
    think, a significant milestone in where we are headed.
        This program does not call for any new regulatory
    strategies to continue our progress in dealing with clean
    water. But it does recognize the important contribution that
    private and public land stewardship can make to achieving those
    goals. And that is significant.
        As a part of our conservation operations budget and related
    to the clean water action plan is $20 million for grants to
    local interests and communities to help them in achieving their
    clean water goals in the context of watershed planning.
        There is a great deal of enthusiasm and initiative and
    creative solutions that have been devised out on the ground by
    conservation districts, by RC&D's, by community groups and
    organizations that are working together with private landowners
    in partnership to improve water quality and address
    conservation needs. And we seek to provide some additional
    support for their efforts.
        You will also find in the conservation operations budget
    additional funds to leverage additional contributions from
    State entities and State interests to further our efforts to
    improve conservation. This is an attempt to try and further the
    use of those Federal dollars and achieve those ends.
        I would also mention that you will see in our budget a
    slight reduction in proposed funding for the Wetland Reserve
    Program. The reason for that is we are well on track to
    achieving the goals that were laid out in the 1996 farm bill.
    In fact, we believe we will achieve the enrollment of 975
    million acres--975,000 acres.
        Yes; that would be a lot of acres--975,000 acres by the
    year 2000, which is 2 years ahead of schedule. So I encourage
    you not to misread our commitment to conservation of wetlands
    by that reduced funding level.
        You will also see, Mr. Chairman, that we ask for $20
    million, basically the remainder of the funds that were
    authorized for the Wildlife Habitat Improvement Program. I
    would dare say we could always use more money for that program.
    We have seen tremendous interest and success with that program.
        And I think that is a program that benefits not only
    landowners but all of us who fish and hunt and enjoy the
    outdoors. And it helps to demonstrate the contribution that
    agriculture is making to improving wildlife habitat.
        You will also see an increase in funding for the
    Conservation Farm Option Program, which is the remainder of the
    installment of funds for that program, an attempt to try and
    come up with an innovative way to put 10-year conservation
    plans in place that provide a little more flexibility in that
    regard.
        Let me close, Mr. Chairman, by emphasizing two things which
    you pointed out in your opening statement. I think the future
    challenges in conservation and land stewardship in the United
    States are on private lands. Seventy percent of the American
    landscape is privately owned.
        And while we spend a tremendous amount of time debating
    what occurs on those lands that are in public ownership--and I
    know, Senator Burns, you and I will have many opportunities to
    discuss this issue--the real challenges that lie ahead, and I
    think the real accomplishments we are going to realize in the
    long term, have got to come from a working partnership with
    landowners and conservation agents who can provide the
    technical skills and the cost-share assistance to help them
    manage their lands, not only for long-term productivity, but
    from the standpoint of improving conservation overall.
        This budget seeks to make investments that will further the
    progress that we already realize. And let me just say that with
    regard to the public land issues, Senator Burns, of course we
    will have another opportunity to address these issues next week
    in the Energy and Natural Resources Committee oversight
    hearing.
        I know that there are many areas in which we disagree with
    regard to public land policy, but on the other hand I think
    there are many on which we do agree. And I hope we will have an
    opportunity to discuss some of those today.
        And, Senator Kohl, I would point out that NRCS is stretched
    in many regards with the conservation challenges and
    opportunities that we face. I would characterize what is going
    on in conservation in Wisconsin as a tremendous opportunity,
    given the commitment of the residents of that State to leaving
    a legacy of conservation that they will all be proud of.
        The State conservationist in Wisconsin is a former
    classmate of mine and a good friend, Pat Leavenworth. So I can
    assure you that the State is in good hands under Pat's
    leadership.
        The role that Wisconsin DNR is playing right in programs
    like CRP is part of any effort really to develop a long-term
    partnership.
        There is no doubt we can use the help, but we hope in a
    closer working relationship with State agencies like DNR, as
    well as the State department of agriculture, we can further our
    efforts to work together, to use our resources more efficiently
    and make sure that through collaboration we get better land
    stewardship and hopefully even a better legacy to leave behind.
        With that, Mr. Chairman, I think Chief Weber has a few
    comments that he would like to offer.

                              Prepared Statements

        Senator Cochran. Thank you, Mr. Lyons. We will insert your
    prepared statement and the statement of Mr. Weber in the
    record.
        [The statements follow:]
                      Prepared Statement of James R. Lyons
        Mr. Chairman, Members of the Committee. It is my pleasure to
    outline for you the fiscal year 1999 budget request for the Department
    of Agriculture's Natural Resources Conservation Service (NRCS).
        The budget plan that the President recently presented to Congress
    is an historic proposal. Founded upon the notion that the commitment
    and contributions of individuals will ensure a better tomorrow, the
    fiscal year 1999 budget proposal gives Congress and the Administration
    the opportunity to reverse three decades of budget deficits and
    burdening debt. In a sense, this Budget proposes to build a legacy for
    the American people of fiscal integrity and responsibility. It ensures
    our children the promising future of a productive and prosperous
    economy. Under this proposal, everyone has a part to play. And more
    than ever before, local people will be challenged to take the lead and
    ownership for that which they value the most.
        I would like to speak today of another legacy which our 1999 Budget
    Proposal challenges us to begin. That is the legacy of conservation and
    land stewardship in America. We speak frequently about the programs and
    activities that we provide and attempt to quantify them in terms of
    dollars of financial assistance provided, and tons of topsoil that we
    preserve. However, we rarely take a step back and look not only at a
    bigger picture of the landscape, but to gaze beyond the horizon into
    the future of our resources. I believe we would all like to ensure that
    citizens who want to help themselves will have the resources and
    knowledge available to meet their future needs.
        As we consider the fiscal year 1999 Budget and the personal
    commitment that we are asking of citizens, we find no better historic
    and present example of local leadership and ownership, than in
    America's conservation movement. In response to the alarming
    realization that the future viability and productivity of domestic
    agriculture was at stake, conservation activities on private lands were
    solidified and organized with a strength from which we continue to
    benefit. There are many parallels between the nation's response to the
    Dust Bowl and the current effort to balance the Federal budget. But
    more importantly, what I would like to talk about today, is how we
    proceed to the next level--how we foster a conservation ethic in
    America well beyond a balanced budget, the duration of current program
    authorizations, or even our own tenure as public servants.
        What we have learned from witnessing the success of the
    Conservation Partnership over sixty years is that folks want to help
    themselves. They only need some guidance and a helping hand from time
    to time. This helping and guiding hand is the foundation upon which the
    conservation legacy must be built. We are all familiar with the story
    of how a house built upon sand was swept away by the rains, while the
    house built upon the rocks endured. So too, conservation must be
    founded upon a rock-solid base that will not erode with time.
        This foundation is the conservation partnership which should be
    bolstered and strengthened so that it may serve us for generations to
    come. We sometimes refer to our farm programs as tools that are used to
    assist the landowner build conservation practices and structures.
    Furthermore, we might think of our conservation field staff as the
    carpenters with the knowledge and skills to put those tools to work.
    But we all know that we cannot build a lasting structure without a firm
    foundation. This groundwork is the legacy that we must preserve and
    strengthen for future generations.
        Clean Water Initiative.--Perhaps no better example provides a
    picture of the legacy that NRCS strives to build than the Clean Water
    Action Plan. On October 18, 1997, the 25th anniversary of the Clean
    Water Act, the Vice President challenged Federal agencies to develop a
    clean water plan that would address three goals--protecting public
    health, preventing polluted runoff, and promoting community-based
    watershed management. More specifically, the plan calls for specific
    actions including identifying sources of nitrogen and phosphorus in
    water; achieving a net gain of 100,000 acres of wetlands per year by
    2005; and promoting ``smart growth'' that is compatible with clean
    water.
        The Clean Water Action Plan, contains common sense goals that are
    highly valued by the public. It also reveals a clear consensus that
    watershed-based assistance, and the kinds of voluntary conservation
    work NRCS supports are a preferred approach to ensuring lasting
    conservation measures in communities. As a result, NRCS will have a
    leading role in helping achieve the goals that are part of the
    President's Clean Water Initiative. On many accounts, the challenge
    that has been presented to Federal agencies involved in this initiative
    are far reaching and present a formidable task in the time frame that
    has been established. However, the resource of NRCS technical
    assistance and the program tools that are presented in this budget
    proposal, represent the foremost resource that is available to the
    public to accomplish the goal of improving water quality across the
    nation.
        The Clean Water Action Plan will help landowners. It will encourage
    Federal, State and local governments to develop agreements that clarify
    their roles and responsibilities, enhance coordination and efficiency,
    and reduce duplication effort. Citizens and landowners will realize a
    more streamlined process to government programs and assistance, with
    fewer office visits and program application forms required.
        Without doubt, the environmental challenges facing agriculture with
    respect to water quality and availability are daunting. Every day we
    read or hear about concerns from across the country about the quality
    of drinking water supplies, conflicts over the availability of water
    for agricultural and urban uses, and about wildlife needing water and
    habitat in order to survive. For these and all the other similar
    issues, USDA does not accept the premise of many that places sole
    responsibility on agriculture. But USDA also believes that it is
    agriculture's primary responsibility to address these challenges
    aggressively and effectively.
        The proposed fiscal year 1999 budget request strives for a balance
    in spending that will provide farmers and ranchers with sufficient
    financial incentives for conservation work, including targeted land
    retirement, while continuing to focus on technical assistance as the
    basis for these activities. The budget 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, including CCC funded programs, and contrasts them with the
    comparable figures from the two prior fiscal years.

                                                [In thousands of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                                      Fiscal years--
                                                                     -----------------------------------------------
                                                                           1997            1998            1999
    ----------------------------------------------------------------------------------------------------------------
    Appropriation:
        Conservation operations.....................................         620,219         633,231         742,231
        Watershed and flood prevention operations...................         226,660         101,036      \1\ 49,000
        Resource conservation and development.......................          29,377          34,377          34,377
        Watershed surveys and planning..............................          12,381          11,190         ( \1\ )
    CCC funding:
        Wetlands Reserve Program [WRP] \2\..........................          99,308         218,597         123,741
        Wildlife habitat incentives [WHIP]..........................  ..............          30,000          20,000
        Environmental Quality Incentives Program [EQIP].............         200,000         200,000         300,000
        Conservation farm option [CFO]..............................  ..............          15,000          25,000
        Farmland Protection Program [FPP]...........................           2,000          18,000  ..............
    ----------------------------------------------------------------------------------------------------------------
    \1\ Technical Assistance for Watershed and Flood Prevention Operations and Watershed Surveys and Planning is
      included under the Conservation Operations Account.
    \2\ Does not include technical assistance costs funded from unobligated WRP appropriation balances; fiscal year
      1997--$12 million; fiscal year 1998--$18 million; fiscal year 1999--$4 million.

        Now, let me describe how NRCS differs from other federal agencies
    and summarize the unique characteristics and assets that make it the
    foundation for a conservation legacy on private lands.
     building upon the 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.
    Technical Assistance
        The foremost tool that we use to meet our goal and the most
    fundamental building block of the conservation legacy is the technical
    assistance that our field staff and partners provide to our customers.
    We try hard to define what technical assistance is on many accounts.
    There are tables and graphs that show the number of hours that a
    technician spends on a number of different functions on a day to day
    basis, and the many types of educational, engineering, and scientific
    functions that they serve. In addition, NRCS will continue to work
    toward quantifying assistance to fulfill provisions of the Government
    Performance and Results Act. But really, the definition of technical
    assistance is quite simple. It consists of all the things that our
    staff do to advance our mission of conserving, improving, and
    sustaining natural resources.
        It has been said in athletics that the great teams are the ones
    that do all of the ``little things''. I believe that the success of
    NRCS and its partners are a testament to this theory. The tasks may not
    always be glamorous, and to a casual spectator they may very well
    remain overlooked. But still, all of the things NRCS staff do on a
    daily basis contribute greatly toward the common goal of moving the
    conservation effort forward. This might mean preparing a soil probe
    truck long before twilight to visit a rancher at the far end of the
    county. It might mean taking extra time to assist low-income producers
    to ensure that their program applications are clear and complete. Or it
    may entail transferring duty stations to another part of the region to
    assist fellow workers with Emergency Flood engineering work that could
    save a community. Conservation technical assistance takes many shapes
    and forms. However, our support of this work is fundamental to the
    conservation legacy we seek and ensuring the stewardship in the
    communities of tomorrow.
        Civil Rights.--As we speak of building a legacy of land stewardship
    in America, I would like to underscore the contributions that NRCS is
    making toward ensuring equitable service and opportunity for all
    customers and employees of USDA. NRCS has had a good record of ensuring
    diversity and opportunity in the past, however I believe we can do
    better. Throughout various program and technical assistance activities,
    NRCS will work hard to provide the necessary outreach and assistance to
    ensure that our customers have easy access to services. In response to
    the Civil Rights Action Team report, the Secretary has undertaken many
    steps to improve the Department's activities and policies in this area.
    I am confident that NRCS will continue to seek proactive ways to better
    serve minority and low income customers. One of the hallmarks of the
    conservation assistance is that it is available to anyone, anywhere.
    That includes areas that are not typically designated as high workload
    areas based upon farm program participation, population, or other
    demographic factors. By offering basic and universal conservation
    assistance on a national basis, NRCS offers minority and limited
    resource farmers a needed helping hand. Clearly, a legacy of
    conservation on private lands must be built with the participation of
    everyone.
        NRCS is the only Federal agency whose major purpose is to provide
    conservation 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. A few of its many
    assets include the following:
        Delivery system.--NRCS has a nationwide network of professional
    staff at the local level 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 and state
    conservation agencies 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. The local field staff 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. Through our regional
    framework, NRCS technical staff are 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 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 at the local level.
        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 1997, some 15,518 NRCS Earth Team volunteers
    donated 534,668 hours to conservation efforts. As calculated by the
    Points of Light Foundation, this equates to an additional $8,300,000 in
    direct assistance to private landowners for natural resource
    protection, an increase of nearly 30 percent from fiscal year 1996.
        Local people as decision-makers.--When NRCS provides conservation
    and program assistance, the agency works under mutual 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.
    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.
        Now I will describe our programs and plans for fiscal year 1999.
            program effects and the fiscal year 1999 budget request
        The activities of the Natural Resources Conservation Service serve
    the Nation in numerous ways and provide many indirect benefits. The
    programs and services provided by NRCS involve direct assistance to
    landowners on an individualized basis. However, this assistance results
    in even greater benefits for the public at large that encompass
    ensuring potable drinking water, cleaner air, and a sustainable supply
    of productive land. In many instances, NRCS involvement spurs local
    investment and as a result, enhances local economic activities as well.
    In other cases, NRCS is simply present to help landowners help
    themselves. By supporting voluntary conservation and fostering
    stewardship, the agency ensures support that is not available or
    provided by other government or private entities. In addition, NRCS
    serves as a vital link between the science of resource conservation and
    the practice of land stewardship on the ground. The data and expertise
    which the agency offers, are truly a treasure for the communities
    around the country that turn to NRCS everyday for help. These services
    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. Conservation Operations represents a long-standing and
    historical partnership of interests all working in a concerted effort
    toward a sustainable and productive nation. The following programs and
    initiatives are funded through conservation operations and represent
    the legacy of conservation on private lands:
        America's private lands conservation is the cornerstone for most
    agency activities. This account (formerly Conservation Technical
    Assistance) has been renamed to more accurately represent its
    uniqueness as the sole federal conservation technical assistance
    program on private lands. The fiscal year 1997 appropriations were
    $529,150,000; and the fiscal year 1998 comparable appropriations are
    $541,739,000. The fiscal year 1999 budget request is $589,110,000.
        The proposed funding levels represent support to the functions and
    activities that are vital to meeting the mission of conserving,
    improving, and sustaining our natural resources for the future.
    Conservationists on the ground are under increasing demand for their
    services, as they tackle new programmatic responsibilities while
    retaining a commitment to the community for providing basic assistance
    to landowners in need. It is our goal to ensure NRCS staff support to
    grassroots watershed partnerships and the development of conservation
    plans for communities. Throughout the nation, NRCS conservationists
    facilitate and enable local action. Technical assistance funding
    ensures the presence of these individuals and promotes voluntary
    conservation.
        During fiscal year 1997, NRCS assisted approximately 800,000
    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.
    While the Federal Agriculture Improvement and Reform Act (1996 Act) has
    provided valuable new tools to assist landowners with their needs, the
    workload associated with support for the Conservation Reserve Program
    (CRP), the Agriculture Market Transition Act (AMTA) and several others
    will place further demands on our field staff. Also, because both
    agriculture and the environment are constantly changing, the agency and
    programs are constantly evolving. NRCS is regularly required to provide
    new plans and conservation systems as land use and the needs of the
    landowner change. Our proposed increase in funding for America's
    Private lands Conservation is reflective of the increased need.
        The proposed funding level for Conservation Operations also
    represents a continued cooperative effort between NRCS and its
    conservation partners including Conservation Districts, Resource
    Conservation and Development Councils, and other non-profit and
    community action groups. The relationship between NRCS and its partners
    represents a catalyst that empowers local people to become involved in
    conservation activity. In addition, the funds that are appropriated by
    Congress are leveraged and matched by the hard work and resources of
    the thousands of partners and volunteers in virtually every aspect of
    NRCS operations. The budget request calls for $20 million to be set
    aside for Partnership Grants in support of the President's Clean Water
    Initiative. The grants will be used to strengthen the leadership of
    locally-based institutions through the hiring of non-federal watershed
    coordinators. The goal of this activity will be to improve water
    quality in watersheds that show particular signs of degradation.
        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. We are proud of the gains that have been made. While the
    combined value of education, technical and financial assistance is well
    illustrated, more remains to be done. The proposed level of technical
    assistance funding will accelerate building the legacy of land
    stewardship that will benefit the Nation for generations to come.
        Year 2000.--One of the necessary steps toward a legacy for
    conservation is to ensure that our technical tools and information
    infrastructure will be available for years to come. Many concerns have
    been raised with respect to information technology of NRCS and other
    USDA agencies. I am happy to report that all NRCS systems will meet the
    Office of Management and Budget target compliance date of March 1999.
    NRCS has 15 critical information technology systems. Renovation has
    been completed for eleven of these systems and are currently undergoing
    validation testing to ensure that they are compliant. The remaining
    four systems are being reengineered and will be completed by March,
    1999.
        Highly Erodible Land Conservation (HELC).--Since 1985, NRCS 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 nearly one 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 Federal
    Agriculture Improvement and Reform Act of 1996 provided amendments that
    have made HELC compliance requirements more farmer friendly and have
    provided USDA with additional options in assisting producers with
    compliance status, 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 fully
    apply a conservation plan or use an approved conservation system on
    highly erodible land. Therefore, NRCS continually assists producers in
    developing plans for land that they acquire and in making changes in
    their current plans so that their practices 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).
        Wetland determinations and certifications.--The 1996 Farm Bill
    changed Swampbuster to give farmers greater flexibility in complying
    with wetland conservation requirements and in making wetlands more
    valuable and functional. As a result, NRCS now determines areas subject
    to Swampbuster and responds to requests from farmers who plan
    activities that may adversely impact wetlands. NRCS certifies wetland
    determinations only upon request when clients propose a project to
    alter the hydrology or bring new land into production. Responding only
    to ``need'' ensures that requests from clients are serviced in a timely
    manner and that certifications are conducted where absolutely
    necessary. Certified determinations stay in effect as long as the land
    is used for agricultural purposes (unless a violation occurs) or until
    the owner or operator requests a review after natural events change the
    topography or hydrology of an area. Under the terms of the 1994
    Wetlands Memorandum of Agreement (MOA), certified wetland
    determinations will be valid for both Swampbuster and 404 of the Clean
    Water Act (CWA). 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.
    Also, the enrollment in AMTA generated requests to NRCS for over 25,000
    new wetland determinations.
        Aside from determinations, changes initiated by the 1996 Act have
    increased the activities of NRCS in wetland mitigation. NRCS provides
    assistance to landowners who wish to enhance existing wetlands, restore
    former wetlands, and create new wetlands to offset loss from planned
    conversions or alterations. These options, while creating increased
    opportunity and flexibility for landowners, require a great deal of
    attention by NRCS field staff, who assess the function and values of
    individual wetlands and provide the customer with technical assistance
    in every phase of the mitigation process. Other changes by the 1996 Act
    include policies in determining if a planned activity will have a
    minimal or inconsequential effect on wetland functions, and also
    revises the concept of abandonment. When done under an approved
    conservation plan, landowners with farmed wetlands and farmed wetland
    pastures may allow an area to revert to wetland status and convert it
    back at a future date without violating Swampbuster. Thus far, interest
    and participation in these wetland activities has been widespread among
    landowners. While NRCS welcomes the opportunity to provide landowners
    with additional services and flexibility, marked workload increases are
    seen throughout the Nation.
        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.
        Natural Resources Inventory (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. For fiscal year 1999, an
    additional $3 million is requested for NRI needs associated with Land
    Health Monitoring and assessment work in support of the President's
    Clean Water Initiative. This effort will enable NRCS to develop
    baseline assessments, integrate compatible inventories, and evaluate
    program impacts.
        In addition, livestock management means better management of waste
    nutrients as well. No doubt, over the course of 1997, there was a
    heightened awareness on the part of the public about issues of animal
    agriculture and waste management. 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 1998, NRCS was able to
    continue support for a Grazing Land Conservation Coordinator position
    in each of the fifty states. This position helps 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.
    Urban Conservation
        Another area of attention has been the work of NRCS in urban and
    suburban conservation. Natural resources do not recognize the boundary
    between urban and rural areas and to ignore their interaction within a
    watershed would not do justice to either. The watershed approach to
    resource conservation has been widely acclaimed and highly successful.
    However, when we begin to examine and work to rehabilitate the health
    of a watershed we must include all contributing factors that may be
    present, including community and residential elements. The efforts of
    NRCS are aimed to improve water quality and protect our natural
    resources while maintaining and enhancing production. The demand for
    assistance with issues such as water quality and soil erosion
    prevention are matters that effect everyone, and workable solutions
    must include the participation of everyone. NRCS has had great success
    in utilizing the science and technology that it has gained in its 60
    year history to all types of resources in many settings. Likewise, the
    expertise in soil and water quality that the agency has gained is well
    suited and easily applied to help communities realize their goals for
    ecosystem health. We will continue to work together as neighbors to
    achieve actual goals.
        Snow survey and water supply forecasts provide western states and
    Alaska with vital information on summer water supplies. The fiscal year
    1997 appropriation was $5,835,000; the fiscal year 1998 appropriation
    is $5,835,000; and the fiscal year 1999 request is $5,990,000. 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 1997
    appropriation was $76,409,000; the fiscal year 1998 appropriation is
    $76,409,000; and the fiscal year 1999 request is $78,323,000. 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.
        Funding opportunities are constrained for all agencies; therefore,
    NRCS is aiming to expand the resources available for all. The budget
    includes $20 million for bonus payments rewarded to those States that
    increase their conservation spending and/or maintain spending above a
    specified threshold. By leveraging these incentive payments,
    conservation funds from State and private sources can be increased.
    Also, to further increase contributions, the budget proposes that NRCS
    collect user fees for certain products and services.
        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 Plant Materials Centers also focus on the important role of native
    species in ecosystem functions. The fiscal year 1997 appropriation was
    $8,825,000; the fiscal year 1998 appropriation remained at $8,825,000;
    and the fiscal year 1999 budget request is $7,825,000. This reduced
    level requested for Plant materials Centers reflects the conclusion of
    an extensive renovation and modernization efforts that were started in
    1994. 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.
        Water Resources Assistance is a new account under Conservation
    Operations for fiscal year 1999. Water Resources Assistance contains
    the technical assistance dollars that have been previously included in
    the Watershed and Flood Prevention account. The fiscal year 1999
    requested funding level for Water Resources Assistance is $70,983,000.
    This is a $9.8 million increase from fiscal year 1998. This requested
    funding level would enable approximately 92 Federal watershed
    coordinators to develop project work plans; coordinate volunteers,
    projects, and watershed council activities in 40 priority watersheds.
        The funding request for fiscal year 1999 also includes an increase
    of $1 million to evaluate the condition of the aging infrastructure
    created by previous works of improvement installed under our watershed
    programs and to help sponsors implement environmentally acceptable and
    economically justified watershed projects in a timely manner. NRCS has
    assisted project sponsors to install over 15,000 individual measures
    since 1944. An integral part of many of these projects was structures
    for flood and water control, municipal and industrial water supply, and
    recreation. Since their installation, conditions surrounding the
    structures have changed due to an increase in population, residences
    built below the structures, upstream land use changes, and changed
    Federal and State dam safety regulations. By fiscal year 2000,
    approximately 2,000 of the aging structures could require significant
    restoration. The safety and stability of these installations are in
    question with serious threats posed to life and property. Clearly,
    there are major public health, safety, and environmental risks that
    must be addressed so that a legacy of sound watershed projects can be
    ensured.
        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. Fiscal year 1997 funding for Public Law 534 and Public Law
    566 was $101,036,000; the fiscal year 1998 financial assistance funding
    was $51,036,000; and the fiscal year 1999 request is $49,000,000. The
    difference from fiscal year 1998 levels is due to a shift of technical
    costs to the Conservation Operations account and the presentation of
    financial assistance activities under Watershed and Flood Prevention
    Operations. The authorized purposes of watershed projects include
    watershed protection, flood prevention, water quality improvements,
    soil erosion reduction, 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.
        We aim to focus resources to address the backlog of approved
    watershed infrastructure projects. NRCS recognizes the need to meet
    currently unfunded commitments to stakeholders and sponsors. Currently,
    there are over $1.5 billion in need for Public Law 566 and Public Law
    534 projects combined. Local sponsors have demonstrated their support
    and await action by their Federal partner to do the same. The process
    of allocating funding to approved projects will be based on a
    competitive process that funds those projects with the highest
    environmental and commercial benefits, which will enhance NRCS's
    ability to succeed in its strategic plan.
        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 calendar year, 1997, EWP was employed in 26 states providing
    disaster assistance including hurricane, flood, and fire
    rehabilitation.
        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 1997
    appropriation was $29,377,000; the fiscal year 1998 appropriation is
    $34,377,000; and the fiscal year 1999 budget request remains at
    $34,377,000.
        Each RC&D area encompasses multiple communities, various units of
    government, municipalities, and grassroots organizations. The RC&D's
    represent a creative 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 for this program and applied directly to local projects, has
    been matched by about $13 from other sources. By fostering local
    ownership and self sustenance for conservation and rural development
    projects, we believe that RC&D will contribute greatly to the legacy of
    locally-led action. The 1999 request will support the 290 RC&D areas
    currently authorized as well as any new area authorizations made in
    1998.
        Commodity Credit Corporation Programs.--NRCS also administers, on
    behalf of the Commodity Credit Corporation (CCC), several cost-share
    programs, including those 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
    conservation programs provided by the 1996 Act, which NRCS administers
    on behalf of CCC, include the Environmental Quality Incentives Program
    (EQIP), Wildlife Habitat Protection 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, forest land, and
    wildlife habitat. Assistance is provided in a manner that maximizes
    environmental benefits per dollar expended, while assisting producers
    with issues such as local environmental laws or community identified
    environmental needs.
        Funds of the CCC are used to fund the assistance provided under
    EQIP. For fiscal year 1998, $200 million was available to implement the
    EQIP. The program is primarily available in priority conservation areas
    throughout the Nation. The priority areas consist of watersheds,
    regions, or areas of special environmental sensitivity or having
    significant soil, water, or related natural resource concerns. For
    fiscal year 1997, nearly 71 percent of the EQIP financial assistance
    funding was provided within priority areas. The process for selecting
    these priority areas begins with the local conservation district(s)
    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 sets priorities for the
    program, including approval of priority areas. Over 600 priority areas
    were approved by the State Conservationists and about 550 of these were
    funded. Funds are made available to the States based upon the quality
    of the priority area proposal, local initiatives, and the environmental
    needs of the affected areas.
        The program has been very successful. We received nearly 60,000
    applications in fiscal year 1997. NRCS estimates that it would require
    over $550 million to fully fund all of the applications received last
    year, alone, which is three times the available financial assistance
    funds. After NRCS ranked the applications based on criteria developed
    at the local and state level, FSA county committees approved over
    22,000 long-term contracts with farmers and ranchers. The EQIP
    financial assistance on these contracts will exceed $174 million.
        Based on the fact that requests for assistance far exceed available
    funding, there is a need to continue to prioritize and focus our
    efforts so that we meet our Congressional mandate to maximize
    environmental benefits per dollar expended. We expect that in fiscal
    year 1999, continued interest in animal nutrient management will spur
    an increase in EQIP participation in this area. The nutrient management
    focus of the program will help meet national objectives of water
    quality, while involving farmers and ranchers in voluntary and
    cooperative solutions. Utilizing inventory and assessment tools, NRCS
    will continue to build the capacity of local communities to inventory
    and assess their watersheds to identify needs for nutrient management
    and priorities for conservation treatment. In addition, EQIP outreach,
    education, and information efforts will include working with
    conservation partners to launch efforts within priority watersheds to
    inform landowners and communities of the opportunities to improve water
    quality and agriculture production through soil conservation and
    nutrient management. The 1999 budget proposal seeks by proposed
    legislation to increase funding for EQIP by a total of $350 million
    through fiscal year 2003. NRCS would receive an additional $100 million
    in fiscal year 1999 and fiscal year 2000, and $50 million in each
    subsequent fiscal year through 2003. The increased funding would be
    directed toward technical, financial, and educational assistance to
    farmers in addressing problems associated with agricultural runoff and
    would support the President's Clean Water Initiative. The request will
    also help with increased assistance to minority and limited resource
    farmers to ensure participation in the program. The technical
    assistance component would be funded initially at the 10 percent level.
        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.
        WHIP is a solely voluntary program, whose projects encompass a wide
    array of wildlife practices. Projects performed under the program
    include advancing the following measures: upland wildlife habitat,
    wetland wildlife habitat, threatened and endangered species habitat,
    fishery habitat and other approved activities. The budget proposal
    assumes 171,400 acres enrolled in fiscal year 1998 and an additional
    114,300 acres enrolled in fiscal year 1999.
        State NRCS offices have made an enormous effort to develop
    partnerships and outreach methods with government and private
    organizations to develop a program that targets specific state
    concerns. We propose to continue to facilitate development of the
    program in a fashion to ensure the greatest amount of success for
    wildlife for the funds appropriated. Based upon proposals currently on
    hand, NRCS anticipates that program funding needs continue to mount as
    the public becomes more aware of its successes and the multiple
    benefits that it offers. The fiscal year 1999 budget request assumes
    continued funding of WHIP at $20 million. This level would conclude the
    authority granted under the 1996 Act.
        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. It provides matching
    funds to leverage funds from States, Tribes, or local government
    entities that have farmland protection programs. The FPP establishes
    partnerships with States, Tribes, and local government entities to
    acquire conservation easements or other interests in land. It protects
    strategic farmland from urbanization. It ensures that the valuable
    farmlands are preserved for future generations and also helps maintain
    a healthy environment and sustainable rural economy.
        The easement acquisition is on a voluntary basis. Qualifying
    farmland must: (1) have a pending offer from a State, Tribe, or local
    farmland protection program; (2) be large enough to sustain
    agricultural production; (3) be accessible to markets for what the land
    produces; (4) have adequate infrastructure and agricultural support
    services; (5) have surrounding parcels of land that can support long-
    term agricultural production; and (6) experience urban development
    pressure. When selected, a conservation plan consistent with other
    conservation programs is required for each farm.
        The FPP was authorized in the 1996 Farm Bill. During fiscal year
    1996, 53 entities from 20 States submitted proposals requesting Federal
    matching funds of $130 million for 628 farms with 176,000 acres of
    valuable farmland at an estimated easement value of $330 million. $14.5
    million of CCC funds were provided to match 37 government entity
    programs. That allocation will lead to the protection of approximately
    76,000 acres of valuable farmland on 203 farms with an estimated
    easement value of $116 million in 17 States once all easement
    acquisitions have been completed. Experience in the first request for
    proposals for the FPP indicates that demands are almost 10 times
    greater than the available Federal matching funds.
        For fiscal year 1997, $2 million was approved by Congress for use
    from CCC funds to purchase development rights from farmers and
    ranchers. In fiscal year 1998, the $18 million approved by Congress
    exhausted the original authorized funds for the program.
        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 1998,
    pilots will be determined through a Request For Proposal in the Federal
    Register. Funding for the CFO is provided through the Commodity Credit
    Corporation. The fiscal year 1998 funding for CFO is $15,000,000. For
    fiscal year 1999, we are requesting authority for $25,000,000 in CCC
    program funds, as authorized by the 1996 Act.
        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 Federal Agriculture Improvement
    and Reform Act of 1996 (the 1996 Act), re-authorized the WRP to be
    funded under the Commodity Credit Corporation (CCC) beginning 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.
        Beginning in fiscal year 1997, the program was funded under the
    Commodity Credit Corporation (CCC). The fiscal year 1997 program
    provided $99,000,000 in CCC financial assistance funds to enroll
    approximately 125,000 acres involving more than 700 individual
    projects. The fiscal year 1998 program will provide $218,597,000 in
    financial assistance to enroll approximately 212,000 acres. In fiscal
    year 1999, we propose enrolling an additional 164,000 acres at a cost
    of $123,741,000. Technical assistance funding for 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.
    Technical assistance funding for fiscal year 1999 will include both
    unobligated appropriated funds ($4,000,000) and CCC funds
    ($11,059,000).
        From inception of the program in 1992 through 1997, interest in the
    program has been exceptional, providing approximately 449,250 acres
    enrolled in the program through the end of fiscal year 1997, and
    coupled with the fiscal year 1998 and fiscal year 1999 program sign-
    ups, approximately 825,450 are expected to be enrolled by the end of
    fiscal year 1999 through use of fiscal year 1997 and fiscal year 1998
    CCC funding. We expect to reach the 975,000 acre enrollment goal
    mandated by the 1996 Act in fiscal year 2000, two years ahead of
    deadline. Historically, there have been more than five fold as many
    acres offered than the program could enroll. The fiscal year 1998 sign-
    up was the fifth that has occurred under WRP since fiscal year 1992.
    The fiscal year 1998 effort provided 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, the fiscal year 1997 sign-up is
    separated into three components (i.e., 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 1998 is 212,000 acres with a
    requirement that the initial 32,000 acres of easements be limited to
    30-year duration. Thus far, approximately 48,596 acres of 30-year
    easements have been enrolled. This enrollment was completed before the
    enrollment of permanent easements was initiated. The 48,596 acres
    represents approximately 60 percent of the 30-year easement offers that
    have been received. We would expect during fiscal year 1998 to easily
    fulfill the 75,000 acre enrollment that is called for in statute.
    Approximately 50,980 acres of permanent easements have been enrolled.
    This represents approximately 32 percent of the permanent easement
    offers. Approximately 4,154 acres of restoration cost-share agreements
    have been enrolled. This represents approximately 100 percent of cost-
    share agreement offers.
        Under the continuous sign-up process the backlog lists for each of
    the program components will continue to be updated. Once the fiscal
    year 1998 enrollment process is completed, these lists will be
    available for immediate use in selection of the 1998 enrollment.
                                   conclusion
        It is clear that as we consider the appropriations for the private
    lands conservation as part of the 1999 budget, that we stand at a
    crossroads. We have been granted a wealth of tools and resources, and
    have willing partners and customers to put them to work. We have the
    opportunity to establish a foundation for the future of conservation--
    fulfilling our commitment to the resources, while ensuring healthy and
    productive land is within our reach. Even more, we can instill a
    conservation ethic that will endure for generations.
        However, 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 and to look beyond. Given the needed resources in
    this appropriation request, together we can ensure a conservation
    legacy for future generations.
        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.
                                     ______

                     Prepared Statement of Thomas A. Weber
        Mr. Chairman, it gives me great pride to represent the Natural
    Resources Conservation Service--NRCS--before the Committee, today. For
    over two decades I have had the pleasure of serving among what I would
    consider to be the most committed and invaluable group of public
    servants and conservation professionals in this nation. It has been
    said so many times that the whole is greater than the sum of its parts.
    I feel this is especially true of NRCS. It has value far beyond the
    conservation programs, cost share dollars, or even the staff that
    comprise it. It is the unique combination of technical skills,
    partnerships, dedication to public service and commitment to working
    with people on the land that are the keys to its value. Therefore,
    rather than focusing on talk about numbers and budgets, I want to
    highlight leadership, partnerships, the accomplishments of our
    employees, and the challenges ahead.
        NRCS has had the fortune of being led by a tremendous cadre of
    leaders who had a vision of natural resources for the future and the
    creativity and courage to see them through. Primary among them was Hugh
    Hammond Bennett who asserted that the solution to soil erosion was to
    tailor conservation practices to fit the individual situation and needs
    of the landowner. In recent history, the leadership of Paul Johnson
    crystallized in our minds the importance of conservation on private
    lands and how the success of voluntary conservation is the key to
    ensuring the productivity and health of the land for future
    generations.
        But meeting the enormous task of performing conservation work on
    the nation's private lands takes far more than the work of a single
    individual or even a federal agency. It is instead through a
    partnership of a federal agency, local conservation districts, state
    conservation agencies and others, and the hard work of local people
    that we are able to accomplish all we do. We refer to it as the
    Conservation Partnership. It is a unique and effective delivery system,
    it is geared to meeting the needs of local people, and it has literally
    changed the landscape of the nation.
        Last year brought about many new responsibilities, many challenges,
    and of course, many changes. I am proud to say that the dedicated
    employees of NRCS and our conservation partners collectively applied
    their knowledge and abilities to start putting Farm Bill programs to
    work for our nation's land and people. But more than simply
    implementing these program, NRCS staff have strived to utilize these
    tools in creative ways to meet the resource needs of our customers.
    Just as Hugh Hammond Bennett originally asserted, we are using the
    programs to meet the greater needs of the land and landowner. Likewise,
    more than ever, we have strengthened the locally led approach to
    conservation.
        Last year, our employees shared responsibility for the largest
    Conservation Reserve Program sign-up in the Department's history. They
    also helped to officially launch the National Conservation Buffer
    Initiative, which will protect water quality, wildlife habitat, and
    provide many more environmental benefits and implemented the
    Environmental Quality Incentives Program (EQIP) which has become one of
    the most popular conservation programs that is available. And more than
    its popularity among our customers, our field conservationists are
    finding it to be the useful tool to help landowners meet their
    conservation needs.
        Thanks to your support and our employees efforts, landowners will
    share with people in their watersheds a future that has healthier land
    and cleaner water and air. We've seen tremendous progress where the
    conservation partnership have engaged communities in resource concerns
    and priority setting. Our employees and partners have also worked to
    improve outreach to underserved customers. That work is an example of
    what can happen when good people set out to achieve a common goal.
    We've made progress, but we need to accelerate our work with
    underserved individuals, communities, and groups and ensure that our
    legacy of conservation and stewardship includes everyone.
        Nineteen ninety-eight is shaping up to be an exciting year in
    natural resource conservation. There are several programs being
    implemented--Wildlife Habitat Incentives Program (WHIP) and
    Conservation Farm Option (CFO). There are a lot of issues of concern to
    be addressed, including animal agriculture and the environment, water
    quality, wetlands, natural disasters, air quality, and farmland
    protection--to name just a few. We in NRCS are also putting a strong
    emphasis on continuing to enhance our technical capability. Our
    employees need to have the best technical skills available to provide
    quality service. As a result, we're providing additional training to
    employees and exploring new technology. It is important that as we
    focus upon new program activities and adapt to changes in producers
    needs, that we continue to address the needs of our employees. The goal
    is to make sure on all accounts that our staff have the best training
    and resources they need to serve our customers.
        One of the goals of our agency-wide reorganization was to place a
    higher share of staff resources in the field to maintain and enhance
    service to our customers. This goal continues to be a high priority.
    We've recently given direction to agency leaders at all levels to
    maintain or, if possible, increase the number of field employees as
    positions become vacant elsewhere in the agency. We're also making
    every effort to reduce the administrative workload of our field
    employees to increase the time they devote to getting conservation on
    the land working directly with landowners.
        Throughout the agency, our focus is to maximize conservation
    benefits with the funds that are available. Therefore, the fiscal year
    1999 budget proposes to increase support for the vital technical
    assistance that our field staff provide. You will note that the budget
    contains a renamed account entitled America's Private Lands
    Conservation. The funds for this program represent the support that is
    needed to get conservation activities on the ground. And while we have
    strived to give our field staff the tools they need to assist
    landowners, we also anticipate increased returns through cooperative
    efforts with federal and non-federal partners as well. Our
    participation in the President's Clean Water Initiative will help to
    improve the health of watersheds, restore wetlands, and help
    communities meet water quality goals.
        The fiscal year 1999 budget proposal for NRCS will help to ensure
    protection and improvement of our natural resources for future
    generations. As the Under Secretary outlined, we have made much
    progress and the success of our many conservation programs is a
    testament to the commitment of so many landowners across the nation who
    want to help themselves. It is also proof that the heritage left behind
    by our predecessors can become a legacy of land stewardship if we are
    willing to take on the task. I believe that we can take on this task,
    and I am confident that the employees of NRCS and its conservation
    partners can meet the challenges for 1998 and beyond.

                          STATEMENT OF THOMAS A. WEBER

        Senator Cochran. Chief, you are recognized. Welcome.
        Mr. Weber. Thank you, Mr. Chairman. It gives me a great
    deal of pride to be here today to represent the Natural
    Resources Conservation Service. It has been said so many times
    that the whole is greater than the sum of its parts. I feel
    this is especially true of the Natural Resources Conservation
    Service. It has value far beyond the conservation programs,
    cost-share dollars, or even the staff that comprise it.
        It is a unique combination of technical skills,
    partnerships, dedication to public service, and commitment to
    working with people on the land that are the key to its values.
    Therefore, rather than focusing on numbers and budgets, I want
    to highlight partnerships, the accomplishments of our
    employees, and the challenges ahead in the few minutes I have
    here.
        Meeting the enormous challenges and tasks of performing
    conservation work on the Nation's private lands entails far
    more work than an individual agency or person can accomplish.
    It is instead, through a partnership of a Federal agency, local
    conservation districts, State conservation agencies and others,
    and the hard work of local people that we are able to
    accomplish what we do.
        We refer to this as the conservation partnership. It is a
    unique and effective delivery system that has been in place for
    over 60 years and is geared to meeting the needs of local
    people on the land. And it has literally changed the landscape
    of this Nation.
        Last year brought many new responsibilities, challenges,
    and of course many changes. I am proud to say that our
    dedicated employees and our partners have collectively applied
    their knowledge and their abilities to put the farm bill
    programs on the land and to put them to work for the Nation's
    land and people.
        We are using these programs as tools to meet the greater
    needs of the land and the landowners. And likewise, more than
    ever, we have strengthened what we call the locally led
    approach to conservation.
        Last year our employees shared responsibility for the
    largest Conservation Reserve Program signup in the Department's
    history. They also helped to officially launch the national
    conservation buffer initiative, which will help to protect
    water quality, enhance wildlife habitat, and provide many of
    the environmental benefits.
        In addition to that, the Environmental Quality Incentives
    Program was brought on board, which has become one of the most
    popular conservation programs in this Nation. Our employees and
    partners have also worked to improve outreach to underserved
    customers. We have made much progress there, but we need to
    accelerate our work with underserved individuals, communities,
    and groups and ensure that our legacy of conservation and
    stewardship includes everyone.
        This is an exciting year in natural resource conservation.
    There are several programs that we are implementing this year,
    one mentioned earlier, the Wildlife Habitat Incentives Program.
        In addition to that, we have the conservation farm option
    that will be soon coming out. There are also a lot of issues of
    concern to be addressed, including animal agriculture and the
    environment, water quality, wetlands, natural disasters, of
    which we have certainly had several here recently, air quality,
    and farmland protection to name just a few.
        We have made much progress, and the success of our
    conservation programs is a testament to the commitment of so
    many of our landowners across the Nation who want to help
    themselves. A few examples of our progress: Total erosion on
    highly erodible cropland has been reduced 47 percent since the
    1985 farm bill.
        The rate of wetland loss has declined between 1982 and 1992
    to approximately 79,000 acres per year.
        Senator Bumpers. Would you repeat that, please?
        Mr. Weber. The annual rate of wetland loss has declined
    between the periods of 1982 and 1992, based on our current
    statistical information, to about 79,000 acres per year.
        Senator Bumpers. Thank you.
        Mr. Weber. The number of waterways safe for swimming and
    fishing has doubled over the last 25 years. This is proof that
    the heritage left behind by our predecessors can become a
    legacy of land stewardship, if we are willing to take on the
    challenge. And the challenge is daunting.
        Soil erosion on agricultural land still exceeds 2 billion
    tons annually. Nineteen percent of the Nation's streams do not
    meet water quality standards due to the environmental impacts
    of animal waste alone. There is some evidence that the rate of
    loss of rural land to urban development has actually begun to
    increase during the 1990's.
        However, with your help I am confident that the employees
    of the Natural Resources Conservation Service and our
    conservation partners can meet these challenges in 1998 and
    beyond.
        In closing, I want to share a story with you that portrays
    the real value of the Natural Resources Conservation Service,
    its employees. A few weeks ago I had the pleasure of hearing
    Mr. Jerry Clower, storyteller and entertainer from the State of
    Mississippi, speak of his land and the special relationship
    with what he called his conservationist over many years.
        Now Mr. Clower spoke eloquently and proudly about
    conservation on his land and also helped--he was helped by his
    conservationist. And he talked about the enjoyment his
    grandchildren had on that land.
        He spoke of the land as being America's conservation
    legacy. Later on Mr. Clower noted that he did not realize his
    conservationist was a Federal employee because that really
    never mattered to him.
        The story points out the real value of NRCS. It is not the
    programs, it is not the authorities, and it is not the cost-
    share funds that are the most critical of America's private
    land conservation effort.
        It is the cadre of highly trained, motivated and skilled
    individuals and technical people working directly with
    landowners that truly result in the conservation benefits we
    all enjoy today.
        We must preserve and nurture this national treasure in
    order to pass on our conservation legacy to future generations.
        Thank you, Mr. Chairman.

                                      EQIP

        Senator Cochran. Thank you, Mr. Weber, for your comments
    and your testimony.
        In connection with the EQIP Program that was mentioned and
    is also discussed at length in the prepared testimony, you talk
    about selecting priority areas for attention and the fact that
    emphasis will be given in providing funds and technical
    assistance to these priority areas.
        Has there been any designation or a map drawn to illustrate
    where these priority areas are? I am curious to know where the
    money is really going, where it has gone so far under this
    program, how much has been spent, and what you intend to do
    with the money you are asking us to appropriate for this next
    fiscal year.
        Senator Bumpers. Mr. Chairman, before he answers that
    question, are you alluding to the Water Resources Assistance
    Program, where he says they have 40 priority watersheds?
        Senator Cochran. No; the Environmental Quality Incentives
    Program [EQIP] that he talks about.
        Senator Bumpers. OK.
        Senator Cochran. It talks about priority areas recommended
    to NRCS by local work groups and State conservationists, but
    then they talk about a national program for selecting priority
    areas. I am just curious to know, have they selected the
    priority areas? And if so, where are they?
        Mr. Lyons. Mr. Chairman, we could provide for the record a
    map of the priority areas that have been designated in each
    State. They are identified. They are identified through a
    process that really begins from the ground up where local
    conservation districts and others help to identify these areas.
        Then those nominations, if you will, are presented to the
    State technical committees, who then work to refine and
    identify those areas of priority. And it is on that basis that
    we set those priorities for allocations.
        [The information follows:]
        [GRAPHIC] [TIFF OMITTED] T01FE26.001

        Senator Cochran. Well, I notice, to follow up on that, that
    you say in fiscal year 1997 nearly 71 percent of the EQIP
    financial assistance funding was provided within priority
    areas. The total amount, as I understand it, that you had to
    work with was less than $200 million.
        And I am just curious to know, are some areas of the
    country being left out of this priority program? Can you tell
    us more about where the money is going?
        I do not think you have--you have a map. Do we have copies
    of the maps that we can look at or a table showing where the
    money has been spent or where you intend to spend it?
        Mr. Lyons. Yes; I do not think we have a map with us, Mr.
    Chairman. We will certainly provide you the EQIP allocations.
        Basically the way the process works is, the State technical
    committees provide oversight in each State. And they include a
    number of interest in entities chaired by the State
    conservationist. But this is a locally led effort to identify
    priority areas.
        The additional funds, though, that are allocated beyond the
    71 percent address statewide concerns and are not necessarily
    tiered toward any specific priority area. So it is really an
    attempt to have those on the ground to understand water quality
    and conservation concern needs, identify priorities, allocate
    funds primarily through that process, but then reserving some
    funds to address other statewide needs, again guided by what
    individual State technical committees advise.

                              EQIP Priority Areas

        Senator Cochran. Do you leave up to the State technical
    committees and the State conservationist the authority to
    decide what areas are priority areas, or do you have
    regulations that you have promulgated that guide them?
        Mr. Lyons. I am going to ask the Chief to offer those
    details.
        Mr. Weber. Thank you.
        As part of the process the State conservationist working
    with the State technical committee gets the advice from the
    State technical committee, which is represented by a number of
    Federal agencies and organizations in the State, including
    State government.
        This committee makes recommendations to the State
    conservationist in terms of which priority areas in the State
    should be funded and at what levels. It also makes
    recommendations in terms of what we are calling statewide
    concerns, which are issues that may cover a total portion of
    the remaining part of the State outside of priority areas, such
    as water quality, where you have perhaps some animal
    concentration issues you are dealing with. And they recommend
    the amounts of the allocation that should go toward those
    efforts.
        The total allocation is given to the State based on the
    State resource needs, but the State conservationist with the
    input of the State technical committee makes the decisions. And
    with Farm Service Agency [FSA] concurrence in this process,
    they make the decisions on where the dollars will go in terms
    of how much to each priority area and to statewide concerns.
        Senator Cochran. In the administration of this program,
    have you found that some States end up having to use all the
    money under the program for the priority areas? Does everybody
    have 29 percent left over to use for local concerns that may be
    outside this classification scheme?
        Tell me how that works as a practical matter.
        Mr. Weber. OK. Thank you.
        We allow that discretion to each State. They receive x
    dollars for their allocation. Then, working with the State
    technical committee, they decide what are the best and highest
    priority uses for those dollars.
        In some cases we may have States that are allocating 50
    percent to the priority areas, and 50 percent to the areas of
    statewide concern. So it is going to vary from State to State
    what that percentage is. But they do have discretion within the
    dollars they have.

                                EQIP Allocations

        Senator Cochran. Well, I am a little bit confused in trying
    to figure out where the money is going. I guess you are going
    to show us a table where the money is going.
        Mr. Weber. Yes.
        Senator Cochran. Can you tell us anything about that, or
    are you just going to furnish that for the record, referring to
    the earlier question that I asked?
        Mr. Lyons. We will furnish that for the record, Mr.
    Chairman.
        [The information follows:]

                                     ENVIRONMENTAL QUALITY INCENTIVES PROGRAM (1998)
    ----------------------------------------------------------------------------------------------------------------
                                                         Technical       Education       Financial
                          State                         assistance      assistance      assistance        Totals
    ----------------------------------------------------------------------------------------------------------------
    Alabama.........................................        $620,000  ..............      $2,580,000      $3,200,000
    Alaska..........................................          82,000          $8,000         342,000         432,000
    Arizona.........................................         981,000         197,200       3,890,800       5,069,000
    Arkansas........................................       1,092,000         120,000       5,278,000       6,490,000
    California......................................       1,448,000         611,000       5,499,000       7,558,000
    Colorado........................................       1,348,000         135,162       4,902,838       6,386,000
    Connecticut.....................................         117,000         473,150          24,850         615,000
    Delaware........................................         212,000           9,000         892,000       1,113,000
    Florida.........................................         925,000           5,400       3,843,600       4,774,000
    Georgia.........................................         811,000          57,450       3,398,550       4,267,000
    Hawaii..........................................         224,000          40,000         787,000       1,051,000
    Idaho...........................................         787,000          50,000       3,306,000       4,143,000
    Illinois........................................         798,000          52,379       3,347,621       4,198,000
    Indiana.........................................         655,000  ..............       2,525,000       3,180,000
    Iowa............................................       1,106,000         211,000       4,173,000       5,490,000
    Kansas..........................................       1,053,000          25,000       4,110,000       5,188,000
    Kentucky........................................         549,000          35,130       2,306,870       2,891,000
    Louisiana.......................................         832,000         144,700       4,334,300       5,311,000
    Maine...........................................         544,000         104,450       1,896,550       2,545,000
    Maryland........................................         451,000          24,000       1,774,000       2,249,000
    Massachusetts...................................         175,000          20,000         665,000         860,000
    Michigan........................................         790,000  ..............       3,367,000       4,157,000
    Minnesota.......................................       1,082,000         224,000       4,263,000       5,569,000
    Mississippi.....................................         865,000          99,550       4,426,450       5,391,000
    Missouri........................................         957,000         121,000       3,897,000       4,975,000
    Montana.........................................       1,208,000  ..............       5,056,000       6,264,000
    Nebraska........................................         954,000          64,100       4,004,900       5,023,000
    Nevada..........................................         286,000           8,000       1,213,000       1,507,000
    New Hampshire...................................          71,000          15,050         285,950         372,000
    New Jersey......................................         203,000          35,000         832,000       1,070,000
    New Mexico......................................         734,000          42,575       3,088,425       3,865,000
    New York........................................         929,000          37,728       3,593,272       4,560,000
    North Carolina..................................       1,123,000  ..............       4,597,000       5,720,000
    North Dakota....................................         851,000         164,676       3,463,324       4,479,000
    Ohio............................................         660,000          50,000       2,574,000       3,284,000
    Oklahoma........................................       1,060,000         126,471       4,204,529       5,391,000
    Oregon..........................................         802,000         244,000       3,173,000       4,219,000
    Pacific Basin...................................         110,000          82,000         324,000         516,000
    Pennsylvania....................................         845,000          33,800       3,301,200       4,180,000
    Puerto Rico.....................................         232,O00          11,000         916,000       1,159,000
    Rhode Island....................................          48,000           9,000         190,000         247,000
    South Carolina..................................         395,000  ..............       1,685,000       2,080,000
    South Dakota....................................         826,000          84,400       3,437,600       4,348,000
    Tennessee.......................................         581,000          23,513       2,451,487       3,056,000
    Texas...........................................       3,122,000         264,260      12,948,740      16,335,000
    Utah............................................         783,000          80,000       2,975,000       3,838,000
    Vermont.........................................         276,000  ..............         942,000       1,218,000
    Virginia........................................         500,000          15,000       2,116,000       2,631,000
    Washington......................................         950,000         172,612       3,876,388       4,999,000
    West Virginia...................................         344,000          10,000       1,455,000       1,809,000
    Wisconsin.......................................         840,000  ..............       3,517,000       4,357,000
    Wyoming.........................................         763,000          21,500       3,090,500       3,875,000
                                                     ---------------------------------------------------------------
          Total.....................................      38,000,000       4,362,256     155,141,744     197,504,000
                                                     ===============================================================
    Undistributed...................................  ..............  ..............       2,496,000  ..............
    ----------------------------------------------------------------------------------------------------------------

        Senator Cochran. Well, let us just pick out a few States.
    Tell us about Wisconsin, Arkansas, Mississippi, and Montana.
    [Laughter.]
        Mr. Lyons. Just to pick four States.
        Senator Cochran. Just to pick four States at random.
        Senator Burns. And if you are having any trouble
    remembering the details in Montana, I will enlighten you.
        Mr. Lyons. OK. Which States? [Laughter.]
        Senator Cochran. Wisconsin, Arkansas, Mississippi, and
    Montana.
        Mr. Weber. Mississippi. OK.
        Mr. Lyons. While Tom is looking at the allocations overall,
    I guess what I should explain, Mr. Chairman, is of course one
    of the problems we have with EQIP is it is oversubscribed. We
    estimate there is $600 million in demand out there.
        So not all producers are able to get the assistance and the
    financial support they seek. We only have $200 million to
    allocate. And of course this year we are seeking an additional
    $100 million to give us $300 million overall.
        So we have established this system to try and come up with
    an orderly way to make allocations based on what people on the
    group perceive to be priority conservation concerns. It puts
    the State technical committees in a tough position. They have
    to make tough calls.
        But candidly, our view was it is better for them to make
    the calls there than for us inside the beltway to be making
    those calls.
        Senator Cochran. Well, there are some decisions that are
    made in Washington though about the national priorities. And
    you talked about how this money was going to be used to support
    the President's clean water initiative and all these other new
    initiatives, which we think are important.
        But what worries me is, you have made decisions as to how
    to spend this money nationally, and when you get right down to
    it, the State conservationists and the State committees are
    being given what is left over. And it is very, very little to
    do the conventional and the traditional things, to protect
    watersheds and protect farmland.
        Mr. Lyons. I guess I would need to understand that more
    clearly, Mr. Chairman. But I see it differently. And of
    course----
        Senator Cochran. Well, tell us what the facts are then.
        Mr. Lyons. Well, the facts are----
        Senator Cochran. What are the facts? Where does the money
    go? Where is the decision made as to the allocation of the
    funds. Can we find that out?
        Mr. Lyons. Sure.
        Senator Cochran. I have asked it about three or four times,
    and I have not heard a word about it yet. I have not heard a
    responsive answer to that question.
        Mr. Lyons. Well, I will let Tom give you the details. And
    if that does not do it, we will go at it again.
        Senator Cochran. OK.
        Mr. Weber. For fiscal year 1998, allocations for EQIP in
    Arkansas is $6.49 million; the State of Mississippi is $5.391
    million; Wisconsin is $4.357 million; and Montana is $6.264
    million.
        Senator Burns. What was Montana again?
        Mr. Weber. $6.264 million. And those are based on----
        Senator Burns. Where did it go?
        Senator Cochran. Let me finish my question, if I could,
    Senator.
        Senator Burns. OK.
        Senator Cochran. Are these funds allocated to the States to
    spend in the national priority areas, or are these funds
    allocated for the States to spend based on decisions made by
    the State conservationist and the State committee?
        Mr. Lyons. The allocations are made to the State for the
    State conservationist with the concurrence of the Farm Service
    Agency and the involvement of the State technical committee to
    decide where those dollars are spent.
        Senator Cochran. And this is out of a total amount of $200
    million, these States got that much? Is that what you are
    telling me?
        Mr. Weber. Correct.

                             Clean Water Initiative

        Mr. Lyons. The role of Washington is the initial allocation
    to the States. But once the States have those funds that Tom
    has described, then it is the State's role to determine where
    those moneys should go and how those allocations should be
    made.
        And let me just clarify, Mr. Chairman. For an initiative,
    like this clean water initiative that I referenced, as we are
    attempting to formulate that, our intent is not to create a new
    allocation formula or the like. We really are trying to
    determine ways in which we can mirror the most efficient
    delivery system out there.
        And we may, in fact, simply elect to use something akin to
    what we are doing now with the EQIP allocation formula, because
    we certainly want those decisions to be made at a State and
    local level.

                      Wildlife Habitat Incentives Program

        Senator Cochran. I am glad that you are going to be
    implementing the Wildlife Habitat Incentives Program. We think
    that it is a new initiative, as you pointed out, that may very
    well lead to the protection of habitat for wildlife, endangered
    species, migratory waterfowl, and other game animals and fowl
    as well.
        We hope that you will continue to monitor that carefully
    and give us a report on participation and how it is going. If
    there are any changes that need to be made legislatively, we
    hope you will communicate those to us.
        We also appreciate the fact that you have established
    conservation centers where farmers and landowners can come and
    find out how they can take advantage of the Federal programs.
    We know that you have established one which we attended
    together, the ribbon cutting in Mississippi.
        Tell me how that is working out. Do you think that is going
    to be a wise investment of Federal funds? Will farmers and
    landowners be better able to take advantage of the Federal
    programs, like Jerry Clower talked about in your testimony,
    Chief?
        Mr. Lyons. Let me offer my perspective on that, Mr.
    Chairman. I think the value of those institutes--and we have
    established several across the country. Of course the one you
    refer to is the Wildlife Habitat Institute that Pete Heard is
    heading up--is that is a mechanism to translate current
    research information and current technology into ways that can
    be rapidly used by State conservationists in applying that
    knowledge on the ground.
        For example, with the Wildlife Habitat Institute, although
    housed in Mississippi, we have individuals in the Pacific
    Northwest, in Colorado, in New England, in several places
    across the country, who are in a position to work directly with
    the State conservationists or with conservation districts to
    help in accelerating and facilitating the use of that
    information to make sure that it is applied in a rapid way.
        And we think it is going to pay off tremendously. It is a
    small investment, but I think it is, using modern
    communications technology, an opportunity to facilitate a
    national dialog by getting information to the ground very
    quickly.

                            Small Watershed Program

        Senator Cochran. Let me conclude my questioning in this
    round with an observation and ask you to give me your reaction.
        The suspicion is out in the farmland area of my State, the
    Mississippi Delta specifically and some other areas too, that
    the Soil Conservation Service approaches of the past by the new
    NRCS is to let low-lying areas flood, that this is good for the
    environment, good for the country, and that traditional
    watershed flood control protection measures are out of date,
    out of favor, and are not being funded by this administration.
        Is that true? And if that is true, why is that?
        Mr. Weber. OK. As you know, in the budget proposal the
    funding for the Public Law 566, Small Watershed Program, for
    the financial assistance side, which is to invest in contracts
    with landowners or build structures, is $49 million. This is
    comparable approximately to what it was last year.
        I would say the answer to the question is that we are
    supporting good conservation. And we have tools at our disposal
    to enhance conservation. The Wetlands Reserve Program certainly
    is applicable where there are needs and interested landowners
    in preserving wetlands and restoring wetlands.
        The watershed program has been--we have gone through a
    review of the backlog on that program trying to ensure we have
    those projects that are really--that people are interested in
    continuing to work with us to put into place. We have done
    that. We are taking a look at the program to broaden it, to
    allow people to participate on land treatment aspects versus
    structural aspects.
        But I would not say the agency prefers one over the other.
    We are simply trying to provide all the tools we can within the
    means that we have to deal with the natural resource issues.
        And I would just share with you, we are also taking a look
    at the infrastructure issue on our old watershed projects, and
    we will share this with you as well, so you get a concept of
    that.
        Senator Cochran. Thank you very much.
        Senator Bumpers.

                                    Wetlands

        Senator Bumpers. Thank you, Mr. Chairman.
        Chief, what role do you have in the 404 permitting process?
    Do you make the determinations of what are wetlands in this
    country?
        Mr. Weber. Part of our responsibility under the memorandum
    of agreement with Fish and Wildlife and the Corps of Engineers,
    is that we do wetland determinations on agricultural lands.
        We are continuing to work with the Corps on revising the
    memorandum of agreement to allow greater flexibility on
    wetlands and the acceptance of wetland determinations that we
    make for those purposes.
        Senator Bumpers. You do not have to sign off on the plan.
    Let us assume that I am a farmer and I apply for 404 permitting
    process on 40 acres of my farm. You have previously determined
    that 40 acres to be wetlands, right?
        Mr. Weber. We may have, yes.
        Senator Bumpers. And it goes to the Corps for permission to
    do something with that.
        Mr. Weber. Yes.
        Senator Bumpers. Which it will also include some
    alternative plan to make up for the loss of that 40 acres, is
    that correct?
        Mr. Weber. A mitigation plan.
        Senator Bumpers. Yes; mitigation plan. So once that is
    submitted to the Corps, we are talking about this 40-acre plan,
    he says, Well, I will convert another 40 acres on my farm to
    wetlands, or whatever plan he submits. Do you have any further
    signoff responsibility on that?
        Mr. Weber. I do not believe so.
        Senator Bumpers. That is solely with the Corps' discretion.
        Mr. Weber. That is solely the discretion of the Corps.
        Senator Bumpers. How are we doing on our preservation of
    wetlands in this country through the 404 permitting process?
        Mr. Weber. I am not familiar with what their
    accomplishments are. But overall----
        Senator Bumpers. I admit--I know that is not really your
    responsibility. Do you add anything to this from time to time?
    Do you add any wetlands to the national plan?
        Mr. Weber. Oh, absolutely. Well, the Wetlands Reserve
    Program is a wonderful example of----
        Senator Bumpers. I am not talking about the Wetlands
    Reserve Program. I am talking about coastal areas and so on. Do
    you find that you have overlooked lands or did you decide that
    lands should be added to the wetlands determination, or do you
    just do it one time and that is the end of it?
        Mr. Weber. We continue to work with landowners on their
    requests to do redeterminations or new determinations of
    wetlands on their lands. We are not doing----
        Senator Bumpers. But you are talking about working with
    owners to determine whether or not you made a mistake in the
    first place.
        Mr. Weber. Sometimes, yes.
        Senator Bumpers. He said you have declared this wetlands
    and it should not be. I can see how you work with them on
    something like that. But I am talking about any additional
    acreage that has not been determined to be wetlands.
        Do you review the areas constantly, or does the State
    agency review and recommend to you that a certain area be
    declared a wetlands, even until this day?
        Mr. Weber. No; let me----
        Senator Bumpers. You said, I think you said this, Chief,
    that we have reduced the loss of wetlands by 79,000 acres a
    year in the period 1982 to 1992, is that correct?
        Mr. Weber. That is correct, based on our national resource
    inventory data.
        Senator Bumpers. How are we losing that 79,000 acres? I
    mean, how are we--let me rephrase the question. That is not a
    correct question.
        You say we have reduced the loss by 79,000, right?
        Mr. Weber. We are----
        Senator Bumpers. How much are we still losing? That is the
    question.
        Mr. Weber. We are losing a net of 79,000 acres per year.
        Senator Bumpers. I think we are talking about two separate
    things. You said we have reduced the loss on an annual basis.
    So if we were losing 179,000 acres in 1982 and we are losing
    100,000 acres now, we have reduced the loss by 79,000 acres,
    right?
        Mr. Weber. You could look at it that way, Senator Bumpers.
        Senator Bumpers. Over the 10-year period, we have cut
    179,000 acres to 100,000. No.
        Mr. Weber. Yes.
        Senator Bumpers. Let me see, am I saying that right? You
    are saying we have reduced the loss. My question is: How much
    are we still losing?
        Mr. Weber. The answer to that is, we are still losing about
    79,000 acres a year. If you set as a goal--of course, this was
    a Bush administration goal, no net loss, originally stated--
    then in relation to that goal, we are still 79,000 acres a year
    short. That is what we are losing every year.
        Senator Bumpers. How are we losing it?
        Mr. Weber. Various forms of conversion and development.
        Senator Bumpers. If a developer comes in and says, I want
    to use this 80-acre tract to build a subdivision, I understood
    that he had to come up with some mitigation plan. Does the
    mitigation plan have to be on an acre-per-acre basis?
        Mr. Weber. I think you are going to go well beyond my area
    of expertise, Senator.
        Senator Bumpers. Well, maybe----
        Mr. Weber. The Corps would play that role.

                                   Soil Lost

        Senator Bumpers. I ought to wait until the Energy and Water
    Committee meets, and we will ask the Corps of Engineers those
    questions. But you said that we were still losing 2 billion
    tons of topsoil a year.
        Mr. Weber. Yes.
        Senator Bumpers. What were we losing 10 years ago?
        Mr. Weber. About 3 billion.
        Senator Bumpers. Three billion?
        Mr. Weber. Yes.
        Senator Bumpers. How are you stemming the loss of topsoil?
    Well, I know that Iowa used to lose 16 tons of topsoil an acre
    per year. Now I understand they have done, through State laws
    out there, some fairly dramatic things to stem that kind of
    erosion. But how do you plan to stop the 2 billion tons that we
    are still losing?
        Mr. Weber. The Congress needs to take credit for the
    outstanding progress we have made, based on the 1985 farm bill.
    A lot of that reduction has come about because of the
    conservation lands provisions of that bill.
        We continue to work with landowners on a voluntary basis to
    adopt different tillage practices that reduce erosion. We are
    working with them on the conservation buffers that were
    mentioned here.
        We continue to work with them on the traditional practices
    of terraces and tillage and wind strips and those kinds of
    things. We are basically focusing on working with them on a
    one-on-one basis and trying to encourage additional
    conservation practices to go the next step versus any other
    option that we may have available to us right now.

                                  Buffer Zones

        Senator Bumpers. You stated that you have identified 2
    million miles of buffer zones along streams that you want to
    acquire, either by easement or some other way, is that correct?
        Mr. Lyons. That is actually part of the CRP program, so it
    would be 10-year contracts.
        Senator Bumpers. Have you identified the 2 million miles?
        Mr. Lyons. No; the way we have administered the program,
    Senator, is each State is in the process of promoting those
    enrollments. And again----
        Senator Bumpers. So that is just a ballpark figure.
        Mr. Lyons. No; that is our goal. Two million miles is our
    goal.
        Senator Bumpers. Is that just a goal?
        Mr. Lyons. Yes.
        Senator Bumpers. So you have not identified the areas.
        Mr. Lyons. No; we are letting--again, we are having that
    determination made at the local level and working with
    landowners, because, again, it is a voluntary program.

                                   Watersheds

        Senator Bumpers. On page 20 at the bottom on water
    resources assistance, you state that the funding level would
    enable approximately 92 Federal watershed coordinators to
    develop project work plans, coordinate volunteers, projects
    from watershed council activities, and 40 priority watersheds.
        Do you have a list of those 40 priority watersheds?
        Mr. Lyons. Not at this point.
        Senator Bumpers. You do not?
        Mr. Lyons. Not at this point, Senator.
        Senator Bumpers. How do you know there are 40?
        Mr. Lyons. Well, that is what we will have funding for.
        Senator Bumpers. You do not know what they are, but you
    will have funding for 40.
        Mr. Lyons. Yes.
        Senator Bumpers. When do you expect to have that?
        Mr. Lyons. Well, part of what we have proposed in this
    clean water action plan is to go through a process where the
    States would lead us in identifying critical watersheds.
        We have national information and on a gross basis have a
    rough assessment of watersheds that are relatively healthy,
    those that are at risk, and those that are maybe beyond our
    ability to restore.
        As we develop that process, we would work with the States
    to identify priority watersheds. And then this funding would
    help us address at least 40 of those priority watersheds. But
    we still have to go through the process to actually identify
    what those watersheds would be.

                             Plant Material Centers

        Senator Bumpers. We have a plant material center in
    Booneville, AR. You have 26 plant material centers in the
    country.
        Mr. Lyons. That is correct.
        Senator Bumpers. The one in Arkansas, Senator Bond got very
    interested in the Booneville facility and came down and spent a
    day with me at their plant a couple of years ago. And he was
    interested in it for a reason that I did not realize they were
    working on. It was called agro-forestry, where they plant trees
    on pasture lands, and you cannot even plant trees on row
    cropping lands.
        And I did not know I had the program going over there, but,
    I mean, they were planting pecan trees. A walnut tree full
    grown is worth something like $20,000 or $30,000. They were
    planting those kinds of trees.
        Are you familiar with that program, anybody on this panel?

                                 Agro-forestry

        Mr. Lyons. I guess I am, Senator. There is actually an
    agro-forestry research center in Lincoln that helps develop
    that technology. I think the Forest Service has been a key
    player in that.
        Senator Bumpers. But does Senator Bond not have a facility?
    Are they not doing some work at the University of Missouri on
    that?
        Mr. Lyons. The University of Missouri has been one of the
    universities that has provided some leadership in developing
    that technology.
        Senator Bumpers. Can you give me any idea as to how
    successful that has all been so far?
        Mr. Lyons. I would have to provide that for the record,
    Senator.
        Senator Bumpers. I would like for you to do that, if you
    would.
        Mr. Chairman, I have maybe three or four questions that I
    will submit in writing.
        Senator Cochran. Thank you, Senator.
        We have a vote on the floor. I am going to stay here as
    long as Senators want to ask questions, and then we will come
    back. I think there are two votes back to back. I would like
    both Senators here who have questions to ask them, if they
    would like.
        Senator Burns.

                                   Watersheds

        Senator Burns. I really do not have that many questions. I
    just--the last answer really bothers me on these 40 areas. It
    has not been identified, and you want money for a program that
    you do not know what it is going to do. That bothers me.
        And I want to tell private landowners and agriculture today
    that this is--we see a movement here of managing their farms to
    the point where it is going to be almost unbearable, if it is
    anything like living in a State where you have public lands.
        I just want to tell American agriculture that today this is
    going way beyond what our responsibilities should be in the
    Department of Agriculture.
        In the CRP this last time, I want to--in the signup--well,
    you wrinkle up your head, but the farmers out there--I was
    raised on a little old bitty 160 acres with 2 rocks and 1 dirt,
    and I can see that right now as the man that farms that will
    have no more rights to what he wants to do with that farm than
    he can fly to the Moon in a bucket. And I mean that, because of
    what happened in EQIP in Montana. And we worked with you and
    got that straightened out.
        Where people were not--and every time you talk about we are
    going to make this decision on watersheds, it is a matter of
    decision made among agencies and maybe not among landowners.
    And I just see a creep here that is unbelievable.
        I have some questions that I want to submit for the record.
    I would like an answer on them. But I am going to go through
    this budget very, very closely, very closely. Here we are
    cutting back on ARS and then flying out of here on programs
    that we do not even know what they are going to do than we can
    fly to the Moon in a bucket.
        And that is--in other words, we are making our investment
    of hard-earned dollars in what I believe is in some wrong
    areas. And I am going to work with the chairman very closely on
    this.
        I have some questions. We will go vote, and then I have
    some other things that I have to do. And I thank the chairman
    for his indulgence.
        Senator Cochran. Thank you, Senator.
        Senator Kohl.

                            Wetlands Reserve Program

        Senator Kohl. Thank you. I have several questions for the
    record. I will just hit on one that is of particular interest
    to me. I understand that the Wetland Reserve Program has
    enrolled 9,800 acres since 1994 in my own State of Wisconsin.
    The State NRCS expects to spend $6 million to enroll another
    6,000 acres in 1998.
        The last farm bill changed the WRP and created three
    programs: 30-year easements, permanent easements, and cost-
    share agreements. The permanent easements are very popular in
    Wisconsin.
        My question is: Can the State NRCS supply all of its money
    to permanent easements?
        They are concerned because they understand, or they have
    heard, that they must divide the money equally among the three
    options that I have just described. Can they spent all their
    money on permanent easements?
        Mr. Lyons. We can work with the State of Wisconsin NRCS to
    allow that to happen. We are limited nationwide to the one-
    third, one-third, one-third. But we can work with them to make
    that work.
        Senator Kohl. You can.
        Mr. Lyons. Yes.
        Senator Kohl. I appreciate that very much.
        Thank you very much, Mr. Chairman.
        Senator Cochran. Thank you, Senator Kohl.
        I have other questions, too. I was going to come back and
    ask some of them, but I think in view of the fact that we have
    two votes, it is going to require a lot of time away from the
    committee.

                              Submitted Questions

        I am going to close this hearing simply thanking you all
    again for your cooperation with our committee. We appreciate
    your being here. And we appreciate your responding to the
    questions that will be submitted 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
       environmental quality incentives program designation of national
                                 priority areas
        Question. Authority exists under the Environmental Quality
    Incentives Program (EQIP) for the designation of national priority
    areas. Have regulations been promulgated to designate these priority
    areas? If yes, then have priority areas been designated?
        Answer. Yes. On May 22, 1997, the final rule for the Environmental
    Quality Incentives Program (EQIP) was promulgated (7 CFR Part 1466).
    Included in the final rule are regulations relating to the designation
    of national conservation priority areas. No national conservation
    priority areas have been designated as of February 26, 1998.
        Question. Has the agency evaluated any applications and provided
    funding for one or more national priority areas? If not, why?
        Answer. The Natural Resources Conservation Service (NRCS) has
    received several requests for designation of national conservation
    priority areas. Requests have been received for areas such as the
    Mississippi Delta, Colorado River Basin, Great Lakes Basin, Illinois
    River (Illinois), and the Chesapeake Bay Basin.
        At this time, we are not planning to designate national
    conservation priority areas because we feel it is important to continue
    our focus on addressing State priority areas and State natural resource
    concerns that have been identified through the locally led conservation
    process. NRCS will be evaluating the progress of locally led efforts,
    including later this year, to determine the desirability of designating
    national conservation priority areas in the future.
        Question. What is the difference in a state priority area and a
    national priority area? How many state and national priority areas does
    the agency have the authority to designate?
        Answer. A priority area, whether designated at a state level or at
    a national level, could be a watershed, a subwatershed, an area, or a
    region that can be geographically described and has specific
    environmental sensitivities or significant soil, water, or related
    natural resource concerns. The purposes and criteria for designating a
    priority area at the national level are not much different than those
    used at the state level. The general differences between a state-
    designated and a national-designated priority area would be the scope
    and the significance of the impacted natural resource. National
    conservation priority areas may be designated because the contributing
    or impacted area is multi-state or international in scope, and the
    impacted natural resource is determined to be of national or
    international importance. Currently, State level priority areas are
    appropriately addressing these identified priority needs. As mentioned
    above, we are continually evaluating this process to ensure this new
    program remains focused.
        There is no statutory or regulatory limit to the number of state
    and national priority areas which may be designated. The major
    limitation is monetary. Focusing the program funds to areas with the
    most significant natural resource needs will assure that significant
    improvement can be made in the environmental conditions in those areas
    thereby maximizing environmental benefits per dollar expended.
        Question. How much money is estimated for Mississippi's
    participation in EQIP in the fiscal year 1999 budget request?
        Answer. NRCS has just begun the deliberation process for making
    EQIP funding decisions for fiscal year 1999. Local work groups and
    stakeholders at the local level are beginning to consider the natural
    resource and program needs in their local area. These recommendations
    will be forwarded to NRCS State Conservationist later this spring, who
    will involve State Technical Committees in the review and
    recommendation process. Designation of priority areas and natural
    resource concerns at the state level are not expected until August,
    1998, after which national funding decisions recommendations will be
    made to the Regional Conservationists. Mississippi received $5.3
    million for EQIP in fiscal year 1998, and we do not anticipate at this
    time that the fiscal year 1999 funding level will significantly change
    if EQIP remains at $200 million.
        Question. Should the Mississippi Delta be designated as a national
    priority area, how much funding would be required to carry out this
    EQIP program?
        Answer. A proposal submitted by the Delta Council, Stoneville,
    Mississippi, based on information developed by NRCS and other
    conservation partners in June, 1997, indicated a combined need of $129
    million (estimated) for water quality and water quantity measures in
    the Mississippi portion of the Delta alone. No such proposal or
    estimates have been submitted for the Louisiana and Arkansas portions
    of the Mississippi Delta. The Mississippi proposal requests an EQIP
    funding level of $4 million per year for 7 years, for a total $28
    million. This would be matched with $9.3 million local cost-share for a
    total of $37.3 million. This would provide sufficient funding to
    implement conservation practices to reach an estimated 30 percent of
    the water quality and quantity goals for the Mississippi portion of the
    Delta.
                           eqip technical assistance
        Question. Does the agency have adequate technical assistance to
    carry out the activities that would be funded if the fiscal year 1999
    budget request to increase EQIP by $100 million is adopted?
        Answer. While NRCS currently has sufficient staff and expertise to
    perform the technical requirements associated with a $300 million EQIP
    in fiscal year 1999, the budget proposal assumes that technical
    assistance will be supported with Conservation Operations funds. In
    fiscal year 1997, NRCS implemented a direct time charge work
    measurement system for EQIP which helped document NRCS EQIP technical
    assistance costs of $44.3 million or 22 percent of a $200 million
    program. For fiscal year 1998, a 19 percent technical assistance level
    was approved by OMB. The fiscal year 1999 budget assumes a 10 percent
    technical assistance level or $30 million from EQIP program funding,
    while the remaining estimated $36 million costs would be absorbed
    within the Conservation Operations appropriations.
        Question. How much money for EQIP technical assistance is assumed
    in the fiscal year 1999 request and how does this compare to the fiscal
    year 1998 level?
        Answer. Technical assistance for fiscal year 1999 is assumed at a
    10 percent level based on the proposed $300 million request. Technical
    assistance for fiscal year 1998 was apportioned at a 19 percent level
    based on the $200 million spending authority.
        Question. What amount of this technical assistance, if any, will
    come from carryover balances from previous fiscal years?
        Answer. None. No carry-over may occur with Commodity Credit
    Corporation funds.
        Question. Will any of the fiscal year 1999 budget request of $100
    million be used for technical assistance? If so, how much?
        Answer. Yes. The budget assumes that technical assistance for
    fiscal year 1999 will be apportioned at a 10 percent level.
            eqip assistance to minority and limited resource farmers
        Question. What type of assistance to minority and limited resource
    farmers will the agency provide to increase their participation in the
    EQIP program? How will this differ from that provided in previous
    years?
        Answer. There are several ideas being considered as we develop
    strategies for providing enhanced education, technical, and financial
    assistance to minority, limited resource, and socially disadvantaged
    farmers and ranchers. Under consideration are items such as:
        a. Information and Outreach--Special efforts have been made to
    incorporate specific outreach actions and measurable goals into agency
    strategic plans at the national, state, and local level. Actions and
    measurable goals may be made for:
      --informational meetings with members of the targeted audiences;
      --news releases and fact sheets, including those through media
            sources which focus on the targeted audiences;
      --involvement of other agencies and groups, including Cooperative
            Extension Service, 1890 and 1994 institutions, Hispanic
            servicing institutions, Research Education Access Program
            institutions, other agricultural and land grant institutions;
      --involvement of churches and other community based organizations
            which represent or assist the target audiences;
      --news releases to targeted media;
      --assuring that local work groups will involve and obtain input from
            target audiences; and
      --use of NRCS field guidance which includes reference materials,
            techniques, and methods for providing outreach, overcoming
            barriers, and assisting limited-resource producers, minorities,
            and Indian nations.
        b. Education Assistance--Special efforts have been made to provide
    training and education assistance to target producers. Education may
    include:
      --program requirements;
      --how to apply;
      --how to make assignment of payments to contractors and vendors;
      --how to recognize natural resource conditions and environmental
            problems;
      --understanding which conservation practices address natural resource
            and environmental concerns;
      --how to install, establish, operate, and maintain conservation
            practices;
      --how to use own equipment and labor to establish conservation
            practices;
      --how to account for use of own labor and equipment when establishing
            practices; and
      --how to submit expenses for establishing practices to receive
            payment.
        c. Technical and Financial Assistance--Emphasizing the use of low-
    cost conservation practices that are effective and affordable to the
    target audiences. This will also help to meet the overall program
    objective of maximizing environmental benefits per dollar expended.
    NRCS, working with other agencies and private industry, should develop
    conservation practice standards and specifications for low-cost
    conservation practices. If the funding level is increased to $300
    million, there will be increased assistance in these activities as
    well.
        d. Farmer Mentoring--Assist with the establishment and sponsoring a
    farmer mentoring network. The initiative could be a coalition of
    farmers, farmer and commodity organizations, natural resource and
    environmental organizations, private industry, and government, whose
    purpose is to provide voluntary mentoring and help limited resource and
    socially disadvantaged farmers and ranchers who need special assistance
    to overcome their limitations and disadvantages.
        Most of the ideas under consideration are not new or different than
    types of assistance provided in previous years. The primary difference
    is that many of these types of assistance were not widely or
    comprehensively used in conservation cost-share programs. The
    activities will be used in a concentrated manner and accountability
    will be vigorously upheld to assure the activities are implemented.
                         conservation planning for eqip
        Question. Please explain what the conservation planning
    requirements will be for those who receive contracts, and how you
    intend to assure those requirements are not more comprehensive than the
    statute requires.
        Answer. The conservation planning requirements for all EQIP
    participants will be the same. A conservation plan must be submitted by
    a participant that emphasizes sustainability of natural resources, is
    based on ecological, economic, and social considerations, and includes
    the producer's decisions and objectives for the farm or ranch. The plan
    must allow the participant to achieve a cost-effective resource
    management system, or some appropriate portion of that system,
    identified in the applicable NRCS field office technical guide, for the
    priority natural resource condition in the priority area or the
    significant statewide natural resource concern outside a funded
    priority area. To comply with the statutory provisions that a
    participant may implement only one conservation practice using EQIP, we
    believe that a whole farm or ranch conservation plan is not required.
    The program is flexible and although it encourages participants to
    voluntarily develop a conservation plan that is comprehensive and
    addresses multiple natural resource concerns, it is not a requirement.
    The likelihood of being assigned a higher priority for selection as a
    program participant depends on whether the conservation plan will
    result in significant environmental benefits to justify its priority.
    NRCS intends to regularly monitor and evaluate the manner in which the
    program is implemented to assure the statutory, regulatory, and program
    guidance requirements are carried-out and not involuntarily exceeded.
                             flood plain easements
        Question. In July 1997, the NRCS notified District Conservationists
    of the Department of Agriculture's new position on the purchase of
    flood plain easements rather than providing conventional measures for
    emergency conservation and watershed protection. The Mississippi Delta
    has survived because of the aggressive flood prevention and watershed
    practices carried on throughout the area. Should NRCS allow nature to
    take its course, the Mississippi Delta would be characterized by
    impassable roads, washed out bridges, sediment-laden streams, non-
    productive crop lands, and dead bottomland hardwoods all due to long-
    standing floods. What spurred this ``new'' policy change?
        Answer. Section 382, Title III, of the 1996 Farm Bill Public Law
    104-127 authorized the Secretary of Agriculture to purchase flood plain
    easements as another technique of assisting local communities
    devastated by a watershed impairment through the Public Law 566, the
    Small Watersheds Program. Some sites have been repaired several times
    with traditional techniques and easements offer a more permanent
    solution to flood devastation in some situations. This change did not
    eliminate traditional watershed activities, it only provided the
    opportunity for the use of easements when and where desired.
        Question. Please provide more definitive explanations of incidences
    where flood easements would be preferred over repair.
        Answer. The most obvious example is where the cost of the easement
    is less than the cost of the repair. Another would be where the damage
    happens too often for the landowner and he/she decides they want a more
    permanent solution. Participation is entirely voluntary so that no one
    is forced to sell an easement.
                            wetlands reserve program
        Question. People who own land adjacent to tracts of land under
    easement restrictions in the Wetlands Reserve Program (WRP) have
    experienced adverse impacts from the water management plans. Has the
    agency given any consideration to the terms of Wetlands Reserve Program
    contracts which affect the adjacent landowners?
        Answer. The current easement provides the Secretary with the
    authority to determine the future vegetative and hydrology conditions
    of the easement. Before any wetland practice is implemented by NRCS or
    by the landowner, NRCS has the opportunity to evaluate if there will be
    an impact on the rights of adjacent landowners. This present authority
    in the easement, coupled with the NRCS engineering capability, makes it
    possible for NRCS to preclude activities on the easement that would
    impact the rights of adjacent landowners. Although we are not aware
    that this problem currently exists, if we learn of specific instances
    where it is occurring appropriate corrective action can be initiated.
        Question. Does the agency have the ability to give high priority on
    the adjacent landowner's considerations when structuring the terms of
    the participant's contract regarding the maintenance of watershed
    protection?
        Answer. The agency has the ability and does place a high priority
    to ensuring that the rights of adjacent landowners are not adversely
    impacted by restoration activities on the Wetlands Reserve Program
    easement. The NRCS does not implement or approve the implementation by
    others of wetland practices on Wetlands Reserve Program easements that
    would exceed the legal rights inherent in the easement. If a situation
    arises where an adjacent landowner's rights have the potential to be
    impacted as a result of actions taken on easement lands, NRCS will work
    with the impacted adjacent landowner and the fee owner of the easement
    area to assure that no adverse impact occurs. If an impact does
    inadvertently occur as a result of activities on the easement, (e.g., a
    man induced development or a less controllable event such as a beaver
    dam encroachment) NRCS will work with the adjacent landowner and fee
    landowner to resolve the problem.
        Question. Why is the fiscal year 1999 budget request proposing a
    decrease in mandatory funding for the Wetlands Reserve Program from
    $219 million in fiscal year 1998 to $124 million in fiscal year 1999?
        Answer. The Wetlands Reserve Program has a maximum acreage cap of
    975,000 acres. At the end of fiscal year 1998, we will have
    approximately 320,000 acres yet to be enrolled under this cap. We are
    proposing to enroll essentially one-half of the remaining acres in
    fiscal year 1999 and fiscal year 2000 respectively. The fiscal year
    1998 sign-up is estimated to enroll approximately 212,000 additional
    acres. The funding request for fiscal year 1999 will provide for the
    enrollment of 164,214 acres.
        Question. What amount of money is needed in fiscal year 1999 to
    fund the technical assistance required to carry out this program? Is
    this amount included in the fiscal year 1999 request?
        Answer. The projected amount of technical assistance funding needed
    to carry out the program in fiscal year 1999 is $15,089,000. This
    amount is included in the request. This includes $11.089 million
    through CCC under CCC Charter Act Section 11 and $4 million will be
    provided from unobligated balances from prior year WRP appropriated
    funds.
        Question. What amount of money from carryover balances in previous
    fiscal years is going to be used for technical assistance for WRP in
    each of fiscal years 1998 and 1999? What are the available carryover
    balances in each of these years?
        Answer. We plan to spend $18.2 million of carryover funds for
    technical assistance in fiscal year 1998 and $4 million of carryover
    funds for technical assistance in fiscal year 1999.
        Question. Mr. Undersecretary, you state that technical assistance
    funding for fiscal year 1999 will include unobligated appropriated
    funds ($4 million) and CCC funds ($11,089,000). Please explain.
        Answer. The projected amount of technical assistance funding needed
    to carry out the program in fiscal year 1999 is $15,089,000. We project
    that we will have approximately $4,000,000 of appropriated funds that
    will not be obligated at the beginning of fiscal year 1999. We propose
    to utilize these funds along with $11,059,000 of funds from the CCC to
    meet the total technical assistance funding need for the Wetlands
    Reserve Program in fiscal year 1999.
                          use of other agency research
        Question. Mr. Weber, in your statement you indicated that erosion
    still occurs by two billion tons per year. Does the agency use the
    research that CSREES, ARS, and land grant universities do on soil
    erosion to improve conservation practices by farmers?
        Answer. NRCS works closely with CSREES, ARS, and other agencies at
    the national level in identifying research and extension needs and in
    setting priorities. We also work with ARS and land grant university
    scientists in conducting field research on erosion and other natural
    resource issues, and with Extension Specialists in training programs
    for staff and in extension educational programs for clients. Research
    results are used by NRCS in developing guidelines for conservation
    practices at the national and state levels. Extension programs help
    NRCS deliver technology to clients and to inform the public about
    resource issues. Examples of current cooperative efforts that are
    paying significant dividends to address soil erosion problems include
    work on erosion prediction models, conservation buffers, conservation
    tillage, and grazing land management.
                          urban resources partnership
        Question. The administration initiated Urban Resources Partnership
    (URP) as an interagency, cooperative Federal partnership in 13 major
    cities and metropolitan areas. NRCS projects that $2.5 million will be
    expended for URP in fiscal year 1998. This includes $2 million for
    project activity and $500,000 for staff costs. What does the agency
    project to spend in fiscal year 1999?
        Answer. It is estimated that NRCS will allocate $2 million for
    project activity for URP in fiscal year 1999. Staff cost are estimated
    at $500,000 for URP in fiscal year 1999.
        Question. How many matching non-federal dollars is NRCS expecting
    to receive in fiscal year 1998?
        Answer. NRCS is estimating that the non-federal match for URP in
    fiscal year 1998 will be $500,000.
                            american heritage rivers
        Question. The Administration established the American Heritage
    Rivers (AHR) in 1997 to help communities restore and protect their
    communities. Ten rivers will be designated by the President. NRCS
    participated in the design of the AHR initiative. NRCS provided $94,000
    in fiscal year 1997 for staff time in designing the initiative. During
    fiscal year 1998, NRCS projects $225,000 will be provided for staff
    time until the ten rivers are designated. When will the ten rivers be
    designated?
        Answer. It is expected that the ten rivers will be designated by
    the President in April 1998.
        Question. How much more money does the NRCS anticipate needing for
    fiscal year 1998? In fiscal year 1999?
        Answer. Future support for this initiative will not be known until
    the ten rivers are designated. It is expected that the level of support
    in fiscal year 1999 will be comparable to fiscal year 1998.
        Question. In fiscal year 1997, 60 percent of the funds came from
    the NRCS Conservation Operations account, and forty percent from the
    Watershed Surveys and Planning Account. What is the breakdown in
    percentages from these accounts in each of fiscal years 1998 and 1999?
        Answer. Until the rivers are designated and the specific work that
    must be undertaken is known, an estimate of the breakdown is not
    possible.
                           northwest salmon recovery
        Question. In fiscal year 1998 no funds will be allocated
    specifically for the Northwest Salmon Initiative from the Conservation
    Operations Account. However, there are 10 small watershed projects that
    included salmon as an integral part of their natural resource concerns.
    The fiscal year 1998 funding for the salmon recovery effort will be
    funded primarily through these projects. Where are these 10 small
    watershed projects located? How much money in fiscal year 1998 are each
    of these 10 small watershed projects receiving?
        Answer. The fiscal year 1998 funds for the Public Law 566 program
    could only support nine Small Watershed Projects that included salmon
    as an integral part of their natural resource concerns.
        The list is as follows:

                      Northwest salmon initiative projects

                                                            Fiscal year 1998
            State/project name/county(s)                           allowance
    California: Hayfork Creek: Trinity............................   $65,000
    Oregon: Buck Hollow: Wasco and Sherman........................   180,000
    Idaho:
        Mission-Lapwai: Nez Perce and Lewis.......................   200,000
        Tammany: Nez Perce..................................................
        Bedrock: Clearwater and Nez Perce...................................
    Washington:
        Omak Creek: Okanagan......................................    50,000
        Tucannon Creek: Columbia/Garfield.........................    60,000
        Moxee Creek: Yakima.......................................   210,000
        Tenmile Creek: Whatcom....................................   100,000
                        --------------------------------------------------------------
                        ____________________________________________________

          Total................................................... 1,115,000

        These projects consist largely of land treatment measures that
    indirectly benefit salmon habitat as well as directly improve water
    quality through reduced erosion and sediment, improved animal waste
    management, and increase the efficient of irrigation water.
        Question. In the fiscal year 1999 budget request, how much money is
    designated for the Northwest Salmon Recovery program? From which
    accounts will the funds come and how much from each account?
        Answer. Funds have not been designated at this time for the
    Northwest Salmon Recovery Program for fiscal year 1999. It is expected
    that funds spent for this purpose will come from the Watershed Surveys
    and Planning Program in the Conservation Operations account.
                    urban environmental resources initiative
        Question. The Urban Environmental Resources Initiative is an
    environmental protection strategy for the citizens of the District of
    Columbia to help make the urban forests and related natural resources
    healthier. How much did NRCS contribute in fiscal year 1998 to this
    challenge cost-share initiative program?
        Answer. NRCS contributed $50,000 to the challenge cost-share
    initiative.
        Question. From which account did this money come?
        Answer. Conservation Technical Assistance under the Conservation
    Operations program funded this activity.
        Question. How much does the NRCS plan to contribute in fiscal year
    1999 and from which account?
        Answer. NRCS plans to contribute $50,000 in fiscal year 1999 to the
    challenge cost-share initiative; funds will come from the Conservation
    Operations Technical Assistance account under the Conservation
    Operations program.
        Question. Does NRCS contribute to this program in other ways
    besides the challenge cost-share initiative program? Please explain and
    provide all moneys used and the accounts from which they come.
        Answer. NRCS also provides technical assistance to the Initiative.
    In fiscal year 1998 a Resource Conservationist and a part time
    Administrative Assistant were brought in to provide the day-to-day
    management for the Initiative. In fiscal year 1998 $200,000 was set
    aside for technical assistance to cover the cost of salaries and
    associated administrative expenses such as office space rental and
    equipment.
                            conservation operations
        Question. In the fiscal year 1999 President's Budget request,
    language is proposed to provide the authority to expand the use of
    Conservation Operations funds to support the technical assistance
    activities of other programs administered by NRCS such as EQIP, WRP,
    and CRP. Why has the Administration proposed this new language?
        Answer. The Administration has proposed this new language to
    clarify the authority for NRCS to use funds appropriated under the
    Conservation Operations account for technical assistance and
    administrative activities in support of natural resource conservation
    programs, in addition to the conservation assistance authorized by the
    Soil Conservation and Domestic Allotment Act of April 27, 1935 (16
    U.S.C. 590a-590f), for which responsibility has been delegated to NRCS.
    These would include the conservation of highly erodible land and
    wetlands under the Food Security Act of 1985, technical assistance
    under the Watershed Protection and Flood Prevention Act (16 U.S.C.
    1001-1009) and the Flood Control Act (33 U.S.C. 701), and technical
    assistance for some of the conservation programs funded by the
    Commodity Credit Corporation.
        Question. Isn't this current practice?
        Answer. NRCS is currently providing technical assistance through
    the Conservation Operations program for conservation of highly erodible
    land and wetlands (conservation compliance, sodbuster, and swampbuster)
    under the Food Security Act of 1985 and for some conservation programs
    funded by the CCC (Conservation Reserve Program and Environmental
    Quality Incentives Program). Congress noted this technical assistance
    support in the legislative reports accompanying the appropriations for
    fiscal year 1998. We have not used Conservation Operations account
    funds for technical assistance for the Watershed Protection Program or
    for the Flood Control Program.
        Question. The fiscal year 1999 budget proposes to establish the
    America's Private Land Conservation Legacy (APLC) program by
    redirecting the appropriated resources formerly used for Conservation
    Technical Assistance (CTA). Please explain the need for the America's
    Private Land Conservation Legacy (APLC) program and how this program
    will differ from the Conservation Technical Assistance (CTA) program?
        Answer. Nearly 70 percent of the United States, excluding Alaska,
    is private land--the single largest portion of our country's landscape.
    We believe that by renaming the CTA program, we are able to more
    properly identify the focus of our work. America's Private Lands
    Conservation Legacy program will increase the significance of
    conservation on private lands for environmental and economic benefits.
    The program will continue the 60 year conservation technical assistance
    support activities that have provided individuals, groups and
    communities with assistance in solving their conservation problems and
    achieving local and national conservation objectives. In addition,
    America's Private Lands Conservation Legacy program focuses
    conservation technical assistance on enhancing Locally Led Conservation
    efforts, expanding partnerships, achieving leveraging objectives,
    enhancing natural resource assessments for decision-makers, developing
    appropriate technologies and maintaining a readiness to respond to
    natural disasters.
        The America's Private Lands Conservation Legacy program being
    refocused and rearticulated delivers to our conservation partners an
    integrated conservation process consisting of five basic products:
    technological innovation, information, conservation partnerships,
    conservation planning, and implementation of the conservation plans.
    The former traditional framework for delivering conservation are
    components of this approach.
        Question. Does this proposed program require authorization?
        Answer. Conservation technical assistance activities were
    authorized under the 1935 Soil Conservation and Domestic Allotment Act.
    Changing the name of these activities to America's Private Lands
    Conservation Legacy program does not require authorization.
        Question. The fiscal year 1999 budget also proposes an increase of
    $20,000,000 to encourage the States to increase their share of
    contributions to ``designated programs'' in support of the President's
    Clean Water Initiative. Which programs are designated for this increase
    in cost-share funds?
        Answer. This funding can support the President's Clean Water
    Initiative and other efforts to strengthen locally led conservation and
    voluntary conservation efforts by encouraging more leveraging of
    limited Federal resources. This funding is part of the America's
    Private Land Conservation allocation, and will be used to support
    NRCS's efforts to help state and local entities who increase their
    contributions to the conservation effort. Programs supported by
    increased state and local contributions will be the ones to benefit
    from this funding.
        Question. When would the ``to be determined threshold level of
    contributions'' from the States be announced? How will these levels be
    determined?
        Answer. It has not been determined when these levels of
    contributions will be announced. They will be determined as the amount
    of state and local funding dollars are identified. Based on the total
    number of dollars identified per state, a percentage for each state
    will be decided by the NRCS America's Private Land Conservation program
    manager. The threshold levels of contributions will be determined at
    this same time.
        Question. Currently in fiscal year 1998, what total amount of funds
    is given to the States for these activities? How are these funds
    determined?
        Answer. Currently America's Private Land Conservation base funding
    is provided to NRCS managers to carry out various programs. This
    program would provide increased levels of support for NRCS in providing
    assistance under the programs receiving additional state and local
    contributions.
        Question. Is this proposed $20 million an increase to the fiscal
    year 1998 Conservation Operations budget?
        Answer. Yes. The $20 million is a component of the net $47.371
    million increase in America's Private Land Conservation Legacy Program.
        Question. Please explain the proposed competitive partnership
    grants in the fiscal year 1999 budget request.
        Answer. Federal, state, and tribal programs can help produce clean
    water and healthy watersheds, but the commitment and resources of local
    communities, private landowners, and citizens are essential to
    improving and maintaining lake, river, coastal, and wetland resources.
    Effective and strong partnerships are the foundation for both restoring
    impaired watersheds and sustaining watersheds that are currently
    healthy. The benefits of watershed partnerships, which typically
    involve those who live and work in the watershed, are multiple. They
    build grassroot constituencies with a commitment to long-term
    improvements. The watershed partnerships can generate new ideas and
    information and lead to a common understanding of individual roles,
    priorities, and responsibilities. They can promote a more efficient use
    of limited financial and human resources.
        The competitive partnership grants are intended to be used to hire
    non-Federal, local watershed coordinators to identify and engage local
    watershed partners in the process of identifying natural resource
    problems, setting goals, and developing watershed restoration plans.
    These grants would be offered on a competitive basis to such groups as
    conservation districts, watershed districts, Resource Conservation and
    Development councils, land trusts and other non-profit and community
    action groups.
        Question. If these grants are used to hire non-Federal, locally-
    based watershed coordinators, how many full-time equivalents (FTE) will
    be displaced? Are these displaced FTE's in the field?
        Answer. The primary objective of the grants will be to hire non-
    Federal watershed coordinators. No full-time equivalents will be
    displaced. These non-Federal staff will complement any NRCS staff who
    are performing watershed coordination-type duties and functions.
                       national resources inventory costs
        Question. An increase of $3 million is proposed for additional land
    health monitoring and assessment and to enhance the National Resources
    Inventory (NRI). In fiscal year 1998, how much money is allocated for
    the NRI?
        Answer. NRCS has allocated approximately $30 million to support the
    1997 baseline National Resources Inventory (NRI) and related activities
    in fiscal year 1998. This includes approximately $26 million being used
    for field data collection.
        Question. Does this come out of the Conservation Operations account
    currently?
        Answer. These funds come out of the Conservation Operations
    account.
        Question. How much money is estimated for fiscal year 1999?
        Answer. The total estimated cost for the NRI for fiscal year 1999
    is approximately $33 million. The additional $3 million is needed to
    evaluate soil quality and resource health, assess nutrient load, and
    integrate NRCS NRI data on private lands with Forest Service data on
    public lands. Inventory, monitoring and assessments will include the
    initiation of a continuous foundation NRI, the special NRI, and land
    health monitoring studies. Partnerships efforts include the integration
    of the NRI with the Forest Service's Forest Inventory Assessment and
    the National Agricultural Statistics Service's Agricultural Resource
    Management Study and the Mid-Atlantic Pilot of the Committee on
    Environment and Natural Resources Environmental Monitoring Initiative.
          transfer of outreach program to departmental administration
        Question. At the Administration's request, in the fiscal year 1998
    budget the Committee moved $193,000 from the Farm Services Agency for
    the Outreach Program for Socially Disadvantaged Farmers and Ranchers to
    NRCS Conservation Operations account. Now I note that the Secretary has
    moved this program account to the Departmental Administration account,
    and further, has transferred $566,000, a difference of $373,000,
    associated with administration of that Outreach program from
    Conservation Operations to the Departmental Administration account.
    Under what authority did you move this account and funding?
        Answer. This account and funding were transferred under the
    Secretary's delegation of authority as provided in the Department of
    Agriculture Reorganization Act of 1994, Public Law 103-354, Section 212
    (d)(1)(B).
        Question. Why was this funding transferred from Conservation
    Operations to Departmental Administration?
        Answer. The USDA Civil Rights Action Team report recommended the
    establishment of an Office of Outreach . . . ``Assign responsibility
    for the Outreach and Technical Assistance to Socially Disadvantaged
    Farmers (2501) program to this new office to assure Department-wide
    implementation.'' The funds were transferred to Departmental
    Administration to cover the costs of salaries and related expenses of
    the eight FTE's operating the program in response to this
    recommendation.
                                 grazing lands
        Question. In each of fiscal year 1997 and fiscal year 1998, $15
    million was earmarked for the continuation of the grazing lands
    conservation initiative. Please update the Committee on this initiative
    and include any money in the fiscal year 1999 President's budget
    request for this project.
        Answer. The Grazing Land Conservation Initiative (GLCI) has
    produced significant accomplishments over the past 2 years as a result
    of directing funds specifically to this activity. Technical assistance
    available to private grazing lands has increased by 160 staff years.
    Over 2,000 Natural Resources Conservation Service staff have received
    formal training in various aspects of grazing lands management. More
    than 11,000 individuals received technical assistance on 40 million
    acres of private grazing lands in 1997. Over 100 special grazing lands
    projects were established in partnership with State GLCI Coalition. An
    active marketing and outreach plan was implemented in each region of
    the Country.
        In fiscal year 1997, $10 million was earmarked for this effort. In
    fiscal year 1998, $15 million is being directed to this activity. The
    fiscal year 1999 President's budget contains $15 million this activity
    which is included in the base program.
                          status of specific earmarks
        Question. Please provide the Subcommittee with a status report on
    the activities and funding for fiscal year 1998 and the level of
    funding in the fiscal year 1999 budget request, if any, for the
    following projects and programs:
      --agricultural development and resource conservation in native
            Hawaiian communities serviced by the Molokai Agriculture
            Community Committee,
      --Great Lakes Basin Program for soil and erosion sediment control,
      --ground water activities in eastern Arkansas, including Boeuf-
            Tensas, and Bayou Meto, and Kuhn Bayou,
      --Great Lakes watershed initiative,
      --Chesapeake Bay,
      --GIS Center for Advanced Spatial Technology and the National Digital
            Orthophotography Program,
      --Multi-year Rural Recycling and Water Resources Initiative in AR,
            LA, and MS,
      --Indian Creek Watershed, MS,
      --loess hills erosion problem, IA,
      --Poinsett Channel main ditch no. 1, AR,
      --alien weed pests in Hawaii,
      --grazing lands initiative, WV,
      --water treatment practices for wastewater from aquaculture in WV,
      --poultry litter composting project in WV,
      --feasibility study for watershed in Waianae, HI, and
      --poultry-related pollution of the South Branch of the Potomac,
            including the poultry waste energy recovery project in
            Moorefield, and resource recovery at Franklin, WV.
        Answer. The status of each follows.
                    molokai agriculture community committee
        The $250,000 earmarked in fiscal year 1998 are targeted to
    addressing conservation and agricultural development needs of the
    Island of Molokai and its Hawaiian population. NRCS oversees the
    earmarked funds through an agreement with the Molokai-Lanai Soil and
    Water Conservation District. Most of the funds to date have been used
    for on-farm/ranch projects for irrigation and fencing. NRCS technical
    assistance provided through the ongoing Conservation Operations program
    is over and above the earmark. A decrease of $250,000 is proposed for
    this item in fiscal year 1999.
        great lakes basin program for soil and erosion sediment control
        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 1998. 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. $750,000 is
    included in the fiscal year 1999 budget request for this project. A
    decrease of $350,000 is proposed for this item in fiscal year 1999.
                    eastern arkansas ground water activities
        Boeuf/Tensas.--To date the local sponsors continue to inform the
    public of water decline and water quality status as well as promoting
    solutions to the problems. The Arkansas NRCS irrigation team is
    developing critical aspects of the project which include digitized
    soils and data layers through the University of Arkansas for use in the
    NRCS Geographic Information System (GIS), inventories of streams,
    canals, reservoirs, utilities, farms, cultural resources, wildlife, and
    other important land use features and resource concerns are being
    identified. Approximately 50 percent of the inventory has been
    completed. A 3-party memorandum of understanding between NRCS, Arkansas
    Soil and Water Conservation Council (ASWCC), and the local irrigation
    district is being jointly developed.
        It is anticipated NRCS will spend $400,000 of Conservation
    Technical Assistance funds in fiscal year 1998 to provide assistance in
    support of the Boeuf Tensas project.
        Goals for fiscal year 1998 include publishing maps of soils
    information for the 1.2 million acres within the project area,
    completion of data inventory for on-farm portions of the project area,
    completion of a water budget calculation for each tract of the 1.2
    million acres with the project area, completion of the preliminary
    irrigation canal and/or pipeline delivery system for the entire 1.2
    million acre project area, development of public information maps and
    fact sheets for project sponsor local information/education efforts,
    and coordination with the Corps of Engineers (COE) to proceed with
    planning efforts. No specific funding was included in the fiscal year
    1999 budget for this project.
        Bayou Meto.--To date the Natural Resources Inventory has been
    completed that includes GIS soils data layers, water quality and water
    quantity analysis, irrigation water needs analysis for more than 3000
    tracts, wildlife, cultural resources, and a completed environmental
    assessment for the on-farm portion of the project plan. NRCS has
    completed a final areawide Natural Resource Conservation Plan for on-
    farm conservation practices and delivered the plan to the project
    sponsors. The COE has received authorization to proceed with planning
    for flood control and irrigation water supply and other purposes in
    this watershed. An initial coordination meeting was held in February
    between the COE, NRCS, and local sponsors and the details were agreed
    to as to the roles and responsibilities in the 1998 planning activities
    of each agency.
        It is anticipated NRCS will spend $200,000 of Conservation
    Technical Assistance funds in fiscal year 1998 to provide assistance in
    support of the Basin Wide Resource Assessment for the Bayou Meto
    project.
        This project has been identified as a priority area for the
    Environmental Quality Incentives Program (EQIP). Financial assistance
    funding has been made available through EQIP to begin the land
    treatment phase for this project.
        Goals for fiscal year 1998 include coordination and transfer of
    data and information from the completed on-farm portion of the areawide
    Natural Resources Conservation Plan to the COE to assist them with
    their efforts in moving into the planning phase of the delivery portion
    of this project and development of a cooperative agreement and work
    plan in cooperation with COE, Memphis District, to refine and complete
    the total Resource Conservation Plan for this project. No specific
    funding was included in the fiscal year 1999 budget for this project.
        Kuhn Bayou.--To date the local sponsors continue to inform the
    public of water decline and water quality status as well as promoting
    solutions to the problems. The Natural Resources Conservation Plan has
    been completed. NRCS is currently performing some of the surveying and
    design functions for this project. A public meeting was held on August
    19, 1997, and a decision was made by the local sponsors to complete the
    design phase of this project. Local sponsors and NRCS have entered into
    a Cooperative Agreement to complete the design with some funding
    provided by the local sponsors. Design completion is scheduled for
    August 1998.
        It is anticipated NRCS will spend $100,000 of Conservation
    Technical Assistance funds in fiscal year 1998 to provide design,
    surveying, and inventory work in the Kuhn Bayou project.
        Goals for fiscal year 1998 include completion of the structural
    design for one large water control structure, completion of the design
    of the irrigation delivery canals and relift stations, incorporation of
    the irrigation pipeline design to assure water delivery to each tract,
    completion of 100 percent of the land rights work maps and provide to
    the local sponsors for land rights/easements acquisition, and
    preparation of final cost and information/education package for local
    sponsor efforts in providing information to their clients. No specific
    funding was included in the fiscal year 1999 budget for this project.
                        great lakes watershed initiative
        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 is
    continuing. 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. $75,000 is included in the
    fiscal year 1999 budget request
                                 chesapeake bay
        NRCS has been providing assistance to the Chesapeake Bay Program
    for over ten years. In fiscal year 1998, $4.750 million has been
    allocated to the six States in the Chesapeake Bay area. We actively
    support and participate in the program by providing training to
    Conservation District employees, including Bay Technicians and
    Engineers; developing conservation plans as a basis for bay contracts;
    technical approval of engineering plans and designs; on-site technical
    evaluations of complex problem areas and inspections of works in
    progress. Staff contribute to the overall program of reducing erosion
    and sedimentation, nutrients, and improving water quality. Chesapeake
    Bay contracts for Best Management Practices treating thousands of acres
    and providing nutrient reductions of nitrogen, phosphorus, and potash.
        During the past year, over 900 systems were planned with waste
    management components, over 3,200 conservation systems were planned,
    over 117 thousand acres benefited from the application of conservation
    practices, and riparian area protection and use of conservation buffers
    were actively planned and installed. No specific funding was included
    in the fiscal year 1999 budget for this project.
                   gis center for advanced spatial technology
        Work at the Center for Advanced Spatial Technology continues.
    Currently support is being given to an initiative to place completed
    Arkansas soil surveys on the Internet including the one for Woodruff
    County. Activities also include supporting the implementation of Field
    Office Computer Systems (FOCS) Geographic Information (FGI) at high
    priority NRCS Field Service Centers. The goal is to have FGI
    implemented in four Field Service Centers by the end of fiscal year
    1998. In fiscal year 1998, $48,000 has been provided to support the
    activities of the Center for Advanced Spatial Technology. No specific
    funding was included in the fiscal year 1999 budget for this project.
                   national digital orthophotography program
        The NRCS contributed $6,225,000 to the National Digital Orthophoto
    Program in fiscal year 1998, and anticipates use of $6,250,000 in
    fiscal year 1999. Approximately 30 percent (about 760 counties) of the
    conterminous US is now complete with high resolution digital
    orthoimagery. Another 40 percent of the country is in production. By
    the end of fiscal year 1998, orthoimagery for an additional 10 percent
    of the country is planned for production.
        The success of this program is directly related to Federal, State
    and local agencies need for an up-to-date digital picture of the
    landscape to be used in a geographic information system. Good progress
    is also being made as a result of agencies willingness to cost-share
    and cooperate in the development and sharing of the data. The
    orthoimage provides a rich source of information for business
    activities like natural resource planning, transportation management,
    pipeline routing, urban planning, parcel mapping and delineation of
    wetlands and soils. The National Digital Orthophoto Program goal is to
    have orthoimagery in production over all private lands by the year
    2000, and all Federal lands by 2002.
           multi-year rural recycling and water resources initiative
        The data collection phase for the Mississippi Delta Water Resources
    Study has been completed with the final draft being compiled and
    completion of the draft anticipated by June 1, 1998.
        Plans are being made to implement practices for the Mississippi
    Delta Recycling and Water Project within the Environmental Quality
    Incentives Program (EQIP) priority area during fiscal year 1998. No
    specific funding was included in the fiscal year 1999 budget for this
    project.
                             indian creek watershed
        The Indian Creek Watershed Project is in the design stage and
    scheduled to be contracted for construction during fiscal year 1998. No
    specific funding was included in the fiscal year 1999 budget for this
    project.
                       loess hills erosion problem, iowa
        Project sponsors plan to install thirty-eight erosion control
    structures during fiscal year 1998. These are in addition to the fifty-
    seven structures in fifteen counties in western Iowa that have been
    installed since the inception of this project in 1992.
        This is a cooperative project involving support from all levels of
    government. In fiscal year 1998, the Federal government, through NRCS,
    contributed $400,000 to this project. The State of Iowa contributed $1
    million (compared with $400,000 in 1997), while county contributions
    were approximately $575,000 (up from $460,000 in 1997). NRCS has
    contributed $400,000 annually since the project began.
        In fiscal year 1997, a total of $1.29 million was spent on this
    project. As a result, an estimated $4,966,785 of local infrastructure
    and land was protected. Thus every dollar spent on the project during
    1997 resulted in the prevention of almost $4 in damages. Throughout the
    life of the project, $4.3 million has been spent to prevent $21 million
    in damages.
        Project sponsors are seeking $1 million from the Federal government
    in fiscal year 1999 for this project. It is estimated that a total of
    $30.3 million is needed to complete this effort. At present levels of
    funding, it is estimated that it will require 18 years to complete this
    project. If the Federal government provided $1 million annually, this
    figure would drop to 12 years.
        During fiscal year 1997, $400,000 of Federal funds were combined
    with $400,000 in State funds and $460,000 in local funds to build 13
    stream stabilization (channel degradation) projects in 12 western Iowa
    counties. These projects will keep these streams from cutting deeper
    into the landscape and prevent an estimated $5 million in damages to
    farmland, roads, bridges, and other infrastructure.
        For fiscal year 1998, $400,000 of Federal funds will be combined
    with $1 million in state funds and $740,000 in local funds to build 24
    projects in 14 western Iowa counties. These projects will provide
    benefits roughly proportional to those listed above, preventing
    approximately $8.5 million in damages to farmland and rural
    infrastructure. A decrease of $400,000 is proposed for this item in
    fiscal year 1999.
                  poinsett channel main ditch no. 1, arkansas
        Technical assistance funding continues to be provided for channel
    improvement in the Poinsett Watershed Project located in Craighead and
    Poinsett Counties. To date, 31 of 36 floodwater retarding structures
    have been constructed. The five remaining structures have an estimated
    construction cost of $1.5 million in financial assistance. Two channel
    improvement contracts for a water control structure and 1.3 miles of
    channel improvement have been constructed at a cost of $954,511. The
    remaining approximate 17.7 miles of channel improvements have an
    estimated construction cost of $4.1 million in financial assistance.
    Work is planned to be completed over several years. No specific funding
    was included in the fiscal year 1999 budget for this project.
                           alien weed pests in hawaii
        NRCS has allocated $20,000 in fiscal year 1998 to begin to address
    the alien weed pests in Hawaii. To date, NRCS has met and is working
    with the Big Island RC&D Council, Soil and Water Conservation
    Districts, and the Gorse Committee to formulate a plan to address the
    gorse problem on the Big Island. No specific funding was included in
    the fiscal year 1999 budget for this project.
                   grazing lands initiative in west virginia
        In fiscal year 1998 $300,000 of appropriated funds are being used
    to support technical staff, the collection of forage and fecal samples
    and to provide education assistance to grassland farmers. Two
    grazingland specialists and field office staffs are providing direct
    on-farm assistance to farmers to improve their pasture management
    systems using both forage and economic analysis. Along with on-going
    assistance the goal is to improve over 65,000 acres of pasture for 125
    farmers. In addition, 30 farmers will attend a 3-day forage and
    livestock school to improve their management and marketing skills. Over
    500 forage and livestock fecal samplings indicate low quality forages
    due to mis-management resulting in lost income. Estimated economic
    benefits is $15/ac/year once an improved grazing system is fully
    implemented by the farmer. This will result in an annual increased
    return of $990,000 at existing funding levels. A decrease of $300,000
    is proposed for this item in fiscal year 1999.
        water treatment practices for wastewater from aquaculture in wv
        In fiscal year 1998 no funding was provided for this activity,
    however, two weeks of engineering time was spent developing Field
    Office Tech Guide standards for the treatment of waste-water from
    aquacultural activities. The development of these standards is an
    interagency effort and the participants comprise a part of the State
    Technical Committee. No specific funding was included in the fiscal
    year 1999 budget for this project.
                   poultry litter composting in west virginia
        Investigations and contacts have been made on five sites outside
    the Potomac River Watershed. Currently this project is in the planning
    stage with application to start in early summer of fiscal year 1998.
    NRCS has allocated $120,000 to fund the technical assistance needed for
    this project. A decrease of $120,000 is proposed for this item in
    fiscal year 1999.
               feasibility study of watershed in waianae, hawaii
        This study was directed as a result of damage caused by heavy rains
    to this and other watersheds in November of 1996. An assessment of the
    feasibility of flood control projects or mitigative measures which
    would reduce the reoccurrence of damages was necessary. Through an
    agreement with the Corps of Engineers, Honolulu District, the Corps
    will carry out the assessment under the direction and coordination of
    NRCS. NRCS is spending $200,000 for this item in fiscal year 1998. A
    decrease of $200,000 is proposed for this item in fiscal year 1999.
          poultry related pollution on the south branch of the potomac
        NRCS has entered into a cooperative agreement with the West
    Virginia Department of Agriculture (WVDA) and Franklin, WV, to do the
    second phase of a feasibility study for a poultry waste digester. In
    fiscal year 1998, NRCS will provide $90,000. NRCS has also entered into
    an agreement between WVDA and Moorefield, WV, for the operational
    expenses of the digester located in Moorefield. NRCS will provide
    $50,000 in fiscal year 1998 for this effort. No specific funding was
    included in the fiscal year 1999 budget for this project.
                     poultry waste problem in west virginia
        Question. Several projects in West Virginia address the poultry
    waste problem in West Virginia. Are any of these projects repetitive in
    nature?
        Answer. No, the various projects underway in West Virginia are not
    repetitive, though several are commonly directed toward meeting our
    goals relative to the Chesapeake Bay. For instance, five sites within
    the Potomac River Basin are receiving additional technical assistance
    to develop composting as an alternative utilization of poultry litter.
    In a separate cooperative agreement with the West Virginia Department
    of Agriculture, we are also supporting feasibility and operational
    assistance of separate projects in Franklin and Moorefield, West
    Virginia, the latter of which is focused on the utilization of poultry
    litter as an alternative energy source. We believe that the work
    associated with these activities will contribute to our overall efforts
    to address animal waste problems across the country.
        Question. Are all of these projects related? If yes, does NRCS have
    a plan for these activities so that a common goal is reached to
    minimize the poultry waste problem in West Virginia? Which account
    under NRCS would this work be done?
        Answer. These projects are related in the sense they are all
    focused on alternative uses of poultry litter. We expect that as we
    learn more about these technologies, and as they are better understood
    at the local level, our current progress relative to conservation
    programs and technical assistance will be enhanced. All of these
    activities are currently funded from our Conservation Operations and
    Technical Assistance funds.
                    colorado river salinity control program
        Question. Are all current balances expended for the Colorado River
    Basin Salinity Control Program? If not, how much is available and in
    which fiscal year will it all be expended?
        Answer. The Colorado River Basin Salinity Control Program has
    approximately $5,661,000 left in obligated funds for contracts to be
    expended on installation of salinity control practices. It is expected
    that these funds will be expended by the year 2004.
        Question. How many projects that once received funding through the
    Colorado River Basin Salinity Control Program are continued with
    funding through EQIP? Which projects are these?
        Answer. There are 5 projects that once received CRBSCP funding that
    are currently receiving EQIP funding. These projects are Grand Valley,
    Colorado; Lower Gunnison Basin, Colorado; McElmo Creek, Colorado; Uinta
    Basin, Utah and Big Sandy River, Wyoming.
                            plant materials centers
        Question. The fiscal year 1999 budget request indicates a decrease
    of $1 million for Plant Materials Centers because of the completion of
    renovation and modification work. Please list the renovations and
    modifications work which will be completed by fiscal year 1999,
    yielding this $1 million in savings, and specify the completion date of
    each project.
        Answer. A partial list of projects scheduled for completion in
    fiscal year 1998 can be found in the table provided. Their cost is
    about $1 million.

                                 Fiscal year 1998 plant materials renovation completions

                        Plant center                             Project: Maintenance, renovation, equipment

    Lockeford, CA................................  Heating-AC system.
    Hoolehoa, HI and Pacific Basin...............  Re-roof equipment building.
    Aberdeen, ID.................................  Combine 10-ft header.
                                                   Irrigation system at PMC office/greenhouse.
                                                   Swather.
    Corvallis, OR................................  Safety upgrade and expand existing storage shed.
    Booneville, AR...............................  Plot harvester.
    Golden Meadow, LA............................  Machinery storage bldg. canopy.
                                                   Grass drill.
    Nacodoches, TX...............................  No-till seeder.
    Kingsville, TX...............................  100 HP tractor.
    Knox City, TX................................  \3/4\-ton truck stakebed.
    Manhattan, KS................................  Upgrade flood irrigation well number 3.
    Bridger, MT..................................  Dust collection system (safety need).
                                                   Forage dryer.
    Bismarck, ND.................................  Tractor.
    Ellsberry, MO................................  Renovation of electrical system.
    Brooksville, FL..............................  New roof two pump houses, paint all buildings.
    Americus, GA.................................  Irrigation pump and motor.
    Coffeeville, MS..............................  Plot combine.
                                                   Laboratory operations.
    Beltsville, MD...............................  Irrigation hydrant for remote field.
                                                   Greenhouse--Reskin and new heat system to improve efficiency.
    Cape May, NJ.................................  Office modification for handicap.
                                                   Upgrade degraded facilities (paint, siding, gutters).
    Alderson, WV.................................  PMC development (in part) of physical facilities.

                            plant materials centers
        Question. Is any renovation and modification work scheduled for
    fiscal year 1999 or future fiscal years? Please provide for the record,
    by center and project, the work needed, when the renovation/
    modification is scheduled to be done, and the amount of funding
    required.
        Answer. Renovation and modification work is scheduled for fiscal
    year 1999 through fiscal year 2002 according to plant center needs that
    are now identified. In order to identify needs effectively, the program
    has a 5-year plan (1998-2002) that is updated annually. For the period
    fiscal year 1999-2002, a total of $4.8 million, or about $1.2 million/
    year, is needed. As with any farm operation, regular maintenance,
    facility renovation, and equipment replacement are important and key
    elements to avoid larger cumulative expenses in the future. In
    addition, the program is able to operate more productively and have
    safe and healthy working conditions with continued regular maintenance.
        With 26 centers in the Plant Materials Program, needs vary from one
    location to another, by year, and according to the condition of
    buildings, roads, property, and equipment. A list of specific project
    needs is presented in the table below. The diversity of needs
    identified in the table illustrates the scope of operations in the
    program.

           PROJECTED PLANT CENTER NEEDS: MAINTENANCE, RENOVATION, NEW CONSTRUCTION, AND EQUIPMENT ACQUISITION
    ----------------------------------------------------------------------------------------------------------------
                                                                          Fiscal year when planned with costs
                Plant center/item project description            ---------------------------------------------------
                                                                      1999         2000         2001         2002
    ----------------------------------------------------------------------------------------------------------------
    Booneville, AR:
        New office building.....................................  ...........  ...........     $200,000  ...........
        Items (3) less than $10,000 each........................      $12,500  ...........  ...........  ...........
    Tucson, AZ:
        Phase 3-PMC rehabilitation..............................       56,700  ...........  ...........  ...........
        Brush machine (commercial size).........................       11,500  ...........  ...........  ...........
        Seed drill (Truax no-till drill)........................  ...........  ...........       12,000  ...........
        3/4-ton pickup..........................................  ...........  ...........  ...........      $20,000
        Items (2) less than $10,000 each........................  ...........       $3,000  ...........        8,000
    Lockeford, CA:
        Panel van...............................................       20,000  ...........  ...........  ...........
        4-row bed shaper with rototiller........................       15,000  ...........  ...........  ...........
        Soil mixer..............................................  ...........       12,000  ...........  ...........
        Administration building roof............................  ...........  ...........       20,000  ...........
        Paint buildings.........................................  ...........  ...........  ...........       20,000
        Seal asphalt............................................  ...........  ...........  ...........       15,000
        Bldg. area water pump...................................  ...........  ...........  ...........       10,000
        Seed bldg. dust system..................................  ...........  ...........  ...........       10,000
        Fire alarm..............................................  ...........  ...........  ...........       10,000
        Item (3) less than $10,000 each.........................  ...........  ...........  ...........       14,000
    Meeker, CO: No long-range update submitted in 1997..........  ...........  ...........  ...........  ...........
    Brooksville, FL:
        4-wheel ATV.............................................       12,000  ...........  ...........  ...........
        Plot vacuum harvester...................................       35,000  ...........  ...........  ...........
        Upgrade office elect., heat/AC..........................  ...........       18,000  ...........  ...........
        Expand conference and educational building..............  ...........       48,000  ...........  ...........
        Re-pave parking lots and driveway.......................  ...........       65,000  ...........  ...........
        \1/2\-ton pickup truck..................................  ...........  ...........       14,000  ...........
        Hydro seeder............................................  ...........  ...........  ...........       15,000
        Up-grade irrigation system..............................  ...........  ...........  ...........       52,000
        Items (7) less than $10,000 each........................        7,000       22,000        4,000  ...........
    Americus, GA:
        Large scale (digital)...................................        1,000  ...........  ...........  ...........
        Grass drill.............................................       10,000  ...........  ...........  ...........
        One row tractor.........................................       15,000  ...........  ...........  ...........
        Pave driveway...........................................       25,000  ...........  ...........  ...........
        Tractor 50-60 hp........................................  ...........       25,000  ...........  ...........
        Hy-cycle sprayer........................................  ...........       25,000  ...........  ...........
        Tractor 80-90 hp........................................  ...........  ...........       35,000  ...........
        Greenhouse..............................................  ...........  ...........       30,000  ...........
        Seed germinator.........................................  ...........  ...........       10,000  ...........
        Van.....................................................  ...........  ...........  ...........       18,000
        Walk-in seed storage unit...............................  ...........  ...........  ...........       30,000
        Items (6) less than $10,000 each........................        4,000       12,500        5,000  ...........
    Houehua, HI:
        Tractor, 42 HP..........................................       35,000  ...........  ...........  ...........
        Front end loader attachment for 595 tractor.............       10,000  ...........  ...........  ...........
        Paint/repair bldgs. (shop /seed)........................       30,000  ...........  ...........  ...........
        Parking lot/driveway paving.............................       75,000  ...........  ...........  ...........
        Potable water hook-up...................................       45,000  ...........  ...........  ...........
        Seed storage walk-in unit...............................  ...........       27,000  ...........  ...........
        Paint PMC seed/equipment building.......................  ...........       30,000  ...........  ...........
        Seed dryer/dust ventilation.............................  ...........  ...........       25,000  ...........
        Paint office............................................  ...........  ...........       10,000  ...........
        Items (2) less than $10,000 each........................        9,000  ...........  ...........  ...........
    Aberdeen, ID: No long-range update submitted in 1997........  ...........  ...........  ...........  ...........
    Manhattan, KS:
        Pickup truck \1/2\-ton..................................       14,000  ...........  ...........  ...........
        Tractor with loader (65 HP and 4 WD)....................       27,000  ...........  ...........  ...........
        Flail vac seed stripper.................................  ...........       18,000  ...........  ...........
        Binocular microscope with camera attachment.............  ...........       10,000  ...........  ...........
        Pickup truck \1/2\-ton (4 WD)...........................  ...........  ...........       18,000  ...........
        Tractor (40 HP and 2 WD)................................  ...........  ...........       25,000  ...........
        Weed badger tree cultivator.............................  ...........  ...........  ...........       20,000
        Gated irrigation pipe for flood irrigation..............  ...........  ...........  ...........       17,000
        Replace oil storage building............................  ...........  ...........  ...........       10,000
        Items (2) less than $10,000 each........................  ...........        9,000        9,000  ...........
    Galliano, LA:
        Pond cell construction (field D)........................       25,000  ...........  ...........  ...........
        Pickup truck \3/4\-ton..................................  ...........  ...........  ...........       15,000
        Air boat................................................       20,000  ...........  ...........  ...........
        Items (3) less than $10,000 each........................       12,900  ...........  ...........  ...........
    Beltsville, MD:
        Small row crop tractor plus implements..................       26,000  ...........  ...........  ...........
        Replace 1976 Dodge \1/2\-ton pickup.....................       16,000  ...........  ...........  ...........
        Replace pavement around PMC.............................       20,000  ...........  ...........  ...........
        Removal of nonfunctional solar panels...................       10,000  ...........  ...........  ...........
        New office building.....................................  ...........  ...........  ...........      200,000
    Rose Lake, MI:
        Pickup truck............................................  ...........       20,000  ...........  ...........
        Single row planter......................................  ...........  ...........       15,000  ...........
        Items (9) less than $10,000 each........................        9,500  ...........  ...........        5,000
    Ellsberry, MO:
        Pickup \3/4\-ton offset.................................       12,600  ...........  ...........  ...........
        Combine (partial support)...............................       50,000  ...........  ...........  ...........
        Pickup \1/2\-ton offset.................................  ...........       12,600  ...........  ...........
        Tractor, 65 HP..........................................  ...........       30,000  ...........  ...........
        Tractor, 18 HP..........................................  ...........       13,000  ...........  ...........
        Vehicle offset..........................................  ...........  ...........       12,600  ...........
        Computer update.........................................  ...........  ...........       20,000  ...........
        Items (12) less than $10,000 each.......................       30,700        6,500       12,000  ...........
    Coffeeville, MS:
        Tractor 75 hp w/cab and loader..........................  ...........       50,000  ...........  ...........
        Seed cleaner (gravity table)............................  ...........  ...........       12,000  ...........
        Van (Suburban type).....................................  ...........  ...........  ...........       28,000
        Items (2) less than $10,000 each........................       12,000  ...........  ...........  ...........
    Bridger, MT:
        Combine.................................................      100,000  ...........  ...........  ...........
        Wheel row sprinkler system..............................       75,000  ...........  ...........  ...........
        Windrower...............................................  ...........       25,000  ...........  ...........
        4 x 4 \3/4\-ton pickup..................................  ...........  ...........       18,000  ...........
        Metal storage shed......................................  ...........  ...........       20,000  ...........
        Baler...................................................  ...........  ...........       12,000  ...........
        Fork lift...............................................  ...........  ...........       20,000  ...........
        Land plane..............................................  ...........  ...........       10,000  ...........
        Greenhouse glass replacement............................  ...........  ...........       22,000  ...........
        Items (11) less than $10,000 each.......................        9,000       32,000       16,000  ...........
    Bismarck, ND:
        Van (4 WD suburban type)................................       35,000  ...........  ...........  ...........
        Greenhouse/lathhouse....................................  ...........       75,000  ...........  ...........
        Computer equipment......................................  ...........  ...........       20,000  ...........
        Tractor.................................................  ...........  ...........  ...........       45,000
    Las Cruces, NM (fiscal year 1999 list only):
        Complete headhouse/lab interior.........................       15,000  ...........  ...........  ...........
        Well for greenhouse area (6"  x  200)...................       10,000  ...........  ...........  ...........
        20-ft. gooseneck trailer................................       15,000  ...........  ...........  ...........
        Renovate well #2........................................       30,000  ...........  ...........  ...........
        Renovate seed storage bldg..............................       30,000  ...........  ...........  ...........
        Hay swather.............................................       35,000  ...........  ...........  ...........
    Big Flats, NY:
        Re-roof seed barn and shop..............................       14,000  ...........  ...........  ...........
        New pole barn...........................................       60,000  ...........  ...........  ...........
        Test plot planter.......................................       12,000  ...........  ...........  ...........
        Ford mower..............................................  ...........       11,000  ...........  ...........
        Tractor (50-60 hp)......................................  ...........       38,000  ...........  ...........
        Pickup truck............................................  ...........       16,000  ...........  ...........
        Computer equipment......................................  ...........       15,000  ...........  ...........
        New office building.....................................  ...........  ...........      150,000  ...........
        Items (2) less than $10,000 each........................        9,000  ...........        9,000  ...........
    Corvallis, OR:
        Expand existing storage shed............................       38,000  ...........  ...........  ...........
        Lab brush machine w/12 cages............................       15,000  ...........  ...........  ...........
        Flail-vac seed stripper.................................       18,000  ...........  ...........  ...........
        Pond fencing and retrofit inlets........................       15,000  ...........  ...........  ...........
        Precision drill w/carbon banding........................       14,000  ...........  ...........  ...........
        Expand headhouse........................................  ...........       75,000  ...........  ...........
        Van.....................................................  ...........       19,500  ...........  ...........
        1\1/2\-ton truck........................................  ...........       32,000  ...........  ...........
        Tractor 60 hp diesel....................................  ...........  ...........       22,000  ...........
        Roof and paint office complex...........................  ...........  ...........       11,600  ...........
        Items (16) less than $10,000 each.......................        7,700       26,700        7,600       19,000
    Kingsville, TX:
        Mezzanine...............................................  ...........       30,000  ...........  ...........
        Road renovation.........................................  ...........       10,000  ...........  ...........
        Combine.................................................  ...........      100,000  ...........  ...........
        1-ton pickup............................................  ...........  ...........       20,000  ...........
        20 HP tractor...........................................  ...........  ...........       15,000  ...........
        Irrigation pond renovation..............................  ...........  ...........  ...........       10,000
        Seed cleaner............................................  ...........  ...........  ...........       20,000
        Items (4) less than $10,000 each........................        8,000        7,000        5,000        5,000
    Knox City, TX
        Round hay baler.........................................       24,000  ...........  ...........  ...........
        Lawn tractor w/tiller...................................  ...........       15,000  ...........  ...........
        Phone system............................................  ...........  ...........       12,000  ...........
        Office/conference complex...............................  ...........  ...........  ...........      160,000
    Nacogdoches, TX:
        \3/4\-ton heavy duty pickup.............................  ...........  ...........  ...........       20,000
        Small tractor...........................................  ...........  ...........       15,400  ...........
        Items (8) less than $10,000 each........................       16,500       11,500       12,500        1,800
    Pullman, WA (fiscal year 1999 list only):
        1-ton 4 WD extended cab pickup..........................       30,000  ...........  ...........  ...........
        80-85 hp tractor w/cab and 4 WD.........................       65,000  ...........  ...........  ...........
        Items (2) less than $10,000 each........................        9,000  ...........  ...........  ...........
    Alderson, WV:
        Combine.................................................  ...........  ...........  ...........      110,000
        Farm tractor--85 horsepower.............................       60,000  ...........  ...........  ...........
        Hay baler...............................................       10,000  ...........  ...........  ...........
        Seed cleaner............................................       15,000  ...........  ...........  ...........
        Irrigation pump.........................................  ...........       10,000  ...........  ...........
        Fork lift...............................................  ...........       20,000  ...........  ...........
        4 x 4 pickup............................................  ...........       22,000  ...........  ...........
        Facility development (bldg. construction)...............      155,000      250,000  ...........  ...........
        Items (9) less than $10,000 each........................       35,500  ...........  ...........  ...........
                                                                 ---------------------------------------------------
          Totals by year........................................    1,699,100    1,297,300      906,700      907,800
                                                                 ===================================================
          Grand total: Fiscal years 1999-2002...................                       4,810,900
    ----------------------------------------------------------------------------------------------------------------

                           water resources assistance
        Question. The fiscal year 1999 budget request proposes $6.9 million
    to provide technical assistance to watershed and rangeland
    coordinators. Currently in fiscal year 1998, how much technical
    assistance is provided to the 40 high-priority watersheds?
        Answer. This is a new initiative in fiscal year 1999 and was
    therefore not funded in fiscal year 1998. These 40 high priority
    watersheds will be identified as those areas with the greatest water
    quality problems in line with the President's Clean Water Action
    Initiative and will, upon approval of this initiative, be selected
    through a locally driven, competitive process. The $6.998 million under
    the Watershed Surveys and Planning Program would fund 92 federal
    watershed and rangeland coordinators in these watersheds. These
    coordinators would assist local people to identify problems, develop
    alternatives, write plans, coordinate volunteers, and implement
    projects in watersheds and grazing lands assistance at risk.
        In addition, they would facilitate access to all USDA conservation
    financial assistance programs that can be used to support watershed
    restoration and clean water goals and to target the most critical
    sources of pollution in the watershed. Finally, these coordinators
    would enhance the technical capability of locally led watershed
    partnerships, particularly for problem identification, development of
    watershed restoration and pollution prevention plans, and monitoring
    progress.
        Question. How many dollars are being spent on technical assistance
    for grazing lands assistance in 1998? How many FTE's are supported by
    this funding?
        Answer. The agency earmark for grazing lands technical assistance
    increased to $15 million for fiscal year 1998. Grazing lands
    specialists positions have been increased in the last two years by more
    than 160 FTE's, including the establishment of grazing lands
    specialists positions in 14 states previously with no qualified grazing
    lands specialists. All states are now receiving allocations in support
    of their workload associated with the Conservation of Private Grazing
    Lands Program. These increases were achieved through a combination of
    new hires, reassignments, and changes in job responsibilities. NRCS now
    has 360 staff assigned to provide grazing lands technical assistance.
        Question. NRCS has installed over 15,000 individual watershed
    systems since 1944. Many of these aging structures are nearing their
    life span and possibly could require environmental restoration. The
    fiscal year 1999 budget request proposes $1 million to provide
    educational assistance to watershed sponsors to inform them of repairs
    needed to old systems. Is there any educational assistance being
    provided to watershed sponsors in fiscal year 1998?
        Answer. Through the Small Watershed Program, Public Law 534 and
    Public Law 566, NRCS has assisted local communities as well as
    individual farmers and ranchers install conservation systems in
    approximately 1,700 authorized watershed projects, in every state. Of
    most serious concern to this aging infrastructure is the 10,400
    federally assisted project dams that are owned by the local communities
    (legal project sponsors). More than half of the project dams are more
    than 30 years old and in the next 10 years, almost 1000 of them will
    reach the end of their evaluated life. While most of the sponsor's dams
    are in acceptable condition we are aware of some that present hazards
    which could result to loss of life and property due to collapse or
    failure. Currently, there are no dedicated funds being provided for
    educational assistance to watershed sponsors in fiscal year 1998.
        Question. How many individual watershed systems in need of
    environmental restoration have been identified to date?
        Answer. Since the structures are considered to be ``federally
    assisted'' and are owned by the sponsors, who are bound by the
    Operations and Maintenance Agreement to keep the structures in good
    condition, we must rely on the sponsors to provide the data on the
    number or location of structures that are in need of rehabilitation or
    modification.
        Question. Will the proposed $1 million support educational
    assistance to watershed sponsors for all of these old systems?
        Answer. Since this is a serious problem, we feel at a minimum, an
    educational effort with all sponsors should take place in order to
    increase awareness and affect sponsor action. We envision fact sheets,
    training workshops, and videos provided through a cadre of experts in
    the field. As part this budget item NRCS would utilize the ``Training
    Aids for Dam Safety'' package of workbooks and videotapes prepared by
    the Interagency Committee on Dam Safety. The package was professionally
    prepared and translated into several languages. It includes modules
    ranging from technical aspects of site inspections to safety program
    development.
                                   user fees
        Question. The fiscal year 1999 President's budget request proposes
    the implementation and collection of $10 million in user fees for
    certain types or areas of technical services and products. How will
    these user fees be implemented? Please list the type of services and
    products that are proposed to be financed by user fees collections.
        Answer. Although we have not fully developed the appropriate fee
    schedules or implementation details, we anticipate the following types
    of services may be included under the proposed user fee program:
      --Conservation Plans exceeding 16 hours of work;
      --Foundation seeds--initial supply;
      --Foundation plants;
      --Testing for animal waste storage lagoons;
      --Inspection and testing of dams;
      --Water supply forecasts;
      --Climate data;
      --SNOTEL data;
      --Soil survey publications;
      --Wetland delineations; and
      --Irrigation systems.
        Question. Which constituent groups will be impacted by this
    proposal?
        Answer. We expect all constituent groups to be affected, although
    some more directly than others.
        Question. What is the estimated cost of these services currently?
        Answer. We do not know the exact cost of the services affected,
    however, the President's budget estimates the cost to be $10 million.
    This amount currently supports about 133 FTE's.
        Question. What legislative authority is required and has the
    Administration submitted its legislative proposal to the Congress for
    consideration?
        Answer. We have requested authority under the USDA Omnibus User Fee
    legislative package (AG 228, Title IV, Sec. 401) to prescribe and
    collect fees to cover the costs of providing information, technical
    assistance, and other services for all NRCS programs where the
    Secretary determines they are feasible. This package is under review at
    OMB and should be sent to the Congress shortly.
        Question. How will NRCS assure that technical assistance maximizes
    the amount landowners actually have available to spend on conservation
    practices?
        Answer. NRCS will do everything possible to assure this including
    reducing costs wherever possible.
                             congressional earmarks
        Question. The fiscal year 1999 President's budget proposes a
    decrease of $6.9 million for earmarked projects funded in the fiscal
    year 1998 Appropriations Act. Please list the projects and funding
    levels for each project affected by the proposed decrease of $6.9
    million for Conservation Operations.
        Answer. The list of earmarks follows.

    Hawaii:
        Feasibility Study--Waianae Watershed......................  $200,000
        Molokai Agriculture Community Committee...................   250,000
    Iowa:
        Loess Hills Erosion/Western Iowa..........................   400,000
        Trees Forever Program.....................................   100,000
    Louisiana: Crowley Rice Research Station......................   125,000
    Mississippi:
        Franklin County........................................... 3,000,000
        Mississippi Delta Water Resources Study...................   350,000
    New York:
        Westchester County SWCD...................................   300,000
        Pastureland Management/Rotational Grazing.................   300,000
        Skaneateles and Owasco Watersheds.........................   250,000
    Oklahoma: Deer Creek Watershed................................   750,000
    West Virginia:
        Poultry Litter Composting.................................   120,000
        Long-Range Grazing Land Initiative........................   300,000
    Not Specified:
        Great Lakes Basin Program for Soil and Erosion Sediment
          Control.................................................   350,000
        Community Leadership Alliance for Sustainable Development
          Program.................................................   100,000
                        --------------------------------------------------------------
                        ____________________________________________________

            Total, Selected Earmarks.............................. 6,895,000

        Question. What is the justification for not continuing funding for
    each of these projects in fiscal year 1999?
        Answer. Earmarks for specific local projects are actions that go
    outside the ordinary allocation process. Most of them focus on issues
    which are local in nature and do not provide benefits to regional or
    national priorities.
                          forestry incentives program
        Question. The Forestry Incentives Program is very popular among my
    landowners in Mississippi. Why does the President's budget request
    propose to terminate funding for this program for fiscal year 1999?
        Answer. The President's budget does not propose funding for the
    Forestry Incentives Program (FIP) for fiscal year 1999. We recognize
    the important goals of the program and the many indirect benefits that
    reforestation provides including water quality and wildlife habitat.
    However, in the interim, NRCS will continue to support landowners with
    FIP contracts as well as provide technical assistance with respect to
    vegetative cover, including trees on private lands. The agency also
    notes that programs such as the Wildlife Habitat Incentives Program
    (WHIP) and the Conservation Reserve Program (CRP) also encourage
    practices that include planting trees.
        Question. How many participants receive funding from this program?
    Please list the number of participants, by state.
        Answer. Totals on the number of participants who received funding
    for FIP in fiscal year 1997 will be provided for the record.
        [The list follows:]

                        Fiscal year 1997 FIP participants

                                                         No. of participants
            State                                    who installed practices
    Alabama...........................................................    62
    Alaska............................................................     1
    Arizona.................................................................
    Arkansas..........................................................   100
    California........................................................    18
    Colorado..........................................................     6
    Connecticut.......................................................     2
    Delaware..........................................................    11
    Florida...........................................................   120
    Georgia...........................................................   635
    Guam....................................................................
    Hawaii..................................................................
    Idaho.............................................................     7
    Illinois..........................................................    23
    Indiana...........................................................    55
    Iowa..............................................................    21
    Kansas..................................................................
    Kentucky..........................................................    34
    Louisiana.........................................................   164
    Maine.............................................................    36
    Maryland..........................................................    29
    Massachusetts.....................................................     8
    Michigan..........................................................    46
    Minnesota.........................................................    36
    Mississippi.......................................................   754
    Missouri..........................................................    14
    Montana...........................................................     6
    Nebraska..........................................................     2
    New Hampshire.....................................................    21
    New Jersey..............................................................
    New Mexico..............................................................
    New York..........................................................    32
    North Carolina....................................................   166
    North Dakota............................................................
    Ohio..............................................................    36
    Oklahoma..........................................................    16
    Oregon............................................................   100
    Pennsylvania......................................................    14
    Puerto Rico.......................................................     3
    Rhode Island............................................................
    South Carolina....................................................   489
    South Dakota......................................................     6
    Tennessee.........................................................    16
    Texas.............................................................   334
    Utah....................................................................
    Vermont...........................................................     8
    Virginia..........................................................   375
    Washington........................................................    57
    West Virginia.....................................................    27
    Wisconsin.........................................................    34
    Wyoming...........................................................    29
                            -----------------------------------------------------------------
                            ________________________________________________
          Total....................................................... 3,953
                      wildlife habitat incentives program
        Question. The Wildlife Habitat Incentives Program (WHIP) is a
    voluntary program that will provide a wide array of wildlife practices
    to address wildlife habitat issues throughout the nation. The budget
    assumes 3,400 contracts in fiscal year 1998 and 2,300 in fiscal year
    1999. Have all of the assumed fiscal year 1998 3,400 contracts been
    awarded?
        Answer. No. WHIP applications are accepted on a continuous sign-up
    basis. Most States initiated the program sign-up after February 1, with
    many waiting until the Secretary officially announced the release of
    funds on February 27. We anticipate the majority of the selections
    being made in late spring/early summer.
        Question. Is the demand greater than the number of contracts which
    can be awarded with the funds available for this program in each of
    fiscal years 1998 and 1999?
        Answer. Yes. When NRCS State Conservationists submitted their
    projected funding needs in 1997 in the State WHIP plan, instructions
    from the National office requested they submit estimated funding needs
    for a six month period. Requests were received from all 50 States,
    Puerto Rico and the Pacific Basin. The total amount of these requests
    was in excess of $35 million. As news about the program has spread to
    many persons who would be eligible for WHIP but who have not
    historically participated in USDA programs, many of the NRCS State
    Conservationists have recognized that the original estimates were too
    conservative.
        Question. How much funding is needed to provide adequate technical
    assistance to the WHIP program in each of fiscal years 1998 and 1999?
    What level of funding is currently available to provide needed
    technical assistance for this program and what level is included in the
    fiscal year 1999 request?
        Answer. The budget assumes $5 million for technical assistance in
    both 1998 and 1999. It is our belief that 25 percent of the total
    program level is needed for technical assistance for WHIP.
        Question. Are any carryover balances from previous fiscal years
    proposed to be used for technical assistance for WHIP? What level is
    assumed, by fiscal year?
        Answer. There are no carryover balances from previous fiscal years.
    1998 is the first year of the program.
                   watershed and flood prevention operations
        Question. The fiscal year 1999 budget request proposes to fund high
    priority flood prevention projects under small watershed authority.
    Should this proposal be implemented, how many small watershed projects
    would not be eligible for funding under the flood prevention authority?
        Answer. The total number of projects has not been estimated at this
    time. The high priority watersheds will be based on their ranking on a
    regional basis, since the ranking for 1999 will not be carried out
    until later summer based upon the funding received, the size and
    complexity will determine how far the dollars will stretch.
        Question. Why has the Administration proposed to allow funds to be
    used to offer subsidized loans through the Rural Utility Service or
    Rural Business Cooperative Service to new and existing approved small
    watershed projects? How many loans does the agency assume to administer
    under this proposed provision?
        Answer. There is an unfunded commitment of approximately $1.5
    billion for Public Law 78-534 and Public Law 83-566 projects. With an
    annual allocation of approximately $50 million for construction, this
    unfunded commitment will not decline, since local communities request a
    greater dollar amount in new projects each year. Therefore, the
    subsidized loan program was developed to allow local sponsors to bear a
    greater part of the burden through loans. NRCS would not administer the
    loan program; it would be the responsibility of the Rural Utility
    Service. It is extremely difficult to estimate usage of these loans
    since this is a new concept. The budget request could fund
    approximately $300,000,000 in loans.
        Question. The fiscal year 1999 budget explanatory notes indicate
    that in 1954 the Watershed and Flood Prevention Act amended the flood
    prevention program, making it possible to administer the flood
    prevention program along the same lines as the Small Watershed Program.
    If the authority has existed since 1954 why is the Administration
    proposing a change in the funding accounts of Watershed and Flood
    Prevention and Conservation Operations now?
        Answer. The Public Law 566 and Public Law 534 flood prevention
    programs are very similar in nature with the major exception of how
    they are authorized. NRCS has very little control over the selection of
    the broad Public Law 534 river basin in which is authorized by
    Congress, as opposed to Public Law 566 where planning starts are
    granted by NRCS under Public Law 566 at the request of local
    communities. There are many minor differences between the two as shown
    on the attached table. Over the years both programs have been managed
    using the National Watersheds Manual for policy guidance. It is prudent
    to operate these programs as similarly as possible to make government
    easier to understand by our clients.

                           COMPARISON OF DIFFERENCES BETWEEN PUBLIC LAW 566 AND PUBLIC LAW 534
    ----------------------------------------------------------------------------------------------------------------
               Attribute                          Public Law 566                          Public Law 534
    ----------------------------------------------------------------------------------------------------------------
    Scope..........................  Nation-wide............................  Specific geographic areas approved by
                                                                               Congress.
    Application....................  Specific request for federal assistance  None once authorized by Congress.
    Initiation of Planning.........  Authorized by Chief....................  Authorized by Federal Legislation.
    Plan Approval..................  <$5 million--Chief/STC.................  Flood Prevention proj.--STC.
                                     >$5 Million--Congress..................  Other than Flood Prevention--OMB.
    Benefits and Costs.............  Analysis required by legislation.......  Not required by law, but by NRCS
                                                                               policy.
    Financial Assist...............  Constr, Admin, Eng, LR for Rec and F&W.  Same but also for any LR for single
                                                                               purpose FP structures and LT on
                                                                               National Forest Land.
    Installation...................  Project Agreement Required.............  PA not req if NRCS does work.
    Project Size...................  250,000 acre limit.....................  May go above 250,000 if Congress deems
                                                                               it prudent.
    Operation and Maintenance......  Sponsor must have taxing authority.....  No special requirements.
    ----------------------------------------------------------------------------------------------------------------

        Question. 414 watershed structures built in Mississippi over the
    last 50 years are greatly in need of repair and renovation. The
    Mississippi Conservation Partnership worked with the Mississippi
    Legislature in acquiring authorization for the Mississippi Soil and
    Water Conservation Commission to administer a program which addresses
    rehabilitation of these structures. The Commission is also lobbying the
    Mississippi Legislature to provide funding for this program. These
    State funds may be provided only if matching Federal funds are
    appropriated. Does the NRCS have the authority to provide matching
    Federal funds for this type of rehabilitative work?
        Answer. Our Office of General Council advises us that NRCS has no
    statutory authority to provide federal funds for rehabilitation of
    federally assisted dams.
        Question. Does the fiscal year 1999 budget request contain funding
    specifically for this maintenance work? If yes, which account is it in?
        Answer. The fiscal year 1999 proposed budget has no funds for
    rehabilitation or modification of watershed dams since NRCS does not
    have statutory authority to conduct such work. One hundred percent of
    the maintenance of the dams was assumed by the legal sponsors through
    an Operations and Maintenance Agreement executed with the federal
    government.
        Question. Does the fiscal year 1999 budget request include funding
    for the following projects: Little Sioux and Mosquito Creek, IA; Little
    Auglaize Watershed, OH; Bush River, VA; and Potomac Headwaters, WV? If
    so, what amount of funding is included?
        Answer. The budget is not built on named watersheds or projects,
    because of an unfunded commitment of approximately $1.5 billion. Funds
    are allocated to NRCS regions who then use a formula to fund the
    highest priority projects. Therefore, funding for the Little Sioux and
    Potomac Headwaters (Public Law 78-534), and Little Auglaize, Bush
    River, and Mosquito Creek (Public Law 83-566) ranking will depend upon
    the other projects they are competing against. Construction on the
    Little Auglaize will be completed this fiscal year (1998). Funding
    needed for 1999 for the remaining three projects is $3.0 million.
        Question. Please list any small watershed projects and their
    proposed amount of funding in the fiscal year 1999 President's budget
    request.
        Answer. There are no Small Watershed Projects specifically proposed
    for funding in the fiscal year 1999 budget. Beginning in fiscal year
    1999, the $1.5 billion backlog in authorized projects will be ranked in
    priority based on their net economic, environmental, and social
    benefits.
        Question. Has the agency completed work on the following projects:
    Lower Otter and Dead Creak, VT; Lower Winooski River, VT; Barton and
    Clyde River projects, VT; Park River Dam, ND; and South Delta watershed
    project, MS? If not, please explain.
        Answer. Work is continuing on all the watersheds this fiscal year
    1998. However, there are no Small Watershed Projects specifically
    proposed for funding in the fiscal year 1999 budget. Beginning in
    fiscal year 1999, the $1.5 billion backlog in authorized projects will
    be ranked by each Regional Conservationist in priority of their net
    economic, environmental, and social benefits.
        Question. Please discuss the agency's role in assisting the Devils
    Lake Basin, ND, in locally coordinated flood response and water
    management activities.
        Answer. The agency considers the impacted part of the Devil's Lake
    Basin to be a high priority area for implementation of wetlands
    easements through the Wetlands Reserve Program and floodplain easements
    under the Emergency Watershed Protection Program. The goal is to
    provide landowners an opportunity to place impacted lands that qualify
    for these two programs under an easement. We hope to be able to
    establish additional water retention capacity in the upper basin areas
    through the restoration of wetland basins. Although, this is unlikely
    to make a substantial contribution to lake levels, it is a step in the
    right direction.
        Question. Does the NRCS continue to utilize conservation programs
    in providing water holding and storage areas on private land as
    necessary intermediate measures in watershed management? If not, please
    explain.
        Answer. Land treatment practices continue to be an integral part of
    all watershed projects. In fact, approximately 50 percent of all new
    projects are for watershed management and composed entirely of land
    treatment rather than a combination of structural and land treatment
    practices.
        Question. Please discuss the repercussions of and the Agency's
    position on the following limitations: (1) $15 million on Public Law
    534 projects, and (2) $50 million on technical assistance.
        Answer. The limitation on Public Law 78-534 projects has had no
    repercussions on the agency in 1998. That is about the amount of money
    that can be spent during the year. As for the Public Law 83-566
    program, the reduction of $10 million has seriously effected the
    capability that the agency has to provide technical assistance needed
    by sponsors to carry out the mission of the watershed program. There
    will be 125 fewer FTE's available to assist the sponsors, but on the
    plus side an additional $10 million is now available for financial
    assistance against the $1.5 billion unfunded commitment.
        Question. Please explain how the Department has raised the priority
    of developing a storage capacity and improving the efficiency of
    delivery systems as the Senate Committee Report accompanying the fiscal
    year 1998 Appropriations Act directed.
        Answer. Work to address limited water storage and inefficient
    delivery systems in Hawaii, noted in the Senate Committee report
    accompanying the fiscal year 1998 Appropriations Act, has progressed on
    three projects. Planning and the Environmental Impact Statement (EIS)
    has been completed on the Upcountry Maui project. The project was
    authorized for operations in August of 1997 by the Chief of the Natural
    Resources Conservation Service. NRCS is currently working on the
    designs and coordinating with the Hawaii Department of Agriculture and
    the Maui County Department of Water Supply on the land rights
    requirements for installation. NRCS anticipates that the project will
    be ready for construction in fiscal year 1999.
        The Waimea-Paauilo watershed project has been replanned and a new
    reservoir site has been selected. The watershed plan and EIS work has
    been completed and NRCS is now preparing to begin the design phase and
    coordinating land rights and funding with the Department of Hawaiian
    Homelands and the Hawaii Department of Agriculture. The first phase of
    this project is expected to be ready for construction in two years.
        NRCS is working closely with the Hawaii Department of Agriculture,
    the Hamakua Soil and Water Conservation District and local landowners
    in completing planning on the Hamakua Ditch Project. This is the top
    watershed planning priority for the NRCS staff in Hawaii, and they
    expect the planning to be completed by the end of this year.
        Question. Please update the Subcommittee on the work to complete
    innovative community-based comprehensive resource management plans for
    West Virginia communities devastated by floods.
        Answer. NRCS has focused community based assistance efforts to
    three areas heavily impacted by the flood of 1996. These are the North
    Fork of the South Branch River, Grant and Pendleton Counties; Upper
    Tygarts Valley River, Randolph County; and Knapps Creek, Pocahontas
    County. These efforts are led by local watershed groups consisting of
    landowners, interest groups, local governments, and other stakeholders.
    A holistic planning effort is underway with the North Fork Watershed
    Association assessing alternatives for flood protection; water supply;
    streambank erosion; forest land use and protection; wetland development
    and protection and soil erosion on upland areas. The plan should be
    completed by July 1998. The NRCS is pursuing cooperative efforts with
    the State of WV to develop a holistic plan for the South Branch Potomac
    Watershed (Grant/Hardy/Pendleton Counties). The Knapps Creek Watershed
    Association with NRCS assistance is assessing similar alternatives for
    flood protection and severe streambank erosion. They are currently
    seeking funding to carry out a geomorphology study for the watershed. A
    water resource plan has been developed for the Upper Tygarts Watershed
    which focused primarily on water supply needs. The Upper Tygart
    Watershed Partnership is currently preparing a Public Law 566 watershed
    application seeking assistance to develop a holistic watershed plan
    which would incorporate the results of the water supply study. Similar
    efforts are underway with the Inwood Watershed Association, Berkeley
    County; and the Dunlop Creek Watershed Association in Fayette County.
    NRCS is working with these groups to assist them in assessing
    alternatives and taking actions to address their land and water
    resource needs.
        Question. Please update the Subcommittee on the need and plans made
    for a cost-share pilot flood plain project for the Tygart River basin
    in West Virginia.
        Answer. The fiscal year 1998 Senate Appropriation Bill contained
    language that NRCS would pursue a pilot flood plain relocation program
    for the Tygarts River Basin, West Virginia. This pilot project would
    assess the effectiveness of a relocation project where home and
    business owners could elect to relocate from the floodplain over a five
    to ten year period. As owners move or relocate from the area, estate
    sales, or others as they desire could sell their homes or businesses to
    the government at their convenience. The project would assess the
    participation rate over the long term. Limited planning will continue
    in fiscal year 1998. No other activity is planned.
        Question. The Secretary stated in his testimony before this
    Committee that the Department ``will also continue to examine approved
    watershed plans to eliminate those projects that are now infeasible in
    order to reduce the backlog of unfunded work.'' What did the Secretary
    mean when he used the word ``infeasible?''
        Answer. Infeasible projects are those where there is little hope of
    ever getting the project installed due to a lack of sponsor interest,
    insurmountable environmental concerns, low benefit to cost ratio,
    changes in land use which precludes constructing a key component, lack
    of ability to obtain land rights, long term litigation, or other
    significant barriers.
        Question. How does the agency plan to eliminate these projects?
        Answer. In those projects where the sponsors agree that nothing
    further can be done, a supplement to the watershed plan will be
    prepared to eliminate the remaining works of improvement and the
    project closed. In cases where the sponsors are not willing to sign a
    supplement, the project will be put on the inactive list. A project on
    the inactive list cannot be reactivated until all the problems which
    caused it to be declared inactive are overcome by the sponsors. NRCS is
    constantly reviewing projects to reaffirm feasibility before proceeding
    further.
        Question. Which projects have been determined to be ``infeasible''
    by the Department to date? Please provide list by state.
        Answer. The following projects have been determined to be
    unfeasible to date:

                           List of infeasible projects

    South Fork Watershed...................  Arkansas.
    Middle Fork Anderson River.............  Indiana.
    Upper Big Blue Watershed...............    Do.
    West Carroll Watershed.................  Louisiana.
    Big Creek Watershed....................  Mississippi.
    Brown's Creek..........................    Do.
    Dry Creek..............................    Do.
    Sowashee Creek.........................    Do.
    Town Fork Creek........................  North Carolina.
    Starkweather Watershed.................  North Dakota.
    Sebastion Martin-Black Mesa Watershed..  New Mexico.
    McKinney-Buzzard Watershed.............  Oklahoma.
    Waterford-Guilford Creek Watershed.....    Do.
    Cross Creek Watershed..................  Pennsylvania.
    Little Shenango Watershed..............    Do.
    Buffalo River Watershed................  Virginia.

                                staff reductions
        Question. In your statement, Mr. Weber, you indicate that one of
    the goals of the agency-wide reorganization ``was to place a higher
    share of staff resources in the field to maintain and enhance service
    to our customers.'' Was this goal achieved after the reorganization? If
    so, what was the increase in number of employees that were placed in
    the field?
        Answer. At the end of fiscal year 1993, approximately 70 percent of
    the NRCS work force was located in offices below the State office.
    Currently, approximately 75 percent of the work force is located in
    offices below the State office.
        Question. Mr. Undersecretary, you state in your testimony that
    currently 9,000 staff are at the local level. Is this number based on
    the fiscal year 1998 Conservation Operations appropriations?
        Answer. This number is based on funding for all accounts
    administered by NRCS.
        Question. Will this number be reduced under the fiscal year 1999
    President's budget request?
        Answer. If staff reductions occur in total, inevitably some loss
    will occur at the field level. However, we are trying to maintain the
    level of staff at the field level at 75 percent or better of the total
    NRCS work force.
        Question. During the Department's streamlining initiative, how many
    NRCS full-time equivalents (FTE) have been reduced in the field and at
    headquarters? Please give the number of FTE's by fiscal year.
        Answer. Since fiscal year 1993, NRCS has reduced FTE's for the
    agency by 1,896 FTE's. Of this amount, NRCS has reduced 159 FTE's from
    National Headquarters (NHQ) and 1,173 FTE's from the field staff. A
    more detailed breakdown follows:

    ------------------------------------------------------------------------
                                                                  All other
                Fiscal year               Total FTE      NHQ         \1\
    ------------------------------------------------------------------------
    1993 (Baseline)....................       13,790        537       13,253
    1994...............................       13,317        527       12,790
    1995...............................       12,163        502       11,661
    1996...............................       11,839        392       11,447
    1997...............................       11,894        378       11,516
    ------------------------------------------------------------------------
    \1\ Includes State, regional, area, and all other offices except
      headquarters.

        Question. How will the proposed administrative convergence affect
    the field staff in each States' county offices?
        Answer. Convergence will produce a modern information technology
    infrastructure that the NRCS, Farm Service Agency and Rural Development
    Agency can share, thereby, making the field office staff more
    productive. In conjunction with convergence, various efforts are
    underway to re-engineer administrative and program delivery systems to
    lessen the administrative workload on field staffs.
        Question. Will the field employees' administrative workload be
    lessened so that they can spend more time with the landowners?
        Answer. The convergence of administrative and information
    technology functions in the Service Center agencies, when fully
    implemented, will reduce the time spent on administrative overhead and
    will free time up for program delivery.
        Question. How will proposed administrative convergence affect
    service center staffing?
        Answer. Administrative and information technology convergence will
    not directly affect offices below the State level. Overall, the State
    level administrative staffing will be reduced when the plan is fully
    implemented in fiscal year 2002. This reduction in administrative
    staffing would make more time available to program related activities
    at the State and field office level.
        Question. How many FTE's are supported by the fiscal year 1999
    budget request?
        Answer. The fiscal year 1999 President's budget request will
    support approximately 11,412 FTE's.
        Question. What is the fiscal year 1998 funded FTE level?
        Answer. NRCS can support an estimated 11,944 FTE's with
    appropriated and carryover balances available in fiscal year 1998.
        Question. What is the total staff reduction expected in fiscal year
    1999?
        Answer. The total anticipated staff reduction for fiscal year 1999
    is 532 FTE's. However, this assumed there would be no additional
    funding for emergency watershed programs.
        Question. How much funding is needed in fiscal year 1999 to prevent
    staff reductions at the Headquarters level and in the field?
        Answer. $40.6 million would be required to prevent the reduction of
    532 FTE's.
        Question. Does the agency expect to cut any more FTE's in the
    coming fiscal years?
        Answer. NRCS anticipates no additional cuts in staffing if the
    requested funding level for fiscal year 1999 is received and
    maintained.
                          county based workload study
        Question. USDA has an outside consulting firm conducting a workload
    study of the farm and rural program delivery system of county-based
    agencies (FSA, NRCS, and RD) to be completed on September 18, 1998.
    What has the consulting firm been told to look at specifically
    regarding NRCS?
        Answer. Since the USDA County based study is an independent study,
    the consulting firm is directed by the USDA Contract (based on the
    original Request for Proposals as printed in the Federal Register) to
    examine the following: existing legislative authorities, regulations to
    actual activities; evaluation of the workload implied by the program
    responsibilities to be carried out under the charge; developing a
    business process map(s) for each NRCS program; and, developing a
    profile report of the USDA customer base.
        The goal of the study is the articulation of alternative approaches
    to organizing and staffing USDA's county-based operations in delivering
    services that are clearly linked to Federal policy and program
    priorities and that can be managed to meet Federal budget targets. The
    key objectives in meeting the goal of identifying alternative field
    service delivery systems include: the articulation of the charge to
    agencies as mandated by legislation and regulation; evaluation of the
    workload implied by the program responsibilities to be carried out
    under the charge; identification of options for organizing agency
    resources to meet customer needs and preferences; and,
    conceptualization of organizational structures that can effectively and
    efficiently match USDA resources with its customer base.
        Question. Are streamlining and collocation of NRCS offices
    postponed until the study is completed?
        Answer. NRCS continues to implement the Secretary's Streamlining
    initiative, started in 1994, with co-locating field offices into
    approximately 2,556 USDA Service Centers.
        Question. As a result of this study, do you anticipate more office
    closings, centralization, or consolidation with the Farm Service
    Agency?
        Answer. The study is just beginning and approximately 20 percent
    complete. Upon completion, appropriate policy makers will review the
    effort to identify any possible findings that may improve the Agency's
    service to farmers, ranchers, and other customers.
                          supplemental appropriations
        Question. Do you expect that you will submit a request for
    supplemental funds for emergency watershed projects, particularly in
    view of the flooding and the other problems that have arisen as a
    result of El Nino?
        Answer. Preliminary estimates for disasters to date reflect a $40
    million need. However, an average for disaster activities in a typical
    year would be closer to $150 million based upon an average annual
    expenditure over the past four years.
        Question. What specific needs have been identified?
        Answer. Immediate anticipated needs are estimated at $25 million
    for California, although until the weather breaks, it is difficult to
    determine the exact need; $10 million for Florida tornadoes; and $5
    million for the Northeast states hit by the January ice storm.
        Question. Previous emergency projects identified in earlier years
    were repaired because of the lack of funds, or there were insufficient
    funds to cover all of the projects that were identified. Will fiscal
    year 1998 Emergency Supplemental funds be available for requests to
    meet these unfounded non-exigency needs?
        Answer. All previously reported needs that are eligible for the
    Emergency Watershed Protection Program have been met and we have no
    projects awaiting funding at this time.
        Question. What unfunded needs have been identified by the state
    conservationists around the country? Please provide a breakdown of the
    unfunded needs by State, and how you plan to distribute any
    supplemental funds that might be requested to the States for emergency
    watershed protection activities.
        Answer. Anticipated needs are estimated at $25 million for
    California, although until the weather breaks, it is difficult to
    determine the exact need; $10 million for Florida; and $5 million for
    the Northeast states hit by the January ice storm and an amount yet to
    be identified by the March 7-8, 1998, storm in the Southeast states.
    Other needs are anticipated, but cannot be identified until an
    emergency occurs.
        Question. What unfunded Mississippi needs are outstanding from past
    fiscal years and what funding is estimated to be needed to meet these
    needs?
        Answer. Mississippi requested no additional funds for unfunded
    needs at this time.
                     resource conservation and development
        Question. The fiscal year 1999 budget request for the Resource
    Conservation and Development (RC&D) is the same as the fiscal year 1998
    funding level, $34.4 million. According to the RC&D operation plan
    submitted to the Committees on Appropriations, the base funding of
    $29.4 million would be used to provide technical assistance to the
    existing 290 RC&D Councils, and administrative and overhead support
    costs of the program. The additional $5 million would be to authorize
    up to 25 new areas and increase base-level funding and provide
    financial assistance for the RC&D Councils. Does the agency again plan
    to implement this in fiscal year 1999 if the fund is provided? If not,
    how will the agency use this funding?
        Answer. The President's Budget for fiscal year 1999 calls for an
    appropriation of $34,377,000, the same as the fiscal year 1998 funding
    level. The RC&D operating plan submitted to the Subcommittees on
    Agriculture Appropriations covers fiscal year 1998. In fiscal year
    1999, the Agency will use the funding to provide technical assistance
    through coordinators to 315 RC&D Councils, along with administrative
    and overhead costs of the program. This will allow the agency to
    maintain a level of funding for direct support and core technical
    assistance to authorized areas.
        Question. The goal of the RC&D coordinator is to assist the Council
    in its activities and to become an empowered, self-sufficient Council
    that has the capacity to build effective public private partnerships.
    How many Councils have reached this goal since the inception of the
    program?
        Answer. The coordinator provides technical assistance to the
    Council and in many cases functions as its only full-time staff. The
    coordinator provides access to USDA and other Federal programs. He or
    she aids the Council in the complexity of dealing with access to
    knowledge, information and resources, and a frequently changing council
    organizational structure. The structure change is due to Council
    sponsor members changing frequently, since many are local elected
    officials. Such changes often affect a Council's dynamics and
    effectiveness. The RC&D Councils are non-profit entities made up of
    volunteer boards. The coordinator plays a pivotal role in bridging the
    transitions in Council membership, focus, and priorities.
        Although many Councils have become very efficient at obtaining
    funding for specific projects, we have not assessed how many are
    ``self-sufficient'' without the assistance of a coordinator.
        Question. Does the agency have an operating plan ``to wean the
    Council off'' of the use of a RC&D coordinator once it has reached this
    goal? If not, does the agency plan to implement one?
        Answer. There is no proposal or plan to de-authorize or de-fund
    RC&D councils.
                             okatoma river project
        Question. I have been told that the Okatoma River needs the
    completion of work referred to as ``desnagging''. Could you explain the
    nature of this work?
        Answer. Clearing and snagging is a process where fallen and badly
    leaning trees are removed from a water course. Much of the work is done
    by hand to minimize damage to the environment.
        Question. Does the fiscal year 1999 budget request include any
    funding for the Okatoma River project in Covington County, Mississippi?
        Answer. The budget is not built on named watersheds or projects,
    because of an unfunded commitment of approximately $1.5 billion. Funds
    are allocated to NRCS regional conservationists who then use a formula
    to determine the highest priority projects to fund. Okatoma River's
    scoring will depend upon it's ranking with other projects in the
    region.
        Question. How much funding is needed to complete the ``desnagging''
    of the Okatoma River? Can the agency finish this project within one
    fiscal year given that the needed amount of funding is provided by the
    Committee?
        Answer. Approximately $1.0 to $1.5 million is needed. The project
    is presently in the final design phase and it is anticipated that the
    work could be completed in less than a year.
        Question. How much money, by fiscal year, has the NRCS made
    available for this project?
        Answer. Approximately $50,000 of technical assistance funds for the
    survey and design has been expended during the last year. However, no
    financial assistance has been needed thus far.
                                 section 11 cap
        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 (CCC)
    Charter Act, section 11, to limit the total amount of CCC funds made
    available for reimbursement to the 1995 spending level, affecting
    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 rate charged for the WRP is
    approximately $80.00 per acre. The technical assistance activities
    under the WRP includes such items as eligibility determinations,
    wetlands restoration planning, development of detailed engineering
    designs, working with appraisers, surveyors, closing agents, attorneys,
    and construction contractors, and monitoring of prior, current and
    future WRP acres. The technical assistance rate was developed over time
    for the WRP. This charge is sufficient to fund the WRP technical
    assistance needs.
        The FAIR Act of 1996 imposed restrictions on the uses of CCC funds,
    beginning in fiscal year 1997 with respect to certain activities.
    Funding for the WRP was made available through the Commodity Credit
    Corporation (CCC). Funding for NRCS technical assistance costs is
    authorized under the CCC Charter Act section 11 funds transfers.
        Unobligated appropriated funds of approximately $31.5 million were
    used to fund the technical assistance needs for the WRP for fiscal year
    1997 and fiscal year 1998. For fiscal year 1999 approximately $15.089
    million is needed for WRP technical assistance activities. Of the total
    amount, $4.0 million is anticipated from unobligated carry-over
    appropriated funds. The remainder, approximately $11.089 million is
    expected to be transferred from CCC through the CCC Charter Act section
    11 authorities.
        Question. What available CCC funds and prior-year balances will be
    used and in what amounts by program?
        Answer. For fiscal year 1999 approximately $15.089 million is
    requested for WRP technical assistance activities. Of the total request
    approximately $4.0 million are unobligated carry-over funds from the
    old appropriated WRP program. The remainder approximately $11.089
    million, of the total technical assistance funds needed for fiscal year
    1999 are requested through CCC. For fiscal year 1999 the $11.089
    million in CCC funds are expected to be used to deliver the WRP
    program.
        Question. Will appropriated funds be necessary to supplement
    available CCC funding? If so, how much, by program? What appropriated
    funds are included in the fiscal year 1999 request, by program?
        Answer. The CCC Charter Act Section 11, as amended, does not
    guarantee that funds will be available for transfer or allotment to
    other government entities to assist it in the conduct of its business.
    Rather, the section 11 transfer is limited to an amount established on
    pre-1996 Farm Bill work activities. Technical assistance costs
    associated with CRP, WRP, FPP and CFO all fall within the Section 11
    limitations. In order to deliver the WRP in fiscal year 1999, $4
    million in unobligated carryover appropriations will be used to fund
    technical assistance. For CRP, $22 million in unobligated carryover
    appropriations will be used for NRCS technical assistance costs. In
    addition, approximately $36 million in appropriated Conservation
    Operations account funding will be used to support technical assistance
    costs associated with the proposed EQIP level.
        Question. Have agency lawyers revisited the section 11 cap and made
    a reinterpretation?
        Answer. The Office of General Council (OGC) has not altered its
    initial position on its interpretation of the section 11 of the
    Commodity Credit Charter Act with respect to the provision of technical
    assistance under any CCC program including conservation programs.
                                research studies
        Question. Does NRCS have research studies budgeted in the NRCS
    account? If so, how much funding has been used in past fiscal years for
    these studies?
        Answer. NRCS does not have research studies built into the budget.
    We do, however, have cooperative agreements with other agencies and
    land grant institutions who conduct research from which NRCS customers
    benefit.
        Question. Does the fiscal year 1999 budget request contain any
    funding for NRCS research studies, and if so, how much? Under what
    account can this request be found?
        Answer. The fiscal year 1999 budget request does not contain any
    funding requests for NRCS research studies.
        Question. How many FTE's that work on research studies are
    supported by the fiscal year 1999 budget request?
        Answer. There are no FTE's in NRCS that work on research studies.
                              franklin county lake
        Question. This Committee appropriated approximately $3 million in
    fiscal year 1998 for technical assistance for Franklin County Lake.
    What is being done currently with the $3 million appropriated for
    fiscal year 1998 to NRCS for Franklin County Lake?
        Answer. A portion of the funds are presently being used to provide
    technical assistance to complete the necessary survey and design work
    for the Franklin County dam. Funds remaining at the end of this fiscal
    year will be carried over to provide technical assistance related to
    the construction of the dam, when construction funds become available.
        Question. What authority under Conservation Operations, Watershed
    and Flood Prevention Operations, and Resource Conservation and
    Development does NRCS have to provide technical and financial
    assistance for the construction of the dam?
        Answer. NRCS does have authority under the Watershed and Flood
    Prevention Operations and Resource Conservation and Development program
    to provide both technical and financial assistance for dams such as the
    one proposed in Franklin County. However, the fiscal year 1999 budget
    does not include a request for financial assistance in the RC&D
    program. Under Conservation Operations, we have the authority to
    provide technical assistance related to soil erosion and sediment
    control both functional elements of most dam construction.
        Question. Is Franklin County designated as a watershed area? Would
    Franklin County be eligible for such designation?
        Answer. Franklin County is not a designed watershed under the Small
    Watershed Protection and Flood Prevention Program. It could be eligible
    for such designation.
        Question. Does the fiscal year 1999 budget request have any funds
    designated for Franklin County?
        Answer. The fiscal year 1999 budget for Conservation Operations
    reflects a decrease of $3 million for Franklin County.
        Question. Should the Forest Service have available funds to provide
    financial assistance to the construction of the dam in fiscal year
    1999, will the technical assistance appropriated in fiscal year 1998 be
    available?
        Answer. If financial assistance is available for construction of
    the dam in fiscal year 1999, NRCS will use the funds appropriated in
    fiscal year 1998 to provide the necessary technical assistance.
                    mississippi delta water resources study
        Question. In the fiscal year 1998 Appropriations Act, the Committee
    provided $800,000 in Conservation Operations for the Mississippi Delta
    Water Resources Study. Is the total amount in the fiscal year 1998
    Appropriations Act used by the State Conservationist of Mississippi on
    the Mississippi Delta Water Resources Study?
        Answer. The fiscal year 1998 Appropriations directed $350,000 to be
    used in the Mississippi Delta Water Resources Study and the total
    amount will be used to complete the Study.
        Question. What activities were funded with the money provided for
    this study in each of fiscal years 1996, 1997, and 1998?
        Answer. In fiscal year 1996 and fiscal year 1997, the activities
    funded included data collection and assimilation. These included water
    quality sampling collection, and testing; fish tissue collection and
    testing, and landowner interviews for crop budget generation as well as
    other economic data collection. In fiscal year 1998, activities
    included competing the design of conveyance systems, completing
    economic evaluations, and completing the final study reports.
        Question. Does the fiscal year 1999 budget request propose any
    funds for this study, and if so, how much? In which account is this
    proposed request?
        Answer. The Natural Resources Conservation Service plans to have
    this study completed during fiscal year 1998, and no funds will be
    needed to carry on this study beyond this fiscal year. The fiscal year
    1999 budget for Conservation Operations reflects a decrease of $350,000
    for this item.
        Question. Does NRCS have the authority under Conservation
    Operations to carry out the next phase of this project or would that
    funding have to come under the Watershed and Flood Prevention
    Operations account?
        Answer. It was the intention of the Natural Resources Conservation
    Service to conduct the water supply study and report the finding back
    to the sponsors. The sponsors would have the responsibility of
    concurring with and implementing the findings. If the Natural Resources
    Conservation Service would have the responsibility of providing
    assistance in this endeavor, the sponsors would have to request
    assistance from the NRCS to plan the desired activity. Then we would
    have to request the authority to expend funds to the project. This
    should be an activity of the Watershed and Flood Prevention Operations
    Division and planned and implemented as an organized watershed.
                          farmland protection program
        Question. The Farmland Protection Program's (FPP) authorization has
    expired. No funding for this program is requested for fiscal year 1999.
    Is all work completed in the Farmland Protection Program?
        Answer. No. Work for the Farmland Protection Program (FPP) just
    started. The 1996 Farm Bill authorized $35 million to establish a
    farmland protection program. A total of $16.2 million was obligated to
    States and local government entities in fiscal years 1996 and 1997. As
    of January 31, 1998, more than 10,000 acres on 47 farms with a total
    easement value of $18 million were acquired. Federal FPP funds
    contributed $4.5 million (25 percent) and State and local government
    funds accounted for $13.5 million (75 percent). Thus, only about 13
    percent of the funds have been expended so far. This is due to the lag
    time the State and local entities have in order to process easement
    appraisals, surveys, and other procedures needed to record the easement
    deed. $17.3 million will be obligated in fiscal year 1998. At the end
    of fiscal year 1998, the $35 million will be exhausted, including
    technical assistance funds earned.
        Question. Do carry over balances exist so that the technical
    assistance work can be completed? If yes, how much exists, by fiscal
    year?
        Answer. The Farmland Protection Program implementation operates
    with few technical assistance funds, especially when we consider the
    cost of preparing conservation plans that are required for each farm
    for which an easement is acquired. A maximum of 4 percent of the
    appropriated funds is allocated for technical assistance. Technical
    assistance funds earned for fiscal years 1996 and 1997 were $575,000
    and $80,000, respectively. $720,000, four percent of the $18 million
    appropriated, is reserved for technical assistance for fiscal year
    1998. Since the funding for this program is provided through CCC, any
    unobligated funds do not carry over.
                            civil rights activities
        Question. Mr. Lyons, in your statement you say that the ``NRCS will
    continue to seek proactive ways to better serve minority and low income
    customers.'' What proactive ways will the agency seek to better serve
    these customers?
        Answer. Some of the proactive ways NRCS is using to better serve
    minority customers are: designation of a staff position in each state
    to serve as the program outreach manager; establishing a data base on
    minority customer groups and their location; development in each state
    of a program outreach plan targeted to minority and low-income
    customers; and, finalization of a multi-year strategic plan to address
    the conservation needs of minority and low-income producers.
                                 grazing lands
        Question. In fiscal year 1998, NRCS is able to continue support for
    a Grazing Lands Conservation Coordinator in each of the 50 States. Will
    the fiscal year 1999 budget request continue to support these
    coordinators in all 50 states?
        Answer. The agency earmark increased to $15 million for fiscal year
    1998. All states are now receiving allocations in support of their
    workload associated with the Grazing Lands Conservation Initiative. The
    fiscal year 1999 budget does not request specific funding for grazing
    lands conservation coordinators, however, they would be supported in
    the Conservation Operations base funding.
                                 sharkey soils
        In response to the Sharkey Soils Study requested by the Committee
    in fiscal year 1998, our specialists in this area have raised pertinent
    and very important questions which I feel should be addressed. Please
    provide your response to these promptly.
                       sharkey soils committee operations
        Question. Given the importance and complexity of the issues, would
    it not have been scientifically prudent to meet and discuss the
    technical issues in open debate?
        Answer. In retrospect, it might have been prudent to physically
    meet, however, the co-chairs debated this and considering the short
    time line and the committee members individual circumstances, decided
    the electronic resource was best. Through the electronic venue, issues
    were discussed in open debate via e-mail. Every committee member had
    ample opportunity to express his opinion to any or all other committee
    members. Some members took advantage of this, while others did not.
    Informal face-to-face meetings were held at the Soil Science Society of
    America's (SSSA) Annual Meeting in Anaheim, CA. These were used
    informally because the entire committee could not come to the SSSA
    Annual Meeting. The committee chairmen both agreed that the scientific
    issues were addressed completely, scientifically, and critically by the
    procedures used. There is no apparent reason why more progress would
    have been made in a formal, debate-oriented meeting. The procedures
    used for the Sharkey Committee had precedence in that they were similar
    to those used to originally develop and to continue to develop the soil
    classification system--Soil Taxonomy. The system of e-mail exchanges
    used here followed a question, answer, debate format that has proven
    effective in dealing with complex scientific issues.
        Question. Are e-mail and faxes the best method to address the
    complex issues in a scientific manner?
        Answer. The committee co-chairs decided that for this committees
    deliberations e-mail and faxes were the best methods to use to address
    the complex issues involved. Issues could be stated in writing so that
    all committee members knew exactly what issues were ``on the table'' at
    a given time. In addition, committee members could evaluate the issues
    by examining their own data, consulting reference materials in their
    libraries, examining scientific literature, or personally seeking
    clarification. The committee chairmen feel there would have been no
    apparent advantage to additional direct, face-to-face formal meetings.
    Finally, e-mail and faxes allowed the committee to keep a written
    record of all correspondence, questions, and debate. The record has
    been supplied to committee members who have requested it.
        Question. Would it have been appropriate for members to have access
    to materials provided by others and have the opportunity to vote on
    issues?
        Answer. Yes. The co-chairs made a diligent effort to keep all
    members fully informed of information supplied by others. In addition,
    key issues were voted on by the members. Unfortunately, not all members
    chose to vote on all issues. It should be noted that the full Sharkey
    Committee, which consisted of 22 individuals, was broken into
    subcommittees to address specific charges. Subcommittees were assembled
    by the co-chairs who selected members with particular expertise to
    address specific charges on a subcommittee. This was the only practical
    way to address all of the charges in the time allotted to the
    committee. Thus, subcommittees were sent correspondence related to
    their charges. If a member wanted to see correspondence related to
    another subcommittee it was sent to him whenever possible.
        Question. Were conclusions based on opinions of various members or
    objective data relevant to Sharkey soils?
        Answer. Both opinions and data relevant to Sharkey soils were used
    to make conclusions. Whether opinions or data were used depended on the
    specific charge. For example, charge 1 was to agree on the ``concept
    and classification of the Sharkey series''. The conclusions for this
    charge were based on data. Charges 4, 6, and 7 asked for definitions,
    and these were based largely on collective opinion or historical
    precedence. Charges 2, 3, and 5 were fulfilled by considering data and
    personal opinions of subcommittee members who had examined their data
    or who had extensive expertise in the subject.
        Question. Would it have been appropriate for committee members to
    have had an opportunity to see and review the report before it was
    released?
        Answer. It would have been desirable for committee members to have
    had an opportunity to see and review the report before it was released.
    This was not done because there was not time. Oral presentations on the
    report were presented in Washington, DC on December 8, 1997 to the
    Natural Resources Conservation Service's (NRCS) top staff. Reports were
    sent to the full committee on December 9, 1997. It is stated in the
    report (page 3) that ``. . . individual committee members may not agree
    with all recommendations made here''. Because the co-chairs made a
    diligent effort to keep the subcommittees focused on key issues via e-
    mail, subcommittee members should not have been surprised by the final
    recommendations made in the report. To the best of our knowledge, no
    committee member was surprised by the final recommendations.
                                 major concerns
        Question. Why was the Sharkey series not correctly classified in
    the Vertisol Order since the adoption of Soil Taxonomy in 1965? It is
    one of the most extensively occurring soil series in the nation. What
    was the scientific basis for incorrect classification as Inceptisols?
        Answer. When Soil Taxonomy was adopted in 1965, the Sharkey series,
    like other soil series, was classified based on existing data and the
    best collective judgment of soil correlators and other experts of the
    National Cooperative Soil Survey (NCSS). At that time, it was felt that
    Inceptisols was the best classification for the Sharkey series. As
    extensive research data have become available in recent years for soils
    of the Sharkey series, it has become apparent, and agreed to by experts
    of the NCSS, that the best classification for this series is Vertisols.
        Question. Recommendations B, page 6. Recommendations 1 and 2 seem
    to conflict with each other. Recommendation 1 states two
    classifications must be given for the series and 2 states if one
    classification must be used, then it should be taken from the micro-
    low. What is the justification for this statement?
        Answer. Vertisols within a single landscape can consist of two
    different, but paired soils--one occurring on a small ridge, and the
    second in an adjacent bowl-shaped depression. This pattern is regular,
    frequently occurring, and is produced by shrinking and swelling
    processes that occur in the soil. The most accurate way to describe
    this natural variability is with two soil classifications, because the
    committee agreed that a single classification does not fully describe
    the soil. It may not be practical to use two classifications for a
    single series in all cases. Therefore, if only one classification is
    used, the committee suggested the depression or micro-low be used to
    represent the soil's properties. The micro-low will tend to be wetter
    and its properties probably will have the greatest impact on how the
    soil is used.
        Question. Was the Committee charged to redefine saturation? Does
    the attempt to redefine saturation mean Sharkey soils are not saturated
    according to the scientific definition of saturation? What effect would
    the proposed redefinition have on these soils; and would it apply to
    other soils as Mollisols, Inceptisols, Entisols? How will land owners
    react when told they are now going to redefine saturation?
        Answer. The committee's charge was to: ``Agree on a method of
    monitoring saturation''. In order to monitor saturation, the term must
    be clearly defined to show exactly what is being monitored. The term
    ``saturation'' was not redefined in the report. Rather, the report
    recommends a method to monitor soil water using equipment that is
    commonly used to assess soil-water potentials in Vertisols. The report
    also recommends a new way to interpret soil-water data that can be used
    to determine natural saturation. This is not a new concept, and
    citations for its use in the scientific literature were included in the
    report (page 11). The method recommended for interpreting natural
    saturation applies only to Vertisols like the Sharkey series. It could
    be adapted to other soils but that was not the intent of the committee.
    The committee does not know how land owners will react to the
    recommendations of this report. The report describes a workable method
    to collect and interpret soil-water data.
        Question. There appears to be no scientific basis for the 14 day
    wetting period suggested in Charge 2. Is this science or arbitrary
    choices between some who want 7 days and others 21 days despite data
    indicating months might be required? If data indicates 4 months why 14
    days?
        Answer. The 14-day wetting period was a suggested compromise based
    on best professional judgment. We state in the report that members of
    the committee who have made measurements of soil-water potentials in
    Vertisols were split on the duration of the recommended wetting
    periods, and estimates ranged from 7 to 21 days. It is pointed out in
    bold type (see page 18) in the report that further research may show
    the duration of the wetting period will have to be adjusted for
    different regions. We encourage more research on this topic.
        Question. Define anaerobic--Does it mean zero oxygen?
        Answer. The Glossary of Soil Science Terms (1996) defines anaerobic
    as ``The absence of molecular oxygen''.
        Question. Does what happened in the past matter for modern usage,
    should it take precedence over the present?
        Answer. Interpreting what has happened in the past is important
    ``for modern usage'' if it is the only way we can predict what will
    happen in the future. For example, a soil is considered to be a hydric
    soil if it contains one or more of the ``Field Indicators of Hydric
    Soils''. The Field Indicators are signs that the soil was anaerobic at
    some point in the past, and it is assumed that the soil will again
    become anaerobic.
        Question. Can uniform, scientifically correct assumptions be made
    on conditions in the past; how far in the past?
        Answer. Interpretations regarding whether the soil was anaerobic in
    the past can be made uniformly and scientifically if a uniform set of
    criteria are applied to the soil. Such a uniform set of criteria are
    the ``Field Indicators of Hydric Soils'' which were published by the
    NRCS in 1996. We do not know how far into the past, in terms of years,
    that interpretations can be made using the Field Indicators.
        Question. Can one assume ancient soils were frequently flooded and
    saturated?
        Answer. Relative to ``ancient soil'', if there are indicators in
    the soil that the soil was flooded or saturated, then presumably it
    was. Geomorphic processes occurring today such as flooding and
    saturation leave indicators in soils. When those same indicators are
    seen in ancient or relic soils then the processes that left those
    indicators are inferred to be the same processes that are occurring
    today.
        Question. Should soil classification be useful in the present or
    the past?
        Answer. Soils are classified, in our opinion, to help make
    assessments as to how well soils are suited for a given use and to
    communicate concepts about characteristics of soils. Classification
    should be useful for the present in order for us to predict how soils
    will function, and this includes a prediction as to whether the soil is
    a hydric soil.
        Question. What is the water table depth in Sharkey soils?
        Answer. The concept of a water table cannot be easily applied to
    Vertisols such as the Sharkey. The report recommends that water tables
    not be measured and that wells not be used to assess the soil-water
    conditions in Vertisols. Instead, measurements of natural saturation
    should be made using piezometers.
        Question. Is the proposed ``natural saturation'' scientifically
    defined and justified?
        Answer. Natural saturation is defined in the Soil Science Society
    of America's monograph ``Methods of Soil Analysis. Part 1. Physical and
    Mineralogical Methods, Second Ed., 1986''. This is the standard
    reference work that describes accepted ways of measuring soil
    properties. The complete reference citation is given for Klute (1986)
    on page 43 of the report. The concept of natural saturation is
    justified not only for use in Vertisols, but for all soils as is
    discussed in the above reference.
        Question. Would criterion for classification of Vertisols in a
    wetland be the same as in upland landscapes?
        Answer. In general, yes, the same criteria are applied to Vertisols
    for classification purposes, regardless of whether the soil is in an
    upland or wetland. We classify soils on the basis of properties that
    occur in the soil. We do not make an interpretation as to whether the
    soil is in a wetland or upland before the soil is classified.
        Question. If only the ped surface is used to determine reduction,
    would this not leave most of the soil volume unused?
        Answer. A portion of the matrix in Vertisols is considered
    ``unused'' if roots have not penetrated into it. Without roots the soil
    volume will probably not contain enough dissolved organic materials or
    microorganisms to produce the biochemical reactions (e.g., reducing
    chemical reactions) that must occur in hydric soils. The volume of
    space that is ``unused'' probably increases with depth. Within 30 cm of
    the surface, the volume of ``unused space'' is expected to be small
    because roots should be spaced closely, but the actual volume is not
    known at this time.
        Question. Item 3, page 18 states, ``the scientists who contributed
    to this report suggest that a wetting period of 14 days be adopted . .
    . .'' Are there not scientists who contributed to the report who
    strongly felt otherwise?
        Answer. One of the 22 scientists who contributed to this report
    openly stated that the wetting period concept was not appropriate. The
    objections of this individual were debated within the subcommittee, and
    the best procedure that could be proposed is the one described in the
    report. As noted in our response to a previous question, the 14-day
    duration for the wetting period may have to be modified for some
    regions. This will only be determined after the concept is tested
    against data.
        Question. Page 28, C3. If no positive reaction with a, a1-dipyridyl
    occurs why can't a simple statement be made that it is not reduced?
    Does any research or literature indicate any Vertisols have no Iron?
    You can't have it both ways.
        Answer. The a, a'-dipyridyl dye only reacts with reduced forms of
    iron. Some soils do not contain enough iron for them to produce a
    reaction to the dye. It is not known that every single Vertisol
    contains sufficient iron to produce a reaction to the dye. From a
    practical standpoint, most Vertisols will probably contain sufficient
    iron for them to react to the dye when reduced. Nevertheless, the
    scientists who contributed to the report felt the possibility of a soil
    not having sufficient iron must be recognized.
        Question. Can you have gray, clayey parent material that is not
    anaerobic?
        Answer. Yes, this condition can exist.
        Question. How do you interpret gray, clayey alluvial parent
    material that was previously eroded from soils that may have been
    located hundreds or thousands of miles away. What is the basis for
    inference of anaerobic conditions? Do all alluvial and coastal plain
    soils form under anaerobic conditions at some stage of their
    evolvement?
        Answer. We look for hydric soil Field Indicators that are composed
    of organic soil materials. Field Indicators made of iron are not
    reliable indicators to use to identify hydric soils in materials that
    do not contain iron. On the other hand, organic material accumulates in
    such anaerobic soils and a number of indicators have been identified
    for use. These have been published in the NRCS's publication: ``Field
    Indicators of Hydric Soils in the United States'', published in 1996.
    Alternatively, an odor of hydrogen sulfide gas may also be used as an
    indicator that the soil is anaerobic and reduced. We cannot say
    categorically that all alluvial and coastal plain soils formed under
    anaerobic conditions; however, we will assume that many did. These
    soils will be considered hydric soil today only if they contain Field
    Indicators of Hydric Soils. The coastal plain sediments can be very
    old, on the order of hundreds of thousands of years. Those coastal
    plain soils that are not hydric have changed color since they were
    deposited and do not contain the hydric soil Field Indicators.
        Question. What are relic soil colors? Do they have meaning in
    current land use?
        Answer. Relic or relict soil colors are colors that formed in the
    past and which persist in places where they could not form today. Such
    colors might have a use in determining whether the soil hydrology has
    been altered, if the colors could be accurately identified as relict.
    In our opinion, there is no simple, reliable way to identify relict
    colors. Making an interpretation that colors in a given soil are relict
    is no more than guesswork at the present time.
                     government performance and results act
        Question. How are the agency's annual performance goals linked to
    the agency's mission, strategic goals, and program activities in its
    budget request?
        Answer. In our strategic plan, we established two overall General
    Goals that state the outcomes that would fulfill our mission. These
    outcomes are:
      --Individuals and their neighbors working together as effective and
            willing stewards of the natural resources on their property and
            in their communities.
      --A healthy and productive land that sustains food and fiber
            production, sustains functioning watersheds and natural
            systems, enhances the environment, and improves urban and rural
            landscapes.
        We then established a series of strategic objectives that identify
    the components of each goal that are of highest priority for the
    immediate future. For each objective, we identified long-term
    performance goals that set measurable targets for accomplishment. Goals
    and objectives and most performance goals are stated in outcome-related
    terms. That is, they refer to the condition of the land or to improved
    management practiced by non-federal individuals or entities. These
    performance goals are the basis for the performance goals in our annual
    performance plan. The objectives correspond to authorized purposes of
    one or more of the program activities in our budget.
        Question. Could you describe the process used to link your
    performance goals to your budget activities? What difficulties, if any,
    did you encounter, and what lessons did you learn?
        Answer. The process drew on the technical and program experience of
    a team of headquarters and regional staff. This team drew on a wider
    circle of state and field level employees and national program
    managers. The team studied each of the performance goals for 2002 that
    are established in the strategic plan and identified program activities
    that contribute to meeting the long-term goal. The team determined
    which activities were most clearly outcome related and recommended
    those be used as performance measures for fiscal year 1999. The main
    problems that we encountered were in the area of data availability. For
    some natural resources objectives, such as water quality, there are not
    currently reliable annual data sources to support an annual performance
    goal.
        Question. Does the agency's Performance Plan link performance
    measures to its budget? Does each account have performance measures?
        Answer. The agency's Performance Plan includes several tables that
    map the linkage between the performance measures and the budget. Tables
    3a and 3b in the plan show the relationships between the objectives in
    the strategic plan and the long-term and annual performance measures.
    Tables 4a and 4b in the plan then show the relationship between
    programs and strategic objectives. Table 5 in the plan presents
    information on the amount of funds from each budget activity that
    support each objective.
        The performance plan includes measures that can be used as measures
    for each program. The measures, however, are designed to fit our larger
    programs. Some but not all activities of smaller programs are covered
    by the current set of measures. For example, activities of the RC&D
    Program that directly relate to resource conservation are covered by
    performance measures in the plan. RC&D activities that relate to
    community development are not.
        Question. To what extent does your performance planning structure
    differ from the account and activity structure in your budget
    justification?
        Answer. Our budget provides funds through a structure of 13
    accounts and activities. These programs are delivered through a single
    work force to customers who may participate in several programs. We are
    using the performance planning process as a means to integrate
    management of our program activities. Our performance planning
    structure, therefore, is natural-resource driven and very closely
    follows the structure of the outcome-related objectives in our
    strategic plan. We have very few single-program performance measures in
    our performance plan.
        Question. Do you plan to propose any changes to your account
    structure for fiscal year 2000?
        Answer. At present we do not anticipate proposing changes to our
    account structure for fiscal year 2000.
        Question. How were performance measures chosen?
        Answer. The annual performance measures that support our strategic
    goal for a healthy land are measures of conservation on the land
    achieved with direct technical assistance provided by NRCS employees at
    the field level. A team that included representation of all regions
    identified possible measures and recommended those that most closely
    related to the long-term goals established in the strategic plan. We
    selected predominantly measures that we can now collect data on, or for
    which we expect to be able to collect data by the beginning of fiscal
    year 1999.
        Performance measures for the goal for stewardship are primarily
    internal measures, such as training levels, that measure our capacity
    to provide quality assistance and customer satisfaction measures.
        Question. How did the agency balance the cost of data collection
    and verification with the need for reliable and valid performance data?
        Answer. We have implemented a reporting system that draws on the
    data stored in automated case files in the Service Centers. The intent
    of this Field Office Computing System is that detailed information can
    be transmitted from the Service Centers to managers in state and
    regional offices and NHQ without employees at the field level doing
    anything other than that required to keep the records that they need to
    do their job in the field. Initially populating the data fields in the
    system is labor intensive, however. Not all field offices are fully
    utilizing the system at present. We have developed the concept that we
    call Future Directions that will utilize newer, more user-friendly
    information management technology to streamline the essential record-
    keeping at the field level.
        We are also planning to use the National Resources Inventory to
    collect annual information on several key outcomes. We are evaluating
    use of a series of annual inventories on specific resource issues, with
    the intensity of sampling and therefore the cost, determined by the
    performance issue.
        Question. Does your plan include performance measures for which
    reliable data are not likely to be available in time for your first
    performance report in March 2000?
        Answer. We expect to have data for the current performance measures
    by March 2000. Work is underway to finalize definitions and determine
    data sources for those few measures for which we are not currently
    collecting data. We do, however, intend to continue refining measures
    over the next several years. This means that there likely will be some
    measures in the plan for any given year for which we may not have
    reliable baseline data or consistent current-year data.
        Question. What are the key performance goals from your fiscal year
    1999 Annual Performance Plan that you recommend this subcommittee use
    to track program results?
        Answer. The annual performance measures that support our strategic
    goal for a healthy land are key outcome-related measures that the
    committee can use to track the effectiveness of our combined programs.
        Question. In developing your Annual Performance Plan, what efforts
    did your agency undertake to ensure that the goals in the plan include
    a significant number of outcome measures?
        Answer. We tied our annual performance goals directly to the two
    outcome goals of our strategic plan. The annual performance measures
    for resource condition are all at least intermediate outcomes that
    measure improvements in natural resource management implemented by
    resources managers with NRCS assistance. We have included relatively
    few measures of internal processes in our performance plan.
        Question. Do you believe your program managers understand the
    difference between goals that measure workload (output) and goals that
    measure effectiveness (outcomes)?
        Answer. Yes, most NRCS managers at all levels have a general
    understanding of the difference between outputs and outcomes. Because
    we are a field agency in which most of our employees are front line
    staff providing services directly to the public, most managers have
    first-hand knowledge of the results our customers want and can
    distinguish between the activities that employees perform and the
    changes on the land that result from that assistance to land users.
        Question. What are some examples of customer satisfaction measures
    that you intend to use? Please include examples of both internal and
    external customers.
        Answer. The performance plan includes a goal for external customer
    satisfaction. We will ask customers not only overall satisfaction with
    our service, but also their judgment as to how well we met the USDA
    Service Center customer standards, which relate to courtesy, prompt
    service, reliable service, clarity and readability of information
    provided, and ease of use of forms . We will collect adequate
    demographic data to compare the satisfaction of various customer
    segments. The performance plan also includes a program-specific
    customer satisfaction goal for ``Percent of water users fully satisfied
    with usefulness of Snow Survey And Water Supply Forecasting Program
    information.''
        The performance plan does not include performance measures
    specifically related to internal customer satisfaction nor do we
    presently plan to add such measures. We do intend to collect data on
    internal customer satisfaction relating to satisfaction with the
    appropriateness and timeliness of training in new technology, including
    both conservation technology and information management technology, and
    satisfaction with our efforts to ensure that all employees are treated
    fairly.
        Question. How were the measurable goals of your fiscal year 1999
    annual Performance Plan used to develop your fiscal year 1999 budget?
        Answer. In early 1997 we identified a tentative set of annual
    performance measures and made the necessary changes in the reporting
    system to automatically report the data entered in the field level case
    files. Most of these measures are items that were not reported
    nationally prior to implementation of the automated case file system.
    Adequate data for the new measures were not available in early 1997 to
    support the initial phases of the budget formulation process for fiscal
    year 1999. Therefore, the fiscal year 1999 budget was developed with
    reference primarily to the program-specific performance measures that
    we have traditionally used. The targets for performance for each of the
    measures were developed later in the year, on the basis of available
    data and state-level managers' best judgment.
        Question. If a proposed budget number is changed, up or down, by
    this committee, will you be able to indicate to us the likely impact
    the change would have on the level of program performance and the
    achievement of various goals?
        Answer. If the committee changes a proposed number, we will be able
    to tell you the impact on the level of program performance in terms of
    program-specific outputs and the outcome goal most closely related to
    the program purpose. We could, for example, tell you the change in
    extent of acreage contracted for the Wetlands Reserve Program
    corresponding to a change in the WRP budget. This would relate directly
    to our performance goal for wetlands created or restored. We could not,
    however, trace with accuracy the impact of that change through all of
    the other goals that might be affected. To continue the example, a
    change in the assistance available for protecting wetlands could affect
    the acreage of cropland and grazing land where conservation systems
    were fully implemented, the miles of riparian area restored, or the
    number of watersheds restored to healthy functioning.
        Question. Do you have the technological capability of measuring and
    reporting program performance throughout the year on a regular basis,
    so that the agency can be properly managed to achieve the desired
    results?
        Answer. Performance information from the field is routinely
    reported quarterly. We have the capability to report more frequently
    should it be necessary.
        Question. The Government Performance and Results Act requires that
    your agency's Annual Performance Plan establish performance goals to
    define the level of performance to be achieved by each program activity
    set forth in your budget. Many agencies have indicated that their
    present budget account structure makes it difficult to link dollars to
    results in a clear and meaningful way. Have you faced such difficulty?
        Answer. The difficulty we face in linking dollars to results in a
    meaningful way stems more from the nature of the results we seek to
    achieve than from our budget structure. Because natural resources are
    parts of an interrelated system, program activities that are undertaken
    primarily to achieve a specific goal will have effects on other
    components of the system. In our performance plan, we have attempted to
    show the linkage between programs and the primary performance goal(s)
    the funds support. However, the goal for any resource objective is
    based on the assumption that the funds requested to meet other
    objectives will also be available.
        Question. Would the linkages be clearer if your budget account
    structure were modified?
        Answer. We have not identified changes in our budget structure that
    would make the linkages clearer. We have, however, introduced
    modifications of the reporting system that will enable field staff to
    record the program that is the funding source for milestones recorded
    in the case files. When these data are consistently recorded, we will
    be able to tie activities to dollars more precisely.
        Question. Does your fiscal year 1999 performance plan--briefly or
    by reference to your strategic plan--identify any external factors that
    could influence goal achievement?
        Answer. Our strategic plan briefly describes key external factors
    that might influence the ability of the agency to achieve the goals in
    the plan. Our performance plan, therefore, refers only to the means and
    strategies by which the agency will achieve the goals.
        Question. If so, what steps have you identified to prepare,
    anticipate and plan for such influences?
        Answer. We are strengthening our capability to analyze resource and
    other data to identify emerging trends in production patterns and
    resource use to help anticipate changes that might intensify pressures
    on the resource base. We are also moving to a system of more annual
    resource inventories for key indicators so that we can identify where
    change is occurring and revise strategies before severe problems can
    develop. In addition we are strengthening our working relationships
    with other natural resources agencies in order to draw on their data
    and expertise.
        Question. What impact might external forces have on your resource
    estimates?
        Answer. The transition to market-driven agriculture could result in
    changes in land use and cropping patterns that affect the conservation
    needs on agricultural land, impacting the level of assistance producers
    need from USDA. Enactment of new requirements for resource protection,
    at either the national level or by a significant number of states,
    could greatly affect the level and kind of resources NRCS would need to
    help landusers meet their responsibilities. Changes in domestic or
    international economic conditions could substantially alter
    agricultural commodity prices, farm incomes, and the ability of private
    individuals to maintain or enhance their investments in conservation of
    natural resources. Such changes could also affect the ability of state
    and local members of the conservation partnership to increase their
    contributions to joint conservation initiatives. Also, dramatic changes
    in weather patterns, such as those experienced with El Nino, could have
    significant impacts on resources needed for protecting natural
    resources and the environment.
        Question. Through the development of the Performance Plan, has the
    agency identified overlapping functions or program duplication? If so,
    does the Performance Plan identify the overlap or duplication?
        Answer. There is some overlap in the sense that several of our
    programs are authorized to address a wide range of resource goals.
    Rather than causing duplication, this overlap creates flexibility that
    permits us to tailor assistance to meet the wide range of conditions
    and needs in local areas across the country. In the performance plan,
    the programs that can be used to address goals are shown in the tables
    that map programs to resource objectives.
        Question. Future funding decisions will take into consideration
    actual performance compared to expected or target performance. Given
    that:
      --To what extent are your performance measures sufficiently mature to
            allow for these kinds of uses?
      --Are there any factors, such as inexperience in making estimates for
            certain activities or lack of data, that might affect the
            accuracy of resource estimates?
        Answer. Fiscal year 1997 was the first year for which national data
    were reported for most of our performance measures, and the 1997 data
    were not available until mid-December. Therefore, we have had little
    opportunity to thoroughly analyze the new data. In addition, not all
    field offices are fully using the automated case file system. We expect
    to correct these weaknesses before early fiscal year 2000, when we
    begin to develop the first performance report required by the Results
    Act.
        Question. Based on your fiscal year 1999 performance plan, do you
    see any need for any substantive revisions in your strategic plan
    issued on September 30, 1997?
        Answer. We do not see any immediate need for substantive revisions.
    We are continuing to strengthen our reporting systems and to improve
    information on baseline resource conditions. We may make minor changes
    to the strategic plan through the fiscal year 2000 performance plan, as
    the Results Act permits, but we do not anticipate any need to consider
    substantive changes until the scheduled update that is required by the
    end of fiscal year 2000.
                                     ______

                     Questions Submitted by Senator Bumpers
                        arkansas water resource projects
        Question. For the past several years, this subcommittee has
    directed funds through NRCS to work toward solutions of serious ground
    water depletion problems in Eastern Arkansas. These areas have included
    Grand Prairie, Bayou Meto, and Boeuf Tensas. I have also worked through
    the Energy and Water Subcommittee to engage the U.S. Army Corps of
    Engineers in these efforts as well. In short, if we don't make better
    use of our available surface water resources, we will soon deplete the
    aquifers to the point they will not longer recharge. If there is no
    solution to this problem, the rice industry in the Mid South will be
    dead and along with it the economy of the entire region.
        Answer. The status of these projects will be provided for the
    record.
                     eastern arkansas ground water projects
    Background:
        (1) NRCS has been cooperating with the Corps of Engineers (Memphis
    District and Vicksburg District), State of Arkansas and local sponsors
    on Eastern Arkansas Ground Water Projects on a routine basis since
    1986.
        (2) 1986 to 1990: Eastern Arkansas Region Comprehensive Study that
    included all of eastern Arkansas North of the Arkansas River. Result:
    Five (5) identified critical ground water decline areas with solutions.
    NRCS was a partner with COE, ASWCC, and local sponsors.
        (3) 1990-1991: Corps of Engineers was directed by Congress to
    choose one of the identified ground water decline areas as a pilot for
    further study with planning and implementation anticipated. This was
    the Grand Prairie area.
        (4) 1991-1997: COE, ASWCC, NRCS, local sponsors plan Grand Prairie.
    NRCS was a partner with the COE, ASWCC and local sponsors in completing
    this detailed resource plan. NRCS performs the on-farm portion of the
    planning efforts and the COE performs the major irrigation canal and
    pumping plant portion of the planning. Planning has been completed and
    local sponsors are awaiting funding.
        (5) 1990-1991: Corps of Engineers Vicksburg district was directed
    by Congress to complete a Reconnaissance study for the Boeuf-Tensas
    Basin. This includes the eastern Arkansas Delta area south of the
    Arkansas River. This study was completed jointly by COE and NRCS.
    Result: An identified project but no authorities within the Corps of
    Engineers to continue planning assistance.
        (6) 1992-1993: NRCS was directed by Congress through earmarked
    funds to begin efforts in planning the eastern Arkansas Water
    Conservation Projects. Specifically named were Bayou Meto, Boeuf-Tensas
    and Kuhn Bayou (Kuhn Bayou name has been changed to Point Remove by the
    local sponsors). NRCS has honored those commitments.
        (7) Current situation: Efforts continued for planning on Grand
    Prairie, Bayou Meto, Boeuf-Tensas and Kuhn Bayou. Detailed
    accomplishments and goals are provided in the following questions.
                                 grand prairie
        Question. The fiscal year 1999 request before the Energy and Water
    Subcommittee includes $14 million to initiate construction on two of
    these projects and I will also work to continue the feasibility study
    on the third. Continued involvement by USDA is also vital: Will you
    provide an update on NRCS activities related to Grand Prairie?
        Answer. NRCS continues to cooperate as a partner with the Corps of
    Engineers, State of Arkansas and the local sponsors. The Planning
    document for this project was completed jointly by the Corps of
    Engineers and NRCS in March of 1997, as scheduled. NRCS completed the
    on-farm planning portion of this project. NRCS has been working closely
    during the past year in completing the plan review phase of this
    project and making additions and corrections as questions and/or issues
    have arisen.
        NRCS provided about $550,000 in financial assistance to landowners
    within the Grand Prairie and Bayou Meto critical ground water decline
    area to aid in on-farm water conservation measure installation during
    1997 through the Environmental Quality Incentives Program. This program
    has worked well but available funding through NRCS will meet less than
    3 percent of the area's needs. NRCS is looking forward to a continued
    strong relationship with the Corps of Engineers, State of Arkansas and
    the local irrigation district as this project moves toward
    implementation.
                                   bayou meto
        Question. Will you provide an update on NRCS activities related to
    Bayou Meto?
        Answer. NRCS continues to work with the State of Arkansas and the
    local Irrigation District to move this project toward implementation.
    NRCS has completed planning for the on-farm portion of this project.
    The natural resource inventory has been completed that includes soils
    data layers, water quality and water quantity analysis, irrigation
    water needs analysis for more than 3,000 tracts, wildlife inventories,
    water quality analysis, cultural resources inventory using Geographic
    Information Systems and a completed environmental assessment for the
    on-farm portion of the project plan.
        This on-farm portion of the plan identified the conservation
    practice treatment needs for the area as well as additional water
    diversion needs to support the water needs within the entire basin.
    NRCS provided about $550,000 in financial assistance to landowners
    within the Grand Prairie and Bayou Meto critical ground water decline
    area to aide in on-farm water conservation measure installation during
    1997 through the Environmental Quality Incentives Program. This program
    has worked well but available funding through NRCS will meet less than
    3 percent of the area's needs.
        Currently, NRCS is establishing a Global Positioning Surveying
    network across the entire Bayou Meto basin to facilitate future
    hydrology and hydraulic needs for evaluating irrigation delivery and
    flood control within the basin. NRCS is looking forward to
    participating with the Corps of Engineers as they become more actively
    involved in the Bayou Meto project. Our Arkansas staff is currently
    transferring data collected by NRCS to the Corps of Engineers to
    facilitate their work. NRCS and the Corps of Engineers continue to meet
    for scheduling work and sharing data to help in completing the overall
    basin plan.
    Goals for 1998:
        1. Coordination and transfer of data and information from the
    completed on-farm portion of the area-wide Natural Resource
    Conservation Plan to the Corps of Engineers to assist the COE with
    their efforts in moving into the planning phase of the delivery portion
    of this project.
        2. A cooperative agreement and work plan is being developed in
    cooperation with the Corps of Engineers, Memphis District, to refine
    and complete the total Resource Conservation Plan for this project.
    Additional goals for surveying, planning, environmental evaluation, and
    other data collection and analysis has not been completed at this time.
    Continued cooperation and teamwork between the COE and NRCS is a
    certainty.
        Anticipated 1998 staffing: 3 staff years and $200,000
        Anticipated 1998 EQIP funding: $500,000 for the Grand Prairie/Bayou
    Meto Basin
                                  boeuf tensas
        Question. Will you provide an update on NRCS activities related to
    Boeuf Tensas?
        Answer. To date the local sponsors continue to inform the public of
    water decline and water quality status as well as promoting solutions
    to the problems. The Arkansas NRCS irrigation team is developing
    critical aspects of the project which include digitized soils data
    layers through the University of Arkansas for use in the NRCS
    Geographic Information System (GIS), inventories of streams, canals,
    reservoirs, utilities, farms, cultural resources, wildlife and other
    important land use features and resource concerns are being identified.
    A three-party memo of understanding between NRCS, Arkansas Soil and
    Water Conservation Commission, and the local irrigation district is
    being jointly developed.
        Current Status.--Approximately 50 percent of the inventory has been
    completed.
        Funds spent/obligated and staff time.--A team has been established
    composed of soil conservationist, GIS specialists, soil scientists,
    economists and engineers working on various aspects of the project.
    Approximately 6 staff years will be devoted to this project during the
    fiscal year. Approximately $400,000 of funding was expended during
    fiscal year 1997.
    1997 Accomplishments
        1. Completed compilation of all soils information for 1.2 million
    acres within the project area.
        2. Completed 60 percent of the data inventory for on-farm portions
    of the project.
        3. Completed 30 percent of a preliminary irrigation canal and/or
    pipeline delivery system for the entire 2 million acre project area.
        4. Completed the initial cultural resources inventory.
        5. Obtained digital quadrangle sheet map data.
        6. Completed draft base map of entire project area.
    Goals for 1998
        (1) Publish maps of soils information for the 1.2 million acres
    within the project area.
        (2) Complete data inventory for on-farm portions of the project
    area (60 percent complete now, goal of 100 percent for 1998).
        (3) Complete a Water Budget calculation for each tract for the 1.2
    million acres within the project area (partially completed, 100 percent
    goal for 1998).
        (4) Complete preliminary Irrigation Canal and/or Pipeline Delivery
    System for the entire 2 million acre project area (40 percent complete,
    100 percent goal for 1998).
        (5) Develop public information maps and fact sheets for project
    sponsor local information/education efforts.
        Coordination efforts are underway with the Corps of Engineers for
    planning activities. Vicksburg District of COE has received
    authorization to proceed with planning efforts.
        Anticipated staffing: 6 staff years and $400,000
                        cooperation with other entities
        Question. Will you provide an overview of your ability and
    willingness to work with the U.S. Army Corps of Engineers, the State of
    Arkansas, and local sponsors of these projects?
        Answer. The partnership formed between the Corps of Engineers and
    NRCS illustrates how federal agencies should work together, utilizing
    the strengths of both agencies, to serve the needs of the State of
    Arkansas, local project sponsors and the citizens within the project
    area. NRCS will continue to support this strong partnership effort
    within available resources and funding levels.
        NRCS in Arkansas continues to struggle with staffing and funding
    levels to meet the needs of these critical resource areas. Our current
    budget projections indicate a reduction in staffing levels as demand
    for technical assistance increases statewide. This demand for technical
    assistance is expected to increase.
                                   kuhn bayou
        Question. On a related matter, will provide an update of NRCS
    activities related to Kuhn Bayou?
        Answer. NRCS has completed the project plan, 100 percent of the
    field survey needs, identified the land rights and easement acquisition
    requirements for sponsors to acquire the necessary land rights and
    easements, reevaluated the cost data and updated information for the
    local sponsors as they search for funding and completed approximately
    30 percent of the project design. The local sponsors and NRCS have
    entered into a Cooperative Agreement to complete the final design by
    October of 1998. Coordination continues to occur with the Arkansas Game
    and Fish Commission.
        Design Completion is scheduled for October of 1998.
        Funds spent/obligated and staff time: Approximately 1.5 staff year
    ($100,000) have been expended for technical assistance to the
    irrigation district during fiscal year 1997. All design activities will
    be completed prior to the local sponsors acquiring funding for project
    implementation.
    Goals for 1998
        1. Complete the structural design for one large water control
    structure (currently 30 percent, 100 percent fiscal year 1998).
        2. Complete the design of the irrigation delivery canals and relift
    stations (currently 30 percent, 100 percent fiscal year 1998).
        3. Incorporate the irrigation pipeline design to assure water
    delivery to each tract (100 percent completed).
        4. Complete 100 percent of the land rights work maps and provide to
    local sponsors for land rights/easement acquisition (currently 80
    percent).
        5. Prepare final cost and information/education package for local
    sponsor efforts in providing information to their clients (20 percent).
        Anticipated staffing for 1998: 2 staff years and $100,000.
                              aging infrastructure
        Question. Your budget includes an increase of $1 million to
    evaluate the condition of aging infrastructure and you suggest that by
    fiscal year 2000 you may have identified 2,000 structures in need of
    significant restoration. In Arkansas, I understand you have identified
    structures on the Muddy Fork of the Illinois River as part of this
    aging infrastructure. What other projects in Arkansas have you
    identified?
        Answer. The $1 million in the budget request is not to evaluate the
    condition of the infrastructure but to provide educational assistance
    to watershed sponsors concerning their need to examine and repair their
    older watershed structures. As these dams and structures age, the need
    for repair or replacement of existing structures becomes critical. The
    increased funding would enable NRCS to provide important educational
    assistance to communities and sponsors regarding the safety and status
    of conditions of existing structures. As part of this budget item, NRCS
    would utilize the ``Training Aids for Dam Safety'' package of workbooks
    and videotapes prepared by the Interagency Committee on Dam Safety. The
    package was professionally prepared and translated into several
    languages. It includes modules ranging from technical aspects of site
    inspections to safety program development. The Interagency Committee
    has also developed ``Federal Guidelines for Hazard Potential
    Classification of Dams'' which could provide the base criteria to
    classify the most threatening structures. This base criteria is very
    similar to current NRCS classification criteria and to the Corps of
    Engineers criteria that was used to inspect the nation's dams in the
    1970's.
        Regarding the Muddy Fork of the Illinois River Watershed, we
    recently assisted the sponsors/partners (Washington County Conservation
    District, City of Lincoln, Arkansas, Arkansas Game and Fish Commission,
    City of Prairie Grove, Arkansas and the Arkansas Soil and Water
    Commission) to develop a case study, which takes a snap-shot of the
    project. The case study examines the benefits planned, benefits
    realized and future opportunity benefits to encourage the community to
    take the necessary steps to protect this valuable investment of the
    infrastructure of which originally utilized a 50/50 local/federal cost-
    share. Currently, this project provides over $542,000 of annual
    benefits which include flood prevention, recreation, two municipal and
    industrial water supplies for the cities of Prairie Grove and Lincoln.
    Other benefits include fish and wildlife habitat, habitat for
    endangered species, improved water quality, erosion control, increased
    employment and fire protection.
        This case study conducted on the Muddy Fork did not provide an
    engineering study/evaluation on the integrity, soundness or remaining
    life-span of structures in the watershed. Depending on the engineering
    complexities of the specific structure, we estimate that it will cost
    sponsors $30,000 to $50,000 per structure, to conduct a detailed
    engineering evaluation. This estimate would not include engineering
    costs for designing the rehabilitation or repair work. We are not aware
    of any other Small Watershed project sponsors in Arkansas who are
    considering a similar type of case study.
        Question. Could you provide a list of projects in all states
    already identified?
        Answer. Other states where sponsors have developed a similar, snap-
    shot, case study of which we are aware include California, Georgia,
    Iowa, Kansas, Mississippi, New Mexico, New York, Ohio, Oklahoma,
    Tennessee, Texas, Wisconsin and West Virginia. Other sponsors have very
    likely developed similar fact sheets on their projects to showcase the
    societal and environmental benefits of other Small Watershed Projects
    of which we are not aware.
        Question. How much of a threat to public health and safety are
    posed by the structures?
        Answer. Dams are classified under the national dam safety hazard
    criteria and in most states are regulated by state dam safety laws. Not
    all dams have been classified and some have an increased safety hazard
    due to development both upstream and downstream of the dams. Dams that
    do fail, pose a great threat to life and property.
        Question. What criteria are you using to classify the most
    threatened structures?
        Answer. There is no classification system which will yield a
    ranking of which are the most threatened structures. This is very
    subjective engineering work usually involving risk analysis studies.
        Question. Have you initiated actions to correct identified problems
    and if so, what are they? If not, when do you plan to take corrective
    action?
        Answer. In cases where dam safety problems have been discovered by
    our field staff, it is our policy to notify the sponsors (owners of the
    dam) and the state dam safety agency. We have provided technical
    assistance to the sponsors (owners of the dams) and recommended
    corrective measures to remove the immediate to life and property.
    However, beginning October 1, 1998 NRCS will charge sponsors for
    technical and consultative services for dam rehabilitation or
    modifications.
        Question. When do you plan to initiate action on the Muddy Fork
    structures?
        Answer. We have no plans to initiate any action on the Muddy Fork
    structures since we have no statutory authority nor funding to take
    action. The complete responsibility for operations, maintenance,
    rehabilitation, decommissioning, and modifications is the legal
    responsibility of the sponsors, owners of the dams. This case study
    conducted on the Muddy Fork did not provide an engineering study/
    evaluation on the integrity, soundness or remaining life-span of
    structures in the watershed. Depending on the engineering complexities
    of the specific structure, we estimate that it will cost sponsors
    $30,000 to $50,000 per structure, to conduct a detailed engineering
    evaluation. This estimate would not include engineering costs for
    designing the rehabilitation or repair work.
        Question. What do you project the ultimate cost may be in bringing
    these structures up to standard?
        Answer. No total cost has been estimated. The first step for the
    sponsors is to conduct a detailed engineering evaluation on the Muddy
    Fork structures in order to ascertain an engineer's estimate of the
    total cost to perform needed remedial work. NRCS has no statutory
    authority nor funding available for this task.
             backlog of approved watershed infrastructure projects
        Question. You mention there are over $1.5 billion in need for
    Public Law 566 and Public Law 534 projects. Please provide the number,
    location, and costs associated with projects in Arkansas on the
    backlog.
        Answer. We will provide that information for the record.
        [The information follows:]

                  ACTIVE PROJECTS IN ARKANSAS WITH THEIR COSTS
    ------------------------------------------------------------------------
                                              Obligations to    Obligation
                  Project/name                     date            needs
    ------------------------------------------------------------------------
    2027, Big Slough........................        $958,120  ..............
    2065, Buffalo River Tributaries.........         698,983      $3,767,700
    2052, Flat Rock Creek...................      10,408,737       1,673,520
    2036, Forche Creek......................      15,711,680       1,121,760
    2064, Gould Portion of Grady-Gould......         197,422       1,095,540
    2063, Little Red River..................       4,005,653       1,254,000
    2034, North Fork of Ozan Creek..........       3,913,758       1,271,100
    2053, Ozan Creeks.......................       6,476,273       7,397,460
    2042, Poinsett..........................      14,031,395       8,839,560
    2054, South Fork........................       4,386,669  ..............
    2038, South Fourche.....................      13,858,666       5,823,120
    2050, Upper Petit Jean..................       5,637,321      11,037,480
                                             -------------------------------
          Total.............................      43,281,240      43,281,240
    ------------------------------------------------------------------------

        Question. Could you provide a list of the number of projects by
    state on the backlog?
        Answer. We will provide that list for the record.
        [The information follows:]

                Number of active Public Law 566 projects by State

    Alabama...........................................................    17
    Alaska............................................................     1
    Arizona...........................................................     8
    Arkansas..........................................................    12
    California........................................................    15
    Colorado..........................................................     3
    Connecticut.......................................................     4
    Delaware..........................................................     4
    Florida...........................................................     7
    Georgia...........................................................    20
    Hawaii............................................................     7
    Idaho.............................................................    14
    Illinois..........................................................    14
    Indiana...........................................................     6
    Iowa..............................................................    20
    Kansas............................................................    24
    Kentucky..........................................................    21
    Louisiana.........................................................    15
    Maine.............................................................     5
    Maryland..........................................................     4
    Massachusetts.....................................................     3
    Michigan..........................................................     6
    Minnesota.........................................................     4
    Mississippi.......................................................    16
    Missouri..........................................................    17
    Montana...........................................................     4
    Nebraska..........................................................    16
    Nevada............................................................     1
    New Hampshire.....................................................     1
    New Jersey........................................................     3
    New Mexico........................................................     8
    New York..........................................................     7
    North Carolina....................................................    16
    North Dakota......................................................     7
    Ohio..............................................................    14
    Oklahoma..........................................................    34
    Oregon............................................................     5
    Pennsylvania......................................................    14
    PB................................................................     3
    Puerto Rico.......................................................     3
    Rhode Island......................................................     1
    South Carolina....................................................    20
    South Dakota......................................................     3
    Tennessee.........................................................    19
    Texas.............................................................    28
    Utah..............................................................     6
    Vermont...........................................................     8
    Virginia..........................................................    14
    Washington........................................................    12
    West Virginia.....................................................    12
    Wisconsin.........................................................     2
    Wyoming...........................................................     2
                            -----------------------------------------------------------------
                            ________________________________________________
          Total.......................................................   530
                            water districts backlog
        Question. Could you provide information relating to the number of
    water districts or associations on this backlog who have initiated
    local tax measures or some similar action in anticipation of the
    federal share being forthcoming?
        Answer. We do not collect information on the number of water
    districts or associations who have initiated local tax measures or some
    similar action in anticipation of the federal share being forthcoming.
                              digitized soil maps
        Question. You mentioned the need to proceed with categorizing soil
    types and inputting that information in a digitized format using GIS
    technologies. Would you please provide an update on the work of the GIS
    Center for Advanced Spacial Technology in Arkansas in developing soil
    digitized maps?
        Answer. NRCS continues to maintain a strong relationship with the
    Center for Applied Spatial Technology (CAST) for the development and
    delivery of digital soil databases and other digital GIS databases for
    counties in Arkansas. Cooperative efforts between NRCS, CAST,
    University of Arkansas at Fayetteville, Agronomy Department, and the
    Arkansas Soil and Water Conservation Commission have resulted in
    digitizing of sixteen counties in the state. Five additional counties
    are planned to be completed by the end of calendar year 1998.
        NRCS has also developed a cooperative agreement with CAST for
    placing the Woodruff County, Arkansas Soil Survey on the Internet. This
    is to be completed by the end of calendar year 1998 and will be the
    first county in the nation with comprehensive soil information on the
    Internet.
        NRCS is also working with CAST to assist soil and water
    conservation districts and county governments to implement GIS
    technology. An example is the Union County Soil and Water Conservation
    District. GIS specialists from NRCS and CAST are jointly providing
    assistance to this conservation district to develop a plan to acquire
    hardware, software, and digital data layers needed to implement a GIS
    in their office. This GIS will be used by the district to collect and
    manage water well data for the Sparta/South Arkansas Critical Ground
    Water Area. NRCS and CAST will work together to provide the district
    with digital soils data, digital orthophotography, and digital USGS
    Rastergraphic data for this project.
                        supplemental disaster assistance
        Question. El Nino and other storm events in recent months have
    caused major destruction in many parts of the nation. Does NRCS intend
    to submit an emergency budget request for disaster assistance?
        Answer. The President submitted a budget request of $40 million.
    NRCS is continuing to gather information on damages.
        Question. What, if any, disaster estimates have you received from
    the affected states?
        Answer. At this time we have not received any requests that we have
    not been able to fund. It is too early to tell in California since the
    weather has not cleared enough to be able to make any significant
    estimates. Our people in Florida are just beginning to gain access to
    various sites struck by tornadoes.
                            plant materials centers
        Question. Could you provide an update on the activities of the
    Plant Materials Center at Booneville, Arkansas?
        Answer. The Booneville plant center has 15 studies that investigate
    various aspects of using plants for conservation purposes. They
    include:
        1. Evaluation of selected grasses as filter strip cover with
    applied poultry litter.
        2. Improving vegetative cover on reclaimed mined land in Arkansas.
        3. Assembly and evaluation of big bluestem Andropogon gerardi
    Vitman.
        4. Eastern Gamagrass (Tripisacum dactyloides) intercenter
    evaluation study.
        5. Evaluation of 115 plant species for adaptation in West Central
    Arkansas.
        6. Establishment of native warm-season grass species into existing
    tall fescue sod.
        7. Determination of the variation in biomass, yield, and stand
    persistence among switchgrass breeding lines and standard commercial
    varieties.
        8. Determining biomass dry-matter yields for selected switchgrass
    breeding lines and standard commercial varieties to be utilized as a
    bioenergy fuel source. (cooperative with 5 other states and 4 different
    agencies)
        9. Indian grass (Sorghastrum nutans) variety evaluation.
        10. Native grass establishment and seed increase for the Arkansas
    Heritage Commission and the White River Irrigation District.
        11. Evaluation and selection of a cold hardy Bahiagrass cultivar.
        12. Development of a crop residue resource quality database for
    predicting decomposition in soil erosion models.
        13. Roadside establishment of native species for the Arkansas
    Highway and Transportation Department.
        14. Bioengineering stream bank erosion control using plant
    materials.
        15. Hackberry ecotype evaluation for windbreaks and wildlife
    habitats.
        Results and progress in work has been presented at various meetings
    and conferences. It has also been summarized in technical reports,
    annual reports, and quarterly newsletters. A big bluestem cultivar
    release is planned in 2001, and an eastern gamagrass cultivar is
    planned for 2000.
        Question. What is the funding level for the Booneville Center in
    fiscal year 1998 and what is projected for fiscal year 1999?
        Answer. The Booneville Center operates on a budget of $302,000 in
    fiscal year 1998. $277,000 are from the Plant Materials program and
    $25,000 are from other sources. A need for $295,000 is projected for
    fiscal year 1999.
                            clean water action plan
        Question. USDA and EPA recently announced the Clean Water Action
    Plan which is designed to carry forward the goals first outlined in the
    1972 Clean Water Act. Since more and more attention is given to non-
    point source pollution, what assurances can you give that this program
    will not ultimately lead to more federal regulation of farmland?
        Answer. The Clean Water Action Plan itself does not propose any new
    regulations for agriculture beyond what was laid out specifically in
    the Vice President's directive last October, and those were already
    underway by EPA before the Action Plan was developed. Further, the
    Action Plan is limited to what is currently authorized under law. We
    believe that the Action Plan can help agricultural producers address
    non-point source pollution through a voluntary, incentive based
    approach if the necessary funding is made available so USDA can provide
    the necessary assistance. For example, we believe that technical and
    financial assistance through EQIP and other farm bill programs can help
    prevent non-point source pollution at the source, and conservation
    buffers can help capture sediments and suspended nutrients before they
    reach surface water bodies.
        Question. Similarly, how does your work in the area of Urban
    Conservation, where there is a tradition of EPA regulation, fit with
    the more traditional ``voluntary'' efforts in rural areas?
        Answer. NRCS provides technical assistance to clientele in urban
    areas to address local natural resource concerns. These services are
    provided on a voluntary basis. While this technical assistance may help
    our customers address requirements from state, local, or other federal
    regulations, NRCS is not a regulatory agency and we do not envision any
    change to this status.
                                   user fees
        Question. Your budget includes collection of user fees for certain
    products and services. Please identify the type of fee and amount
    expected to be collected from each.
        Answer. Although we have not fully developed the appropriate fee
    schedule type details, we anticipate the following types of services
    may be included under the proposed user fee program:
      --Conservation Plans exceeding 16 hours of work;
      --Foundation seeds--initial supply;
      --Foundation plants;
      --Testing for animal waste storage lagoons;
      --Inspection and testing of dams;
      --Water supply forecasts;
      --Climate data;
      --SNOTEL data;
      --Soil survey publications;
      --Wetland delineations; and
      --Irrigation systems.
        We do not know the exact cost of the services affected, however,
    the President's budget estimates the cost to be $10 million. This
    amount currently supports about 133 FTE's.
        Question. Which ``users'' are more likely to be affected?
        Answer. Our first priority would be to focus on those customers who
    profit directly from the services we provide, such as private
    contracting firms which use our technical interpretations and soil
    surveys for consultive services. The extent of the customer impact will
    depend upon the number of fee items that are ultimately implemented.
        Question. How do you expect these fees to be received by the
    conservation community and the farm community?
        Answer. Since the majority of our clients have historically
    received most technical services free of charge from NRCS, we
    anticipate the new program to be received with some disfavor from
    constituents. Every effort will be made to collaborate with effected
    individuals and groups to explain and minimize any adverse impact of
    the fee for service program.
                          farmland protection program
        Question. I have long been concerned about the loss of farmland to
    urban conversion and other uses that in time, will greatly reduce the
    ability to maintain adequate food supplies. You mention that no funds
    are budgeted for the Farmland Protection Program in fiscal year 1999
    due to the fact that the $18 million approved by Congress exhausted the
    original authorized funds for the program. To what extent has this
    program been successful in stopping urban conversion of farmland?
        Answer. $16.2 million were obligated to 41 programs in 18 States in
    fiscal years 1996 and 1997. When conservation easement acquisitions are
    completed, approximately 80,000 acres on 230 farms with an estimated
    easement value of $134 million will be protected from conversion to
    nonagricultural uses in part with Federal funds. On an average, Federal
    matching funds account for about 25 percent of the recorded easement
    value, and State and local government entities contribute the rest of
    the 75 percent. State and local government entities also pay for all
    administrative costs incurred, such as easement acquisition,
    management, monitoring, and enforcement. As of January 31, 1998, more
    than 10,000 acres on 47 farms with a total easement value of $18
    million were acquired, among which Federal FPP funds contributed $4.5
    million (25 percent) and State and local government funds accounted for
    $13.5 million (75 percent).
        Question. If continued, what effect would it have in protecting our
    long-term ability to produce adequate food supplies?
        Answer. One of the most significant features of the Federal
    Farmland Protection Program is to establish partnerships with State and
    local government entities. By doing so, the program provides the
    opportunity to leverage State and local farmland protection efforts.
    The program has generated lots of discussions as to what the local or
    State governments can do to better protect their resource base. As of
    June 1, 1997, about 491,000 acres on 3,321 farms with an easement value
    of $901 million are permanently protected under various State and local
    farmland protection programs. If funding for the Farmland Protection
    Program continued, the benefits would outweigh the costs, not only to
    ensure long-term food supplies, but also to achieve other goals such as
    ground water recharge, wildlife benefits, better management of the
    natural resources, or just for open space and aesthetic values.
        Question. What would you project the cost of such a goal might be?
        Answer. The Farmland Protection Program (FPP) takes the approach
    that this is a grass-root effort. It is a locally-led process and FPP
    funds are used to supplement emerging and existing State, Tribal, and
    local programs. To continue the same process and at the same rate as in
    the past few years, we estimate that a minimum of $50 million annually
    is needed. However, with new State and local programs emerging each
    year, this program has the potential of being 3 or more times that
    amount to match State and local funds.
                                     ______

                      Questions Submitted by Senator Kohl
                          conservation reserve program
        Question. Has the Conservation Reserve Program's wetland
    restoration option deterred interest in the WRP's 10-year cost share
    arrangements in Wisconsin and the Nation?
        Answer. Specific information on which to base the answer to this
    question from a Nationwide perspective does not exists. However, in
    Wisconsin we do have information to show that NRCS personnel and
    others, while working with landowners, generally find that more
    landowners turn to the CRP wetlands option than accept the WRP 10-year
    cost share agreement option. This situation probably occurs throughout
    the Nation where the landowner has lands that meet the eligibility
    requirements of both programs. The Wisconsin experience also shows that
    a landowner may initially seek to enroll in the cost-share agreement
    option, but when presented with the 30-year and permanent easement
    option frequently picks one of the easements. In most instances the
    permanent easement option is the choice.
                     wetlands reserve program partnerships
        Question. Congress has encouraged NRCS to work in partnerships with
    other conservation entities to implement the WRP. What are the results
    of your efforts with this directive? Have you identified any program
    constraints that prevent partnerships?
        Answer. The partnership effort continues to be a great success.
    Private and governmental conservation entities have become a critical
    factor in successful program delivery. For instance, in Wisconsin the
    Wisconsin Waterfowl Association is actively assisting with the
    identification of projects and with planning and completion of
    restoration activities. The National Fish and Wildlife Foundation has
    assisted with project identification and funding. The Department of
    Natural Resources is partnering in the acquisition and implementation
    of several important restoration projects. The Fish and Wildlife
    Service is assisting with project identification, design and
    construction. The Forest Service is providing help in completion of
    surveys and boundary marking. Throughout the nation a host of other
    entities are providing assistance (e.g., Ducks Unlimited, The Nature
    Conservancy, Delta Wildlife Foundation, Pheasants Forever, California
    Waterfowl Association, Minnesota Waterfowl Association, and a number of
    state agencies).
        The lack of authority under the WRP to provide CCC funds to Federal
    or State agencies for salaries and expenses is a major program
    constraint. If we could reimburse these entities with CCC funds the
    added valuable expertise that we could enlist would greatly increase
    program effectiveness. The WRP statute does not specifically address
    the use of cooperative agreements as an aspect of program
    implementation. This continues to be cause for concern for some who
    would be more comfortable with specific authority in the statute and
    not so much reliance on appropriations act report language.
                   conservation reserve program in wisconsin
        Question. As I mentioned in my opening statement, the State
    Department of Natural Resources lent staff to the NRCS offices to help
    complete the Conservation Reserve Program sign up in Wisconsin. What
    are you going to do to make sure it doesn't happen again?
        Answer. NRCS views the willingness of federal and State wildlife
    and forestry agencies, and local wildlife organizations to cooperate
    and work along side with USDA agencies during the 15th CRP sign up, as
    a good sign that USDA is sincere in its efforts to forge a partnership
    in improving the environment. It's a true testimony to the locally led
    process, whereby local people provide input into a USDA program(s). The
    Federal Agriculture Improvement and Reform Act of 1996 provided a
    provision for a locally led initiative. The 15th CRP signup proved that
    other federal and State agencies and organizations stands ready to
    assist USDA in implementing Farm Bill programs.
        Many people, besides staff from the Natural Resources Conservation
    Service and the Farm Service Agency, assisted during the sign up period
    for both the 15th and 16th Conservation Reserve Program during 1997.
    This was a collaborative effort with many State agencies and
    conservation organizations. We strongly encourage, partnership efforts
    such as this in the delivery of these programs.
                                     ______

                      Questions Submitted by Senator Byrd
                      status of potomac headwaters project
        Question. Please provide a status report on the Potomac Headwaters
    Land Treatment Watershed Project, complete with pertinent timetables
    and participation rates.
        [The information follows:]

    Contracts signed 1997.............................................   116
    Contracts signed 1998.............................................    21
    Carryover applications 1997.......................................   121
    New applications 1998.............................................    46
                            -----------------------------------------------------------------
                            ________________________________________________
          Total contracts and applications............................   304

        Federal funds expended in fiscal year 1997 was $2,116,241. Federal
    funds available for contracts in fiscal year 1998 are $2,230,000.
        Recently updated projected funding costs are as follows:

    ----------------------------------------------------------------------------------------------------------------
                                     Federal       Federal
             Fiscal year            financial     technical       Total         State       Operator        Total
                                   assistance    assistance      Federal                                   project
    ----------------------------------------------------------------------------------------------------------------
    1997........................    $2,116,300      $300,000    $2,416,300      $423,260    $1,693,040    $4,532,600
    1998........................     2,230,000       900,000     3,130,000       446,000     1,784,000     5,360,000
    1999........................       300,000       700,000     1,000,000        60,000       240,000     1,300,000
    2000........................  ............       700,000       700,000  ............  ............       700,000
    2001........................  ............       300,000       300,000  ............  ............       300,000
    2002........................  ............       200,000       200,000  ............  ............       200,000
    2003........................  ............       200,000       200,000  ............  ............       200,000
    2004........................  ............        60,000        60,000  ............  ............        60,000
    2005........................  ............        60,000        60,000  ............  ............        60,000
    2006........................  ............        60,000        60,000  ............  ............        60,000
    2007........................  ............        30,000        30,000  ............  ............        30,000
                                 -----------------------------------------------------------------------------------
          Totals................     4,646,300     3,510,000     8,156,300       929,260     3,717,040    12,802,600
    ----------------------------------------------------------------------------------------------------------------

        The participation rate based on the need for agriculture waste
    storage facilities is 108 percent. The plan identified a need for 162
    facilities. At this time requests have been received for 337.
        A supplemental watershed agreement is being prepared between NRCS
    and sponsors to accommodate this increase in participation.
        Question. How does participation in this project compare with
    similar projects in other watersheds?
        Answer. Participation rates in similar projects include Opequon
    Creek Watershed West Virginia, with 70 percent of planned agriculture
    waste facilities.
        Question. Please provide a full list of all flood control projects
    in West Virginia that are currently under construction, the cost
    associated with that construction, and a timetable for the completion
    of each project.
        Answer. The following is a list of flood control projects under
    construction in West Virginia, including the federal construction cost
    and the time table for completion:
        1. Cranberry Creek Channel Improvement Project, Raleigh County
              --Federal Cost: $16,355,289
              --Completion Date: May 1998
        2. Little Whitestick Channel Improvement Project, Raleigh County
              --Federal Cost: 5.0 million
              --Construction bids received on March 3, 1998
              --Completion Date: August 2000
        3. Lost River Dam No. 27, Hardy County
              --Cost $4,446,435
              --Completion Date: August 1998
        4. Upper Mud Recreation Facilities, Lincoln County
              --Cost $1,219,142
              --Completion Date: June 1998.
        Question. Please provide a full list of flood control projects in
    West Virginia for which feasibility studies have been completed.
        Answer. A list of all Public Law 566 and Public Law 534 projects in
    West Virginia that are currently being installed will be provided.

               Public Law 566 projects currently being installed

    Brush Creek
    Elk Twomile Creek
    Headwaters of Indian Creek
    Howard Creek
    Little Whitestick-Cranberry Creeks
    Mill Creek
    Opequon
    Piney Creek-Soak Creek
    Teter Creek
    Upper Buffalo Creek
    Upper Mud River
    Wheeling Creek

               Public Law 534 projects currently being installed

    Potomac:
        Cacapon River
        Potomac headwaters
        Lost River
        Lunice Creek
        New Creek-Whites Run
        North and South Mill Creek
        North River
        Patterson Creek
        South Branch Upstream of U.Tract
        South Fork River
                             eqip in west virginia
        Question. Please provide a status report of the Environmental
    Quality Incentives Program in West Virginia.
        Answer. In fiscal year 1997, West Virginia received $2.0 million to
    carry out the EQIP program. Over 990 applications were received for the
    program, requesting about $6.7 million in financial assistance. Just
    over $1.8 million financial assistance was obligated in 362 EQIP
    contracts with eligible producers. These contracts will treat natural
    resource concerns and environmental problems on over 24,000 acres. The
    average contract was for $5,000 and will treat 68 acres. The program
    was primarily delivered in four priority areas: Mid Ohio River Basin;
    Central West Virginia Hills; Potomac Headwaters; and the Little Kanawha
    River Basin.
        In fiscal year 1998, $1.8 million has been allocated to West
    Virginia. Of this amount, nearly $1.4 million will be used for
    financial assistance to eligible West Virginia producers. The program
    will be focused in the same priority areas as in fiscal year 1997.
                 alderson, west virginia plant materials center
        Question. Please provide a status report on construction of the
    Plant Materials Center in Alderson, West Virginia.
        Answer. Construction activities are underway in Alderson, WV.
    Development of the building site was completed in September, 1997.
    Plans and construction drawings for the seed barn are complete, and the
    construction contract was been awarded to an 8A construction firm.
    Anticipated date of issuance of the Notice to Proceed with construction
    is April 1, 1998, but the notice could be issued earlier if weather
    conditions permit.

                              Subcommittee Recess

        Senator Cochran. This concludes today's hearing. We will
    have another hearing on Tuesday, March 3, at 10 a.m., in this
    room, SD-138 of the Dirksen Senate Office Building, to hear
    from Department of Agriculture witnesses regarding the budget
    request for the Rural Economic and Community Development
    Programs.
        Until then, the subcommittee stands in recess.
        [Whereupon, at 11:10 a.m., Thursday, February 26, the
    subcommittee was recessed, to reconvene at 10 a.m., Tuesday,
    March 3.]

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 1999

                                  ----------

                             TUESDAY, MARCH 3, 1998

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

                           DEPARTMENT OF AGRICULTURE

    STATEMENT OF JILL LONG THOMPSON, UNDER SECRETARY, RURAL
                DEVELOPMENT
    ACCOMPANIED BY DENNIS KAPLAN, BUDGET OFFICE

                            Rural Utilities Service

    STATEMENT OF WALLY 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 ROBERT ARMSTRONG, EXECUTIVE DIRECTOR

                                Opening Remarks

        Senator Cochran. The subcommittee will please come to
    order. We are pleased to continue our review of the President's
    budget request for the next fiscal year. This morning, we are
    specifically reviewing that portion of the budget which funds
    the Department of Agriculture's rural development programs.
        We are pleased to have with us the Under Secretary for
    Rural Development, Jill Long Thompson, and other witnesses who
    have responsibilities in related areas. I will invite the
    Secretary to make whatever comments she would like to make and
    introduce the panel. First of all, I am going to call on my
    good friend the distinguished Senator from Iowa, Mr. Harkin,
    for any opening statement he might have.
        Senator Harkin.

                          STATEMENT OF SENATOR HARKIN

        Senator Harkin. Mr. Chairman, thank you very much.
        I want to welcome this distinguished panel here again this
    morning because what you all deal with really is just
    absolutely critical to the quality of life in all of rural
    America, kind of small towns that dot my State of Iowa and,
    indeed, the State of Mississippi too. What you do really is the
    lifeblood of how people live and whether they have good jobs,
    and places to live, and electricity, and telecommunications,
    clean water, wastewater facilities. These are all the things
    you deal in.
        Coming from a small town myself where only just a few years
    ago they tested all of the wells in my town including the well
    that I drank from all my life, and none of the wells tested fit
    to drink, which a lot of my political opponents always pointed
    out that is probably what was wrong with me, drinking that
    water all my life.
        We finally got good water through the help of your agency.
    This predated your time being there. I am just saying that it
    meant a lot to people there to have that and now we have
    wastewater facilities there also. The rural business
    cooperatives that we have seen spring up have just been a
    dramatic engine for economic growth in our country.
        I just want to take my few minutes, Mr. Chairman, and just
    again return to a topic that you are very familiar with I know,
    and I know Senator Bumpers always hits me a little bit about
    this because I always bring it up all the time, that is: the
    need to increase our support for getting new nonfood, nonfeed
    agricultural products into the market. I think this is one of
    the best ways to increase not only farm income, but rural
    income, to create jobs and foster economic growth in rural
    America.
        To that end, Mr. Chairman, it has been a bipartisan effort.
    I am speaking specifically here of AARCC. I first started
    working on it with Ed Madigan when he was in the House. I
    greatly appreciate, Mr. Chairman, especially the support that
    you have given as chairman of this subcommittee to AARCC and
    also that Senator Bumpers has also provided over the years.
        I just want to emphasize once again the importance of the
    Alternative Agricultural Research and Commercialization
    Corporation and the success it has had with its limited
    funding. It leverages. It has leveraged private capital. From
    $3 to $4 of private money has been invested for every $1 of
    Federal money. That is pretty darned good leveraging. That
    means that AARCC has spurred some $120 million of private
    investment in new agricultural products.
        Again, these are always open for interpretations and
    whether it is good or not, but I think it can be safely said
    that AARCC has created over 5,000 new jobs, it has generated a
    new demand for over 250,000 acres' worth of farm commodities.
    Again, AARCC is set up so it gets repaid as those new markets
    grow. It is supporting a wide range of new products from
    relatively low technology to high technology, but all based on
    farm materials. Of course, I brought my crop with me here. Mr.
    Chairman, this is a tabletop. It is really nice with my name on
    it. [Laughter.]
        It really looks like granite. They are making those now.
    That was one of the investments made by AARCC.
        You are just in time to hear my thing on AARCC. How lucky
    can you be? [Laughter.]
        Your timing is perfect.
        Senator Bumpers. Can you start over again?
        Senator Harkin. I just wanted you to see. You can have one
    of these tables too. If you are a nice guy, you can have one of
    these tables too. Find out how much they cost.
        These are some of the new products. I know in looking at
    your testimony, Secretary Thompson, we are now importing wall
    panels made of wheat straw from England. Can you imagine that?
    We are importing wall panels made of straw from England. We are
    the wheat producers in the world, not England, so I am thinking
    this ought to be an American product. If they can do it there
    and we can ship it all the way here and it can be competitive,
    it makes no sense to me why we cannot be spurring this here, a
    lot of things: industrial oils and greases, cleaning products,
    packaging materials.
        Senator Daschle told me last week about using millet. Now,
    you know these little plastic peanuts that you get in boxes,
    you know, that packages things up and stuff? It takes I do not
    know how many thousands of years for that to decompose and all
    of that kind of stuff. They now have a millet that they use.
        Senator Cochran. Biodegradable?
        Senator Harkin. Biodegradable totally. The good thing about
    it is you can ship a small box of this. You can put it through
    a microwave or something like a corn popper, and it pops it up
    so you do not have to have big boxes to ship this stuff in.
        Senator Cochran. Then you can eat it?
        Senator Harkin. Then you can eat it. Put it on your cereal
    after you are through emptying the box out. These are the good
    things that we can work with, biomaterials, all of that.
    Anyway, we are moving forward. It is a snail's pace because of
    the shortage of funds. I have argued for years that AARCC
    should not be funded at the $10 million level. It could
    effectively use at least twice that much next year and more
    thereafter.
        Really, again I know I sound like a broken record on this,
    but just the history of it has been great and we are moving
    ahead in it. I think that there is just a lot of promise out
    there, especially with the leveraging of the private money that
    we get. I just want to thank Secretary Thompson, I want to
    thank Mr. Armstrong and all of the people at AARCC who have
    worked so diligently. I think you are doing a great job, and I
    just hope that we can provide the resources.
        I know we are under a bind with the budget and the money
    that we have. Mr. Chairman, I am very respectful of that, and I
    know you have a heck of a time trying to balance all of those
    things. I just hope that we can come up with some more funding
    for AARCC to spur more of these kinds of product developments.
        Thank you very much, Mr. Chairman, for letting me do my
    annual thing here on AARCC.
        Senator Cochran. Thank you. Well, you have done it very
    well this time. We appreciate the props.
        We are also delighted Senator Bumpers is here, the
    distinguished ranking member of the subcommittee.
        Senator, I have already introduced Ms. Thompson and
    welcomed her to the hearing, but we would be delighted to hear
    any comments or opening statement that you might have.

                          STATEMENT OF SENATOR BUMPERS

        Senator Bumpers. Mr. Chairman, I will insert my opening
    statement into the record.
        I do want to acknowledge that Secretary Thompson came down
    to Arkansas last year to College Station for an announcement.
    College Station is an ultrapoor section. It is an
    unincorporated village outside Little Rock that was devastated
    by a tornado--400 poor black citizens. Secretary Thompson's
    appearance there on behalf of the Department of Agriculture and
    the U.S. Government was a real shot in the arm to those people.
        I want to personally thank her again, and also Mr. Shadburn
    and Mr. Beyer and Mr. Romano, who is here this morning, thank
    all of them for the attention they gave us. This is a
    particularly appropriate time to thank them for that because
    that tornado was, I believe, a year ago the day before
    yesterday or Saturday, I forget which. I just wanted to
    publicly acknowledge your compassion and your attention to an
    area not just there, but Arkadelphia which is going to be a
    brand new city.
        Incidentally, Harry Thomason, you know, who is Linda
    Bloodworth Thomason's husband and producer of some note,
    ``Coach'' and a host of other shows, has taken it on himself to
    try to restore--he wants to restore Arkadelphia, which I think
    was his home, to make it just like it was around the turn of
    the century, particularly the courthouse and a few other
    buildings there.
        I have seen tornadoes devastate towns in my State. When I
    was Governor, I used to go out. At first I would not go because
    I thought it sort of looked like I was trying to take a
    political advantage of other people's misery. I found out they
    not only want you there, but it is a great comfort for somebody
    in authority, an authoritative position, to show up when
    tornadoes occur.
        I can name communities in my State that were just leveled
    which are now brandnew cities. I mean, except for the tragedy
    of the deaths it was almost a good thing because they are just
    beautiful cities. Arkadelphia will not be any exception.
    College Station is going forward thanks to you with things they
    never dreamed would ever come their way.
        Thank you, Mr. Chairman.
        Senator Cochran. Thank you, Senator.
        Ms. Thompson, we appreciate your being here again. Please
    introduce the panel of witnesses who are with you and proceed
    as you like.

                        Statement of Jill Long Thompson

        Ms. Thompson. Thank you. Thank you all for your very kind
    words. I am very appreciative. I must tell you that for me this
    is a labor of love, and working with you over the past 2\1/2\
    years and reaching out and working with communities across the
    country has been just 100 percent pleasure for me. Again, so I
    thank you very much.
        With me today are Dayton Watkins, who is the Administrator
    of the Rural Business Cooperative Service; Dennis Kaplan, who
    is with the Office of Budget and Program Analysis; Jan
    Shadburn, with the Rural Housing Service; Wally Beyer with the
    Rural Utility Service; and Bob Armstrong with the Alternative
    Agricultural Research and Commercialization Corporation. It is
    quite a mouthful.
        If it pleases the chairman, I will simply summarize my
    remarks and submit the statement for the record.
        Senator Cochran. We appreciate your giving us the statement
    in advance and it will be printed in the record in full. You
    may summarize it as you like.
        Ms. Thompson. Well, Mr. Chairman, I am very pleased to be
    here today and to present to the subcommittee the ``President's
    Budget Request for Rural Development'' for fiscal year 1999.
    This particular request reflects the budget's strong commitment
    to the needs of rural areas even when balancing the Federal
    Budget has been his highest priority.
        I think the President's commitment to balancing the budget,
    as well as the commitment of both the House and the Senate, to
    deficit reduction and balancing the budget have resulted in
    unprecedented economic growth. I think it really presents a
    very important lesson to us as a nation. The lower deficit has
    generated the lowest interest rates in decades, and that has
    lowered the cost of capital, which has generated new investment
    in plant and equipment and it has created millions of new jobs.
        In addition, the level of home ownership in this country
    has reached an alltime high of 66 percent, and perhaps the best
    news is that the misery index, the combination of unemployment
    and inflation, is at its lowest level in 30 years.
        Almost all of the new jobs that have been created are in
    the private sector. Government has been a very important
    partner in this expansion, but its role has been to create an
    environment of investor confidence and this is the way that our
    economy works best. This is also the role we think appropriate
    in rural areas to help create the environment that generates
    the confidence and private investment.
        I wish that I could report today that the full benefits of
    the economic expansion have reached rural areas, and we are
    beginning to see some improvement in the net creation of new
    jobs and some increases in salaries, but not as much as I would
    like to see. After a full decade of decreasing real income,
    rural wages are beginning to increase because of the tight
    labor markets.
        However, income levels in rural areas continue to lag
    behind those in urban areas and rural areas continue to
    experience very high poverty rates. The rural median household
    income is only about 77 percent of that in urban areas and
    additionally the median household income for African-American
    and female headed households is only about 50 percent of the
    overall rural median income.
        One disturbing fact is that employment still does not
    always lift a family out of poverty in rural areas. A typical
    rural wage is below the poverty line and is not sufficient to
    support a family of four. Poverty in rural areas is 2
    percentage points higher than it is in urban areas, 15.6
    percent compared with 13.4 percent, respectively. Poverty in
    the rural South is just under 20 percent.
        Probably, the most devastating effect of rural economies is
    that 3.2 million rural children live in poverty and 48 percent
    of the African-American children in rural areas live in
    poverty. It is very difficult for these children to attain the
    educational levels the will be necessary to compete for jobs in
    this information technology-dominated economy.
        These are the reasons that the President is committed to
    continuing Federal investment in rural areas. Yet, he is
    cognizant, as we are at USDA, that the Federal Government alone
    cannot solve these problems. An additional benefit of the
    economic expansion is that interest rate-sensitive programs
    administered by the rural development area are 40 percent less
    costly than they were in fiscal year 1993. We are in the
    enviable position of being able to deliver these programs to
    rural America at less cost.
        The budget request for the programs administered by rural
    development agencies totals $10.4 billion, requiring $2.2
    billion in budget authority. These are increases of about $540
    million and $110 million, respectively, over the levels enacted
    for fiscal year 1998. I will briefly, if you would like, go
    through the three agency areas and highlight the requests in
    those three agency areas.

                             Rural Utility Programs

        If you would prefer that I be briefer, just indicate so and
    I will be glad to cut it even shorter. In the Rural Utilities
    Service, the programs that are administered by rural
    development contribute significantly to the economic viability
    of rural communities. Perhaps, none are more important than the
    programs that provide the basic infrastructure investment
    because economic growth and vitality cannot occur without the
    systems that provide water and sewer, electric, and
    telecommunications service.
        The telecommunications and electric industries throughout
    this country are in the vortex of change and a monopolistic
    supply is giving way to open competition. While the generally
    held perception that competition will drive down cost may be
    true for the two industries from a macroeconomic perspective,
    we have to be vigilant that rural areas are treated fairly in
    the process.
        The Telecommunications Deregulation Act continued the
    universal service concept and that ensures that rural areas
    will continue to have access to the telecommunications network
    at a reasonable cost. The administration is in the process of
    addressing similar issues for electric service. A lack of
    consumer density in rural systems combined with the fact that
    construction costs in rural areas is virtually the same as in
    urban areas means the cost per rural consumer is much higher.
        The budget authority requested for the Electric and
    Telecommunication Loan Program is $40.3 million, which will
    support lending levels totaling $1.7 billion. When we factor in
    the private capital that accompanies this investment, the total
    investment in electric and telecommunications grows to $5.1
    billion.
        Due to the growing demand for electric loans, we are also
    proposing a new Treasury rate direct loan program of $400
    million, which would require budget authority of only $840,000.
    The reason that we are proposing this program rather than
    increasing the request for the Federal financing bank is that
    the FFB financing has traditionally been used only for
    generation and transmission loans and distribution borrowers
    have expressed some reluctance to use the FFB authority because
    of the additional time needed to process the loans.
        The budget authority requested for telecommunications
    loans, including the rural telephone bank, totals $10.3
    million. As you all are very well aware, there are still many
    rural areas that cannot access the full benefits of modern
    telecommunications because the basic switching equipment has
    not been modernized.
        Also, as you are very familiar, in prior years we have
    proposed immediate privatization of the rural telephone bank,
    but because of concerns of the bank's ability to suddenly begin
    operating effectively as a private lending institution in a
    deregulated environment without a transition period, the
    administration is now proposing that the bank operate as a
    performance-based corporation. As such, it would be required to
    set specific targets and strategic goals to be achieved in not
    less than 10 years.
        For the distance learning and telemedicine loans and
    grants, the budget requests a lending level of $150 million and
    a grant level of $15 million. The request for grants is an
    increase of $2.5 million. The loan request is the same as
    enacted for 1998.
        For water and waste, we are requesting $1.3 billion in
    loans and grants for this program, which is a slight increase
    over the amount made available in 1998. This level of funding
    would provide new water service to about 500,000 rural
    residents, improved water service to an additional 400,000
    rural residents, provide new or improved waste disposal service
    to about 410,000 rural residents, and in the process support
    about 30,000 jobs primarily in the construction trades.

                             Rural Housing Programs

        In the Rural Housing Service, we believe very strongly that
    no single factor contributes more to community stability than
    does home ownership, and even though home ownership is at an
    alltime high there are still some very serious needs that are
    not being met in housing.
        The budget request for the Rural Housing and Community
    Facilities Program is $5.5 billion, requiring $895 million in
    budget authority and 65 percent of that is for rental
    assistance. This represents an increase in the program level of
    $300 million over the 1998 level and an increase of $27 million
    in budget authority. The request for the home ownership
    program, which is the flagship program, is $4 billion of which
    $1 billion is for direct loans, the same amount enacted for
    1998. The average income for families borrowing under this
    program is $17,000, which is barely above the poverty level.
        For the Guaranteed Ownership Program, we are requesting $3
    billion. Together these two programs would finance over 60,000
    new and improved homes. In addition, we are again proposing
    legislation that would permit use of the Guaranteed Loan
    Program for refinancing direct loans and that is because if
    these loans could be made available to borrowers who do not
    have enough equity in their homes to refinance in the private
    market but are paying interest rates in excess of the existing
    market rates, then they would be allowed to refinance their
    homes with this program. We are currently prohibited from
    refinancing direct loans.
        For multifamily housing and rental assistance, we are
    requesting $250 million of which $100 million is for direct
    loans, requiring $48 million in budget authority, which is a
    decrease from the level enacted for 1998. This level of funding
    will provide 1,100 new units and will provide for the
    rehabilitation of just under 5,000 units. The average income of
    tenants in this program is $7,300 a year. We are also
    requesting $150 million for the Guaranteed Multifamily Housing
    Program, which has operated as a pilot program for the past 2
    years. This program serves tenants with higher incomes up to
    115 percent of an area median income.
        For rental assistance, the budget requests $583 million.
    That is a $42 million increase over 1998. Of this amount, $544
    million is needed for expiring contracts and the remainder will
    be used for rehabilitation and construction and servicing, as
    well as for farm labor housing.
        We are again requesting $26 million for the Mutual and
    Self-Help Program, which as you know provides technical
    assistance required for families engaging in the construction
    of their own homes. For the community facilities programs, we
    are requesting a total of $418 million, $200 million for direct
    loans, $210 million for guaranteed loans, and $8 million for
    grants. As you know, these programs finance a wide variety of
    facilities throughout rural America.

                      Rural Business-Cooperative Programs

        In the Rural Business-Cooperative Service, we believe that
    the key to improving economic conditions in rural America is
    the creation of business opportunities and jobs and the role of
    the Federal Government is to assist in creating the environment
    that generates the private investment.
        Our budget request for the Rural Business-Cooperative
    Service Program totals $1.2 billion, which requires $77.6
    million in budget authority for the flagship program,
    guaranteed business and industry loans we are requesting $1
    billion and $50 million for direct B&I loans.
        Direct lending will be targeted to those traditionally
    underserved areas of the country for the rural economic
    development loan and grant programs. We are requesting $15
    million in loans and $11 million in grants, $35 million for
    intermediary relending, and $40.3 million for the rural
    business enterprise grants.
        For assistance to cooperatives, as Senator Harkin so
    eloquently stated, we are seeing quite an interest in
    developing cooperatives in a variety of areas across the
    country. We are requesting $1.7 million in rural cooperative
    grants and $2 million for Federal, State research on
    cooperatives.
        Research on cooperatives has not kept pace with the growth
    in cooperatively owned businesses, and particularly with
    respect to nontraditional cooperative activity such as
    processing and retail and export cooperatives. In addition, we
    are also requesting $2 million for the appropriate technology
    transfer for rural areas programs.
        For the Alternative Agricultural Research and
    Commercialization Corporation, we are requesting a total of $10
    million, $8.5 million for investments and $1.5 million for
    administrative costs. This level of funding is expected to help
    bring six new products to market and would create about 1,000
    new jobs in rural America.

                             Salaries and Expenses

        Finally, the request for salaries and expenses for rural
    development is $527 million and that is an increase of $18
    million over 1998. There are several reasons for the increase.
    First, because of all of the organizational changes that have
    occurred within rural development over the past few years, we
    have lost a disproportionate share of employees at the lower
    level of employment. Even though we have used every means
    available to keep them, that just has not happened. That has
    caused our average salary costs to increase significantly.
    While our costs are less than they would have been without
    those changes, they are still more than they are going to be in
    this fiscal year 1998.
        If sufficient funding is not available for salaries and
    expenses, then it will be necessary to execute a reduction in
    force to remain within our available funding levels. That
    action would only exacerbate the problem, because a RIF will in
    turn eliminate additional lower paying positions and that
    drives the average salary cost even higher. The vast majority
    of these staff are in our field offices and are primarily
    responsible for delivering the programs that we are discussing
    today. I feel that we really need them to continue doing the
    work that they are.
        Another reason for requesting an increase is that in order
    to retain our employment level through 1998 we have deferred
    investment and information technology and training, and that is
    something that we cannot afford to continue to do. Investments
    in information technology and training are means through which
    we can realize additional efficiencies, but there are some
    initial investment and startup costs to accomplish that.
        With that, Mr. Chairman, I will conclude my formal remarks
    and we will be glad to answer any questions that you or the
    committee have.

                              Prepared Statements

        Senator Cochran. Thank you, Ms. Thompson. Your complete
    statement will be made part of the record along with the
    statements of the other witnesses.
        [The statements follow:]
                    Prepared Statement of Jill Long Thompson
        Mr. Chairman, I am very pleased to be here today to present to the
    subcommittee the President's Budget request for Rural Development for
    fiscal year 1999. This request reflects the President's strong
    commitment to the needs of rural areas even when balancing the Federal
    Budget has been his highest priority. I think the President's
    commitment to balancing the budget and the resulting unprecedented
    economic growth presents us with a very important lesson. The lower
    deficit has generated the lowest interest rates in decades, thereby
    lowering the cost of capital which has generated new investment in
    plant and equipment and created millions of new jobs. In addition, the
    level of home ownership in this country has reached an all time high of
    66 percent. Perhaps the best news is that the ``misery index'', the
    combination of unemployment and inflation, is at its lowest level in 30
    years.
        Almost all of the new jobs that have been created are in the
    private sector. Government has been a very important partner in this
    expansion, but its role has been to create an environment of investor
    confidence, and this is the way our economy works best. This is also
    the role we think appropriate in rural areas, to help create the
    environment that generates confidence and private investment.
        I wish I could report to you that the full benefits of this
    economic expansion have reached rural areas. We are beginning to see
    some improvement in the net creation of new jobs and some increase in
    rural salaries, but not as much as I would like to see. After a full
    decade of decreasing real income, rural wages are beginning to increase
    because of tight labor markets. However, income levels in rural areas
    continue to lag behind those in urban areas, and rural areas continue
    to experience very high poverty rates. Rural median household income is
    only about 77 percent of that in urban areas. Additionally, median
    household income for African American and female headed households is
    only about 50 percent of the overall rural median income. One
    disturbing fact is that employment still does not always lift a family
    out of poverty in rural areas. A typical rural wage is below the
    poverty line and is not sufficient to support a family of four. Poverty
    in rural areas is 2 percentage points higher than it is in urban areas,
    15.6 percent and 13.4 percent respectively. Poverty in the rural south
    is just under 20 percent. The unemployment rate is 16 percent higher in
    rural areas than in urban areas. And as I stated last year, the most
    devastating effect of rural economies is that 3.2 million rural
    children live in poverty and 48 percent of the African-American
    children in rural areas live in poverty. It is very difficult for these
    children to attain the educational levels that will be necessary to
    compete for jobs in this information technology dominated economy.
        These are the reasons that the President is committed to continuing
    Federal investment in rural areas. Yet, he is cognizant that the
    Federal government alone cannot solve these problems. I recently had an
    opportunity to review a report prepared by a USDA Task Force on rural
    poverty. Its authors concluded that a healthy rate of economic growth
    is essential to the alleviation of rural poverty, but it is not (by
    itself) a sufficient condition to bring the adjustments needed. The
    report was written in 1961.
        I think the authors also had the answer to much of the problem of
    rural poverty when they stated ``the problems of rural economic
    stagnation are so deep-seated and the effects are so widespread on all
    community facilities, resources and attitudes, that the only
    development program that will work is one that attacks many problems
    simultaneously, and in depth''. The President recognized this approach
    when he created the Empowerment Zone/Enterprise Community (EZ/EC)
    legislation, the concept of which is to address the structural economic
    problems comprehensively and in depth.
        As noted in the President's Budget, the Kentucky Highlands, one of
    the three rural empowerment zones, has used $11 million of its EZ funds
    to expand the amount of investment capital. From the amounts obligated
    to date, they have leveraged an additional $38 million in private
    capital for 11 new manufacturing enterprises creating 575 new jobs, and
    they have commitments to create an additional 1,600 jobs. According to
    one of the EZ/EC Board Members, the current unemployment rate for the
    three county area is below 6 percent for the first time in memory. The
    President's budget provides for a second round of EZ designations, five
    for rural areas and 15 for urban areas. This comprehensive and in depth
    approach was also part of the Administration's thinking in the Rural
    Community Advancement Program (RCAP) which we have discussed previously
    with the subcommittee. The budget again requests the authority to
    transfer funds among the program areas within RCAP to provide us the
    flexibility to address problems as they need to be addressed. The
    budget also provides for the 3 percent set-aside of the RCAP funding
    for federally recognized Indian tribes as authorized by the 1996 Farm
    Bill.
                        rural development budget request
        An additional benefit of the economic expansion is that the
    interest rate sensitive programs administered by Rural Development are
    40 percent less costly than they were in fiscal year 1993. We are in
    the enviable position of being able to deliver these programs to rural
    America, at less cost. The budget request for the programs administered
    by the Rural Development agencies totals $10.4 billion requiring $2.2
    billion in budget authority. These are increases of about $450 million
    and $110 million respectively over the levels enacted for fiscal year
    1998. This includes the program level and budget authority, $2.8
    billion and $715 million, requested for the programs under RCAP.
                            rural utilities service
        Mr. Chairman, each of the programs administered by Rural
    Development contributes significantly to the economic viability of
    rural communities, but perhaps none are more important than the
    programs that provide basic infrastructure investment. Economic growth
    and vitality cannot occur without the systems that provide water and
    sewer, electric, and telecommunications services. The presence of these
    systems does not guarantee economic growth. But one thing is an
    absolute certainty: growth and stability will not occur without them.
    These programs are responsible for much of the economic growth that has
    occurred in rural areas during the past fifty years, but as you well
    know, many rural areas still have not prospered and many of the
    infrastructure systems that we have built are now old and they need to
    be replaced. These programs are still very much needed in rural
    America, but the measurement of need has shifted from prior years when
    success was the number of farms or households connected to electricity
    and telephone systems for the first time to the amount of economic
    activity generated by these investments.
                        electric and telecommunications
        The telecommunications and electric industries throughout this
    country are in the vortex of change. Monopolistic supply is giving way
    to open competition and while the generally held perception that
    competition will drive down cost may be true for the two industries
    from a macro-economic perspective, we must be vigilant that rural areas
    are treated fairly in the process.
        The Telecommunications Deregulation Act continued the ``universal
    service'' concept which ensures that rural areas will continue to have
    access to the telecommunications network at reasonable cost. The
    Administration is in the process of addressing similar issues for
    electric service. The lack of consumer density in rural systems,
    combined with the fact that construction cost in rural areas is
    virtually the same as in urban areas, means the cost per rural consumer
    is much higher. On average, revenue per mile for urban utility systems
    is 8 times that of rural areas. This, of course, translates to higher
    rates in rural areas and puts rural systems at a competitive
    disadvantage with neighboring systems. We are working with electric
    borrowers to ensure they are in the best possible competitive position
    and to ensure that our loan security is protected when the electric
    industry is deregulated.
                                 budget request
        The budget authority requested for the electric and
    telecommunication loan programs is $40.3 million. This will support
    lending levels totaling $1.7 billion and factoring in the private
    capital that accompanies this investment, the total investment in
    electric and telecommunications grows to $5.1 billion. This level of
    investment will provide new or improved service to at least 1.8 million
    residents of rural areas and in the process support over 34,000 jobs
    primarily in the construction trades.
        Due to the growing demand for electric loans, we are also proposing
    a new Treasury rate direct loan program of $400 million which requires
    budget authority of only $840,000. We are proposing a new direct loan
    program rather than increasing the request for the Federal Financing
    Bank (FFB). The reason for this request is, since FFB financing has
    traditionally been used only for generation and transmission loans,
    distribution borrowers have expressed some reluctance to use the FFB
    authority because of the additional time needed to process the loans.
    This new authority requires authorizing legislation which will be
    submitted to Congress in the very near future. The total budget
    authority requested for electric loans is just under $30 million.
        The budget authority requested for telecommunications loans,
    including the Rural Telephone Bank, totals $10.3 million. There are
    still many rural areas that cannot access the full benefits of modern
    telecommunications because the basic switching equipment has not been
    modernized. Most of the exchanges in this category for the past few
    years are being sold and the new owners are installing newer equipment.
    We do not provide financing for the purchase of these systems, but we
    are financing the new equipment, and require that the equipment that we
    finance will provide the capability to provide subscribers full access
    to modern telecommunications.
        As you know, in prior years the Administration has proposed
    immediate privatization of the Rural Telephone Bank. Because of
    concerns of the Bank's ability to suddenly begin operating effectively
    as a private lending institution in a deregulated environment, without
    a transition period, the Administration is now proposing the Bank
    operate as a performance based corporation. As a performance based
    organization, the Board and managers would be required to set specific
    strategic and financial goals, one of which would be to achieve
    privatization in not less than ten years, and more quickly if possible.
    The Bank would have the authority to hire its own personnel, and
    funding for salaries and expenses and the subsidy cost of loans would
    be requested from balances in the liquidating account. Legislation is
    necessary to effect this proposal.
                distance learning/telemedicine loans and grants
        For Distance Learning/Telemedicine loans and grants the budget
    requests a lending level of $150 million and a grant level of $15
    million. The request for grants is an increase of $2.5 million. The
    loan request is the same as enacted for 1998. The demand for this
    program continues to grow, not only because of the education and
    medical benefits that it provides rural areas, but also because more
    and more people are beginning to realize its potential as an economic
    development tool. As firms are assessing areas for opportunities to
    locate facilities in rural areas, among the first questions asked are
    about the quality of education and health care. This program provides
    the opportunity to rural areas to reap immediate benefits in education
    and medical care, but the presence of these capabilities also provides
    the longer term benefits of attracting new growth.
                   water and waste disposal loans and grants
        Mr. Chairman, the value and benefits of this program are best
    demonstrated by comments made in 1995 by the manager of a water system
    in the southwestern part of the country--``Thanks to the Department of
    Agriculture, we have running water in our faucets. We hauled water in
    barrels and water tanks until you gave us a loan and grant * * * for
    the first time since the town was founded the citizens were able to get
    a drink of water from a faucet. Without your help, it never would have
    happened.'' This statement was made following completion of a Water
    2000 project awarded in 1995.
        The 1980 Census reported 2.1 million rural Americans did not have
    any drinking water flowing into their homes. The 1990 Census reported
    that this number had been reduced to just over 1 million and since the
    Water 2000 Initiative was implemented in fiscal year 1995, Rural
    Development has invested $1.3 billion in loans and grants that have
    afforded just under 300,000 people the opportunity to have safe, clean
    water in their homes for the first time.
        Water 2000, as ambitious, challenging and rewarding as it is, is a
    small part of the water and waste disposal program in rural America.
    The Drinking Water Infrastructure Needs Survey conducted periodically
    by the Environmental Protection Agency estimates the total investment
    needed in small systems (serving less than 3,300 people) to bring them
    into compliance with the Nation's Drinking Water standards is $37
    billion. A similar investment is needed for water disposal systems. At
    present the applications for loan and grant assistance through this
    program total over $3 billion.
        The budget requests $1.3 billion in loans and grants for this
    program, a slight increase over the amount made available for fiscal
    year 1998. This level of funding would provide new water service to
    about 500,000 rural residents, improved water service to an additional
    400,000 rural residents, provide new or improved waste disposal service
    to about 410,000 rural residents and in the process support about
    30,000 jobs primarily in the construction trades.
                             rural housing service
        No single factor contributes more to community stability than does
    home ownership. Since the early 1970's USDA's rural housing programs
    have played a key role in improving the availability and quality of
    housing in rural America. These programs reach families and individuals
    who cannot otherwise afford decent, safe, and sanitary housing. The
    Rural Housing Service (RHS) has financed over 2 million single family
    homes since the inception of its home ownership program. RHS has been
    particularly successful in reaching those residents that the private
    market and other government programs cannot reach--low and very low
    income families living in isolated rural areas.
                             single family housing
        The budget request for the rural housing and community facilities
    programs is $5.5 billion requiring $895 million in budget authority, 65
    percent of which is for rental assistance payments. This represents an
    increase in the program level of $300 million over the 1998 level and
    an increase of $27 million in budget authority. The request for the
    home ownership program, the flagship program, is $4.0 billion of which
    $1.0 billion is for direct loans, the same amount enacted for 1998. The
    average income for families borrowing under this program is $17,000,
    barely above the poverty level. For the guaranteed ownership program we
    are requesting $3.0 billion. These two programs will finance over
    60,000 new and improved homes. Each home constructed provides 1.75
    years of employment, over $50,000 in wages and over $20,000 in taxes
    for the local economy.
        In addition, we are again proposing legislation that would permit
    use of the guaranteed loan program for refinancing direct loans. These
    loans would be made available to borrowers who do not have enough
    equity in their homes to refinance in the private market and are paying
    us interest in excess of the existing market rates. We are currently
    prohibited from refinancing direct loans.
                     multi-family housing/rental assistance
        For the multi-family housing programs, we are requesting $250
    million, of which $100 million is for direct loans, requiring $48
    million in budget authority. This is a decrease from the level enacted
    for 1998. This level of funding will provide over 1,100 new units and
    will provide for the rehabilitation of just under 5,000 units. The
    average income of tenants in this program is $7,300.
        We are also requesting $150 million for the guaranteed multi-family
    housing program which has operated as a pilot program for the past two
    years. This program serves tenants with much higher incomes, up to 115
    percent of area median income, than in the direct program and is
    therefore much less costly. The budget would provide for the
    construction of about 4,100 units.
        For rental assistance, the budget requests $583 million, a $42
    million increase over the 1998 level. Of this amount $544 million is
    needed for expiring contracts and the remainder will be used for
    rehabilitation, new construction, and servicing, as well as for farm
    labor housing consistent with the recommendations of the Civil Rights
    Action Team. Rental assistance payments are made to the developers of
    the projects as the difference between the 30 percent of income
    required by the tenants and the market rental cost of the unit.
                         mutual and self housing grants
        We are again requesting $26 million for the mutual and self-help
    program which provides the technical assistance required for families
    engaging in the construction of their own homes. As you are well aware,
    Mr. Chairman, this is one of the most rewarding programs that we
    administer. It provides not only a decent, safe housing unit, but it
    also provides a measure of self confidence and self assurance for the
    family and it is the only way the participants will ever have the
    opportunity to own a home. One measurement of success for this program
    is that the delinquency rate is significantly below that of the direct
    loan program. The participants are incredibly and justifiably proud of
    their accomplishment.
                              community facilities
        For the community facilities programs we are requesting a total of
    $418 million, $200 million for direct loans, $210 million for
    guaranteed loans, and $8 million for grants. These programs finance a
    wide variety of facilities throughout rural America, but the priorities
    are health and safety projects. During the past two years RHS has also
    placed an emphasis on funding child care centers. The decrease in real
    income for rural families during the 1980's; the fact that close to 50
    percent of rural workers have income that is near or below the poverty
    level; and the fact that women are filling many of the new jobs created
    in rural areas dictate that child care facilities be available in rural
    areas. This is critical for families to make the transition from
    welfare to work. RHS, working with a national non-profit organization,
    began the rural child care initiative in 1996 and since then we have
    increased the number of child care projects funded from 6 in 1992 to 44
    in 1997 and we expect to fund even more in 1999.
                       rural business-cooperative service
        The key to improving economic conditions in rural areas is the
    creation of business opportunities and jobs and the role of the Federal
    government is to assist in creating the environment that generates
    private investment. Economic growth tends to occur with concentrations
    of population and investment capital, or is associated with the
    abundance of extractable natural resources. For too many years, this
    country has been attempting to apply what is known about economic
    growth in urban areas to rural areas. This is not practical. And it is
    equally true that there is no single ``solution'' that can be employed
    in each situation. Rural areas hold two key advantages in economic
    development, the abundance of natural resources, including agricultural
    production, and a labor pool that has a tremendous work ethic.
        We can be more effective if investment is channeled into businesses
    associated with what is readily available in rural areas. The
    concentration of agricultural production and processing causes the
    migration of investment capital out of rural areas and the population
    tends to follow in hopes of economic improvement. In addition, the out-
    migration of capital and people diminishes prospects for attracting
    external capital.
        The question is, ``how do we maximize the advantages that rural
    areas have to offer''. One solution is to ensure that a larger portion
    of the income generated from agricultural production remains in rural
    areas. One way this can be done is through the establishment of more
    businesses engaged in processing and marketing of agricultural
    commodities. The processing of food and non-food as well as feed and
    non-feed uses of agricultural commodities in rural areas helps retain
    income and capital needed for other investments in rural areas.
        With the $1.0 billion requested for the Business and Industry loan
    guarantee program, I intend to set aside $200 million exclusively for
    the use of cooperative businesses. These funds will be available only
    for cooperatives for a time certain, and if not used for this purpose
    will be available for other loans. We will also continue to work
    closely with AARC and other organizations to ensure that no investment
    opportunity is missed and we will continue to work with cooperative
    associations to develop other investment opportunities, both for the
    Rural Business-Cooperative Service and for AARC.
                                 budget request
        Mr. Chairman, the budget request for the Rural Business-Cooperative
    Service programs totals $1.2 billion, requiring $77.6 million in budget
    authority. For the flagship program, guaranteed Business and Industry
    loans, we are requesting $1.0 billion, and $50 million for direct B&I
    loans. Direct lending will be targeted to those traditionally under-
    served areas of the country. For the Rural Economic Development loan
    and grant programs (cushion of credit) we are requesting $15.0 million
    in loans and $11 million in grants; $35.0 million for Intermediary
    Relending loans and $40.3 million for Rural Business Enterprise Grants.
        For assistance to cooperatives, we are requesting $1.7 million in
    Rural Cooperative grants and $2.0 million for Federal/State Research on
    Cooperatives. Research on cooperatives has not kept pace with the
    growth in cooperatively owned businesses, particularly with respect to
    non-traditional cooperative activity such as processing and retail and
    export cooperatives. In addition, we are also requesting $2.0 million
    for the Appropriate Technology Transfer for Rural Areas program. The
    volume of requests handled by this office has grown significantly in
    recent years and the level of financial support has remained constant.
    We need to increase funding for this activity in order to respond
    quickly to customers.
                                     aarcc
        For the Alternative Agricultural Research and Commercialization
    Corporation we are requesting a total of $10.0 million, $8.5 million
    for investments and $1.5 for administrative costs. This level of
    funding is expected to help bring 6 new products to market and will
    create about 1,000 new jobs in rural America based on agricultural
    commodities. Mr. Chairman, this helps retain more income in rural
    America and I would like to do more of this. This program can take what
    has been a waste product like wheat straw or peanut hulls, which
    actually have a negative value, and develop new products and creating
    positive economic values for farmers and producing jobs for other rural
    residents. Other countries invest much more in this type of activity
    than we do and we are losing business opportunities. For example, a
    firm in England is exporting non-load bearing wall panels made from
    wheat straw to this country, of all places. The largest wheat producing
    country in the world is importing products made from wheat straw.
                             salaries and expenses
        The request for Salaries and Expenses for Rural Development, $527
    million, an increase of $18 million over 1998. There are several
    reasons for this increase. First, because of all of the organizational
    changes that have occurred within Rural Development over the past few
    years, we have lost a disproportional share of the lower level
    employees, even though we have used every means available to keep them,
    such as buyouts and early retirements of our more senior employees.
    This has caused our average salary costs to increase significantly.
    While this is a situation I would not have preferred, it is something
    that has to be dealt with because the alternative is no better. If
    sufficient funding is not available for salaries and expenses then it
    will be necessary to execute a reduction-in-force (RIF) to remain
    within available funding. This action will only exacerbate the problem
    because a RIF will, in-turn, eliminate additional lower level employees
    driving the average salary cost even higher. The vast majority of these
    staff are in our field offices and are primarily responsible for
    delivering the programs we are discussing today. We need to keep them
    employed.
        Rural Development is blessed with very dedicated and hard working
    staff that have maintained a positive attitude toward public service
    through our reorganization, restructuring and streamlining efforts.
    They know the value of the programs we deliver because most of them
    live and work in the communities in which we provide assistance.
        Another reason for requesting an increase is that in order to
    retain our employment level through fiscal year 1998, we have deferred
    investment in information technology and training, something we cannot
    again afford to do. Investments in information technology and training
    are means through which we can realize additional efficiencies. In
    fact, the Secretary's plan for achieving efficiencies through
    convergence of the administrative services of the three county based
    mission areas is dependent on investments in the common computing
    environment and re-engineering of our business practices. Achieving
    additional savings through administrative efficiencies will provide the
    flexibility for all three mission areas to continue to support the
    staffs responsible for delivering the programs. We will also better
    utilize support staffs by directing their efforts to more critical
    needs rather than maintaining antiquated, staff intensive systems. Of
    the $18 million increase for salaries and expenses, $8.5 million is for
    investments in information technology; most of this is for maintenance
    of our existing systems, proceeding with service center implementation,
    and accomplishing the changes in systems necessitated by the Century
    date change.
        Providing support to the very dedicated employees of Rural
    Development is a priority equal to funding any of the programs we have
    discussed. Without the employees we will not be able to continue to
    deliver the programs as effectively as we have in prior years and many
    needs in rural areas will not be met. I ask for your very serious
    consideration of this request.
        This concludes my comments. Thank you for the opportunity to appear
    before the subcommittee. The Administrators and I will be most happy to
    answer any questions you and members of the subcommittee may have.
                                     ______

                       Prepared Statement of Wally Beyer
        Mr. Chairman, members of the subcommittee, thank you for the
    opportunity to appear here today to discuss the President's budget and
    program proposals for fiscal year 1999. I want to begin by thanking you
    and the members of the subcommittee for our productive working
    relationship over the years. A relationship that, I am proud to say,
    has helped rural America contribute to the nation's continuing
    prosperity.
        Rural America continues to be a vital part of our nation and its
    economy. As we look to the future, we see an environment of challenge
    and opportunity. The global marketplace is redefining rural America.
    Rural America's customers and competitors are no longer just down the
    road, but around the world as well. National and global changes are
    constant and rapid.
        Safe, affordable, modern utility infrastructure is a key component
    of economic competitiveness. The telecommunications and electric
    industries are at the vortex of change. Rural America is at a critical
    juncture, and the challenge is to secure its role, as well as its
    future, in a rapidly changing national and global economy. USDA/RUS is
    helping communities meet this challenge.
        To secure this role, rural America must reinvest in infrastructure,
    provide quality education, and continue to address quality of life
    issues. Rural youth must be provided with educational opportunities
    that will enable them to compete with the best and brightest from
    around the world. The aging rural population must have affordable
    access to quality health care, and rural businesses need state-of-the-
    art communications technologies to foster new economic growth, create
    new jobs and enhance the quality of life.
        Through a successful local/public partnership with the federal
    government, RUS programs help provide needed capital and critical
    credit support to leverage private capital for infrastructure
    financing. RUS programs focus scarce resources into areas burdened by
    poverty, low population density, and high out-migration. These factors,
    contributing to a lack of economies of scale, make it significantly
    more expensive to construct infrastructure in rural areas.
        As rural America is changing to meet these challenges, USDA/RUS is
    changing as well. We are reinventing program delivery, streamlining our
    organizational structure, and leveraging private investment. We embrace
    these changes as new opportunities. Our goal is to help provide rural
    America with the tools and resources necessary to realize the full
    extent of its potential. This requires creative thinking, commitment,
    and value-added program delivery. From the point of initial contact, to
    project reality, the USDA/RUS role has never been more important.
                   the federal partnership with rural america
        The nearly $42 billion RUS loan portfolio includes investments in
    approximately 7,000 small community and rural water and wastewater
    systems, and 2,000 telecommunications and electric systems, servicing
    approximately 84 percent of America's 3,096 counties. This 60-year old
    local/federal partnership is a classic American success story. It is a
    partnership providing critical infrastructure to 80 percent of the
    nation's landmass while enhancing the lives of 25 percent of the
    nation's population. That infrastructure spurs economic growth, creates
    jobs, and improves the quality of life in rural America. The vitality
    of rural communities truly depends on access to modern, reliable, and
    affordable utilities.
                               telecommunications
        This year's telecommunications budget proposes $4.895 million in
    budget authority to support $50 million in direct telecommunications
    loans and $810 thousand in budget authority to support $300 million in
    Treasury-rate loans, as well as $4.638 million in budget authority to
    support $175 million in Rural Telephone Bank (RTB) loans.
    Implementation of the Telecommunications Act of 1996 poses many
    challenges for rural consumers. RUS continues to work with our
    borrowers to assure that rural citizens share in the benefits of the
    digital revolution. I am very proud of the role RUS plays in assuring
    that citizens outside America's great urban centers have affordable and
    quality service. Our borrowers are providing modern, reliable
    telecommunications service that enables rural Americans to benefit from
    the rapidly improving technologies of the information age. Continued
    capital investments and operational and technical support are critical
    to maintaining that level of quality in areas served by RUS borrowers.
        The budget also reflects our commitment to move the RTB toward
    privatization within the next 10 years. The RTB is proposed to become a
    performance based organization, under which the RTB can demonstrate its
    financial and managerial independence, as an intermediate step towards
    full privatization. This move toward independence is consistent with
    funds for subsidy budget authority and administrative expenses being
    transferred from the unobligated RTB liquidating account balances in
    fiscal year 1999.
                       distance learning and telemedicine
        In the Distance Learning and Telemedicine (DLT) Program, the budget
    request of just over $15.2 million in budget authority will support
    $150 million DLT Loans and $15 million in DLT grants.
        The Distance Learning Telemedicine Program provides financial
    assistance for rural education and health care providers utilizing
    state-of-the-art telecommunications technologies. The DLT loans and
    grants provide for needed infrastructure and end-user equipment for
    rural areas. This program is a powerful complement to the new schools,
    libraries and rural health care discounts recently authorized by the
    FCC, which primarily focus on the recurring monthly telecommunications
    costs to those entities.
        When Vice President Gore announced the 1997 DLT awards, he stated
    ``This country cannot afford a digital divide between those who have
    access to the benefits of the Information Superhighway, and those who
    do not.'' A range of financing options that includes loans, grants, and
    combinations of the two makes this program a flexible tool and resource
    for any rural community that wants to use telecommunications to bring
    the advantages of technology in the 21st Century to rural America's
    students and citizens.
        The DLT Program is making a real difference in people's lives. RUS
    made a grant to the Fiber Optic Consortium United Schools (FOCUS)
    project. This initiative united eight school districts in Northeast
    Montana to share teachers and other course resources in foreign
    languages, vocational agriculture, science and mathematics, and for
    staff training. These same facilities are used by the community for
    fire, emergency medical, and environmental training.
        Since 1993, the DLT program has funded 192 projects totaling $52
    million in 41 states and one U.S. territory. These projects serve 850
    schools and learning centers and 600 hospitals and rural health
    clinics. The DLT program provides seed money to leverage almost two
    times its investment from other private and public sources.
        Simply put, rural Americans must be connected to America's
    Information Superhighway. USDA/RUS is the catalyst for the rural
    connection.
                                electric program
        The Electric Program budget proposes $30 million in budget
    authority to support a program level of over a billion dollars. The RUS
    Electric Program continues to serve as one of the most effective local/
    public partnerships of the federal government. Today's program ensures
    that all areas of our nation have access to reliable, reasonably
    affordable, electric energy.
        Fiscal year 1997 budget authority for RUS loans and loan guarantees
    enabled 136 rural electric utilities in 33 states and the Marshall
    Islands to upgrade their electric systems to provide more reliable and
    efficient electric service to their customers.
        Over the last several years, changes have been made in the electric
    lending program to reduce the overall federal cost of the program. This
    year's proposal contains $1 billion of funding for the electric
    program, an increase from $925 million in fiscal year 1998. In an
    effort to reduce the cost of the electric program and provide yet
    another financing tool to meet increasing demand, the Administration
    proposes a new Treasury Rate Loan Program to complement its existing
    loan programs. This $400 million loan program can be generated with
    only $840,000 of budget authority.
        Each RUS electric loan dollar leverages three dollars from private
    sources. RUS provides only 1/3 of the $3 billion annual capital needs
    of the RUS borrowers. The following chart illustrates leveraging of the
    Federal dollars:

                                  INVESTMENT IN ELECTRIC PLANT--YEARS 1991 THROUGH 1996
                                                  [Dollars in millions]
    ----------------------------------------------------------------------------------------------------------------
                                                                                                         Private and
                                                                     Gross                     Funds       general
                                Year                               additions       RUS        advanced     capital
                                                                    to plant                    FFB        expended
    ----------------------------------------------------------------------------------------------------------------
    1996........................................................       $3,212         $682          $93       $2,437
    1995........................................................        3,269          809          211        2,249
    1994........................................................        3,344          618          242        2,484
    1993........................................................        2,833          388          169        2,276
    1992........................................................        3,104          401          208        2,495
    1991........................................................        2,833          592           98        2,241
    ----------------------------------------------------------------------------------------------------------------

        We believe that RUS has a continuing role to play in assuring that
    electric systems serving rural communities have access to the capital
    needed to maintain reliable, high quality, affordable electric service
    to support economic development and meet new environmental
    requirements.
        In the coming years, rural distribution and power supply systems
    will require assistance in upgrading and replacing an aging electric
    infrastructure to support growing electricity demand, new technologies,
    and a more competitive industry structure. For example, RUS financing
    will enable rural electric systems to replace aging, inefficient and
    undersized electric transformers and conductors to enhance the
    reliability of distribution and transmission systems to meet load
    growth while cutting line losses, improving energy efficiency, and
    reducing carbon and other air pollution emissions.
        RUS is also working very closely with borrowers facing financial
    stresses from past nuclear and large base-load generating plant
    investments and from increasing pressures from wholesale and retail
    competition. In each instance, RUS is diligent in ensuring that work-
    out agreements maximize the recovery to the Federal taxpayers. Today,
    RUS is actively working with 6 financially stressed borrowers as
    compared with some 15 borrowers 3 years ago.
                       water and waste disposal programs
        This budget seeks $503 million in budget authority for Water and
    Waste grants and $126 million in budget authority to support $839
    million in loans.
        The RUS Water and Waste Disposal (WWD) program improves the quality
    of life of thousands of rural Americans each year by bringing safe
    drinking water and environmentally sound wastewater facilities to those
    rural communities in the greatest need. The program is delivered by a
    field network of Rural Development employees who provide ``hands-on''
    technical and financial assistance. The funding for this program is
    contained in the Rural Community Advancement Program (RCAP), and could
    be enhanced as a result of the flexibility of funding offered by RCAP
    authorizations. This funding is also part of the Environmental Fund for
    America.
                       water 2000 presidential initiative
        The demand for this program is high. As of January 1998, $3.7
    billion of unfunded loan and grant applications were on hand. Based on
    the Administration's belief and policy that low income, high
    unemployment and high poverty areas--especially those with water-
    related public health problems--represent the greatest need, we
    increasingly target drinking water and waste disposal investments to
    those areas.
        In a state-by-state safe drinking water assessment performed in
    1995, RUS found that at least 2.5 million rural Americans had very
    critical needs for safe, dependable drinking water, including one
    million rural residents who had no water piped into their homes.
    Approximately 5.6 million more were found to have serious needs under
    Safe Drinking Water Act standards. The costs of meeting all of these
    needs was estimated at $10 billion. Water 2000 is an initiative to
    clearly assess rural drinking water needs and target loan and grant
    investments to address them.
        Under Water 2000 targeting guidelines, over three fiscal years, RUS
    has committed almost $1.3 billion in loans and grants to over 1,000 of
    the high priority safe drinking water projects throughout the nation.
    Water 2000 projects serve communities with the most limited financial
    resources and highest poverty rates. They are financed with significant
    grant assistance and our lowest interest rate loans to ensure safe
    drinking water at affordable cost. We estimate that the Water 2000
    projects funded through September 1997 will serve an estimated
    1,900,000 rural Americans and leverage approximately $437 million in
    additional investments from other federal, state, and local sources.
    For the first time ever, 280,000 Americans will receive water from
    properly maintained and tested public sources.
        A good example of Water 2000 in action is a project funded with
    Water and Waste Disposal loans and grants for the Pueblo of Acoma, in
    New Mexico, in fiscal year 1997. The RUS investment is allowing the
    Pueblo, which has an annual median household income of less than
    $17,000 (slightly above the national poverty standard), to expand and
    improve its drinking water treatment and distribution system to
    overcome serious water quality, quantity, and dependability problems.
    To overcome the constraints of the relatively low income of the
    population and limited resources of the community, New Mexico Rural
    Development field personnel worked closely with Pueblo officials to
    develop a fundable application. In April 1997, Rural Development
    announced a grant/loan package of $1.5 million, to be combined with
    funds from the State of New Mexico, to allow the Pueblo to develop
    Phase One of a drinking water system that will supply 177 homes, two
    schools and a Head Start center, and a 25 bed Indian Health Service
    hospital that serves three pueblos.
        In summary, we are very proud of our record of bringing drinking
    water and wastewater facilities to thousands of rural Americans--
    serving those who truly need our services the most.
        the new telecommunications and electric competitive environments
        To ensure that newly formulated policies address the role of rural
    utility systems in a deregulated marketplace, RUS has assumed a
    proactive role in discussions with FCC, FERC and our partners within
    the executive branch to protect and enhance RUS loan security, and
    improve the lives of rural residents. As this nation grapples with
    telecommunications and electric market reforms, the RUS will remain in
    the forefront of these discussions and will lead the policy debate as
    it impacts on rural Americans. In an ever-changing legislative and
    regulatory environment, ensuring the security of a $42 billion loan
    portfolio while providing modern, high quality, reliable, and
    affordable infrastructure in rural America will present a formidable
    challenge into the 21st century.
        The February 2nd issue of U.S. News and World Report article
    outlines, in human terms, the impacts of a deregulated environment in
    rural areas. It points out that in Arizona alone, 5,000 rural Americans
    remain involuntarily phoneless. The spokesperson for one of America's
    large for-profit telecommunications companies was quoted as asking
    ``Why should we be spending money in expensive rural areas if we need
    to upgrade our network in the cities to compete with competitors?'' No
    other statement better illustrates the need for the RUS program to
    provide financial support to high-cost rural areas.
        Financial support mechanisms will be critical to supporting high
    costs, rural areas in a market driven, for-profit environment. The
    stage is now set for serious reflection on the rural challenges of
    electric infrastructure deregulation in state legislatures and Congress
    as well.
        Although the pace of restructuring in the electric industry may
    have slowed, many states are moving ahead. At last count, 10 states
    have passed legislation providing for retail electric competition and 6
    state public service commissions have issued comprehensive
    restructuring orders to promote competitive retail electric markets.
    Other states are continuing to study the issue and may act on
    legislative recommendations in 1998 or 1999. Many unanswered questions
    remain concerning how to transform America's $200 billion plus electric
    industry from a traditional, monopolistic, industry to a more
    competitive, market-based, consumer-driven environment. One of those
    questions is, what happens to electric rates in high cost rural areas?
        In a recent letter to Energy Secretary Pena, Secretary Glickman
    expressed concern that in a restructured marketplace, electric rates in
    high cost to serve rural areas will likely increase.
        ``In examining the potential effects of restructuring on rural
    areas, it is important to consider the common practice of `cost-
    averaging' across customer classes within utility systems. This
    practice has been supported historically by public utility systems. It
    most often occurs when utilities use revenues from industrial and large
    commercial consumers to offset other fixed costs within the system.
    This is done to maintain reasonably affordable cost of service to
    residential customers and to balance the high cost of service in rural
    areas.''
        In a competitive environment, larger industrial and commercial
    power purchasers in high cost areas will be lured away from incumbent
    utilities. New competitors will engage in ``cherry-picking''. The
    Secretary went on to state that ``Although distribution companies may
    be able to institute ``wire charges'' to cover delivery cost of another
    company's power, these charges may not be sufficient to maintain
    reasonably affordable rates for smaller customers.''
                                   conclusion
        USDA/RUS continues to be an integral part of rural America's
    future. Rural America's ability to capitalize on new opportunities
    depends, to a large extent, on the success of RUS in meeting its goals
    of creating modern community facilities and infrastructure. RUS is
    enabling rural communities to utilize state-of-the-art
    telecommunications technologies to improve education and health care.
    By continuously reinventing our programs to address the changing needs
    of rural residents, RUS will achieve its ambitious goals, and continue
    to play a significant role in advancing rural America's quality of life
    and enhancing its competitiveness in the global marketplace.
        Thank you Mr. Chairman for the opportunity to appear before your
    committee.
                                     ______

                     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 1999 budget
    proposal and discuss some of the accomplishments and goals of the Rural
    Housing Service.
        The Rural Housing Service continues to provide 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 and sustainability. We accomplish this by
    providing rural people and communities access to credit--which, as you
    know, is often limited in rural areas. We also subsidize loans and
    rents and provide technical assistance and support to complete their
    community development efforts.
        Our community facilities direct and guaranteed loan and grant
    programs provide funding for essential facilities such as health care
    centers, fire stations, municipal buildings and day care centers. These
    facilities allow rural communities to improve the quality of life for
    their citizens and remain competitive in attracting jobs and
    businesses.
        In the rural United States, 5.6 million households live below the
    poverty line. Almost one quarter of rural households pay more than 30
    percent of their income for housing with more than four of every 10
    rural poverty level households paying more than 50 percent of their
    income for housing. Minorities in rural America are disproportionately
    likely to be low-income or in poverty and have housing problems. One
    third of African-American households, and almost one third of Hispanic
    households, pay more than 30 percent of their income for housing. Rural
    African-American households are far more likely to live in seriously
    inadequate housing than are rural white households or urban African-
    American households. Native Americans continue to be the most poorly
    housed population in America.
        Our programs are largely targeted to lift these populations out of
    poverty and provide stability for the family, the community and rural
    America. Some communities have been rebuilt from disaster or economic
    downturn, others have reversed the outward migration of their people
    and jobs and have built a sustainable economy and tax base. We have
    invested in two of our most vital assets--our people and our small
    communities--and enabled them to have a part of the American Dream. To
    assure our programs meet the needs of rural America, RHS has developed
    five strategies to further the implementation of the Rural Development
    Strategic Plan.
        The five strategies are as follows:
      --Support self sufficiency;
      --Expand access to our programs to all eligible rural Americans;
      --Continue reinvention;
      --Expand partnerships and leveraging opportunities; and
      --Protect the government's interest.
                            support self sufficiency
        The RHS home ownership programs offer rural people and their
    families the most basic piece of the American Dream--the chance to own
    their homes. The President's fiscal year 1999 Budget requests a program
    level of $1 billion for the Section 502 Direct program and $3 billion
    for the Section 502 Guarantee program. This $4 billion dollar program
    level will provide approximately 65,000 homes for individuals and
    families in fiscal year 1999 and ensure that the home ownership
    opportunities that are accessible in suburban and urban America are
    equally available to rural America.
        RHS has also proposed legislation to permit the use of Federal
    guarantees to help graduate current direct loan borrowers to private
    credit. Many of our 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
    fiscal year 1999 Budget requests an authorization of $100 million for
    graduating direct loan borrowers into the guaranteed program.
        The Mutual Self-Help Grant program enables low and very-low income
    rural families to become homeowners through the efforts of their
    ``sweat equity'' contribution while simultaneously building and
    stabilizing their communities. The sweat equity contributed by these
    families not only builds communities, but also reduces the cost of the
    mortgage and enables the Agency to reach a lower-income customer. The
    majority of the mortgages are provided by the Agency's Direct 502 loan
    which allows the interest rate to be subsidized down to as low as 1
    percent based on income.
        These Self Help borrowers have exceptional track records--both
    lower delinquency rates and better graduation. Over half have paid off
    their loans in full or graduated to private credit. Approximately
    27,000 self-help loans have been made since the program's inception in
    1971, providing housing for approximately 1,000 families per year. In
    fiscal year 1995, RHS received over a 100 percent increase in the grant
    program. In fiscal year 1998, the program expanded to 46 states with an
    estimated 121 grantees serving approximately 1,600 new homeowners. The
    fiscal year 1999 request of $26 million would enable RHS to serve over
    100 grantees.
        Time and time again we hear stories of how participating in the
    self-help program has truly turned borrowers lives around--enabling
    them to achieve the equity from home ownership that can finance
    children's education, launch entrepreneurial careers and move families
    towards financial independence.
        For example, Rudy and Angie Lopez lived from one paycheck to
    another; he was a cook, she was a waitress. Owning a home seemed out of
    reach until they qualified for the Mutual Self-Help Housing program.
    After completing their home, Rudy and Angie Lopez decided to open their
    own business. Now they operate Rudy and Angie's Mexican Restaurant in
    Grover Beach, California.
        In support of Secretary Glickman's Civil Rights Action Team Report,
    the Administration is requesting a significant increase for Farm Labor
    Housing over the available level in fiscal year 1998. For fiscal year
    1999, the $20 million increase in budget authority would provide for
    $32 million for farm labor housing loans and $13 million for grants.
    These additional funds will address some of the worst housing in the
    country by providing increased safe and affordable rental housing for
    our farmworkers. The horrendous housing conditions that some of these
    families endure impact their health and their quality of life.
        In Molalla, Oregon, Soledad Morales lives with her farmworker
    husband, his elderly mother, and her four children; she cares for other
    farmworker's children in her apartment. Before they moved into RHS'
    farmworker housing, they lived together with many families. ``Meal
    preparation and access to the bathroom were the worst part; with so
    many in one kitchen and one bathroom, sometimes I'd have to get up at
    2:00 a.m. to bathe or make my husband's lunch, and sometimes I'd have
    to wait until 11:00 at night. It was chaotic and impossible to keep
    clean, since there wasn't agreement about cleanliness.''
        ``Our health is better here; I think we live better. The children
    live better because they have the freedom to play outside in the lawns,
    playground and court. There's also counseling, classes, more access to
    programs, more communication. Also, here, those of us who give and
    receive childcare can participate in co-payment and reimbursement
    programs that we couldn't access before, due to the condition or
    distance of our homes from services.''
        This is just one example of the thousands of hardworking, low-
    income American families whose housing and quality of life will benefit
    from the increased funding requested for farm labor housing loans and
    grants in fiscal year 1999.
        The President's fiscal year 1999 request for Community Facilities
    program levels provides an increase of approximately $50 million over
    the available levels in fiscal year 1998. We have significantly
    increased the utilization of the guaranteed program. In reviewing
    applications for assistance, we first consider if the project can be
    funded by a guaranteed loan. If this is not feasible, we look at a
    blended approach prior to considering the direct loan and/or the grant
    program. As a result of this approach, we have significantly expanded
    the number of guaranteed loans made to rural communities by
    approximately 100 percent between fiscal year 1995 and fiscal year
    1997.
        Access to high quality, affordable child care is a major priority
    for many young working rural families. The benefits of this kind of
    care are numerous: children are nurtured in a safe environment, parents
    have the opportunity to enter the work force to earn sufficient income
    to obtain an acceptable standard of living, and employers maintain a
    work force whose productivity is not impaired by unstable child care
    arrangements. Recognizing the importance of providing excellent child
    care to America's low-income rural families, the Rural Housing Service
    has consistently invested in child care facilities through the
    Community Facilities program.
        In fiscal year 1997, 19 States obligated $8.8 million in direct and
    guaranteed Community Facility loans and grants for 32 new child care
    centers. Five of these centers are funded through a new partnership
    that includes RHS, the Federal Housing Finance Board, Head Start, the
    Freddie Mac Foundation and the Rural Local Initiatives Support
    Corporation (Rural LISC). These partnerships and others go beyond
    funding to provide technical assistance and build capacity.
        RHS programs also enable many rural elderly residents to remain
    self sufficient by continuing to live independently. The Section 504
    repair loan and grant program, the Section 515 multi-family housing
    program and the Section 521 rental assistance program all enable
    elderly residents to live independently. For others who can no longer
    be independent, RHS helps provide a decent quality of life in their own
    rural communities. The Community Facilities Programs finance assisted-
    living, adult and child day care, emergency services, nursing homes and
    health care facilities to help improve the quality of life.
        These programs are helping people like Ms. Caroline Young, a 70
    year old tenant currently living in LaPaula Villa Apartments, a 515
    complex located in Friars Point, Mississippi, a poor Delta town. Ms.
    Young rented a home on the outskirts of Friars Point, prior to moving
    to the complex four years ago. The living conditions were deplorable,
    with cracks in the walls and floor. Ms. Young indicated she could see
    the ground through the cracks. The house was very old and extremely
    cold in the winter months. Even though the home had gas heat, she had
    to wear layers of clothes to keep warm. Now that she lives in the 515
    project, she feels her health has improved significantly. Ms. Young
    said, ``it's like living in a mansion compared to my previous living
    conditions.''
        If it were not for the Section 515 multi-family housing and rental
    assistance programs, Ms. Young would likely not have been able to live
    independently in a decent safe environment. Ms. Young sought other
    housing options before finding a vacancy at a local 515 project,
    including an assisted living facility and a group home, both of which
    would have resulted in a greater cost to the government.
        For fiscal year 1999, the President's Budget requests $583 million
    for rental assistance. This level is needed to renew $544 million of
    expiring contracts, enabling 37,516 elderly individuals and families to
    continue to live in decent and affordable housing. In addition to
    renewals, based on the fiscal year 1999 loan and grant request for Farm
    Labor Housing, $8.4 million of rental assistance will be used
    specifically to ensure affordability for all new Farm Labor tenants.
    For Section 515, $5.9 million has been requested to preserve
    affordability in projects eligible for prepayment and prevent
    displacement of tenants.
        expanding access to our programs to all eligible rural americans
        Under Secretary Glickman's leadership, the Rural Housing Service is
    continuing its outreach to underserved communities and populations.
    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.
        RHS has also improved the quality of life on tribal lands by
    expanding the use of the Community Facilities programs by Native
    American communities. The Agency has placed increased emphasis to
    provide funding opportunities to tribal colleges through the Community
    Facilities loan and grant programs. In fiscal year 1997, the Agency
    provided a total of $9,950,000 in financing through the direct,
    guaranteed and grant program to Native Americans. This funding provided
    day care, administrative, medical and food preparation facilities.
        RHS has been promoting outreach activities to historically
    underserved customers. For example, RHS has participated in the ``Home
    Ownership Opportunities for Women'' (HOW) partnership, one of 58
    national partners in the President's Home Ownership Initiative. HOW is
    committed to increasing national home ownership rates for women.
        On July 11, 1997, Secretary Glickman and HUD Secretary Cuomo signed
    a Memorandum of Understanding outlining the responsibilities between
    the two Departments on how to manage Fair Housing complaints. This MOU
    provides a more efficient and streamlined process for handling
    discrimination claims. In addition, RHS has worked hard to ensure that
    all of our borrowers and staff follow the Fair Housing Laws. We are
    continuing to incorporate a Fair Housing training component at all
    national housing training meetings.
                          reinvention and partnerships
        We are continuing our reinvention and partnership efforts we
    initiated over three years ago. Our reinvention efforts in the single
    family 502 direct loan program were a great success and have set the
    standard for future efforts. We reduced the size of the 502 regulation
    by almost 90 percent and made it easy to read. We are currently
    streamlining and simplifying our other housing programs. As we move to
    a balanced budget with the President's fiscal year 1999 Budget request,
    we all recognize the need for automation and modern technology to
    increase our efficiency, improve our customer service and cut costs.
    The USDA field structure has been reduced in the number of offices and
    employees. We have to work harder and smarter to continue to reach our
    customers. The ongoing reinvention of the housing programs include the
    following:
      --Continuation of our Congressionally mandated servicing for escrow
            and taxes of the single family housing portfolio. The DLOS
            initiative, which automated our loan origination and servicing
            functions, established the Centralized Servicing Center (CSC)
            in St. Louis. In September of 1997, the Agency completed the
            last phase in the transfer of approximately 700,000 single
            family loans for 550,000 plus borrowers from the states to one
            centralized facility in St. Louis. This was a massive
            undertaking and one of the largest portfolio transfers, private
            or public, in history.
      --We are proceeding with the reinvention of the guaranteed single
            family housing and the mutual self help regulations. We will
            create new handbooks for both programs that will act as a guide
            for our employees and customers.
      --Reinvention of the multi-family regulations will ease the burden on
            our borrowers and our staff. This streamlining effort, which
            will include the Section 515 Multi Family Housing and the
            Section 514/516 Farm Labor Housing programs, will be completed
            by the end of 1998.
            expanding our partnerships and leveraging opportunities
        I would like to share with you our continued efforts to build
    partnerships and leveraging opportunities which expand our limited
    resources, drive dollars 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
    formed many successful partnerships. Let me tell you about one.
        The Rural Home Loan Partnership, formed in June of 1996 by RHS, the
    Rural Local Initiatives Support Corporation (Rural LISC) and the
    Federal Home Loan Bank System, enables more families below 80 percent
    of area median income to achieve home ownership. RHS provides a fixed-
    rate, subsidized 502 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 partnership is just one example of our
    leveraging success. In fiscal year 1997, with all partners, we
    leveraged 46.24 percent or $125,699,475 of the Section 502 low-income
    allocation with $58,149,512 from lenders.
        RHS' loan guarantee programs have brought increased numbers of
    financial institutions into partnership with the Agency. Over 2,000
    lenders now participate in the Section 502 guarantee loan program which
    serves low and moderate-income residents.
        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 new Section 538 Guarantee Multi Family housing program, we
    have completed two years under a demonstration mode and are in the
    third year of operation. For fiscal year 1996 and fiscal year 1997, the
    Agency provided $41 million in guarantees for 25 projects, which when
    leveraged with other funding, financed total development costs of $71.5
    million. For fiscal year 1998, the Agency proposes to issue final
    regulations and a Notice of Funding Availability in the late Spring.
        In the Community Facilities programs for fiscal year 1997, RHS has
    leveraged over 50 percent of its Direct funds and 26.5 percent of the
    guarantee funds, with state, local and private partners. RHS developed
    a new partnership with the Department of Health and Human Services Head
    Start, the Freddie Mac Foundation 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.
                      protecting the government's interest
        I would like to offer my appreciation for the reforms to the
    Section 515 program that were passed by this Committee in the fiscal
    year 1997 Appropriation Act. The Department worked diligently to
    expedite the implementation of these reforms, and they were published
    as an interim rule on May 7, 1997 and as a final rule on December 23,
    1997. In developing these rules, RHS 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.
         As a result of this Congress' and the Administration's efforts to
    provide the necessary tools to provide the proper oversight and
    management, the 515 portfolio is healthier and safer today. The
    tenants' and government's interest are protected.
        In March of 1998, a joint effort between the Office of Inspector
    General (OIG) and the Rural Housing Service will begin. This will
    include joint participation between National and field staff from both
    RHS and OIG to identify and review projects, owners and management
    companies in 12 states that potentially are at risk for financial
    abuse. This will allow RHS and OIG to assess the recent legislative
    changes including the equity skimming provision and their effect on
    curbing fraud, waste and abuse in the 515 program.
        We have become concerned, as I know this Committee has, with the
    increasing need for budget authority for our rental assistance program,
    which has grown from $404 million in 1993 to $541 million last year,
    and is projected to reach $650 million by 2000. We are exploring ways
    to address this issue while preserving the safety net for rural
    families. We will work with the Congress on this effort in the coming
    months.
        Since 1994, the Agency has placed a high priority on rehabilitation
    of Section 515 Multi Family projects. Currently, the 515 Multi Family
    portfolio consists of over 18,000 projects with over 458,000 units.
    With this large and aging portfolio, the Administration is committed to
    preserve the integrity of these structures and protect both the
    tenants' and government's interest.
        Now I would like to highlight the following points from the fiscal
    year 1999 Budget proposal.
        For section 502 direct single family housing loans in fiscal year
    1999, we are requesting a loan level of $1 billion. This is the same
    level provided in the fiscal year 1998 Appropriation Act. For the
    Section 502 guaranteed loans, we are requesting a loan level of $3
    billion.
        In the section 515 multi-family housing loans, a loan level of $100
    million is requested for fiscal year 1999. The loan level request for
    housing repair loans (Section 504) is $25 million. For domestic farm
    labor housing loans, we are requesting $32 million program level, a $17
    million increase over fiscal year 1998 to meet the needed housing for
    farm workers consistent with the recommendations in Secretary
    Glickman's Civil Rights Action Team Report. We are requesting $5
    million for two loan programs for housing site development. This
    significant increase over current levels will allow the Agency to
    effectively serve applicants on a national level.
        The loan level request for the Multifamily Housing guarantee
    program (section 538) is $150 million. This will allow RHS to have a
    fully operational program that will provide approximately 2,000 units
    to low and moderate-income tenants in rural areas.
        The budget authority appropriation requested for the housing and
    community facilities loan programs is $231 million, approximately $13
    million less than in the 1998 appropriation.
        An increase of $42 million to $583 million is requested for rural
    rental assistance in 1999.
        For the Self Help Technical Assistance Grants we are requesting $26
    million, the same level as appropriated in fiscal year 1998.
        The housing grant programs are being requested for fiscal year 1999
    under the Rural Housing Assistance Grants Program. Within this program,
    our requests include $13 million for farm labor grants, $25 million for
    housing repair grants, and $9 million for housing preservation grants.
    The supervisory and technical assistance grant program and the
    compensation for construction defects grant program will continue to
    operate in fiscal year 1999 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 $200 million will be available for direct community
    facility loans and that another $210 million will be available in the
    guaranteed loan program. Approximately $8 million is proposed for
    community facility grants. The appropriation requested within RCAP to
    support the community facility programs is $36 million for fiscal year
    1999. This is $10 million more than is available for fiscal year 1998.
        For administrative expenses, the Budget requests $429 million. This
    is a $15 million increase from fiscal year 1998. RHS's ability to
    successfully implement the Centralizing Servicing Center and deliver
    the programs in the field and protect the portfolio requires this
    increase in administrative expenses.
        This is the conclusion of my statement. I appreciate the
    opportunity to appear before this Committee today and as always, I will
    respond to any questions that you may have at this time. For release
    only by the Senate Committee on Appropriations
                                     ______

                    Prepared Statement of Dayton J. Watkins
        Mr. Chairman and members of the Subcommittee, I am pleased to
    appear before you today to report on our progress in rural development
    and to present the Administration's fiscal year 1999 Budget for the
    Rural Business-Cooperative Service (RBS).
                     demographic data on rural development
        As I am sure the Subcommittee will agree, we in RBS firmly believe
    that, there cannot be a strong America without an equally strong and
    participating rural America. The USDA Economic Research Service (ERS)
    in a 1995 report identified a re-shift of population from urban areas
    back to rural communities. This underscores an increased need for our
    programs. The proportion of real poverty is worse in rural areas than
    in the cities according to ERS data. In some areas of the rural south
    and on some Indian reservations, poverty and its associated ills of
    poor health, poor nutrition and poor educational opportunities is
    staggering.
        The RBS is a component of the Rural Development Mission area and as
    such strives to make significant contributions to the enhancement of
    life for rural Americans. In partnership with the other agencies of the
    Rural Development Mission area, we share in the belief that a strong
    rural America requires a continuing investment from all levels of
    government and the private sector in people, education, technology,
    health care, infrastructure and social and community affairs.
    Certainly, there can be no sustainable development without employment.
    According to the ERS report, the unemployment rate in rural areas is 16
    percent higher than in urban areas. There is energy and resources for
    business development in rural areas which can be harnessed to address
    this issue. Our efforts have been focused on leveraging this energy and
    investment potential to maximize employment in rural communities. The
    rural business programs proposed in this Budget will create and save
    about 83,000 jobs.
        These investments will enable rural Americans to continue advancing
    in the economic mainstream of this great nation and help citizens build
    sustainable rural communities. The RBS contribution to this effort
    continues to be our ability to make our financial and technical
    resources available to rural America.
                       partnerships for rural development
        These resources facilitate the building of partnerships within
    rural communities when leveraged with public, private, and non-profit
    resources and stimulate economic growth and development. New jobs,
    paying higher wages, are created or saved. This further enhances the
    ability of rural citizens to be able to meet the individual needs of
    their families for the basic necessities of life.
        This is accomplished by assisting rural residents in acquiring
    adequate income to pay for the educational expenses of their children,
    meet their housing needs, and building their pride and self esteem.
    This means helping new entrepreneurs implement their dream of owning
    and operating their own businesses by providing for the credit and
    financing needs of rural business owners who are unable to find credit
    from traditional sources. Further, it means helping agricultural
    producers analyze alternative business forms, like cooperatives, which
    offer greater economic opportunities than currently found in the
    marketplace. Each of these efforts touches rural America in a
    meaningful way. Our responsibility is to provide efficient and cost
    effective access to our programs so that rural Americans can maximize
    the resultant benefit.
        A paramount objective is to use this opportunity to be creative in
    developing new concepts and approaches to serving our customers. To
    ensure that rural Americans continue to have access to our programs and
    services, we are continuing to develop and advance new and exciting
    initiatives. These initiatives will focus more resources on
    individuals, businesses and communities that have not been traditional
    participants in our programs. By continuing this effort, we can and
    will be instrumental in increasing the contributions made to the
    overall growth of rural America by putting underutilized resources to
    better use. This is consistent with the overall strategic 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 continue along the direction
    begun last year to increase strategic alliances through creative
    partnerships with other Federal departments and/or agencies of the
    United States Department of Agriculture, corporate America, educational
    institutions, non-profit organizations and others. Through strategic
    alliances, we can serve more people and communities because more
    organizations will be available as resources to rural residents.
                       role of agricultural cooperatives
        We endeavor to enhance the quality of life for rural Americans by
    encouraging the use of cooperatively owned businesses as a self-help
    tool in the marketplace. Our programs of research, technical
    assistance, education/information, finance and assistance in starting
    new cooperatives are designed to establish viable business entities
    that help individual farm operators and other rural residents retain
    access to markets and sources of supplies and services in a sector that
    is rapidly becoming vertically integrated and industrialized.
    Cooperatives are a means for rural people, both farm and non-farm, who
    typically have weak market power compared to buyers and suppliers, to
    be treated more fairly in the marketplace.
        The existence of these rural cooperative businesses is an important
    component to most rural communities providing jobs, opportunity for
    purchase of more reasonably priced supplies and services, and a market
    outlet and improved returns for farm products. A noticeable trend in
    recent years has been the attempt to add value to raw commodities by
    primary and further processing in the communities near the source of
    production. The Cooperative Services Program continues to augment these
    efforts by helping to determine feasibility, assistance in the
    development of new cooperatively owned businesses, and maintaining
    statistical data on aggregate trends and commodity sector developments.
        Since 1926, USDA has worked as a partner to farmer cooperatives,
    helping interested groups of agricultural producers form new
    cooperatives and working with existing cooperatives to improve their
    efficiency and expand the scope of services to members. This work is
    carried out by our National Office staff who specialize in research,
    technical assistance, statistics and educational/informational
    activities and the State Rural Development Offices that are identifying
    Cooperative Development Specialists on their staffs to assist in
    starting and servicing the needs of new cooperatives. We are further
    aided by partnerships with universities, State departments of
    agriculture, and non-profit associations through various programs aimed
    at strengthening rural people's ability to use mutual self-help efforts
    to earn a decent living and to enhance their quality of life.
                      outreach through innovative programs
        The National Commission on Small Farms recently released its report
    A Time To Act which points to the role of cooperatives in assisting
    small farm operators to survive and prosper in a rapidly changing
    production agriculture. The Department is formulating a response to the
    recommendations in this report that will address effective marketing
    methods and other needs of small farmers throughout the nation. We will
    be an integral part of this overall effort since group action, so
    prominently recommended in the report, is also the focus of our
    programs. As part of this effort, we want to determine how under served
    rural Americans can utilize the cooperative form of business to help
    overcome market access barriers.
        During the past year, we implemented a Cooperative Value-Added
    Program funded from the Fund for Rural America. Eligible applicants
    were institutions of higher learning or nonprofit associations that
    would provide technical assistance to specific value-added projects. We
    were surprised, and a bit overwhelmed, to receive 104 applications
    requesting a total of $19.4 million. After review, 18 projects were
    funded up to $75,000 each for a total of $1.1 million. We think this
    experience is good evidence of the expanded interest in the value-added
    strategy.
        Another major initiative of this Mission Area is to expand the
    types of cooperatives serving rural America. Legislation has been
    developed and introduced at the Secretary's request under which we
    would assist rural residents interested in forming cooperatives for
    rural non-farm business. Based on our proven track record of success,
    we believe we can maximize their chances for business success.
    Successful nonagricultural cooperatives can assist rural residents to
    obtain increased access to technology, housing, rural utilities, health
    care and other shared services. These services will strengthen the
    infrastructure of many rural communities that are faltering by
    providing stable businesses, more reasonable prices for goods and
    services, and increased earnings for products sold.
                            re-invention of programs
        Last year, in my testimony to the Subcommittee, I discussed the
    sweeping revisions we were making to the regulations for our Business
    and Industry Guaranteed Loan Program. The new regulations are shorter,
    clearer, and more logically organized. They're certainly more concise,
    taking up about one-half the pages of the previous regulations. The new
    regulations shift some responsibility for loan documentation and
    analysis from the Government to the lenders. We've made the program
    more responsive to the needs of the lenders and businesses, and created
    an environment for easier and faster application processing.
        This year, I'm pleased to be able to update the Subcommittee on
    recently published revisions to the Intermediary Relending Program
    regulations. These regulations were published in final on February 6,
    1998. The new regulations expand the current $2 million cap on loans to
    intermediaries to a $15 million cap to any one intermediary in annual
    increments of $1 million. The regulation is more user-friendly and
    authorizes the Rural Development State Offices to process applications
    at the State level, rather than submitting applications to the National
    Office for processing. This change will speed up the applications
    process and allow State Offices to work closer with borrowers to
    provide immediate feedback concerning their applications. There will
    continue to be a nation-wide competition for funding the applications.
        A revised priority scoring system will help us target more funding
    to the neediest communities such as those in low-income or in under
    served areas, those with declining population, or communities faced
    with economic restructuring or natural disasters. In addition, the
    eligible purposes for loans to businesses have been expanded.
        Mr. Chairman, since the streamlined Business and Industry
    Guaranteed Loan Program regulations were published last December,
    demand for the program has increased 300 percent. This increased demand
    for the program will mean that the quality of the applications and the
    opportunity of providing funding to the communities most in need will
    be enhanced.
        Now, I'd like to address our specific programs and their
    accomplishments in a little more detail.
                               business programs
        To meet our goals and objectives and the growing demand for our
    services and resources, we have increased partnerships and strategic
    alliances with other Federal agencies. One example is the
    implementation of a Memorandum of Understanding between Rural
    Development and the U.S. Department of the Treasury to carry out the
    Community Adjustment and Investment Program under the North American
    Free Trade Agreement (NAFTA). We estimate that this partnership will
    provide for an additional $75 million in business and industry
    guaranteed loans in fiscal year 1998.
        For all business programs, the emphasis this year is to provide
    program funding in our targeted areas of greatest need. This objective
    is supported in the Performance Goals identified in the Rural
    Development Strategic Plan, the Administrator's Priority Goals, and the
    priority selection criteria of the various regulations that are used to
    score and select projects. To demonstrate our earnestness, Rural
    Development State Directors' annual performance will be evaluated, in
    part, based upon how well they accomplish the program objectives of
    providing financial assistance to targeted areas and areas of greatest
    need.
        The following are examples of how the Business and Industry
    Guaranteed Loan Program, the Rural Business Enterprise Grant Program,
    the Intermediary Relending Program, and the Rural Economic Development
    Loan and Grant Program provide economic opportunities in America:
    B&I Guaranteed Loan Program and Rural Economic Development Loan
            Program: Freshwater Farms, Inc., Mid Delta Employment Zone,
            Mississippi
        Freshwater Farms, Inc., was originally incorporated in November
    1982 under the name ``Humphreys County Catfish Processing'' by Mr.
    Robert Edwards. In September 1986, a group of nine local catfish
    farmers and businessmen joined with Mr. Edwards to provide new capital,
    new management, and increased catfish supplies. Stock in the company
    was issued equally to all ten stockholders, a new ten-member Board of
    Directors was elected, and the name was changed to Freshwater Farms,
    Inc. Under this leadership, the company has grown in annual sales from
    $4 million to $18 million, in employment from 75 to 170, and the number
    of stockholders has increased to 19.
        The Rural economic Development Loan Program provided a $400,000
    loan to Twin County Electric Power Associate to finance the processing
    equipment for Freshwater Farms.
        Rapid growth, requiring continuous repair and renovation, placed a
    considerable strain on the company facilities and resulted in
    inefficiencies and added expenses. Yet, even with these disadvantages,
    the company has proven itself to be a low-cost processor in the
    industry, delivering a quality product to markets in over 20 States. By
    relying almost exclusively on stockholders to supply catfish, the plant
    has been able to operate at near maximum capacity and has been
    profitable during varying market conditions.
        In order to supply additional processing capacity for the
    stockholders, who have expanded their operations, the Board of
    Directors unanimously agreed to build a completely new facility which
    would accommodate future sales of $30 million, improve efficiencies,
    and increase employment from 170 to 235. An increase of 65 new jobs and
    the economic activity associated with these jobs have a very positive
    impact upon the unemployment rate, sales tax revenues, property tax
    revenues, and welfare rolls. The facility is located in the Mid Delta
    Employment Zone, one of only three Federally designated Rural
    Empowerment Zones in the United States. The new facility is a source of
    pride for the owners, employees, and the community as a whole. Had the
    new facility not been built, production would have been reduced in
    order to meet ever increasing environmental regulations, and employment
    would have been reduced by nearly 40 jobs.
    Rural Business Enterprise Grant: Town of Medway, Maine
        A $30,000 rural business enterprise grant was awarded to the Town
    of Medway to develop an industrial site. The project was a cooperative
    effort between the town, the State of Maine, private business, and RBS.
    In addition to the $250,000 provided by the funding partners, Great
    Northern Paper, Inc., donated the land for the roadway.
        The project enabled Medway to bring in much-needed employment.
    Earthgro, Inc., a manufacturer and processor of bark, wood chips, and
    other forest byproducts, initially provided 16 new jobs when the
    company started a new operation in the industrial park in 1997. The
    business now provides 25 jobs and is Medway's largest employer. Since
    this is a new operation, it did not just relocate the company's
    existing jobs.
        Medway is an economically depressed area which has depended on the
    paper mills located in adjacent towns to provide jobs. Since 1990, the
    mills have eliminated more than 2,500 jobs, significantly affecting
    Medway's economy. The area unemployment rate exceed the State rate by
    approximately 50 percent. This project provided immediate jobs to the
    area, and it is expected that additional businesses will locate to the
    park in the future, thus further mitigating economic distress in the
    area.
    Intermediary Relending Program: Northeast Delta and Macon Ridge
            Enterprise Communities, Louisiana
        Magnolia Home Health Services of Tallulah, Louisiana, is a family
    owned home health care business situated in rural Madison Parish,
    within the Northeast Delta Enterprise Community. The family saw the
    need to provide home health care services to this impoverished Delta
    Region and developed a plan to implement the service. After several
    unsuccessful attempts to obtain funding through traditional lenders,
    the business presented a plan to Northeast Delta Enterprise Community.
    The Northeast Delta Enterprise Community was not yet set up to provide
    business loans, and Macon Ridge Economic Development Region, Inc.,
    stepped in and provided a loan of $112,500.
        Magnolia Home Health Services has not only provided rural Madison
    Parish with quality home health care, but has grown well beyond the
    projected 10 employees to a staff of more than 20. In addition to
    Madison Parish, it now serves a total rural population of 12,463
    including areas of Tensas Parish and Richland Parish, which are within
    Macon Ridge Enterprise Community.
        The business has been so successful that it paid the original loan
    of $112,500 down to $38,000 in just over a year, $50,000 ahead of
    schedule. The business is still growing and has certainly boosted the
    economy and health care service in Madison and surrounding parishes.
    Rural Economic Development Loan Program: Winnebago Cooperative
            Telephone Cooperative, Lake Mills, Iowa
        A $350,000 zero-interest loan was made to the Winnebago Cooperative
    Telephone Cooperative for the purpose of assisting the Larson
    Manufacturing Company of Lake Mills with its plant expansion.
        Larson Manufacturing Company produces aluminum wood core storm
    doors, aluminum windows, and energy saving products. The Company's
    overall plant expansion included the purchase of land, site
    preparation, building of roads, sewer and water extensions,
    construction of a 70,000 square foot building, parking lots, and the
    purchase of new manufacturing equipment. An additional $2.43 million
    was leveraged from other funding sources for a total project cost of
    $2.78 million. It was estimated that the project would increase
    production capacity by 25 percent and warehouse capacity by 50 percent.
        It was projected that 50 new jobs would be created within two years
    of completion of the project. Plant representatives have indicated
    that, in less than one year, the employment projection had already been
    surpassed. The jobs created in this small rural community of 2,143
    population consist of sales managers, sales persons, truck drivers,
    general production workers, warehouse workers, production coordinators,
    forklift operators, and office support staff. The new jobs have led to
    an increase in the long-term productivity and per capita personal
    income in the rural areas of north central Iowa and south central
    Minnesota.
    Rural Economic Development Loan and Grant Program: Chariton Valley
            Rural Electric Cooperative, Albia, Iowa
        A $300,000 grant was made to the Chariton Valley Rural Electric
    Cooperative of Albia, Iowa, to establish a revolving loan fund program.
    The electric cooperative provided $60,000 of its own funds and made
    loans totaling $360,000 to the Albia Industrial Development Corporation
    to renovate a vacant industrial building in Albia and to purchase 24
    acres of land to expand an industrial park. These loans were leveraged
    with $662,000 of financing from private sources.
        After renovation of the 102,000 square foot industrial building,
    one-half of the space was sold to a metal fabricating business which
    employs 33 people. The business holds the option to purchase the
    remaining building space. In the interim, a plastics company proposes
    to lease the remaining space for a period of three years. At the end of
    the lease term, the plastics company intends to build a 100,000 square
    foot building in the new industrial park.
                              cooperative services
        The Cooperative Services Program 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 a more 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 change often referred to as the ``industrialization of
    agriculture.'' United States businesses involved in agriculture are
    finding it increasingly necessary to have a coordinated and controlled
    supply of a narrowly defined raw product. As previously mentioned, the
    report ``A Time To Act'' by the National Commission on Small Farms has
    recommended an expanded use of cooperatives as a means for smaller farm
    operators to access markets.
        A major initiative by RBS has been to encourage the staffing of
    Cooperative Development Specialists in each State Office. These
    individuals, either solely or collaterally, provide a more localized
    source of expertise in guiding the development of new cooperative
    businesses and helping to determine their feasibility. We are confident
    they will become a more important source of assistance to emerging
    businesses as they gain more expertise.
        Development of a sound knowledge base acquired through research is
    essential to offering sound technical and cooperative development
    assistance. This program utilizes researchers at the 1862 and 1890
    universities as well as state departments of agriculture on important
    agricultural cooperative marketing projects. As an example, Purdue
    University completed research on cooperative coordination in the hog-
    pork sub-sector that may help maintain the status of independent hog
    producers.
        There has been a lapse in supporting research on cooperatives in
    recent years, and the 1997 budget includes $2 million for the Federal/
    State research on cooperatives program. This money will be used in
    partnerships with State Departments of Agriculture and State
    universities and colleges to fill the void and make up for lost ground.
    Among the new areas for research are the role that cooperatives can
    fulfill as Federal farm price supports are ratcheted down and perhaps
    eventually terminated, the emergence of collaboration between farm
    operators in farm production cooperatives, evaluation of types of
    strategic alliances developed between cooperatives and with investor
    owned firms, identification of key successes and problems of ``new
    generation'' cooperatives, and operational adjustments being made by
    cooperatives to global competitors.
        We met recently with representatives from the 1994 Native American
    institutions and encouraged them to develop, with our help, teaching
    modules on cooperatives that fit into their expanding curriculums. We
    also encouraged development of a Cooperative Center of Excellence at
    one or more of their institutions.
        As an example of technical assistance, we worked with Shoreham
    Apple Growers of Vermont, an apple packing and warehouse operation
    serving the majority of apple growers in the state, to develop a plan
    to revitalize its organization. A business plan and financial
    projections were developed with the help of Cooperative Services staff
    to enable them to obtain bank financing required to keep in operation.
    The cooperative was also assisted in adopting operational and record
    keeping changes required for its long term survival.
        The emerging alpaca industry is characterized by its geographical
    dispersion and its lack of organization at the producer level. This
    past year, Cooperative Services staff worked closely with producers
    throughout the western states to establish the framework for a
    producers' association that will facilitate development of industry
    strategies and orderly marketing. From a disorganized group of
    producers at the beginning of the year, the alpaca association has
    emerged with a strategic plan, experienced officers, and a sense of
    direction that will carry them forward as an effective marketing
    cooperative.
        Small vegetable growers in Arkansas have been assisted in growing
    tomatoes to supply Burger King. The growers are attempting to structure
    a cooperative that will continue to provide them market access to the
    growing produce market. Similar efforts are being made in eastern
    Kentucky to assist small producers accustomed to growing tobacco to
    engage in vegetable production as a parallel crop and to market it
    through a local cooperative packing facility.
                      rural cooperative development grants
        Another source of assistance to developing cooperatives is the
    funding of new and existing cooperative centers through the Rural
    Cooperative Development Grant Program. This partnership with
    institutions of higher learning and nonprofit associations permitted us
    to fund 11 centers for a total of $1.7 million in 1997.
        The program is used to facilitate the creation or retention of jobs
    in rural areas and enhance producers' incomes through the development
    of new rural cooperatives, value-added processing, and other rural
    businesses. Grants are competitive and awarded based on specific
    selection criteria.
            appropriate technology transfer for rural areas (attra)
        We have also been providing extensive support for the Appropriate
    Technology Transfer for Rural Areas program which provides producers
    and agribusiness advisors information on use of the best sustainable
    production practices. Encouragement of such practices lessens
    dependence on agricultural chemicals and is more environmentally
    friendly.
        The ATTRA program handled over 18,000 requests this past year and
    continues to be a major source of information on sustainable
    agriculture throughout the country through its 800 telephone number and
    the use of the Internet. We're asking for $2 million, an increase of
    $700,000, for the ATTRA program to accommodate expanding requests for
    information.
                   national sheep industry improvement center
        The National Sheep Industry Improvement Center was established this
    past year. The Center has held three public hearings, developed a
    strategic plan, and hired an Executive Director. This program will
    become operational under the Board's direction this year and will
    assist development of infrastructure in the sheep and goat industries
    through a $20 million revolving fund provided in the Federal
    Agriculture Improvement Act of 1996.
                        fiscal year 1999 budget request
        The fiscal year 1999 Budget requests a program level of $1.2
    billion for the Rural Business-Cooperative Service including amounts
    under the Rural Community Advancement Program. The Federal loan
    guarantee as used in the Business and Industry Program is an extremely
    cost effective mechanism to meet capital needs of rural businesses.
    Under Federal Credit Reform, business and industry guaranteed loan
    program borrowers or the cooperating financial institutions pay an up-
    front fee which is pooled as a reserve to be used in future years to
    cover losses in the program. This reserve remains in the Treasury and
    draws interest until it is needed. In this way, the participants in the
    program ``self insure'' the program against losses and minimize the
    cost of the program to tax payers. The result of this self insurance
    feature is that the loan subsidy rate, that is, the proportion of the
    program cost that must be provided from tax money is currently less
    than a penny on the dollar.
        As part of the Rural Community Advancement Program (RCAP), the
    Budget requests program levels of $1 billion for business and industry
    guaranteed loans, $50 million for business and industry direct loans,
    and $40.3 million for rural business enterprise grants.
        The Intermediary Relending Program of the Rural Development Loan
    Fund is requested at the $35 million level.
        The Rural Economic Development Program budget proposal includes a
    $15 million loan level and $11 million for grants.
        The total program request for Cooperative Services is $5.7 million.
    This includes $1.7 million for cooperative development grants and $2
    million for appropriate technology transfer. Federal/State cooperative
    marketing research agreements are proposed at $2 million.
        For administrative expenses, the budget includes $29.9 million for
    the Rural Business-Cooperative Service. Although this amount is
    slightly greater than the current level, the increase is less than the
    rate of inflation and will call for a reduction in employment in 1999
    and belt tightening in other administrative activities.
                  empowerment zones and enterprise communities
        The Rural Business-Cooperative Service continues a strong fiscal
    year 1999 Program in Empowerment Zones and Enterprise Communities. The
    Budget estimate includes a program level of $31 million to be reserved
    for these designated areas. We are also proposing legislation to
    provide for additional rural Empowerment Zones as authorized in the
    Taxpayer Relief Act of 1997.
                                   conclusion
        Mr. Chairman, this concludes my formal statement on the fiscal year
    1999 Budget. I would be happy to respond to any questions the
    Subcommittee may have regarding the business and cooperative
    development programs of the Rural Development Mission Area.
                                     ______

                     Prepared Statement of Jeffrey W. Gain
        Mr. Chairman and members of the Subcommittee, I am pleased to
    testify today on the President's fiscal year 1999 budget proposal of
    the Alternative Agricultural Research and Commercialization Corporation
    (AARCC). It is a pleasure to provide you with an update on the
    Corporation's investment successes and the impact the AARC Corporation
    is having on the economy of rural communities.
        I am not a federal employee and am not here to support the growth
    of another Federal bureaucracy. I do, however, own and operate a
    diversified farming operation near Hardin, Illinois, producing grain,
    orchard crops, and livestock. I also serve as Chair of the
    Corporation's Board of Directors. I am here today on behalf of the
    mostly private sector members of the AARCC Board of Directors to
    testify to the unique opportunity the AARC Corporation offers to add
    value to agricultural raw materials and create economic opportunities
    in rural communities.
        The committee has copies of the latest Source Book which lists many
    of the AARCC-supported companies and the products now being produced
    and sold. The committee also has a copy of our first annual report as a
    corporation. You will notice such industrial products as absorbents,
    building materials, lubricants, cleaners, and others. Many of these
    products are made from what was considered agricultural waste.
        As an aside, I would be remiss if I did not point out that because
    of their very nature, these products may be environmentally friendly.
    In many instances, they replace finite or polluting raw materials such
    as petroleum. Certainly, using renewable, sustainable raw materials
    from agriculture can be viewed as having a positive impact on the
    environment.
        I would like to offer the committee a short background on how we
    got to where we are today. Congress created the AARCC Center in the
    1990 Farm Bill and reauthorized it in the 1996 Farm Bill as a wholly-
    owned corporation of the U.S. Department of Agriculture (USDA). AARCC's
    creation followed a 1987 report of the New Farm and Forest Products
    Task Force. I served on that task force which met for 2\1/2\ years. The
    task force recommended developing and commercializing a wide array of
    new farm and forest products utilizing the excess productive capacity
    of American agriculture as a way to revitalize ailing segments of rural
    America.
        When we downsize agricultural production through set-aside or other
    non-production incentives, we also downsize rural communities and the
    infrastructure which supports agricultural production. Rural America
    must harness the productive capacity of idled acres by producing crops
    for value-added industrial use, or by growing new unsubsidized
    industrial crops. The U.S. ``farm plant'' is running under capacity.
    The National Agricultural Statistics Service reports that in 1996, only
    336 million out of a possible 430 million acres of cropland were
    cultivated in the United States. Approximately 94 million acres of
    cropland, or 22 percent of our total productive capacity, lay idle.
    Companies in the U.S. must create and sell bio-based, value-added
    industrial products from agricultural and forestry materials and animal
    by-products if we hope to restore productivity and economic vitality to
    Rural America and expand world markets for U.S. agricultural products.
        It is true that many of the things we make today from petroleum
    can, in fact, be made using biodegradable materials. This is not a new
    idea. USDA's four regional research laboratories were built in 1938-41
    to find new uses for farm products. A national Presidential Commission
    on Increased Industrial Uses of Farm Products studied new uses in 1956-
    57. I have already mentioned the work of the 1985-87 USDA Task Force.
    Predating all these activities was the formation of the ``Chemurgic
    Council'' in 1935 under the leadership of Wheeler McMillen with
    financial support from Henry Ford. Other notables on the council
    included Thomas Edison, Irenee du Pont, MIT President Karl Compton,
    Nobel Prize winning physicist Robert Milliken, General Motors Vice
    President Charles Kettering, and Sears, Roebuck & Company Board
    Chairman Robert E. Wood. George Washington Carver was also a leader in
    the work of finding new uses for agricultural materials. Henry Ford
    even built a car body from vegetable plastic and plant fibers. He felt
    we could ``grow our cars.'' Today we are beginning to see a move in
    Europe to a car which can be totally recycled. Increased use of
    vegetable fibers is part of that effort. Here in the U.S. a number of
    car manufacturers are also moving toward a ``green'' automobile.
        The AARC Corporation, a unique venture capital entity, is
    attempting to restart the bio-based economy by investing in small
    businesses that are using agricultural materials to produce
    environmentally-friendly industrial products. The decision as to which
    companies and industrial sectors should receive AARC Corporation
    investments is made by a largely private sector board. Eight of the 11
    members of the AARCC Board are from the private sector representing
    processing, financial, producer, and scientific interests.
        It is important to recognize the AARC Corporation intends to make a
    profit for the Federal government from these investments and reinvest
    those repayments in other companies. But AARCC has a larger mandate.
    Unlike private sector venture capital firms, the AARC Corporation's
    investment strategy considers much more than profit, also referred to
    as return on investment (ROI). In pursuing AARCC's investment strategy,
    no one variable--ROI, jobs creation, or agricultural material used has
    priority. Investment decisions are made after weighing these three
    factors in order to maintain a balance in our portfolio. To date the
    AARC Corporation has invested $33 million in Federal funds, leveraging
    an initial $105 million in initial private investments creating more
    than 5,000 new jobs in rural communities. AARCC continues to be an
    engine for rural development by investing in technologies that create
    real jobs and increase the use of agricultural materials or
    agricultural wastes.
        AARCC's first investments were made in 1993. We know that not all
    the companies in which the AARC Corporation invests will be successful.
    However, many will. The venture capital industry norm for portfolio
    performance is that companies do not begin to break even until 75
    months after the initial investment, somewhere between the sixth and
    seventh year. Even so, some 15 companies have already repaid the AARC
    Corporation over $200,000 in royalties. The business plan anticipates a
    continued and steady increase in repayments over the next 5 years.
        We are constantly working with those companies in which we have
    invested to help them secure additional outside financing. Because the
    AARCC partnership places the USDA ``stamp of approval'' on these
    companies, it gives private investors a better ``comfort level'' and
    many partners have been able to attract significant follow-on financing
    from private sources. The AARC Corporation has secured an additional $3
    dollars in private follow-on financing for each $1 dollar it has
    invested.
        Many AARCC companies have succeeded in penetrating difficult to
    access retail distribution channels for consumer products. Those
    marketing efforts are continuing. Perhaps the biggest near-term market
    for AARCC-supported companies, however, is government. To help jump-
    start these companies, as part of the 1996 Farm Bill, Congress included
    language which gives Federal procurement preference to products
    produced by AARCC partners. The preference language is part of the new
    Agricultural Acquisition Regulations (AGAR), which govern USDA
    purchases, recently published in the Federal Register. This year,
    similar information will be included in the Federal Acquisition
    Regulations (FAR), which govern all Federal purchases. As part of on-
    going marketing efforts to the Federal government this past fall, AARCC
    and 30 of its partners participated in the National Marketplace for the
    Environment here in Washington attended by Federal procurement
    officials, private buyers, and environmental organizations.
        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 the AARC Corporation investment serving as
    a catalyst, private sector funds, which otherwise would not be
    available, will be committed to these companies. The AARC Corporation
    respectfully requests $10 million in 1999 to continue its mission. An
    appropriation at this level would enable the AARC Corporation to fund
    approximately 20 new investments. In addition, these funds would make
    it possible for AARCC to provide follow-on financing to some of its
    existing portfolio companies which have begun to transition from the
    start-up stage of their development to intermediate stage in which they
    are beginning to penetrate markets and make sales. At the requested
    funding level of $10 million, AARCC can attract some $30 million in
    private capital investment in its portfolio companies, thereby creating
    hundreds of new jobs in rural communities.
        In conclusion, AARCC's venture capital approach is quite different
    from that of traditional government loan or grant programs. Indeed,
    AARCC may be seen as a model for public/private cooperative
    developments and several other Federal departments are investigating
    the possibility of establishing AARCC-like programs. The AARCC model of
    eventual self-sufficiency, coupled with the program's role as an engine
    for economic development, makes it an attractive option for a new way
    of doing the government's business.
                                     ______

                             Biographical Sketches
                                jeffrey w. gain
        Jeff Gain was appointed to the Board of Directors of USDA's
    Alternative Agricultural Research and Commercialization (AARC)
    Corporation in 1995 and serves as Chairman of the Board. The AARC
    Corporation makes equity investments in small, mostly rural-based
    companies to commercialize industrial uses for agricultural materials.
    Mr. Gain currently manages his farm in Calhoun County, Illinois, and is
    also engaged in agricultural policy, marketing, and management
    consulting.
        Mr. Gain served for 10 years as the Chief Executive Officer the
    National Corn Growers Association, retiring October 1, 1994. Prior to
    that, he was Executive Director of the American Soybean Association
    from 1977 to 1984. He is one of the original founders of the New Uses
    Council, formed in 1990 to serve as an advocate for commercializing new
    industrial uses for agricultural raw materials and to help coordinate
    public and private sector activities in that regard. He was Chairman of
    the New Uses Council from 1991 to 1993.
        Mr. Gain was one of the founders of the St. Louis Agri-Business
    Club and served as its first president. He was named the Agri-Business
    Leader of the Year by the Club in 1985. He also served as a member of
    USDA's New Farm and Forest Products Task Force, which resulted in the
    new industrial uses initiatives for U.S. agriculture. The Task Force
    recommendations in 1987 led to the creation of the AARC Corporation in
    the 1990 Farm Bill.
        For his work in promoting the development of industrial products
    from agricultural materials, he received the Outstanding Leadership
    Award from the American Crop Protection Association. Most recently, he
    was presented the prestigious Wheeler McMillan Award from the New Uses
    Council. Mr. Gain has traveled extensively on various agricultural
    marketing missions to Europe, South America, and Asia, including the
    People's Republic of China.
        Jeff is a native of Rushville, Illinois, and has a B.S. degree in
    management from the University of Illinois. After graduation as a
    Lieutenant, he served as a Public Information Officer and as an
    admiral's aide in the U.S. Coast Guard. He then served as Executive
    Secretary of several Illinois county chapters of the American Farm
    Bureau Federation and was director of Commodity Programs for the
    Illinois Agricultural Association for 10 years. He has two daughters,
    Ann and Gretchen, and a 6-year old son, Jeffrey.
                                     ______

                              robert e. armstrong
        Dr. Armstrong joined the Alternative Agricultural Research and
    Commercialization (AARC) Corporation in early 1993. Since that time, he
    has assumed a variety of increasing responsibilities, culminating in
    being named Executive Director in 1997.
        The AARC Corporation is a wholly-owned corporation of the U.S.
    Department of Agriculture (USDA). Operating under the guidance of a
    largely private-sector Board of Directors, the Corporation functions as
    a venture capital firm that invests in companies commercializing non-
    food/non-feed products derived from agricultural raw materials. The
    AARC Corporation currently has $35 million invested in companies
    throughout the U.S. As Executive Director, Dr. Armstrong is responsible
    for the daily operations of the Corporation, as well as the on-going
    growth and management of the Corporation's portfolio.
        He was graduated summa cum laude/Phi Beta Kappa with a B.A. degree
    in psychology from Wabash College in Crawfordsville, Indiana. He holds
    an M.A. in experimental psychology from Oxford University, Oxford,
    England. In addition, he holds an M.S. in biology and a Ph.D. in
    agronomy (plant breeding and genetics), both from Purdue University in
    W. Lafayette, Indiana.
        His early professional work centered on Third World issues, and he
    has worked in a number of developing countries. His work includes
    projects related to famine relief and food availability in Sahelian
    Africa, agricultural development in the Persian Gulf and deforestation
    in Southeast Asia.
        Dr. Armstrong is a Vietnam veteran and continues to serve in the
    U.S. Army Reserve. He has two sons and two daughters and is married to
    the former Leslie Carlson, a career USDA employee.

                   Delta Region Economic Development Program

        Senator Cochran. Ms. Thompson, we appreciate your comments
    and the written statement that you submitted. There is a
    proposal the administration has made to create a Lower
    Mississippi Delta regional economic development program and to
    have it administered, in effect, by the Appalachian Regional
    Commission or in some way be managed by the Appalachian
    Regional Commission staff.
        The President's budget request includes $426 million for
    the Appalachian Regional Commission and a $26 million program
    is proposed for the Lower Mississippi Delta Region. Senator
    Bumpers has taken an active role in earlier years, and I
    cosponsored his initiative to establish a study commission to
    see if there were ways that we could deal with problems of
    poverty, education, economic development, transportation, and
    the like in this region. A lot of information was compiled and
    work was done and the Commission went out of business after it
    made its recommendations.
        I like the idea of targeting funds to this region because
    it is one that has characteristics that are similar throughout
    the area. I am curious to know what your reaction would be if
    the Congress decided to approve the idea, but place the
    responsibility for administering the program in the Department
    of Agriculture, and specifically under your jurisdiction. What
    would your reaction be to that?
        Ms. Thompson. Well, I think that it could be extremely
    valuable to that region of our country. The reason I do is that
    this particular approach would be a broader regional approach
    to partnering with communities. The more we learn about the
    role that the Federal Government can play, the more I
    personally and we as a department appreciate that we work best
    as a partner and the communities have the greatest potential
    for sustainable growth when each community works harmoniously
    within the community, but also partners and joins with other
    communities in a larger regional area, that long-term
    sustainable growth and economic and social development are
    going to occur probably only if there is a regional approach to
    economic development and rural development.

                        National Centers for Excellence

        Senator Cochran. Earlier this year, I think in January, you
    announced that you were establishing some national centers for
    excellence to provide technical expertise to rural America. One
    of those centers is to be located, as I understand it, at
    Mississippi Valley State University in Itta Bena. The center is
    to receive $100,000 and a Peace Corps fellow to assist as
    liaison between the community and the university. What other
    funds would be available to support this center's activity, and
    what is the status of it now?
        Ms. Thompson. Well, this, as you stated, is a new
    initiative. The funds, additional funds, that would be
    available would be funds through our traditional programs that
    are administered in rural development. I think this is an
    excellent approach to economic development because community
    colleges have always served a variety of purposes in the
    communities.
        In addition to providing education opportunities, they very
    typically are doing outreach and working with community
    leaders, both local government leaders as well as business
    leaders, and so I believe that there is considerable potential
    for this partnering to occur between us and the community
    colleges and the community colleges and their communities that
    they are serving. As they put together plans and initiatives
    for their own communities, then that will allow them to come
    back to us, or us to go to them, to discuss and explore how the
    programs that are administered through rural development at
    USDA could also benefit those communities.

                            Rural Utilities Service

        Senator Cochran. The Rural Utilities Service is one of
    those agencies that ends up being under some pressure from time
    to time because of the growing awareness of deregulation, the
    idea that we are going to have a new national energy policy in
    utility service. What is being done to prepare for these
    changes, and are these changes having any effect on the ability
    to provide utility services in rural America under the
    traditional government programs that are administered by the
    agency?
        Mr. Beyer, would you be able to respond to that?
        Ms. Thompson. I would ask Mr. Beyer to elaborate on that.
        Mr. Beyer. Thank you, Mr. Chairman and Senator Bumpers. I
    would be happy to respond to that. Thank you for the question.
    The electric and telecommunications industries, as you know,
    are in a revolution. It is a milestone in the history of
    providing infrastructure services, moving from the old
    traditional monopoly structure to an open-access, market-based
    price, customer choice.
        The telecommunication industry has now moved over to the
    Federal regulatory and the Public Service Commission activities
    in rulemaking to comply with the legislation, which is another
    difficult, very difficult process from the standpoint of
    providing support into high-cost-to-serve areas. I think, you
    know, we are going to be all right, but there are a couple of
    critical things that we are working with, with the FCC and with
    the Public Service Commission where we have an opportunity.
        Basic to our loan security issue is certified areas, which
    is now multiple. States can issue as many certified areas as
    they wish. The second principal thing for our loan security
    traditionally has been the universal service pool mechanism
    that exists in the telecom industry. About 65 cents out of
    every revenue dollar, on the average, of the RUS borrowers
    comes from that pool, which includes toll separation.
        There is another part that addresses the high-cost-to-serve
    areas and high-cost-to-maintain-and-operate areas. That pool is
    now about $20 billion that is generated from within the
    infrastructure, and is a huge issue at FCC in the rulemaking.
        We are working with the FCC and making as much input as we
    can to stand up for the rural systems, obviously. You know, it
    is going to continue to evolve and we are hopeful that in the
    end--Congress will provide a public policy that says we need to
    support the high-cost-to-serve areas so that we don't end up
    with infrastructure have-nots and haves in this country. I am
    marching forward with that 50-year-old, 60-year-old policy that
    has been enacted since the Rural Electrification Act.
        Senator Cochran. One provision of the budget request
    suggests the Administrator of RUS will have the ability to move
    subsidy budget authority among the electric loan programs under
    your jurisdiction. Is this something that is going to require
    additional legislation to provide that authority, or do you
    suggest or does the budget suggest that you now have that
    authority? What is the reason for that?
        It seems to me it might bypass the appropriations process
    where we appropriate specific amounts and identify subsidy
    levels and the like in our bill. Now we are going to have the
    provisions of the bill ignored and instead we are going to see
    the administrator moving subsidy authority among the programs
    without any further action by Congress?
        Mr. Beyer. Well, Mr. Chairman, we view that as a tool in
    managing the dollars invested in infrastructure. If there is a
    need for additional hardship loans, we would like some
    authority to utilize budget authority to increase hardship
    loans from funds that are not being utilized. It would simply
    be another tool for us to better manage the portfolio.
        Senator Cochran. I assume the answer is that you think you
    have that authority now? No new legislation is required?
        Mr. Beyer. No; my understanding is we do not have that
    authority now.
        Senator Cochran. This proposes that that authority be
    given?
        Mr. Beyer. Appropriation legislation is required, Mr.
    Chairman.

                             Water 2000 Initiative

        Senator Cochran. I see. The President's Water 2000
    Initiative has a goal of providing clean running water by the
    year 2000 to all rural households. Is that something that is
    possible under the budget that is proposed by the President? I
    suppose that should be asked of the Secretary?
        Ms. Thompson. Under the budget that is being proposed, we
    will not be able to reach every household by the year 2000, but
    we have made tremendous progress over the last several years in
    this initiative. The numbers in the beginning of 1993, before
    the Water 2000 Initiative, were about 400,000 households with
    about 1 million rural residents without any running water.
    Through the Water 2000 Initiative we are now down to about
    300,000 households and about 800,000 residents without running
    water.
        The challenge gets greater the closer we get to reaching
    the goal because we are now reaching the hardest to reach
    clients, and so it is a real challenge.
        Because I have an optimistic nature, I think it is
    important to keep working toward that goal that was established
    in the Water 2000 Initiative. I think it is also important to
    realize that it is a very, very difficult goal to achieve given
    our commitment to also balancing the budget.
        I, as well as our Administrator and others in the Rural
    Utilities Service--John Romano was recognized earlier--we will
    continue to have a very, very strong commitment to reaching as
    many homes as we can by the year 2000. You know, there is
    always 2001 and we can just keep moving forward at that point
    as well.
        Senator Cochran. Senator Bumpers.
        Senator Bumpers. Thank you, Mr. Chairman.

                              Home Ownership Loans

        Mr. Shadburn, let me ask you, Secretary Thompson alluded to
    the President's commitment to add 8 million homeowners by the
    year 2000. Is that correct?
        Mr. Shadburn. Yes, sir.
        Senator Bumpers. How many of those are not going to be in
    rural areas, but how many of those are you going to be
    responsible for under the Agriculture Department housing
    programs? Do you have any idea?
        Mr. Shadburn. In terms of----
        Senator Bumpers. Have you been assigned any kind of a quota
    on this?
        Mr. Shadburn. We have not been assigned a quota, but
    obviously we are working with our rural partners throughout the
    Nation to look and see how we can take $4 billion in the
    housing programs to maximize the total number of units we can
    place toward reaching that 8 million goal that the President
    has set.
        Senator Bumpers. Well, it is a very laudable goal, but it
    is a pretty long stretch, I think, to get there. I applaud the
    President for doing it.

                           Delta Regional Commission

        Secretary Thompson's statement, I was especially impressed
    with the statistics you gave about poverty still being fairly
    pervasive in the rural areas, and especially in the South. Let
    me just add my own comments to what the chairman has already
    mentioned, and that is, the Appalachian Regional Commission
    [ARC]. I will tell you now, I am not for putting this $26
    million in the ARC. I would like to see the Delta Commission
    stand on its own. They have unique problems. I just do not want
    it to get lost in the Appalachian Regional Commission.
        I have a lot of time invested in that in my life, and the
    President has too. The only person I would yield to in my
    commitment to the delta is the President, because when he was
    Governor he did everything but stand on his head down there to
    try to help those people.

                             Delta Teachers Academy

        In any event, one other question I wanted to ask you on the
    delta and you mentioned education and the role it plays in
    rural areas. Are you familiar with the Delta Teachers Academy?
        Ms. Thompson. I am not, per se.
        Senator Bumpers. You are not. Is anybody here?
        Senator Cochran. I am. [Laughter.]
        Ms. Thompson. Is there a role that we can play through
    community facilities or distance learning with the Delta
    Teachers Academy? I may have someone here.
        Senator Bumpers. I will submit a question to you in writing
    on that, because that is something that Senator Cochran and I
    are both committed to. It is a $3.5 million program. It is for
    the delta. I want it continued, and I would like to see it
    expanded. I would like to get the Department's view on how well
    they are performing.
        Ms. Thompson. Well, we will be very happy to respond.

                Appropriate Technology Transfer for Rural Areas

        Senator Bumpers. Yes; for many years, Senator Cochran's
    former colleague in the House, Jamie Whitten, and I fought
    vigorously, long, and hard over a program which was originally
    housed in Memphis. I do not think--Jamie is not with us anymore
    and I am reluctant to say that I think Jamie turned against it
    when it moved from Memphis to the University of Arkansas. Of
    course, that is what peaked my interest.
        In any event, we had a long, rather volatile battle about
    that. I was always convinced that in the coming days as we
    looked for different methods of farming using less herbicides,
    less pesticides that the so-called appropriate technology
    transfer program at the university had great potential.
        I think Jamie was right to some extent. Back when I was
    fighting it--I guess that has been 10 years ago--he had some
    arguments on his side. They were not as busy as they would have
    you believe, but now all of a sudden--not just all of a sudden,
    but the demands on their services have been increasing almost
    exponentially. Really, this is not a question. It is just a
    statement that applauds you for asking--who has that program?
        Mr. Watkins. [Raising hand.]
        Senator Bumpers. Mr. Watkins, I want to applaud you for the
    request for the increase in that program, because they are
    really--the demands on them are increasing dramatically as you
    probably know. I am sure that is the reason--is that the reason
    you have asked for the increase?
        Mr. Watkins. Yes, sir; actually, Senator Bumpers, the
    demands on the program, as you have already indicated, are
    growing exponentially. Information requests are coming from
    farmers, from small farmers, from extension agents throughout
    the entire country. One of the things that you suggested in a
    previous hearing, I believe, was that we consider bringing
    technology, the use of Internet and computers to that program.
    That is something that we would like to see going forward as
    well. That is part of the reason for the request for an
    increase.
        Senator Bumpers. Sometime, Mr. Watkins, if you get a
    chance, I wish you would go down to Fayetteville and look at
    the brewery.
        Mr. Watkins. I certainly will.

                            Water and Waste Programs

        Senator Bumpers. Mr. Beyer, I will probably submit some
    questions to you in writing, but I wanted to ask you, first of
    all, it is my understanding that private companies are making
    efforts to buy some of these rural water programs. Is that
    true?
        Mr. Beyer. Senator Bumpers, Mr. Chairman----
        Senator Bumpers. Systems, I mean, some of the systems.
        Mr. Beyer. In some cases where a community starts growing
    out into a rural area, then, you know, you have a little bit of
    a confrontation between the community and the rural areas.
    There is some of that.
        Senator Bumpers. Is that presenting any kind of a problem
    for you?
        Mr. Beyer. Well, we have looked at this this particular
    year, and, you know, we do not think the problem is wide enough
    for Federal legislation. We would not recommend that at this
    point in time. It is all down to the local community issues.
    Where communities work together, where the rural people work
    together with their urban neighbors, they work this out and
    they sell it. Where they do not work together, it is a very,
    very difficult process and they fight.
        You know, unless it really spreads all over, it would not
    be our recommendation that there be Federal legislation. That
    would just create another big problem.
        Senator Bumpers. I do not have any planned. I just wanted
    to know what kind of a problem it was, if any, for you.
        Mr. Beyer. It crops up here and there. I can give you some
    numbers, if we go back and look at it. We would be happy to do
    that.

                            Electrical Restructuring

        Senator Bumpers. OK. Mr. Beyer, you and I have discussed
    electrical restructuring in my office, but I think two or three
    questions for the record might be helpful. It is no secret that
    the co-ops in the municipalities are the biggest opponents, I
    think, generally of electrical restructuring.
        Now I would assume since the President has said that he
    feels electrical restructuring will go a long way toward
    helping with the global warming problem, that the Agriculture
    Department, the Rural Utilities Service, you are not adamantly
    opposed to this bill, even though most of your members in the
    co-op, electrical co-ops, out there are. What is the official
    position of the Agriculture Department? I assume it is the same
    as the President's, is it not?
        Mr. Beyer. Yes, sir.
        Ms. Thompson. It is precisely the same as the President's.
    [Laughter.]
        Mr. Beyer. To the letter. The dilemma is that as we move
    along in this country toward molding a new infrastructure it is
    a very complicated process as you all know.
        Senator Bumpers. Well, let us get down to the heart of it.
    There are two or three things. No. 1, they have enjoyed a great
    deal of independence----
        Mr. Beyer. Right.
        Senator Bumpers. A lot of Government assistance, never had
    a better friend than Senator Cochran and me. I do not enjoy
    being on the opposite side of them for the first time really in
    my public career. I must say that I really have some reluctance
    to say this publicly, but I think their fears are largely
    unfounded.
        Now, California has allowed municipalities and, I think,
    co-ops to opt in or opt out of their program. There are some
    people who think we ought to do that here. I have always felt
    this thing will only really work well if you don't make any
    exceptions. I am not going to make an exception for TVA and I
    would not make an exception for the PMA's, municipalities, co-
    ops, or anybody else because I think everybody ought to have a
    chance to enjoy the benefits of competition, picking and
    choosing whom they want to provide them with electricity.
        I must say because of the political and other alliances I
    have had with the co-ops I just want to ask this question.
    Their principal concern, at least I think it is their principal
    concern, is, as I have always said, the guy that lives down at
    the end of the lane. Now INRON, for example, may come and pick
    off some of your industrial customers and the Arkansas Electric
    Co-Op through one of their regional co-ops supplies one of the
    biggest steelmills in the United States.
        The point is they have got a contract which the steelmill
    must honor, but at some point that is going to be up for
    renewal and the co-op may get it and they may not. That is
    competition. When you are in the steel or aluminum business,
    you cannot stay in business unless you compete and unless you
    have a competitive electric rate.
        The fear is that the big customers are going to be picked
    off, the little guy at the end of the lane is going to be
    left--this is the traditional case--and his rate is going to go
    up. Now I want to give you the opposite of that and then ask
    you to comment.
        No. 1, there are a few States that allow competing
    distribution lines to be built, but I do not think very many.
    In my State, you cannot just walk in and build a competing
    distribution line. Let us assume for a moment that that is not
    a problem, that people cannot come in and build a distribution
    line.
        Let us assume further that the steelmill, that you lose the
    steelmill and not just because of my bill, because as I said in
    my illustration the REA is having to compete for that business
    anyway, but at the end of that contract, say, they lose it.
    That takes a big chunk out of their revenue. They have
    generating capacity that they have gone in debt for to supply
    the steelmill. When the steelmill leaves, let us assume that
    they now have a 50-percent excess in generating capacity that
    they cannot use.
        Is everybody with me so far?
        [No response.]
        Senator Bumpers. The question then becomes, What are you
    going to do with the rest of your customers? How are you going
    to pay for it? Now, No. 1, under my bill as you know, and it is
    the only bill in the House or Senate either one that provides
    for stranded costs. I feel very strongly about that, because
    that just takes away a lot of arguments against the bill, but I
    also think it is right to do that.
        In my State under the bill, the co-op has the right to
    collect stranded cost. You know who sets the amount of stranded
    cost they are entitled to recover? They do.
        Let us assume that they wind up with a generating plant
    that they owe $2 billion and they lose $1 billion of generating
    customers, customers who would use that generating capacity, so
    they are stuck. They say, ``How do we get our $1 billion
    back?'' You get it through stranded costs. They set it
    themselves.
        That means that the steelmill or any other customer--now
    that steel would apply because that is a private contract--but
    most every customer in the co-op system if they leave the
    system and the co-op has stranded cost there will be a wire
    charge against the people who have left to make sure that
    people's rates do not go up until that stranded cost is
    collected.
        Do you follow me on what I am saying, Mr. Beyer?
        Mr. Beyer. Yes, sir; yes, I do.
        Senator Bumpers. Now, you still have the distribution line
    to the guy at the end of the lane. My question is, How is the
    co-op hurt? They are going to recover their cost of the lost
    generating capacity, and nobody else is going to be able to
    build a distribution line to somebody else that they are going
    to lose customers with. Why is that not a fair deal?
        Mr. Beyer. Well, Mr. Chairman and Senator Bumpers, my sense
    is that most people agree there needs to be some mechanism to
    recover that cost on generation and transmission facilities,
    high-cost stuff. When you get down to the distribution system
    where the folks are, where the meters are, the wire system, if
    you please, if you take a big load like a steelmill, for
    example, out of that system there is a huge revenue loss. You
    are suggesting that they will pick that up with a wire charge.
        The wire charge is going to be a big issue because I can
    tell you that the average cost to operate a distribution system
    in our loan portfolio--excluding power costs now, this is
    everything--is 2.9 cents a kilowatt hour. It ranges from, you
    know, probably 1.5 to 6 cents. Now, if that steelmill is on a
    6-cent line, there is going to be some negotiations.
        The Public Service Commission will probably get involved,
    and probably some lawsuits, because those entrepreneurs, those
    power marketers, that want that steelmill to make some profit
    are not going to be interested in what happens to that system.
    They are not going to want to pay a 6-cent wire charge.
    Therein, I think, lies the dilemma.
        I just want to go on and say that--and I am sure this is
    the administration's position--I really feel that competition
    in the electric industry would in the long run now, I am
    talking about, would be useful.
        I also feel very strongly that the high-cost-to-serve areas
    will continue to need some support. It simply costs more money
    to build a capital investment to build, per consumer to build,
    lines in high-cost-to-serve areas in rural America and it costs
    more to operate. We have some figures on that. It simply costs
    more. Not unlike the telecom, this universal service is to me
    one of the critical elements of deregulation in our portfolio
    along with the stranded investment as well.
        To me it is not such a huge issue. I mean, it is not a
    multibillion-dollar issue. With a little tweaking and a
    continuation of Federal policy that has been there for 60
    years, this thing could work. This thing could really work.
    There is going to be a lot of--you know, EEI is not going to
    want it. There is going to be all kinds of opposition to it.
    You know more about that than I do, really. In the end, if
    Congress sets up some financial support mechanism that does not
    have to be huge in my judgment, it will work. I think that will
    work.
        Senator Bumpers. Mr. Beyer, I want you to know that I want
    to be accommodating.
        Mr. Chairman, I will finish after this. I have taken too
    long, but obviously this is a big issue with me and I can talk
    about it for a long time. Let me just suggest that, if you
    will, along the lines we are talking about--because nobody is
    any more concerned--I have got more people at the end of the
    lane than just about anybody in the country, and I do not want
    those people to be penalized as a result of this legislation.
    If this legislation does not work for everybody, then it is no
    good.
        I believe strongly it will, but there is one other thing I
    might just say by way of digression, and that is: I try every
    time I speak to groups to disabuse them of the notion that they
    are going to have a 20-percent utility cut almost immediately.
    The truth of the matter is the benefits of competition are down
    the road. It is going to take a little while to flesh this
    whole thing out. Stranded costs are going to have to be taken
    care of. In the long run, I think it is the right thing for us
    to do.
        I am concerned as much about the REA as I am anything else.
    I wish I could dampen their opposition to this bill. I
    understand they have done their own thing for a long time, and
    I can understand that. If you would, just assume that I have
    asked you this question to be responded to in writing and
    include in your answer some of those figures you have said that
    you have. Because as I say, it seems to me that as long as the
    co-ops own the distribution lines and they get their stranded
    costs, there really should not be much left to recover in order
    to service the guy at the end of the lane. That is sort of the
    point I am trying to make.
        Mr. Chairman, thank you very much.

                             Rural Housing Programs

        Senator Cochran. Thank you very much, Senator.
        In the budget request for housing, there are proposals to
    increase funding for some of the housing programs and there is
    also a proposal for some legislative changes, one of which
    would require tenants to pay a monthly minimum rent to cover
    costs of the Rural Housing Service finance programs.
    Specifically, though, there are requests to decrease funds for
    a number of these housing programs: Section 515 multifamily
    housing programs, the Direct Housing Repair Loan Program, the
    Rural Housing Preservation Grant Program.

                              Multifamily Housing

        In a meeting I recently had with the Inspector General for
    the Department of Agriculture, he told me that there were
    serious problems of fraud and waste and abuse in some of these
    programs. He specifically mentioned the 515 program. Is the
    Department cooperating with the Inspector General to try to get
    to the bottom of some of these problems, and is that why you
    are requesting decreased funding for some of these programs?
        Ms. Thompson. Well, in a moment I would like to defer to
    Jan to talk about some of the specifics of our housing
    programs. We are more than cooperating with the Office of
    Inspector General. We are working as a partner with the Office
    of the Inspector General in particular to address the issue of
    equity skimming among 515 multifamily housing borrowers, and
    feel very strongly that this is an important program that for
    the most part is working well to serve some of the lowest
    income individuals and families in rural America.
        There are a few borrowers who are simply not adhering to
    the rules and are taking advantage of the program, and more
    significantly taking advantage of the people who live in the
    facilities and are to be the ultimate beneficiary of the
    programs.
        With regard to some of the lower requests, some of the
    decisions are made simply because we have to make some tough
    fiscal decisions that if we are serious about balancing the
    budget, and we are serious as I know you are, we just have to
    make some tough choices. That explains part of it. Jan Shadburn
    can answer some of the more specific questions regarding the
    specific programs that you have referenced.
        Senator Cochran. Thank you.
        Mr. Shadburn. Yes; Mr. Chairman, we have initiated several
    administrative changes over the last couple of years to
    strengthen the 515 program. We have also initiated the reforms
    that the Appropriations Committee enacted, and we have those in
    place.
        We feel very comfortable with the steps that have been
    taken to strengthen the program over the last couple of years,
    as well as initiating this OIG/USDA partnership to look at
    incidents of fraud, waste, and abuse. We have been working with
    the 12 States on the reforms that we have enacted with the OIG,
    and looking at creating a model that identifies the potential
    for fraud, waste, and abuse. Obviously no one is more
    interested in the future integrity of the 515 program than the
    Under Secretary and myself. We want to make sure that we do
    prevent fraud, waste, and abuse, as well as making sure that we
    continue to provide safe, sanitary, and affordable living
    conditions for our tenants.

            Alternative Agricultural Research and Commercialization

        Senator Cochran. The AARC program, as I understand it, is
    under a legislative mandate to phase out its loan programs into
    a totally private ownership situation. Could you tell us, Mr.
    Armstrong, what the timetable is for this phasing out or
    sunsetting of the program and whether or not you are prepared
    to meet those dates? Help us understand what the funding needs
    are going to be in view of the legislative timetable.
        Mr. Armstrong. Thank you, Mr. Chairman. Before I answer
    your question, I want to take a second and introduce Mr. Jeff
    Gain, the chairman of our board. As you know, AARCC is run by a
    largely private sector board of directors, and Mr. Gain serves
    as our chairman. He is my boss and I thought it would be nice
    to introduce him.
        In answer to your question, Senator, in the 1996 farm bill
    the mandate was that by the year 2001 we would present a plan
    to privatize. The actual privatization date was not set, but
    the plan is to be submitted by 2001. We are ahead of that date
    in terms of our preparation of the plan.
        At the moment, we are working through a number of scenarios
    that we would identify as likely endpoints for AARCC when we do
    privatize. Would we become a small business investment
    corporation? Would we put it up for sale in private markets?
    Would we become a government-sponsored enterprise? Those
    decisions are being worked through by the board after they
    identify what they think makes the best economic sense, then we
    will take it to the secretary and then bring it to the
    Congress.
        Now, in preparation for all of this, you know, AARCC has
    done a business plan where we have projected out our repayment
    schedule over the next 5 or 6 years. In fiscal year 1998, we
    project $300,000 in repayments. We are right on target for
    that. In fiscal year 1999, we are projecting we will recover
    about $1.7 million. If some of the notes--and which I feel
    certain they will--the repayment agreements that we have in
    place are paid off on time, we will be right on target for
    that.
        Now to get to the question of the appropriations to meet
    this repayment schedule, in determining the business plan we
    laid out appropriations through 2001. In fiscal year 1997, we
    actually fell short. The number that we placed in our business
    plan was $10 million. We received $7 million, but we still have
    been able through our investment strategy to recover the
    $300,000 in fiscal year 1998 that we were projecting would be
    derived from that fiscal year 1997 investment.
        My point is that the $10 million that is being requested in
    this year's appropriation, although it is $2 million less than
    what we had in our business plan, and the business plan was put
    together 3 years ago, it is less than what was in the business
    plan. We feel we can still track with the repayment schedule,
    and that is really the key to making sure that we are
    financially sound to privatize.
        Senator Cochran. What would be the projected outyear
    appropriations? Do you have those in your timetable? Will the
    $10 million level be funded for the balance until you get to
    2001?
        Mr. Armstrong. No, sir; not for the balance. Actually, we
    increased it in the business plan. Now that is strictly AARCC's
    Board of Directors' business plan, not anything to do with the
    administration's budget. In the business plan, we had projected
    $15 million for the next 3 years and then dropped it back down
    to $12 million for the final 2 years of the business plan.
        Senator Cochran. OK. Will the schedule for repayments
    continue to go up over that period of time in your view or in
    the business plan? What is contemplated with respect to
    repayments?
        Mr. Armstrong. In the business plan repayments, Mr.
    Chairman, as I said $300,000 is anticipated for fiscal year
    1998 and we are at--oh, already here at the first of March we
    are at $248,500, I think, is the actual figure. I am very
    confident by the end of the fiscal year we will have $300,000;
    next fiscal year is projected $1.7 million; in 2000 we are
    projecting $3.801 million; $7.9 million; and in 2002 $12.2
    million.
        As we have structured these investments, you know, some of
    them are based on a royalty repayment, some of them are
    predicated on a company undergoing an IPO or an acquisition. We
    have identified a core within the AARCC's portfolio that we
    feel is going to carry the bulk of this repayment. That is very
    typical of how the private sector venture capital fund works.
    You know, there is a certain core that really carries the rest
    of the investments forward.
        In total, we are looking at, just through the year 2002 we
    are looking at, almost $26 million anticipated in repayments. I
    do not anticipate a problem in meeting that sum, particularly
    given the strength of three or four of those core companies
    that we have identified to focus on.
        Senator Cochran. My impression of the program has been that
    it has worked pretty well. I know that you have had an
    opportunity to be, you know, more closely involved in assessing
    the quality of the performance. What is your impression overall
    of this program? Is it one that we should continue, or are we
    just throwing money away by supporting AARCC?
        Mr. Armstrong. Gosh, Senator Harkin is not here.
        Senator Cochran. I know, he has left. [Laughter.]
        Mr. Armstrong. Well, obviously, Senator, we do not feel
    that this is good money after bad. The real crux of the
    question, I think, is why isn't the public sector doing this?
    If this is such a great idea, why isn't the private sector
    doing this? I think the answer to that is the private sector is
    doing it, but we have had to show the way; in a sense, jump off
    the bridge.
        The idea of investing in agriculture to many in the private
    sector is simply an agricultural loans for major agriculture
    projects like irrigation or for farming equipment or for seed
    money to buy next year's seed or whatever. We are about value
    added. We are about investing in companies that use these raw
    materials from agriculture to process and manufacture things
    that then are not nonfood and nonfeed.
        Our long-term vision, our 100-year vision is really
    transforming the economy to one based on biology they derive
    from agriculture, as opposed to the one we have at present
    based on geology, which uses petroleum. The advantages are
    numerous. The environmental advantages, the life cycle cost
    analysis of our products versus something made out of
    petroleum, you cannot compete with our products because there
    is hardly any disposal issue. The private sector is just now
    beginning to realize that this biologically based economy makes
    some long-term sense.
        As I say, we have been the first to jump off the bridge in
    a sense in these investments, but as Senator Harkin pointed out
    we, we attract $3, $3.50, $4, private sector dollars, for every
    $1 of public money that we put in. More and more we are getting
    attention from the private sector. We are developing a network
    based on environmental investment funds, based on socially
    responsible investing funds.
        We are beginning to understand what AARCC does and we are
    using them as coinvestors. I think the momentum that the public
    sector has started, the momentum needs to continue. I think the
    2001, 2002, 2003 timeframe is appropriate, and then AARCC as an
    investment portfolio sunsets out of the Federal Government.
        The mission, however, the mission of this bio-based economy
    of job creation in rural America, and that is really what it is
    an engine of, if you use biologically-based materials because
    of literally the physical chemistry in the molecules, you have
    to process and manufacture close to the source. You cannot drag
    it out of the ground like we can with petroleum and bring it
    one-half way around the world and still make any money. As we
    use these biological molecules, then the jobs are going to have
    to go to where they are, and that is rural America.
        Ms. Thompson. Mr. Chairman, could I also answer that?
        Senator Cochran. Sure, Secretary Thompson.
        Ms. Thompson. The private sector does not traditionally
    invest in, whether it is venture capitalists or rural lenders,
    they simply do not invest in the kinds of development
    traditionally that we are investing in. There is tremendous
    potential for the small firms that we are partnering with, but
    there is even greater potential for the agricultural community
    and rural communities in general because of the technological
    development that comes as a result of these investments. I can
    say without any reservation, without any question that this is
    something that ought to be invested in, and that many rural
    communities will benefit down the road in the long run as a
    result of a very small investment.

                         Business and Industry Programs

        Senator Cochran. Mr. Watkins, I know that you and I have
    talked in the past about how can we do a more aggressive job
    and more active job of identifying needs for loans and
    technical assistance to develop business opportunities and job
    opportunities in rural communities and small towns. For a
    while, I was a little aggravated because it seemed like the
    administration was interested in having meetings, not in making
    loans. There were meetings being held all over the Mississippi
    Delta and my State and other States. You were traveling around
    and identifying folks to come talk about how we could help the
    people who need help in these areas.
        I think we have finally gotten around to seeing some money
    loaned and some businesses started and expanded. I wondered if
    you could give us a report on how you see the progress that has
    been made? Has it been good? Tell me what you are doing with
    the money that you are supposed to be awarding to these
    borrowers in rural communities.
        Mr. Watkins. Thank you very much, Mr. Chairman. You are
    exactly correct. The business activity in rural America has
    mushroomed beyond actually our own estimates. At the end of
    fiscal year 1997 in our flagship, the Business and Industry
    Loan Guarantee Program, we had more than $950 million in
    applications and preapplications pending. We only had a fund of
    about $815 million that we could finance business deals. We
    project a very similar activity in fiscal years 1998 and 1999.
        You know, we certainly cannot take credit. We can take
    credit for having gone around the country, as you said, and
    held all of those meetings, but a part of that was required in
    order for us, one, to get the lenders back to the table to
    participate in the program; and then, second, to alert
    businessowners and entrepreneurs in rural America that this
    opportunity existed for them to gain access to this kind of
    financing. It has worked. You know, we are creating and saving
    and maintaining a lot of jobs in rural America.
        As the Under Secretary mentioned in her testimony, you
    know, the poverty line and the wage rates and wage levels in
    rural America are certainly behind urban America. We are still
    financing traditional businesses that are located or that have
    always been located in rural communities. We are beginning,
    though, to focus on value added companies that are agriculture
    related, but that are adding value to their agricultural
    product.
        We are also interested in trying to attract high-technology
    companies, companies that are, in fact, affiliated with AARCC
    that are invested in by AARCC. We see those in the future as
    having some tremendous value and benefit to increasing the
    standard of living to Americans in rural America. The picture
    is very bright. You know, it is certainly not any brighter than
    the picture for the U.S. economy.

                               Mississippi Delta

        Senator Cochran. Do you have any statistics from the last
    fiscal year about how many loans were made or how many jobs
    were created so we will know what the money went for and what
    was the result of the loans that were made, Madam Secretary?
        Ms. Thompson. Yes; we do. We have funded projects totaling
    just under $160 million in the Mississippi Delta, of which
    about $75 million has been for water and waste disposal
    projects and about $80 million for business loans and grants.
    In fiscal year 1997, specifically we funded $65 million in
    various types of projects.
        In my testimony I made mention, in the written testimony I
    made mention, of the lowest unemployment rate in the Kentucky
    Highlands Empowerment Zone counties in recent history. You, of
    course, are very familiar with the warehousing facility in the
    zone in Mississippi and the number of jobs that are going to be
    created there.
        Senator Cochran. That would be good to have for the record,
    particularly as to what has happened this year too.
        Ms. Thompson. I will be happy to do that.
        Senator Cochran. Thank you very much. Secretary Glickman
    made a statement the other day which caught my attention. He
    said that the Department had awarded $1.1 million in rural
    business enterprise grants to 10 States to support business
    development in economically depressed areas. We only
    appropriated $40,000 for rural business enterprise grants, and
    we were wondering where the money came from to make up the $1.1
    million in grants. Do you think he misspoke, or do we have our
    numbers confused in my notes?
        Ms. Thompson. There was $41 million appropriated?
        Senator Cochran. Well, my notes say $40,000. I am not sure
    that is right, but anyway that is what my notes say.
        Ms. Thompson. I am sure what we did----
        Senator Cochran. For rural business enterprise grants.
        Ms. Thompson. I am sure what we did was within the law
    but----
        Senator Cochran. Yes, sure, I am not suggesting--I am just
    curious whether it was reprogrammed or whether maybe these were
    not grants. Maybe they were grants plus some guaranteed loans
    or something and he just grouped it all under one. It sounded
    like the Government was giving away $1 billion in grants for
    business subsidies, and we did not remember appropriating any
    money, but just a little bit of money for it.
        Ms. Thompson. I believe it was $41 million.

                            Research on Cooperatives

        Senator Cochran. OK. Thank you. There is also another item
    that I was going to ask about. There is an increase proposed in
    your budget request of $2 million in funding for research on
    cooperatives. I am curious to know what research is being done
    by the Department on cooperatives and what the increased amount
    of money will be used for? What will this extra funding
    accomplish; what you are going to find out when you do this
    research on cooperatives?
        Ms. Thompson. We actually have not been doing much research
    over the last several years, but because of opportunities that
    are developing as a result of the 1996 farm bill and the
    phasing out of the commodity program, there has been a
    considerable increase in interest. We are very strong advocates
    of the cooperative approach to business development and growth,
    because it allows small producers in rural America to gain
    advantage in the food chain in the marketing of their products,
    either through value added or through a marketing cooperative.
        There are also, we believe, some new kinds of opportunities
    in existence out there, and that is what the research will be
    used for, to determine in a very methodological way how, in a
    methodologically sound way how, we might better provide
    technical assistance and so forth to individuals and entities
    that are interested in pursuing the cooperative approach to
    business development and growth.
        Senator Cochran. Will this money be used for additional
    staff at the Department of Agriculture here in Washington to do
    the research, or would you contract out the research activity
    and actually pay some outside group to do the research? How do
    you propose to spend the money?
        Ms. Thompson. It will be, I believe, entirely through
    contracting. As you know, we are downsizing at the Department
    of Agriculture and don't expect that we will be adding new
    positions, and also believe that the kinds of research that
    need to be done can be done through contracting with
    universities that are involved in cooperative research already.

                              Submitted Questions

        Senator Cochran. We really do appreciate your assistance to
    our committee by being here this morning and providing the
    information that you have and by agreeing to respond to
    questions for the record. We have some additional questions
    that we will submit for the record so that we will fully
    understand the requests and what the needs are for these funds,
    and how the programs that we are funding are working, and
    whether changes need to be made in them.
        [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 business-cooperative service
        Question. The budget includes $200 million for guaranteed loans
    that will be directed to cooperative-owned businesses. How much demand
    does the agency have for these loans?
        Answer. Due to the fact that many cooperatives operate businesses
    that are incorporated we cannot give you an accurate indication of
    demand at this time from our automated management information system.
    We are, however, in the process of surveying our field offices to
    determine the demand. Results of that survey will be provided to your
    office.
        Question. In fiscal year 1998 and in the fiscal year 1999 budget
    request, the Rural Cooperative Development program grants were
    allocated $1.7 million. The National Cooperative Business Association
    claims that there is a need for $5 million to fund grant requests. How
    many grant requests does the agency have on hand and how many grants
    will be funded with the $1.7 million appropriated?
        Answer. In fiscal year 1997, the agency received 30 applications
    for the Rural Cooperative Development Grant program. Those applicants
    requested a total of $4.8 million. Eleven grants totaling $1.7 million
    were awarded. Unsuccessful applicants, and any other eligible
    applicants can apply for the fiscal year 1998 program which will be
    announced in the spring of 1998. The number of grants to be funded with
    the $1.7 million appropriation will not be determined until the
    applications are received and scored.
                     intermediary re-lending program (irp)
        Question. The fiscal year 1999 budget request proposes an increase
    in the intermediary relending direct loan subsidy. The explanatory
    notes says this increase is due to two factors--the cashflow model has
    been changed and the new methodology for calculating the subsidy cost.
    What is meant by ``the cashflow model has been changed?''
        Answer. We found an error in the Cashflow model we had been using
    and corrected it. The cash flow model was adding the two year grace
    period to the term of the loan when calculating the amortization
    schedule.
        Question. What is the backlog for the Intermediary Re-lending
    Program (IRP)?
        Answer. As of March 10, 1998, there are 31 IRP projects pending for
    a total of $25,650,000. The balance of remaining IRP fiscal year 1998
    funds available, including the amounts earmarked for the Pacific
    Northwest (PNW) and Empowerment Zones and Enterprise Communities (EZ/
    EC) initiatives, is $18,990,506. For fiscal year 1997, the number of
    loan requests unfunded at the end of the fiscal year, by State, was as
    follows:

     INTERMEDIARY RELENDING PROGRAM LOAN REQUESTS NOT FUNDED IN FISCAL YEAR
                                      1997
    ------------------------------------------------------------------------
                        State                        Number       Amount
    ------------------------------------------------------------------------
    Alabama......................................          1      $1,000,000
    Alaska.......................................          1         750,000
    Arkansas.....................................          1       1,000,000
    California...................................          1       1,000,000
    Hawaii.......................................          1         750,000
    Idaho........................................          4       3,150,000
    Illinois.....................................          1       1,000,000
    Kentucky.....................................          3       2,390,000
    Louisiana....................................          1       2,000,000
    Michigan.....................................          1         600,000
    Minnesota....................................          2       1,500,000
    Mississippi..................................          1       2,000,000
    Montana......................................          2         200,000
    North Carolina...............................          3       5,500,000
    New Hampshire................................          1         500,000
    New York.....................................          2       1,200,000
    Pennsylvania.................................          1       1,000,000
    South Carolina...............................          1       1,000,000
    Vermont......................................          1         500,000
                                                  --------------------------
          Total..................................         29      27,040,000
    ------------------------------------------------------------------------

        Question. What major changes have been made to this program?
        Answer. The new regulation was published in the Federal Register
    and became effective on February 6, 1998. The regulation for the
    Intermediary Relending Program (IRP) is renumbered and completely
    reorganized and rewritten for improved clarity. Major program changes
    include the following:
      --Definitions are provided for ``Agency IRP loan funds,'' ``IRP
            revolving fund,'' and ``revolved funds.'' Each section of the
            Regulation that imposes a requirement states whether that
            particular requirement applies only to Agency IRP loan funds or
            to everything in the IRP revolving fund (including revolved
            funds). This will result in the reinstatement of some
            requirements on loans made from revolved funds that had been
            determined to be unenforceable under the previous Regulation.
      --A new purpose statement is provided.
      --The program is made available in the Republic of Palau, the
            Federated States of Micronesia, and the Republic of the
            Marshall Islands.
      --Eligibility requirements are revised to provide that applicants
            with any outstanding delinquent debt to the Federal Government
            are not eligible.
      --State Offices are authorized to accept and process applications
            without the application having to go through the National
            Office. State Directors may delegate IRP responsibility to
            other offices under the State Director's jurisdiction provided
            the staff has had adequate training. The National Office will
            continue to allocate funds based on a quarterly national
            ranking of priority scores.
      --Eligible loan purposes have been expanded to include refinancing
            (under certain conditions), management consultant fees,
            educational institutions, commercial fishing, revolving lines
            of credit (under certain conditions), and hotels, motels, and
            other tourist and recreational facilities except golf courses,
            race tracks, and gambling facilities.
      --The definition of agriculture production is revised and exceptions
            to the prohibition against loans for agriculture production are
            eliminated.
      --Security requirements are revised to provide that no assignments of
            promissory notes or collateral documents will be obtained at
            loan closing. The documents must, however, be assignable. The
            Intermediary will agree to provide additional security or
            documents later if requested to protect the Agency's interest.
      --Guidelines are provided for rates and terms of loans to ultimate
            recipients. All rates and terms must be within limits
            established in the intermediary's work plan.
      --Loan ceilings are revised to provide that, subject to certain
            conditions, intermediaries may receive initial loans of up to
            $2 million and subsequent loans of up to $1 million per year to
            a total of up to $15 million.
      --The ceiling on the size of loans to ultimate recipients is raised
            to $250,000. However, no more than 25 percent of the
            intermediary's portfolio may be used for loans of over
            $150,000.
      --A requirement is added for the intermediary to establish a reserve
            for bad debts.
      --Loan disbursement procedures are revised to allow intermediaries to
            draw up to 25 percent of their loan at loan closing.
      --The contents of a complete application and work plan are revised to
            eliminate some unnecessary items; provide more detail on what
            should be covered regarding relending plans; add certifications
            regarding debarment, Federal debt collection policies, and
            lobbying; provide goals, strategies, and anticipated outcomes;
            provide information on technical assistance available to
            ultimate recipients; and provide for streamlined applications
            for subsequent loans.
      --The priority scoring system is revised by reducing the number of
            points for other funds, adjusting the threshold for points
            based on service area income compared to the poverty line,
            adding a category of points based on service area income
            compared to statewide income levels, adding a category of
            points for service to under represented groups, and providing
            additional guidance regarding justification for Administrative
            points.
      --The frequency of required reports from intermediaries is adjusted
            to quarterly during the first year and until all Agency funds
            have been advanced, then semiannually unless there are
            servicing problems.
        Question. Please provide information on the performance of the IRP
    to date, by fiscal year.
        Answer. The following chart provides the performance of the IRP to
    date by fiscal year.

                  INTERMEDIARY RELENDING PROGRAM--ALLOCATIONS/LOANS/OBLIGATIONS SINCE PROGRAM INCEPTION
    ----------------------------------------------------------------------------------------------------------------
                                                                                                          Number of
                                                                                                             jobs
                                                              Number of      Amount       Average loan     created/
                   Fiscal year                  Allocation      loans       obligated        amount       saved over
                                                                                                           life of
                                                                                                           loan \2\
    ----------------------------------------------------------------------------------------------------------------
    1988 \1\................................     $14,000,000          9     $13,990,000      $1,544,444       11,890
    1989....................................      14,000,000         13      13,625,980       1,048,152       11,580
    1990....................................      19,135,000         15      19,050,000       1,270,000       16,190
    1991....................................      32,500,000         28      32,499,540       1,160,698       27,625
    1992....................................      32,500,000         35      32,500,000         928,571       27,625
    1993....................................      32,500,000         42      32,500,000         773,809       27,625
    1994....................................      77,365,918         71      77,365,918       1,089,661       65,760
    1995....................................      85,153,646         81      85,153,646       1,051,279       72,380
    1996....................................      37,638,655         47      37,638,655         800,822       31,990
    1997....................................      37,155,765         53      37,155,765         701,052       31,580
                                             -----------------------------------------------------------------------
          Totals............................     381,948,984        394     381,479,504         968,222      324,245
    ----------------------------------------------------------------------------------------------------------------
    \1\ Fiscal year 1998 was the first year the new program was implemented as a result of the 1985 Farm Bill
      authority.
    \2\ Historically, other funds have been leveraged to assist borrowers at the rate of $3.75 for every dollar of
      IRP assistance. Over the 30-year life of an IRP loan, for each $4,000 of initial IRP program funding, a total
      of 3.4 jobs will be created/saved.
    As of December 31, 1997, no loans are delinquent under the current IRP Program which was authorized by the 1985
      Farm Bill. However, there are delinquent loans under the old Rural Development Loan Fund (RDLF) Program that
      were inherited from HHS, which makes the total delinquency rate below 1 percent.

                                 rural electric
        The fiscal year 1999 budget proposal signals a shift in Rural
    Utilities Service (RUS) programs from the highly subsidized direct 5
    percent and municipal rate electric loans to direct Treasury rate
    electric loans at an interest rate that is tied to the Government's
    cost of money. This proposal would result in an additional $400 million
    in available loans to consumers. This proposal would require
    legislation, I understand.
        Question. Instead of requesting a new program, the Administration
    can propose to simply increase the request for direct Federal Financing
    Bank (FFB) loans. Why did the you not request an increase for direct
    FFB loans?
        Answer. The proposed Treasury rate program would differ somewhat
    from the FFB program. First, the FFB program is a loan guarantee
    program; that is, RUS guarantees loans made by FFB. The Treasury rate
    program would be a direct loan program in which the borrower deals with
    only one federal agency. RUS would administer all phases of the
    program, as it does with the hardship and municipal rate programs. The
    Treasury rate program would, therefore, be a more customer friendly
    financing source for RUS borrowers.
        The Treasury rate program would also be a less costly alternative
    to RUS borrowers. FFB interest rates reflect Treasury's cost of money
    plus one-eighth of one percent (0.125 percent). Under the proposed RUS
    Treasury rate program, this one-eighth of one percent would not be
    added thereby reducing the interest rates to RUS borrowers.
        Question. Why can't you use these FFB funds, along with the
    transmission and generation loans? Why are distribution borrowers
    reluctant to use the FFB program?
        Answer. The Treasury rate program is intended to supplement, not
    replace, the FFB program. FFB offers a complex range of financing
    options that many borrowers, especially smaller distribution borrowers,
    find confusing. In addition, FFB's former reluctance to allow borrowers
    to refinance high interest loans has disillusioned some borrowers.
    Although current law now provides for refinancing of FFB loans, many
    borrowers believe that dealing with FFB represents an unnecessary
    complication. In contrast, the Treasury rate program would offer
    borrowers a simple, streamlined financial tool. By offering a wider
    range of financing options, the RUS program becomes more flexible and
    more responsive to the constantly evolving electric utility industry.
        Question. Are any costs associated with this legislation in budget
    authority or outlays?
        Answer. The cost associated with this legislation is $840,000 in
    budget authority to support a lending level of $400 million. The
    subsidy rate for this program would be very low, only 0.21 percent.
        Question. Should the authorizing committee decide not to pass this
    proposed legislation, what would the fiscal year 1999 estimate be to
    meet the current demand for direct electric loans?
        Answer. The estimates to meet the current demand for direct
    electric loans are $7.172 million in budget authority to support a
    lending level of $55 million for hardship rate loans, and $56.940
    million in budget authority to support a lending level of $650 million
    for municipal rate loans.
        Question. How many loans will be supported with a loan level of
    $400 million?
        Answer. Approximately 80 Treasury rate loans would be supported by
    a loan level of $400 million.
        A provision in the Balanced Budget Act of 1997 states that the
    surcharge on the Treasury's Federal Financing Bank (FFB) loans is to be
    deposited in the RUS account held by the Treasury and used to finance
    the cost of the guaranteed loans for electricity and
    telecommunications.
        Question. Why is the Administration proposing to implement this in
    fiscal year 1999 when you had the authority to do it fiscal year 1997?
        Answer. Legal issues arose concerning the appropriate
    implementation of the enacting legislation. The Administration is in
    the process of resolving these issues for implementation in fiscal year
    1999.
        Question. In a GAO report it was suggested that RUS should use a
    repayment rate of no less than 100 percent to control the vulnerability
    to losses on guaranteed loans. What percentage of guarantee does the
    RUS use for these loans? Why?
        Answer. A report entitled ``Rural Utilities Service: Opportunities
    to Operate Electricity and Telecommunications Programs More
    Effectively'' issued by GAO in January 1998 notes, on pages 2 and 17-
    18, that RUS guarantees 100 percent of FFB loans, and that some rural
    development programs reduce their exposure risk by guaranteeing less
    than 100 percent of a loan. RUS' risk would not, however, be reduced by
    lowering the guarantee percentage. As the report goes on to note, on
    page 2, since FFB is a part of the Treasury Department, the ``risk to
    the federal government as a whole would not be reduced if the FFB
    continues to be the sole source of loan funds.''
        Traditional lending practice may suggest that a loan should be
    guaranteed for less than 100 percent to help ensure that the lender is
    diligent in its loan processing and servicing because a portion of its
    own funds would be at risk. In the case of FFB loans, however, RUS
    performs virtually all processing and servicing functions, while FFB
    establishes the terms and conditions of the loan. Reducing the amount
    of the guarantee would, therefore, have no practical effect on FFB's
    vigilance.
        The subsidy rates for fiscal year 1999 seem to be higher than for
    fiscal year 1998, yet interest rates decreased.
        Question. Can you explain the reasons for this increase?
        Answer. Most of the increase in subsidy rates for electric and
    telecommunications programs can be attributed to a change in the
    methodology used in calculating the subsidy rate. The change is the
    direct result of the Federal Credit Reform Act of 1990 being amended by
    the Balanced Budget Act of 1997. The 1997 Act requires that the
    Treasury discount rate utilized to calculate the subsidy be the same
    for all cash flows, regardless of whether the loan disbursement is made
    in the budget year or in subsequent years. In the past, the Treasury
    discount rate utilized in calculating the subsidy rate could be
    different, based upon Office of Management and Budget (OMB) Economic
    assumptions, for each loan disbursement year.
        While interest rates have recently decreased, the interest rate
    used in this year's OMB Economic Assumptions is not lower than that
    used last year. The OMB Economic Assumptions used to calculate fiscal
    year 1999 subsidy rates were based upon a Treasury discount rate of
    6.11 percent for 20-year plus loans regardless of when the loans were
    disbursed. The fiscal year 1998 subsidy rates were based upon a
    Treasury discount rates of 6.1 percent for first year disbursements,
    5.76 percent for second year disbursements, 5.48 for third year
    disbursements, and 5.24 percent for fifth year and all later
    disbursements for 20-year plus loans.
        Question. How does this new calculation affect the program level
    and loan subsidy for the electric and telecommunications programs?
        Answer. This change in the calculation methodology has a greater
    affect on loan programs that have low disbursement rates in the first
    year and/or slower annual disbursement patterns. The electric and
    telecommunications programs experience both; therefore, the impact is
    more clearly evident and is less likely to be offset by other technical
    assumptions.
                            rural telecommunications
        The Economic Research Service (ERS) is requesting an increase of
    $200,000 for an interagency research activity with USDA's Rural
    Utilities Service (RUS) and the Department of Energy (DOE) to expand
    Research, Education and Economic's (REE) capacity to assess the
    potential impacts of electric utility deregulation.
        Question. Will this project be completed in fiscal year 1999, or do
    you anticipate funding requests in future fiscal years?
        Answer. We expect that ERS will be asked to extend its research on
    issues associated with electric utility deregulation for one additional
    fiscal year beyond 1999.
        Question. Will RUS and DOE fund any portion of the research
    project? If so, how much is being provided by each agency? If not, why?
        Answer. DOE is not funding any portion of the research project
    beyond its commitment to provide a series of model runs, using its
    Policy Office Energy Modeling System (POEMS) computer model, to provide
    input into the analytic framework being developed by ERS. RUS is
    currently exploring options that may allow RUS to contribute
    financially to the project.
        Question. What will be the role of each agency in this project?
        Answer. DOE has committed to provide ERS with the output of several
    model runs of its POEMS model using ERS developed scenario assumptions.
    DOE has not yet provided the requested model runs because it is still
    calibrating its POEMS model. RUS has made operational and trade area
    data on rural electric cooperatives available to ERS.
        The fiscal year 1999 budget request cuts the Rural Utilities
    Service (RUS) 5 percent hardship telecommunications loan program from
    $75 million to $50 million. In the President's budget request for
    fiscal year 1998, the program was cut from $75 million to $40 million.
    The other loan programs were left intact.
        Question. How much total backlog in loan requests exists for this
    program?
        Answer. As of March 1, 1998, hardship loans approved totaled $65.1
    million, with an additional $61.5 million in applications on hand. With
    an authorized lending level in fiscal year 1998 of $75 million, we
    estimate that, based upon the number and amount of applications
    currently on hand and anticipated by the end of the fiscal year, the
    hardship program will have a backlog--or excess demand over available
    funding--of $79 million at the end of fiscal year 1998.
                                rural telephone
        The fiscal year 1999 President's budget request also proposes that
    the Rural Telephone Bank (RTB) become a performance-based organization
    ``to establish its financial and operational independence prior to its
    being privatized within ten years.''
        Question. The Administration has proposed in the last two fiscal
    years to privatize the RTB. Why has the Administration changed its
    position and now proposed to make the RTB a performance-based
    organization before it is privatized?
        Answer. We became concerned with the Bank's ability to make an
    immediate transition to a private entity given deregulation of the
    telecommunications industry. We chose a more gradual approach with
    privatization to occur within ten years. During this period we expect
    full retirement of the government's investment of just under $600
    million, if the limit on retirement of this debt is removed by the
    Congress.
        Question. Does this require legislation?
        Answer. Establishing the Bank as a Private Base Organization (PBO)
    would require legislation. RUS would craft legislation to fit the
    Bank's needs. Once established, the Bank could pursue privatization
    efforts while still under the U.S. Department of Agriculture (USDA)
    umbrella. As the proposed budget language stated, the Bank would hire
    its own Chief Executive Officer (CEO) and Chief Financial Officer and
    begin to take independent responsibility for its operations, acting
    more like a private corporation than a government agency. As a PBO, the
    Bank would ``enjoy'' a less restrictive operating environment than its
    current organizational structure provides. A primary reason for
    establishing a PBO is to foster the more efficient operation of a
    government agency performing a public purpose. One of the key
    qualifications to becoming a PBO is the ability to generate cash flow.
    The PBO status is a way for the government to increase operating
    efficiency by allowing certain exemptions from government rules; yet at
    the same time, maintain control over the function the agency is
    performing. For most government agencies, becoming a PBO is a permanent
    status. However, for the Bank, it is a stepping stone to privatization.
    At the direction of the CEO, the Bank would focus its efforts on
    becoming a fully private entity within ten years while fulfilling its
    mission of providing financing for rural telecommunications
    infrastructure. PBO status will heighten the goal of privatization and
    provide a platform for the Bank to structure itself for complete
    privatization.
        Question. Does this proposal result in budgetary savings? If yes,
    how much?
        Answer. If the Bank were able to use its cash reserves in the
    liquidating account to pay administrative expenses and cover loan
    subsidies, those amounts would not require appropriations as they do
    now. Federal Credit Reform currently limits the use of those funds in
    the liquidating account to meet advances on loans obligated prior to
    fiscal year 1992 and to pay expenses associated with those loans, i.e.,
    debt service to Treasury, dividends to shareholders, and retirement of
    government stock.
        Question. Will the government's Class A stock still be repaid?
        Answer. To transition the Bank from a government agency/PBO to a
    fully privatized entity within ten years, as the proposed budget
    states, all of the Class A stock of the Bank must be retired.
        Funding for the RTB's loan subsidies and administrative expenses
    are proposed to be paid for by transferring funds from unobligated
    balances in the bank's liquidating account.
        Question. Would this proposal not affect the bank's solvency and
    ability to privatize?
        Answer. As of December 31, 1997, the liquidating fund balance
    totaled $493 million. Principal outstanding on loans in the liquidating
    account totals more than $1.2 billion while Treasury debt associated
    with those loans--excluding A stock--totals only $316 million. Last
    year, the budget authority required for a $175 million loan program was
    $3.7 million. The use of liquidating account funds for administrative
    expenses and loan subsidies would only decrease slightly, and
    temporarily, the amount of funds available for retirement of Class A
    stock and other purposes. The repayment of principal on loans in the
    liquidating account and associated interest on those loans in future
    years will enable the Bank to generate sufficient capital to privatize
    on its own.
        Question. How were subsidy costs of loans and administration
    handled last year? Does this proposal save money?
        Answer. The funds were appropriated in fiscal year 1998. The
    proposal is to use funds in the liquidating account in fiscal year
    1999.
                             rural housing service
        The fiscal year 1999 budget request proposes an increase of $42
    million for rural rental assistance, from $541 million to $583 million.
        Question. What is the breakdown of funding for rural rental
    assistance for renewal of contracts, new construction, and for repair
    and rehabilitation?
        Answer. The following chart provides a breakdown for the projected
    use of rental assistance in fiscal year 1999:

                                                 RENTAL ASSISTANCE CHART
    ----------------------------------------------------------------------------------------------------------------
                                                                         Existing         Number
                              Type of unit                               demand in     requested in     Total funds
                                                                           units           units         requested
    ----------------------------------------------------------------------------------------------------------------
    Renewals........................................................          37,516          37,516    $551,898,000
    New construction:
        515.........................................................           1,667           1,003      12,868,000
        Farm labor..................................................             658             658       8,442,000
    Servicing.......................................................         100,000  ..............  ..............
    Rehab...........................................................             326             292       4,289,000
    Debt forgiveness................................................             401             401       5,900,000
                                                                     -----------------------------------------------
          Total.....................................................         140,568          39,870     583,397,000
    ----------------------------------------------------------------------------------------------------------------
    Note.--This chart assumes that all renewals and Farm Labor new construction will be funded. Funding for Section
      515 new construction and rehabilitation units will be limited. At this time, we estimate that the $17 million
      available will be split 75 percent towards new construction and 25 percent towards rehabilitation needs.

        Question. How does the difference in the subsidy rate and the
    separate line items for single-family credit sales of acquired property
    and multi-family credit sales of acquired property affect these loans?
    Does this save money in fiscal year 1999 and other future fiscal years?
        Answer. Our proposal to have separate line items for single family
    and multi-family is designed to make the credit sale programs easier to
    administer. Combining these two programs with different subsidy rates
    and providing a single cohort is not typically done. With more closely
    related program, this would be feasible. Operating this program though
    two accounts will better serve the Agency in addressing portfolio
    management.
        Question. The fiscal year 1999 budget request proposes a decrease
    of $1.8 million in rural housing preservation grants which will support
    2,500 units. At the fiscal year 1998 appropriated level, how many units
    are supported? Why does the Administration propose to cut these grants
    which are used for elderly housing?
        Answer. For fiscal year 1998, the Housing Preservation Grant (RPG)
    Program was appropriated $10,820,000. The Agency estimates that 2,500
    units will be repaired/rehabilitated.
        The Administration believes the fiscal year 1999 request balances
    the high demand for all the housing programs while striving to maintain
    financial restraint necessary to balance the budget.
        Question. The fiscal year 1999 budget request proposes legislation
    to allow Section 502 single-family housing direct loan borrowers to
    graduate to guarantee financing, and then ultimately to strictly
    conventional private financing. The projected subsidy rate for the
    program in fiscal year 1999 is negative, so no additional subsidy
    budget authority is required. However, would this program cost in out
    years? If so, what subsidy appropriations are projected to be required?
        Answer. We do not anticipate future budget authority costs from
    this proposed legislation. Section 502 Direct borrowers who use the
    Guaranteed Rural Housing loan program as a vehicle for refinancing will
    generally be seasoned home owners with adequate loan repayment
    histories. We would expect defaults for these established borrowers to
    be minimal.
                      rural community advancement program
        The 1996 FAIR Act authorizes the Rural Community Advancement
    Program (RCAP) which has 5 funding streams that include a rural
    communities facilities account, rural utilities account, rural
    business--cooperative account and the federally recognized Indian tribe
    account.
        Question. Do Federally recognized Indian tribes not already qualify
    for these programs under the RCAP? How would the 3 percent reserve
    account be administered?
        Answer. Federally recognized Indian tribes do qualify for these
    programs. The reserve account would be administered by the National
    Office. Tribes would submit applications through the State Offices and,
    following review for eligibility, the applications would be submitted
    to Washington for decisions.
        Question. How much funding has been received by Indian tribes
    during the past three fiscal years? What percentage of the total RCAP
    program dollars will the set-aside receive for each fiscal year?
        Answer. Over the past three fiscal years Indian tribes have
    received $14,138,798 in Water and Waste loans, $13,753,307 in Water and
    Waste grants, $11,757,806 in Business and Industry guaranteed loans,
    $1,313,860 in Rural Business Enterprise grants, and $23,381,730 in
    Community Facilities loans, totaling $64,345,501, which is roughly
    equivalent to 3 percent of the RCAP budget authority over the same
    period.
        Question. How much funding have the Mississippi Choctaw Indians
    received in the past two fiscal years?
        Answer. During the past two fiscal years the Mississippi Choctaw
    Indians have not received any funding.
        Question. Is there a demand and/or need from the Rural Development
    State Directors to transfer funds between the different funding
    streams, rural community facilities, rural utilities, and rural
    business and cooperative service? If so, between which accounts would
    they most want to transfer?
        Answer. There is a need by the State Directors to transfer funds
    between the different funding streams to manage their program monies
    more efficiently and to address more appropriately the unique and
    changing needs in each state. It is not expected that transfers of
    funds would be used frequently, but the ability to do so would be very
    useful when it is needed in a state. The amounts of funds transferred,
    and the direction of the transfers, would vary from year to year
    depending on the needs in the states.
        The Administration did not propose in the fiscal year 1999 budget
    request to earmark funding for Rural Alaskan Villages for water and
    waste grants. In fiscal year 1998, the Committee earmarked $15 million
    for direct water and waste loans for Alaska. The fiscal year 1999
    budget also proposes a decrease of $7.2 million for water and waste
    grants.
        Question. Should the Committee again earmark funding for direct
    water and waste loans for the Rural Alaskan Villages, would the funding
    for water and waste grants need to be increased rather than decreased
    as the fiscal year 1999 budget proposes to supplement loans? If so, how
    much?
        Answer. In the event that the Committee earmarked funding for
    direct water and waste loans, funding for water and waste grants would
    not need to be increased.
        Question. How much funding would Alaska receive if no funds are
    earmarked? Why did the Administration propose not to earmark this
    funding for Alaska?
        Answer. If no funds were earmarked Alaska would receive a state
    allocation of about $1.8 million in direct water and waste loan funds
    and approximately $1 million in grants. The policy of the
    Administration is to eliminate all earmarks that do not have a specific
    statute requiring an earmark in the appropriation language or those
    that are not included in specific policy initiatives.
      rural development--lower mississippi delta development center, inc.
        The Department has urged the Lower Mississippi Delta Development
    Center (LMDDC) to become involved with the Enterprise Zone/Empowerment
    Community program and to become partners with these Federally approved
    communities of the Delta to work on a variety of regional efforts in
    order to attract non-government funds.
        USDA has provided LMDDC with funds for three separate fiscal years
    and this has allowed the Center to stay open and to work on a variety
    of agricultural and rural development activities. This money has been
    given to the Center at the end of the fiscal year, once USDA has
    evaluated and allocated its funds. Because of limited funds, the Center
    wants assurance of this continued funding and is asking that report
    language be included in the fiscal year 1999 committee report to
    instruct USDA to include approximately $200,000 for the Center.
        Question. How much money has USDA provided to the Center in past
    fiscal years? Was this grant money?
        Answer. USDA has provided approximately $400,000 since 1994 to the
    Center for the purposes of updating the socio-economic characteristic
    data contained in the original report on the Lower Mississippi Delta,
    to develop a data base of development success stories throughout the
    Delta that could be utilized by other communities, and to retain staff
    of the Center to permit them to continue to work on behalf of the
    residents of the Delta area. The funds were not grant money, but rather
    salaries and expense monies and were provided to the Center through a
    cooperative agreement.
        Question. How did the Center use this funding?
        Answer. The bulk of the funding was used to update the socio-
    economic data that was contained in the original report on the Delta
    which primarily reflected the 1980 Census information.
        Question. What sort of work is USDA currently doing with the
    Center? What does it plan to do in the future?
        Answer. The most important role of the Federal government is to
    help create an environment that attracts private investment and creates
    jobs. This is what we are attempting to accomplish with the Empowerment
    Zones; providing tax incentives and infrastructure investment as well
    as directed job training, education and counseling and a variety of
    other services through a well orchestrated plan with specific
    objectives directed by local residents. We have also recently been
    working with the Lower Mississippi Delta Center and the EZ/EC
    designated areas to get them to work together to improve the region. A
    partnership agreement will be signed in March to effect this
    cooperation.
        Question. How much funding will the Center need to help with these
    projects?
        Answer. The Center has indicated that it may need as much as
    $200,000 over the next two years.
        Question. Has the agency included funding for the Center in the
    fiscal year 1999 budget request? If not, why?
        Answer. The budget constraints under which we are working do not
    provide the flexibility to fund activities such as the Center's
    operations and therefore no funds were requested.
                             salaries and expenses
        Question. In what areas of Rural Development does the decrease of
    150 staff years occur in the fiscal year 1999 budget request, and how
    will those reductions be accomplished?
        Answer. The reductions occur throughout the Mission Area; 80 in the
    Rural Housing Service; 49 in the Rural Utilities Service; and 24 in the
    Rural Business-Cooperative Service. The reductions will primarily come
    from administrative areas rather than program areas. We anticipate that
    administrative convergence will provide the reductions.
        Question. The President's request for Salaries and Expenses for
    fiscal year 1999 is significantly higher than the level enacted for
    fiscal year 1998 which was close to the fiscal year 1997 level. With
    streamlining and the conversion of loans to a new servicing system, one
    would assume the administrative expenses should be decreasing. Why is
    there such a significant increase in cost?
        Answer. The request for Salaries and Expenses for Rural
    Development, $527 million, is considerably higher than the level
    requested and appropriated for fiscal year 1998. There are several
    reasons for this. First, because of all of the organizational changes
    that have occurred within Rural Development over the past few years, we
    have lost a disproportional share of the lower level employees, even
    though we have used every means available, to keep them. This has
    caused our average salary costs to increase significantly and while
    this is a situation I would not have preferred it is something that has
    to be dealt with because the alternative is no better. If sufficient
    funding is not available for salaries and expenses then it is necessary
    to execute a reduction-in-force (RIF) to remain within available
    funding. This action would only exacerbate the problem because a RIF
    will, in-turn, eliminate additional lower level employees driving the
    average salary cost even higher. The vast majority of these staff are
    in our field offices and are primarily responsible for delivering the
    programs. We need to keep them employed.
        Another reason is the need for investment in Information
    Technology. In fiscal year 1998, we decided to defer investment in
    information systems and training in order to maintain our employment
    level. We cannot afford to make the same decision in fiscal year 1999.
    Information systems and training are means through which we can realize
    additional efficiencies in future years and we need to maintain our
    investments in these areas. Converging the administrative systems of
    the three county based organizations into one and completing the move
    into the service center which will house the three mission areas can be
    accomplished if we have a common computing environment. Further, in
    order to continue to function, we must maintain our legacy systems
    while we are building new systems to replace them and we need to
    complete the Year 2000 assessments and corrections where necessary.
        The Department of Agriculture is in the midst of converging the
    administrative system of the three county-based organizations into one
    system.
        Question. What is the status of the administrative convergence? How
    will this affect Rural Development?
        Answer. The Secretary announced his decision on March 16, 1998 to
    proceed with administrative convergence, implementing the plan
    developed by the three Under Secretaries. A manager of the planning
    effort has been selected and the planning will commence shortly. The
    Secretary is still committed to having a new administrative structure
    in place on October 1, 1998.
        Question. Are there any savings in the fiscal year 1999 budget
    related to administrative convergence?
        Answer. There are no savings reflected in the fiscal year 1999
    budget attributed to administrative convergence but, from the
    perspective of Rural Development, consolidation of the administrative
    functions at headquarters and in the field will provide the flexibility
    needed to ensure an effective program delivery system remains in place.
        Question. Why does the fiscal year 1999 budget request propose a
    significant increase in the Rural Housing Services' salaries and
    expenses account amounting to $15.2 million?
        Answer. The Rural Housing Service has by far the largest staff of
    the three agencies, so pay costs will necessarily be large. In
    addition, the account includes the management initiatives for the
    mission area. For instance, $8.5 million of the total covers
    information technology needs, including the $1.5 million mentioned
    later regarding Rural Utilities service information technology. The
    balance of the increase is salary related.
        Question. The fiscal year 1999 budget request proposes an increase
    of $1.5 million for the Rural Utilities Services' information
    technology. This increase will be used for software development for the
    century date change, among other things. Will this funding proposed in
    the fiscal year 1999 budget for the computer system century date change
    complete these efforts?
        Answer. Yes. The funding proposed in the fiscal year 1999 budget
    will complete Rural Development's Year 2000 conversion efforts.
                     government performance and results act
        Question. How are the agency's annual performance goals linked to
    the agency's mission, strategic goals, and program activities in its
    budget request?
        Answer. Rural Development established one strategic plan which
    supports the three agencies in the mission area. The Rural Development
    Strategic Plan contains a mission statement which encompasses the role
    of the entire mission area and three Goals, one for each agency. It
    also contains four broad Management Initiatives which support the
    entire mission area. By having a Goal for each agency, alignment with
    the existing budget structure, which is agency-based, is achieved. The
    Annual Performance Plan for the mission area consists of a Purpose
    Statement for the mission area, an Annual Performance Plan for the
    Management Initiatives, and separate Annual Performance Plans for each
    agency. The separate Annual Performance Plans for each agency
    facilitate the reconciliation of the Plan with the budget request. The
    Goals in the agency Annual Performance Plans, which align with the
    Objectives in the strategic plan, are supported by one or more
    quantifiable performance measures to be achieved during the fiscal
    year.
        Question. Could you describe the process used to link your
    performance goals to your budget activities? What difficulties, if any,
    did you encounter, and what lessons did you learn?
        Answer. Since the Goals and funding are by agency, and the
    performance measures are aligned to the Goals, there were no particular
    difficulties encountered. The primary challenge was determining how to
    aggregate the numerous programs included in the budget into reasonable
    Program Activities in the Annual Performance Plan. Many of the programs
    are used jointly when providing assistance, for example, grant programs
    are often combined with a loan to assist a community. Attempting to
    develop separate performance goals for both the grant and loan programs
    would be tedious and generally meaningless. We have instead aggregated
    performance goals along major program activities, i.e., single family
    housing, multi-family housing, water and waste, telecommunications,
    etc.
        Question. Does the agency's Performance Plan link performance
    measures to its budget? Does each account have performance measures?
        Answer. As indicated above, we do not have performance measures for
    each account since they are often used together to finance a project.
    We have aggregated the accounts into various program activities which
    result in a more meaningful expression of the expected impact on the
    public.
        Question. To what extent does your performance planning structure
    differ from the account and activity structure in your budget
    justification?
        Answer. Agency performance plans focus on the major programs that
    account for, by far, the bulk of the mission area's funding.
    Performance measures are not provided for all of the small programs and
    activities. Further, in some cases performance measures reflect
    achievements in similar programs and programs that are often used
    concurrently (i.e. certain loans and grants). We are continually
    refining the process as we learn from our experiences. Measures will
    change as we determine what best indicates the outcomes of programs and
    what is most useful for our management and monitoring purposes. For
    instance, in future submissions guaranteed and direct single family
    housing measures will probably be desegregated to describe more
    effectively our results in improving housing in rural areas.
        Question. Do you plan to propose any changes to your account
    structure for fiscal year 2000?
        Answer. Rural Development does not propose any changes to the
    account structure for fiscal year 2000.
        Question. How were performance measures chosen?
        Answer. Performance measures in the five-year strategic plan were
    developed over time through a series of drafting sessions involving
    major stakeholders and were then refined through reviews by mission
    area and other Departmental officials. Performance measures in the
    annual plans are based on measures in the long range plan but are
    limited to data that are currently available or will likely be
    available in fiscal year 1999.
        Question. How did the agency balance the cost of data collection
    and verification with the need for reliable and valid performance data?
        Answer. Existing data collection systems in place have been able to
    produce most of the information necessary to address performance
    measures which have been proposed. The mission area is considering
    changes to the data collection systems to allow the use of performance
    measures for which data is not currently available, provided the data
    is needed for purposes other than just reporting performance under the
    Government Performance and Results Act.
        Question. Does your plan include performance measures for which
    reliable data are not likely to be available in time for your first
    performance report in March 2000?
        Answer. Reliable data should be available for the performance
    measures included in the fiscal year 1999 Annual Performance Plan, for
    which the first performance report is due in March 2000.
        Question. What are the key performance goals from your fiscal year
    1999 Annual Performance Plan that you recommend this subcommittee use
    to track program results?
        Answer. Performance goals reflecting the themes from Rural
    Development's Strategic Plan would be the most useful to use to track
    results. These themes include leveraging, partnering, and directing
    resources to the weakest communities, and are consistent with the Rural
    Community Advancement Program (RCAP). For most programs we have
    developed a handful of measures that, together, describe the results of
    the program activity. Identifying only one measure for a particular
    program could lead to focusing too narrowly on only one facet of that
    program or activity.
        Question. In developing your Annual Performance Plan, what efforts
    did your agency undertake to ensure that the goals in the plan include
    a significant number of outcome measures?
        Answer. The development of outcome measures has been a significant
    challenge for the mission area. The limited size of our programs mean
    that there is not a National outcome which can be verified through
    existing data. The impact of our programs are on the individuals and
    communities who received assistance and on their immediate, surrounding
    community. Developing data to measure this impact is expensive for the
    agency and would have a significant reporting burden for the public. We
    have elected, instead, to use existing data, such as the number of
    loans made, to project the impact on the local community through the
    number of jobs produced using a recognized multiplier which currently
    exists. As we develop or enhance our systems in the future, we will be
    looking for opportunities to obtain better outcome data so long as the
    cost and impact are reasonable.
        Question. Do you believe your program managers understand the
    difference between goals that measure workload (output) and goals that
    measure effectiveness (outcome)?
        Answer. The mission area has conducted performance measurement
    training sessions for program managers and their staffs. They have
    developed an understanding of the difference between inputs, outputs,
    and outcomes.
        Question. What are some examples of customer satisfaction measures
    that you intend to use? Please include examples of both internal and
    external customers.
        Answer. A sample performance measure for external customers is;
    ``obtain feedback from Program Customers for: (applicable program). A
    sample performance measure for internal customers is; ``Reduction in
    program and EEO complaints backlog.''
        Question. How were the measurable goals of your fiscal year 1999
    Annual Performance Plan used to develop your fiscal year 1999 budget?
        Answer. The measurable goals in the Annual Performance Plan were
    not used to develop the fiscal year 1999 budget. The long lead time in
    the development of the budget required that the fiscal year 1999 budget
    be developed ahead of the Annual Performance Plan.
        Question. If a proposed budget number is changed, up or down, by
    this committee, will you be able to indicate to us the likely impact
    the change would have on the level of program performance and the
    achievement of various goals?
        Answer. The impact of budget number changes by the committee could
    be determined for those measures which are budget sensitive. The impact
    of some changes could not be defined, for example, the impact on
    customer service if staffing levels were reduced.
        Question. Do you have the technological capability of measuring and
    reporting program performance throughout the year on a regular basis,
    so that the agency can be properly managed to achieve the desired
    results?
        Answer. We are relying on existing data bases for most performance
    measures. We can, therefore, monitor performance during the year for
    most measures.
        The Government Performance and Results Act requires that your
    agency's Annual Performance Plan establish performance goals to define
    the level of performance to be achieved by each program activity set
    forth in your budget.
        Many agencies have indicated that their present budget account
    structure makes it difficult to link dollars to results in a clear and
    meaningful way.
        Question. Have you faced such difficulty?
        Answer. Yes. Because several of our programs are often used
    together to assist a customer, having performance measures for each
    budget account would result in a great deal of duplication or tedious
    sorting out of data to a level that is meaningless to the user.
        Question. Would the linkages be clearer if your budget account
    structure were modified?
        Answer. For GPRA reporting purposes, combining of similar accounts
    would be helpful.
        Question. If so, how would you propose to modify it and why do you
    believe such modification would be more useful both to your agency and
    to this committee than the present structure?
        Answer. Combining like accounts (those with the same basic purpose
    and customer) would result in a reduction in the number of accounts
    which both the agency and the Congress must manage. It would be easier
    for a third party to understand the budget document.
        Question. How would such modification strengthen accountability for
    program performance in the use of budgeted dollars?
        Answer. A modified account structure would not necessarily result
    in a strengthening of accountability.
        Question. Does your fiscal year 1999 performance plan--briefly or
    by reference to your strategic plan--identify any external factors that
    could influence goal achievement?
        Answer. The Performance Plan discusses extensively the potential
    impacts of external factors on goal achievement. The ability of the
    mission area to achieve the goals of its strategic plan can be impacted
    by a variety of factors beyond its control including macroeconomic
    influences, legislative and other regulatory changes, and reductions in
    funding.
        Question. If so, what steps have you identified to prepare,
    anticipate and plan for such influences?
        Answer. No steps have been defined as the identified external
    factors are beyond the control of the mission area.
        Question. What impact might external factors have on your resource
    estimates?
        Answer. Changes in legislative, regulatory, or funding levels will
    impact our ability to assist our customers. Significant changes in the
    economy will affect the amount of funds we have available, after
    considering Treasury's discount rate. Likewise, changes in the economy
    may impact our delinquency and loss rates.
        Question. Through the development of the Performance Plan, has the
    agency identified overlapping functions or program duplication? If so,
    does the Performance Plan identify the overlap or duplication?
        Answer. We have identified no overlapping functions or program
    duplication for the specific customers we have been mandated to assist.
        Future funding decisions will take into consideration actual
    performance compared to expected or target performance. Given that:
        Question. To what extent are your performance measures sufficiently
    mature to allow for these kinds of uses?
        Answer. To the extent that performance measures are based upon
    existing data bases, they are basically mature. Outcome-based measures
    which are not tied to an established data base will be much less
    reliable.
        Question. Are there any factors, such as inexperience in making
    estimates for certain activities or lack of data, that might affect the
    accuracy of resource estimates?
        Answer. The concept of impact or outcome-based data is very new and
    very little experience exists for relating the cost of such data to its
    usefulness.
        Question. Based on your fiscal year 1999 performance plan, do you
    see any need for any substantive revisions in your strategic plan
    issued on September 30, 1997?
        Answer. The current mission area strategic plan has been several
    years in development, clearly defines our priorities, and is adequate
    to meet our needs. While we have no plans for substantive changes, we
    are committed to reviewing it this year to ensure the recommendations
    from the Departmental civil rights activities are adequately included.
    At the time of that review there may be other areas in need of
    enhancement.
                                     ______

                    Question Submitted by Senator McConnell
                  rural community development venture capital
        The Rural Community Development Venture Capital Demonstration which
    is authorized in section 761 of the Federal Agriculture Improvement and
    Reform Act of 1996. Under this demonstration, the Secretary may
    designate ten organizations per year to establish and operate rural
    venture capital pools. Using federal guarantee authority, these rural
    venture capital programs will seek to encourage private sector
    investors in rural business enterprises. This is a very important
    demonstration. Economic Research Service reports indicate that there is
    a lack of investment or equity capital for rural businesses. Most rural
    businesses have neither the size nor the proximity to private sector
    investment company to attract much private sector equity investment.
        In August, 1996 USDA published in the Federal Register a notice of
    intent to publish regulations on the demonstration. Nothing has been
    published since that time.
        I have written, along with Senator Leahy, to the Secretary urging
    the Department to get regulations so that the Subcommittee may consider
    an appropriation for the program.
        Question. Please provide the Subcommittee with a status report on
    the regulations and a date certain for publication.
        Answer. This program is authorized as part of the Rural Community
    Advancement Program Rural Development Trust Fund in the 1996 Farm Bill.
    The Agency is considering options available for promulgating
    regulations to implement this program. As part of that process, an
    advanced notice of proposed rule making was published in the Federal
    Register on April 9, 1997, requesting suggestions for implementing this
    authority. Five comments were received and are being considered in the
    drafting of the regulation. The fiscal year 1998 Appropriations Bill
    does not appropriate funding for this program, and the President's
    fiscal year 1999 Budget does not request funding for this program.
    However, we are in the process of developing a proposed rule. We
    anticipate publication of the proposed rule by early calendar year
    1999.
                                     ______

                     Questions Submitted by Senator Bumpers
                               loan subsidy rates
        A couple of years ago, rising interest rates cut the program level
    of many rural development loan programs nearly in half. Last year
    Congress enacted legislation that helped avoid that problem by locking
    in the loan subsidy amount over a period of years. In addition, you
    state that lower interest rates will reduce the costs of these
    programs. Still, we see the subsidy rates increase for fiscal year
    1999. For example, $67 million in BA for the water and wastewater loan
    program in fiscal year 1998 provided a program level of $691 million.
    For fiscal year 1999, the budget increases the BA to $126 million
    (nearly double) but the program level only increases to $764 million
    (roughly 10 percent).
        Question. Please explain why the subsidy rate increase by this
    amount.
        Answer. Provisions in the Balanced Budget Act of 1997 changed the
    economic assumption requirements for subsidy calculations on all
    Federal credit programs. Previously, economic assumptions provided by
    OMB assumed a declining baseline of Treasury interest rates used for
    the present value calculations of loan subsidy rates. This declining
    interest cost baseline assumption drove down the subsidy rate for loan
    programs that are long term disbursers. Under provisions of the new
    law, Treasury interest rates are held constant and are based on actual
    Treasury rates from the current year.
        The water and wastewater loan program is a long term disbursing
    program, with loans expected to disburse over six or more years, and
    the bulk of the loan program level being disbursed in years two through
    four.
        OMB economic assumptions for the fiscal year 1998 President's
    Budget assumed a baseline of Treasury interest rates used for
    discounting the present value calculation of loan subsidy costs as
    follows: 6.16 percent for fiscal year 1998, 5.76 percent for fiscal
    year 1999, 5.48 percent for fiscal year 2000, 5.29 percent, for fiscal
    year 2001, and 5.24 percent for fiscal year 2002 and thereafter. The
    average Treasury rate of this forecasted baseline is 5.586 percent. OMB
    economic assumptions for the fiscal year 1999 President's Budget assume
    a constant baseline of 6.11 percent for fiscal year 1999 and
    thereafter. This is an increase of over one half of one percent from
    the average Treasury rate baseline assumed in the preparation of the
    fiscal year 1998 President's Budget and is enough of an increase to
    double the subsidy costs in fiscal year 1999.
        Question. What would the subsidy rate have been if the process of
    previous fiscal years had been used?
        Answer. We are unable to provide specific estimates of the subsidy
    rates, but it is reasonable to assume the rates would be lower than the
    rates used in the President's budget.
        Question. Were the subsidy rates in the fiscal year 1999 budget
    directed by OMB and if so, did USDA appeal these rates?
        Answer. These subsidy rates calculated for fiscal year 1999 were
    not directed by OMB. After the Balanced Budget Act of 1997 was passed,
    OMB and Agency officials realized that these new provisions in the
    Credit Reform Act would drive up subsidy costs, so we worked together
    to provide the budget authority necessary to offset these technical
    changes that were now required by law without exposing these loan
    program levels to substantial cuts.
                   rural community advancement program (rcap)
        The 1996 Farm Bill created the RCAP with funding flexibility
    greater than provided in the appropriations acts. The Farm Bill
    envisioned USDA being able to transfer certain funds between rural
    development programs. This subcommittee has not provided you that full
    amount of flexibility. Still, you request this ability again for fiscal
    year 1999.
        Question. Had you been granted full flexibility in fiscal year 1997
    or fiscal year 1998, how would you have administered the programs
    differently?
        Answer. It is impossible to predict how the funds would have been
    used differently if we had been granted full flexibility to transfer
    funds under RCAP. With the full authority to transfer funds, the State
    Directors would have been afforded the flexibility to respond to their
    unique, changing needs and circumstances.
        Question. With the exception of natural disasters, what events have
    occurred that would have led you to shift funds from accounts where you
    had allocated the funds in the first place?
        Answer. One example of an unanticipated occurrence was the dramatic
    increase in demands for the B&I program that appeared subsequent to the
    publication of revised regulations on December 23, 1996. Since that
    date demand for the B&I program has increased by 300 percent.
        Question. In other words, if you wanted more funds for water and
    sewer, why didn't you allocate them to that account in presentation of
    the budget request?
        Answer. The key concept in the RCAP program is the ability to
    provide State Directors the flexibility to respond to unanticipated
    needs or events. Our budget request reflects the best information that
    we have available at this time, but the ability to respond and
    reallocate funds in the future to changing situations, unique to states
    or regions and identified by local staff, would greatly increase Rural
    Development's effectiveness.
                         water and wastewater programs
        Question. Please provide information regarding attempts by private
    water distribution companies to acquire systems financed by RUS.
        Answer. Nationwide, few attempts have been made by private
    companies to purchase RUS financed water systems. The most significant
    activity has been in the State of West Virginia, where at least three
    systems have been purchased and several others are under consideration.
    In Kentucky, one RUS-financed system is in the process of being
    purchased by a private company.
        Question. Is this trend viewed as potentially harmful to RUS
    programs and customers?
        Answer. Since the volume is so small, we do not anticipate that
    these sales will have a harmful impact on RUS programs. When RUS grant
    funds are used to finance all or a portion of a system, RUS' consent to
    the sale of the facilities is required under the terms of the grant
    agreement. Based upon information reviewed at the time of sale,
    customers have benefited from lower water rates and, in some cases,
    improved quality of water. Our concerns are the effect of water rates
    in future years and whether the private company will provide service to
    ``pockets'' of low income rural residents that may be less profitable
    for the company to serve.
        Question. Is there a role in RUS programs for private well
    installations as a means to reduce total overall project costs and if
    so, what precautions would be necessary to ensure safety standards for
    customers and to protect overall RUS program integrity?
        Answer. In rural America, most wells are, and will continue to be,
    privately owned and maintained by individual homeowners, farmers, and
    businesses. For RUS to finance individual or cluster wells with RUS
    water and waste disposal funds, applicants must be eligible public
    bodies, nonprofit organizations, or recognized Indian tribes that would
    own and operate the facilities. Even though our regulations have
    permitted such financing for many years, we have financed no projects
    recently. Applicants could propose individual or cluster wells rather
    than a piped water system as the solution to provide drinking water to
    residents of a particular community. We have discussed the possibility
    of three pilot projects with water well industry representatives. RUS
    regulations require that applicants comply with all applicable Federal,
    State, and local laws and regulations pertaining to water quality. If
    individual or cluster wells are proposed, the Federal and State rules
    that apply to community water systems may not apply, depending upon the
    circumstances and the States in which the facilities are located. Water
    systems proposing individual or cluster wells would be expected to
    provide essentially the same quality water that a community water
    system would. If the usual RUS requirement of complying with all
    applicable laws and regulations would not assure water quality, an
    appropriate loan condition would likely be added to the loan agreement.
                        electric and telephone programs
        Last week, a national news broadcast portrayed the rural electric
    programs as wasteful, misguided, or both. These are not new attacks. In
    fact, a GAO study released in January of this year also made
    suggestions on ways this program and the rural telephone program could
    be operated more efficiently.
        Question. Please respond to the claims made by last weeks news
    story and the recommendations contained in the GAO study.
        Answer. I am pleased to have the opportunity to respond to the
    statements made in this broadcast. The broadcast contained many half-
    truths and I appreciate the opportunity to clarify the information
    provided. The broadcast pointed out that America is now fully
    electrified. While this is generally true, the challenge today is to
    maintain the rural electric infrastructure intact and to provide the
    same high levels of service that all Americans have become accustomed
    to, while holding rates at reasonable levels.
        Electric infrastructure, like all infrastructure, requires periodic
    maintenance to prevent the potholes from ruining the road, so to speak.
    Electric systems also require improvements to accommodate the new
    technologies that we all enjoy. This maintenance and improvement is
    inherently more expensive, on a per consumer basis, in rural areas than
    in urban areas, while revenue per mile of line is far lower for RUS
    borrowers than for most investor-owned utilities. Today, the main
    emphasis of the RUS program, and, in fact the electric industry as a
    whole is on ensuring the continuing availability of high quality
    electric service at affordable rates.
        The broadcast discussed a number of specific RUS borrowers and
    provided isolated facts and statistical data about each--facts that,
    without a more complete discussion of the borrower's profile, were
    quite misleading. I appreciate the opportunity to provide background on
    each.
        The borrower that serves Vail, Colorado, has not received an RUS
    loan since 1991. The borrower voluntarily rescinded this 1991 loan in
    1995, before the loan was fully advanced.
        The borrower that serves Hilton Head, South Carolina, serves four
    counties in that state. Three of these counties are classified as
    poverty counties, with one of the three having the lowest per capita
    income in the state. Recent RUS loans have been targeted only to
    provide service in those poverty-stricken counties. It should be noted
    that if the lucrative Hilton Head Island consumers were ``cherry
    picked'' off the system by an investor-owned utility, we estimate that
    rates to the RUS borrower's remaining consumers would increase by 20
    percent.
        Hoosier Energy Rural Electric Cooperative in Indiana submitted its
    last loan application to RUS in 1990. After resolution of all
    outstanding issues, RUS approved the loan in 1995 contingent upon
    Hoosier executing addenda to its wholesale power contracts with its
    member systems. Since Hoosier and the member systems could not agree on
    these addenda, RUS never released the loan and no funds have been
    advanced.
        Withlacoochee River Electric Cooperative in Florida serves over
    140,000 consumers, as stated in the broadcast. The number of customers
    served, however, is not truly indicative of an entity's need for RUS
    financing. Withlacoochee, for example, serves only about 17 consumers
    per mile of distribution line, about half the consumer density of the
    average investor owned utility. Moreover, 130,000 of Withlacoochee's
    140,000 consumers (92 percent) are residential with very little
    commercial or industrial base to support affordable service rates. This
    relatively low consumer density and the nature of the consumers allow
    Withlacoochee to meet the statutory tests for a municipal rate loan
    with a 7 percent cap on the interest rate. Its average revenue per
    kilowatt hour is higher than the state average, indicating that its
    service territory is indeed expensive to serve, and both the average
    per capita income and the median household income of its consumers are
    lower than the state average and median, respectively.
        The broadcast also discusses Soyland Power Cooperative. As you are
    aware, Soyland's financial problems were the result of investments in
    nuclear power plants. RUS' loans to Soyland were made under the 1978
    National Energy Policy Act that encouraged investment in nuclear
    plants, initially restricted the use of natural gas, and, by 1990
    forbade its use in power plants. The assumptions behind this policy
    with respect to projections of costs of construction, load growth, and
    the economy turned out to be inaccurate.
        Soyland's problems go back to a small minority share in the Clinton
    Nuclear Station. Because of cost overruns and significant delays in the
    construction of the Clinton Nuclear Station, and interest rates that
    were among the highest ever in this nation's history, Soyland's
    investment quadrupled. During the decade of the 1980's, Treasury did
    not allow RUS borrowers to refinance their high interest-rate loans.
    This investment, coupled with a sagging rural economy left Soyland
    economically unviable. Please also note that Soyland has not received
    an RUS loan since 1984.
        GAO Study.--RUS provided GAO with a detailed response to the
    recommendations contained in the January 1998, study entitled ``Rural
    Utilities Service: Opportunities to Operate Electricity and
    Telecommunications Loan Programs More Effectively. The complete text of
    the RUS response is provided for the record.
        Rural Utilities Service's Response to GAO Report Entitled Rural
          Utilities Service: Opportunities To Operate Electricity and
               Telecommunications Loan Programs More Effectively
        We appreciate the opportunity to review and comment on the draft
    General Accounting Office (GAO) report entitled ``Rural Utilities
    Service: Opportunities to Operate Electricity and Telecommunications
    Loan Programs More Effectively.''
        The report offers a number of recommendations to make these loan
    programs more effective and less costly. The report mentions a portion
    of 7 U.S.C. 930. We believe that your abbreviated version of the
    provision does not accurately reflect the meaning of the provision. The
    provision in its entirety states:
        ``It is hereby declared to be the policy of the Congress that
    adequate funds should be made available to rural electric and telephone
    systems through direct, insured and guaranteed loans at interest rates
    which will allow them to achieve the objectives of the Rural
    Electrification Act of 1936, as amended, and that such rural electric
    and telephone systems should be encouraged and assisted to develop
    their resources and ability to achieve the financial strength needed to
    enable them to satisfy their credit needs from their own financial
    organizations and other sources at reasonable rates and terms
    consistent with the loan applicant's ability to pay and achievement of
    the Act's objectives.''
        We recognize that the goals of the report: ``(1) make the
    electricity and telecommunications loan programs more effective and
    less costly for the government and (2) decrease RUS' vulnerability to
    loan losses'' are, to some extent, contradictory. Financially stronger
    borrowers have easier access to reasonably priced private sector
    capital, while borrowers in greater need of a government subsidy are
    poorer credit risks. Nonetheless, these goals can be reconciled in
    order to support the electric and telecommunications infrastructure
    that is vital for rural communities, while maintaining the integrity of
    the RUS loan portfolio.
                                general comments
        Since the report recommends fundamental changes in the RE Act, we
    believe that it is important for its readers to have a comprehensive
    understanding of the current characteristic of RUS borrowers and the
    uncertainty surrounding the industries in which they operate.
    Rural communities
        The Rural Electrification Act of 1936, (7 U.S.C. 901 et seq.) (RE
    Act) is intended to benefit rural communities by supporting their
    electric and telecommunications infrastructure. The residents of these
    communities are the true beneficiaries of the RE Act. The benefits of
    low interest loans are reflected in rates to residential electric and
    telecommunications customers in rural areas, and in rates for
    commercial and industrial service that make rural communities
    attractive to business opportunities.
        The implication that a change in the composition of a borrower's
    service territory should disqualify that borrower from participating in
    the RUS loan programs is not fundamentally sound. Many borrowers'
    service territories include both rural and non-rural customers. This
    diversity of customer base contributes to the financial health of the
    utility, helps maintain reasonable rates for rural customers, and
    reduces the risk of RUS loans. We believe that this diversity of
    customer base will be critically important to the long-term financial
    stability of borrowers as their industries become more competitive at
    the local level.
        Congress recognized this changing nature of borrower when it
    enacted the Rural Electrification Loan Restructuring Act of 1993. It
    set interest rate eligibility based upon per capita income of
    consumers, rate disparity, and consumer density. This Act also revised
    the definition of ``rural'' for new borrowers of both the electric and
    telecommunications loan programs. We suggest, therefore, that caution
    be used in strictly applying classifications such as rural, urban, and
    metropolitan to service territories as the measure of whether an RUS
    borrower is achieving the Congressionally stated policy objective of
    the RE Act.
    The changing environment of the electric and telecommunications
            industries
        The movement to a more competitive environment in both the electric
    and telecommunications industries substantially increases risk both for
    utilities and for customers in areas that are seen as less profitable
    to serve. New telecommunications regulations take effect January 1998,
    and their impacts will be felt gradually. The impacts of restructure of
    the wholesale end of the electric industry are just beginning to be
    felt. Statutes and regulations to make the retail end of the electric
    industry more competitive are under development at both the federal and
    state levels. The increased risk of both industries affects capital
    markets and the ability of utilities to attract private sector capital.
    RUS urges, therefore, that any recommended changes to RUS loan programs
    take this volatility into consideration.
    The nature of RUS borrowers
        The report makes repeated mention of what it terms borrowers'
    ``profit''. The repeated use of the term ``profits'' shows a lack of
    understanding of the characteristics of cooperative organizations. In
    fact, most electric borrowers and many telecommunications borrowers are
    cooperatives owned by the consumers they serve. Rather than earning
    profits that yield dividends to shareholders, these cooperatives
    allocate their ``margins'' earned during any reporting year as
    patronage capital to their members. These patronage capital allocations
    result in de facto rate reductions to the cooperative members, reducing
    the cooperative's operations to a break-even level. The benefits of
    these patronage allocations, therefore, flow to the consumers/
    subscribers who are, coincidentally, the intended beneficiaries of the
    RUS programs. The member-sourced earnings of RUS cooperative borrowers
    are not considered profits by the Internal Revenue Service and as such,
    are exempt from federal income tax.
     opportunities to make the loan programs more effective and less costly
        The report states that ``opportunities exist to make the loan
    programs more effective and less costly.'' We have analyzed the
    report's conclusions and recommendations, along with the underlying
    premises and data, and we offer the following:
    Loans are sometimes made to borrowers serving large customer
            populations
        The report bases its findings to a great extent on significant
    mischaracterizations of RUS borrowers. While a few RUS borrowers do, in
    fact, serve large customer populations, most borrowers serve small
    subscriber populations and are considered small businesses according to
    the size standards established by the Small Business Administration
    (SBA). The telecommunications borrower specifically cited as an example
    illustrates this point. The borrower serves a city and the surrounding
    sparsely populated rural area. RUS financing was not used to provide
    service to the city because it does not meet the Urban/Rural test of
    the RE Act. The only telecommunications plant financed by RUS was that
    dedicated to serving rural subscribers outside the city. Absent RUS
    financing, prudent business practice would dictate that this borrower
    invest its higher cost capital in the areas in which it will earn the
    best return--the high density urban area. Ultimately rural area service
    would be improved only after the higher density city subscribers, if at
    all. Under the Telecommunications Act of 1996, as competition comes to
    rural areas, the pressure to invest in competitive markets will place
    even greater pressure on the availability of capital to improve service
    in rural areas. It is important to note that over 85 percent of RUS'
    telecommunications borrowers have less than 10,000 subscribers, nearly
    70 percent serves less than 5,000, and the medium number of subscribers
    per borrower is less than 2,800.
        We strongly disagree with the use of customer size as a criterion
    for determining eligibility for loans. Large customer population alone
    is not an accurate measure of a borrower's financial strength or its
    ability to attract capital. The average RUS electric borrower serves
    between 5 and 6 consumers per mile of distribution line, while the
    average investor owned utility (IOU) serves about 35 consumers per
    mile. Because the electric and telecommunications industries are highly
    capital intensive, a utility that serves a large number of mostly
    residential consumers over a large geographic area may not be able to
    achieve the economies of scale necessary to attract steady infusions of
    private sector capital at interest rates that can support reasonable
    electric and telecommunications rates for rural consumers.
    Loans with subsidized interest rates are made to financially healthy
            borrowers that may not need RUS' assistance
        The RUS electric and telecommunications programs provide a
    financial incentive to encourage rural electric and telecommunications
    utilities to provide modern service in areas that otherwise might not
    be well served, or served at all. RUS is, therefore, quite different
    from other Federal lending programs, particularly the single-family
    housing program. High financing costs of capital investments in
    sparsely populated areas may inhibit the construction of necessary
    facilities and/or dramatically increase electric and telecommunications
    rates. It is critical, therefore, to the provision of reliable service
    that all rural borrowers, including those that are financially healthy,
    be afforded the opportunity to obtain Federal financing to make
    improvements in rural service areas.
        The report notes that many RUS borrowers have high equity levels
    and favorable debt to asset ratios and alleges that RUS borrowers do
    not invest significant amounts of their own funds in plant nor obtain
    non-Federal financing when opportunities exist. Many RUS borrowers
    maintain these somewhat favorable statistics because they have, in
    fact, invested considerable amounts of their internally generated
    capital in plant. In 1996 alone, a total of $1.5 billion was expended
    by RUS borrowers on telecommunications plant, of which RUS financing
    accounted for only $261 million.
        By investing the cash generated by operating margins in plant, a
    borrower's debt-to-asset ratio improves as does its ability to generate
    positive margins. Plant that is financed by internally generated funds
    is, by definition, debt free thereby alleviating the impact that
    additional interest expense would have on a borrower's margins while
    increasing the borrower's equity. Equity, it should be noted, is a
    measure of an entity's operations and is not cash, as the report seems
    to imply.
        The debt to asset ratio, (or similar measures of leverage such as
    equity to assets, or debt to equity) is certainly a valuable component
    of an analysis of creditworthiness but only when interpreted correctly.
    In evaluating creditworthiness, private sector lenders compare loan
    applicants to industry benchmarks. The report discusses debt-to-asset
    ratios for borrowers that obtained loans between 1994 and 1997. The
    figure cited is the ratio prior to obtaining the new debt, and the
    report implies that a debt to asset ratio of less than 70 percent is
    looked upon favorably by lenders. Comparisons to other electric
    utilities, however, show otherwise. DOE figures show that the average
    debt to equity ratio for IOU's is about 48 percent.\1\ Virtually all
    IOU's are vertically integrated. RUS data for the same year shows that
    distribution borrowers had an average debt to asset ratio of about 40
    percent, and G&T's about 70 percent. In the light of the IOU
    benchmarks, the ratios for RUS borrowers, even if the ratios are
    blended as a surrogate for vertical integration, do not seem as
    favorable. By this measure RUS borrowers have a distinct disadvantage
    in capital markets.
    ---------------------------------------------------------------------------
        \1\ Financial Statistics of Major U.S. Investor-Owned Electric
    Utilities 1995, DOE/EIA-0437(95)/1, Department of Energy, Table 29.
    ---------------------------------------------------------------------------
        Finally, the current ratio can hardly be considered an appropriate
    tool for measuring ability to obtain long-term debt. A ratio that
    indicates to what extent current assets are available to meet current
    obligations simply does not demonstrate a borrower's long-term
    borrowing capability.
    A graduation program could assist in moving financially healthy direct
            loan borrowers to commercial credit
        The report correctly notes that the RE Act offers electric
    borrowers the opportunity to voluntarily graduate out of the direct
    loan program by prepaying direct loans at a discount. It is important
    to note that the discounted value is calculated on a net present value
    basis thereby resulting in no cost to the Government. To date, 115
    borrowers have prepaid their loans and we expect that there will be
    more. Borrowers who take advantage of this opportunity are ineligible
    for direct loans for 10 years
        Specifically, the electric borrower cited in the report to support
    GAO's recommendation of forced graduation is, in fact, voluntarily
    moving away from the RUS program. RUS has not advanced loan Finds to
    this borrower since 1975, over 22 years ago. The borrower has been
    repaying its debt and now owes RUS only $128,000. Its total long-term
    debt from all sources is approximately $145,725 and interest on all
    long-term debt for 1996 was only $3,211. This borrower has achieved a
    high TIER and current ratio, and high levels of equity by avoiding all
    financial leverage, a rare feat, indeed, in the electric industry, or
    any industry today. By graduating itself from all lending programs,
    this borrower is truly an anomaly. The medium TIER for electric
    borrowers in the United States and in this borrower's state are 2.44
    and 2.62, respectively.
        A recent RUS analysis of borrowers who graduated out of RUS under
    this provision shows two significant trends. First, these borrowers
    tend to be stronger according to a number of measures. They are
    typically characterized by: ability to realize economies of scare
    measured by high consumer density and kWh sales per mile of line; size
    measured by larger number of consumers (as noted above, one of the
    report's suggested criteria for measuring strength), total kWh sold,
    and total utility plant; and newer plant. Interestingly, equity as a
    percent of total assets seems to be almost the same for borrowers who
    graduated and borrowers that did not. Also, most of these borrowers
    serve in states where electric rates are at or below the national
    average, and their territories show higher load growth.
        Finally, while these graduated borrowers are not eligible for
    direct RUS loans for 10 years, the law leaves them the option of
    applying for a loan guarantee. As the report points out, the lender is
    almost always the Federal Financing Bank (FFB), part of the Treasury
    Department. The interest rate is one-eighth of one percent above
    Treasury's cost of borrowing, and RUS guarantees 100 percent of the
    loan. In other words, if these graduated borrowers find that private
    sector capital is no longer affordable, the RE Act offers a backstop.
        Similarly, recent lending activity indicates that a number of RUS
    telecommunications borrowers have sought financing through non-Federal
    sources. Borrowers are, in fact, seeking alternative financing through
    CoBank and/or the Rural Telephone Finance Cooperative as indicated in
    the GAO report. We believe that this voluntary graduation protects
    rural communities against the capital risks inherent in the
    restructuring of the industry.
        We are extremely concerned about requiring electric and
    telecommunications borrowers to refinance their direct loans with
    private sector financing at this time. In contrast to the relatively
    stable operating environment of the water and waste disposal program
    that currently graduates borrowers, the operating environment of the
    electric and telecommunications industries is highly volatile. The
    Federal Energy Regulatory Commission is implementing wholesale
    competition in the electric industry, and many provisions and impacts
    of wholesale restructuring are not yet clear. At the same time, the
    Federal Communications Commission (FCC) is implementing the
    Telecommunications Act of 1996 which will have a dramatic impact on
    revenue streams for rural telecommunications providers.
        RUS direct loans for electric infrastructure are generally
    available only to borrowers that serve at retail, and restructuring of
    the retail side of the electric industry has barely begun. The 105th
    Congress has already seen five bills introduced in the Senate and seven
    in the House that would, in some form or another: allow, promote or
    require retail competition; revise or remove restrictions on utility
    holding companies; institute new requirements on sources of energy
    sold; or otherwise profoundly alter the industry. In a few states
    retail choice of electric supplier will be available to all consumers
    in a few months. Other states are still exploring options.
        While not mentioned in the report, the Telecommunications Act of
    1996 will have a profound effect on the telecommunications industry.
    RUS is closely following the FCC as it moves toward implementing the
    Telecommunications Act, and believes that rural telecommunications
    service providers will be affected in at least these ways. RUS
    telecommunications borrowers receive, on average, 65 percent of their
    revenues from long distance access charges and cost pooling; however,
    nationwide, telecommunications service providers receive only 44
    percent of their revenues from these sources. The Telecommunications
    Act will change the way in which revenues from these sources are
    collected and distributed. Access charges will decline at a controlled
    rate and cost pooling (the current method for collecting and disbursing
    funds to cover high cost service) will be completely restructured. The
    rulemaking process intended to design the new universal service cost
    pooling support mechanism is scheduled to begin in 1998; however, until
    that mechanism is operational, the degree of negative impact on
    borrowers' revenue streams cannot be fully determined.
        While small rural telecommunications companies may be protected
    (depending upon the policies of their state regulatory commissions) in
    the short-term from competition in their service areas, competition
    will ultimately come, in some form, to all areas of the nation.
    Initially, competition will most likely come from another service
    provider who will attempt to serve the lowest cost subscribers in an
    area. This will leave RUS borrowers with only their high cost
    subscribers to serve, thereby reducing the density of the service area
    and increasing the average cost per subscriber.
        Since the debate over retail choice in the electric industry has
    barely begun, impacts are even more uncertain. We believe that this
    uncertainty will be reflected in higher costs of private sector capital
    for electric and telecommunications utilities. Decreasing revenues and
    increasing costs will strain rural service providers and may endanger
    universal service. Forcing direct loan borrowers to private sector
    financing during this period of uncertainty may leave them paying
    extremely high interest rates that would be directly translated into
    higher electric rates for rural consumers. Since the vast majority of
    these borrowers are, as noted above, cooperatives, they cannot raise
    equity capital by selling stock. Since they are small businesses, as
    well, they may lack the large cash how cushion that can protect large
    businesses against such ``sticker shock.'' Even borrowers that have
    been historically strong could be left with no alternative other than
    raising rural service rates.
          opportunities to decrease rus' vulnerability to loan losses
        The report made several recommendations for decreasing RUS'
    vulnerability to loan losses: ``(1) limit loan size and total amount of
    debt outstanding to a borrower, (2) reduce loan guarantees from 100
    percent and (3) establish policies to preclude loans to risky
    borrowers. Second only to RUS' mission of financing high quality
    electric and telecommunications service to rural consumers reasonable
    rates, is its concern for the creditworthiness of its borrowers and the
    security of its loans. It is important to note that the
    telecommunications program, based upon its policies and procedures
    currently in place, has an outstanding record of loan repayments--zero
    defaults since its inception. Equally important to consider is the fact
    that the majority of loan losses in the electric program arise from
    investments in ill-fated nuclear plants that were either constructed at
    costs substantially higher than initial projections or totally
    abandoned during the construction phase.
    Loan and debt limits could reduce RUS' vulnerability to losses
        We do not agree that loan limits equate to a reduction in
    vulnerability to loan losses. RUS cannot make a direct loan or loan
    guarantee unless the agency determines that the borrower will be able
    to repay the loan according to its terms and conditions, and that the
    security for the loan is adequate. These determinations are based on
    the borrower's past performance, its management and operating
    environment at the time of loan approval, and projections of load
    growth and financial performance. Applications for electric loans
    include long-range financial forecasts as well as engineering studies
    of facilities that will be constructed with loan funds. The requirement
    that security for a loan be adequate effectively limits the borrower's
    total amount of secured debt.
        Lending limits also constrain a borrower's ability to take
    advantage of certain economies that arise from system-wide
    improvements. A single loan may finance the upgrading and improvement
    of an entire electric or telecommunications system. All pertinent plant
    could be constructed under a single contract under one simplified
    competitive bidding process. This method is, by far, the most efficient
    way for small utilities to construct plant. If loan limits were
    imposed, system-wide construction would take place only in small
    segments thereby significantly increasing the cost to serve rural
    subscribers. increased subscriber costs are certainly not in the best
    interest of rural ratepayers, rural electric or telecommunications
    service providers, or the Federal lending programs that finance such
    service.
    Establishing policies to preclude loans to certain risky borrowers
            would reduce future exposure to loss
        We believe that this recommendation is based on faulty premises.
    The rule \2\ in the report implements the new statutory authority of
    the Secretary of Agriculture to compromise, adjust, reduce, or charge
    off debts or claims owed to the governments. The rule adequately
    addresses the issues raised in the report by requiring credit support
    in the full amount of the loan as a condition of any subsequent loan.
    ---------------------------------------------------------------------------
        \2\ The rule, adding a new subpart Y to 7 CFR Part 1717, was
    published September 26, 1997, at 62 FR 50486.
    ---------------------------------------------------------------------------
                            electric program issues
    Impacts of the electric loan program in maintaining electric
            infrastructure
        The electric loan program provides an efficient and effective use
    of taxpayer funds to support electric infrastructure. The subsidy
    amounts cited in the report actually support relatively high lending
    levels. The total subsidy for fiscal years 1994 through 1996 for
    electric hardship rate loans was $49.6 million while the lending level
    was $273.9 billion. For municipal rate loans during this period, $148.9
    million in subsidy supported lending levels of $1,489.8 billion.
        This subsidy actually generates increases in electric utility plant
    far greater than what lending levels indicate. For example, in calendar
    year 1995, RUS advanced a total of $860 million in direct and
    guaranteed loan funds to electric borrowers. During the same year,
    additions to plant by electric borrowers totaled almost four times this
    amount, $3.3 billion. In calendar year 1996, RUS advanced $1.02 billion
    to borrowers, and additions to plant totaled $3.3 billion. Borrowers
    make up part of this difference with internally generated funds, and
    part with loans from non-RUS sources. In the case of municipal rate
    loans, most borrowers are required to obtain part of their debt
    financing from a supplemental source with no RUS guarantee.
    Financially healthy borrowers obtain municipal rate loans at interest
            rates lower than rates on hardship rate loans
        The report's description of the interest rate structure for
    municipal rate loans is generally accurate. We emphasize only that, as
    a general principle, short-term interest rates are lower than long-term
    rates. A borrower that locks in a low rate for a short term runs the
    risk of a sharp increase in the rate when the advance rolls over.
        Moreover, the federal subsidy is based on the difference between
    RUS interest rates and the rate at which RUS borrows from the Treasury.
    While the interest rates on RUS borrowings and municipal interest rates
    may not rise and fall strictly in tandem, they do follow similar
    trends. In other words, the subsidy rate does not necessarily increase
    when municipal rates fall, and vice versa.
                       telecommunications program issues
    Nonrural Areas
        RUS strongly supports its policy of making loans for service to
    nonrural areas when it is incidental to providing service in rural
    areas. In instances where telecommunications service is to be provided
    in a nonrural area, RUS applies a ``necessary and incidental'' test to
    determine that, without financing plant in a particular nonrural area,
    the rural area would suffer the consequences by receiving less or no
    service. In addition, when making a loan to a telecommunications
    borrower where funds are to used in a nonrural area, RUS conducts
    Urban/Rural studies to determine that the majority of the benefit from
    the financing will be derived by the rural residents. Defining a rural
    area is simply not as easy as assigning a number. These policies enable
    RUS to apply judgment in making loans that ultimately benefit the
    residents in rural areas, be they rural, extremely rural, or some
    mixture. The goal of ``universal'' service can only be achieved if
    service is provided in areas, both rural and nonrural.
        Once again, we appreciate the opportunity to review and comment on
    the draft report. If you wish to discuss these comments on a more
    detailed basis, we are available at your request. While we welcome
    suggestions that will improve the operational efficiency of our loan
    programs, any recommendations that are forthcoming should take into
    consideration the revolution that is taking place in both the electric
    and telecommunications industries. Due to the numerous uncertainties
    surrounding the eventual evolution of these industries, it is important
    the RUS lending programs remain flexible in their abilities to provide
    financing to ensure modern, reliable electric and telecommunications
    service to rural America.
        The report states that loans are sometimes made to borrowers
    serving large customer populations. I emphasize again that, although a
    few RUS borrowers serve large customer populations, the vast majority
    have customer bases that are, quite small, by industry standards.
    Furthermore, all but a handful are small businesses according to the
    Small Business Administration's size standards, which are based on MWH
    sales for electric utilities and number of employees for
    telecommunications companies.
        I strongly disagree with the use of customer base as a criterion
    for determining loan eligibility. Large customer size alone is not an
    accurate measure of a borrower's financial strength or its ability to
    attract capital. The electric and telecommunications industries are
    both capital intensive, and a utility that serves a large number of
    customers over a large geographic area may not be able to attract
    steady infusions of private capital at interest rates that can support
    reasonable electric and telecommunications rates for rural consumers.
        The report also asserts that RUS makes loans to financially healthy
    borrowers that may not need RUS assistance. The measures of financial
    health used in the report do not accurately measure a borrower's true
    borrowing strength. High equity, for example, does not automatically
    translate to credit worthiness for a cooperative. The debt-to-asset
    ratio of RUS borrowers is not nearly as favorable as indicated in the
    report, when the ratio is compared with industry benchmarks. Similarly,
    the current ratio has little or no relevance to a utility's long-term
    borrowing capability.
        GAO recommends a graduation program to forcibly move borrowers out
    of the RUS program and into private sector financing. RUS now offers
    electric borrowers the opportunity to voluntarily prepay their RUS debt
    at a discounted present value. Borrowers who choose this option are
    ineligible for direct loans for 10 years. To date, 115 borrowers have
    voluntarily moved to private sector financing, and I fully expect that
    there will be more.
        I am also concerned that requiring electric and telecommunications
    borrowers to graduate to private sector financing would be detrimental
    to the rural economy at this time. In contrast to the relatively stable
    operating environment of the water and waste disposal program that
    currently graduates borrowers, both the electric and telecommunications
    industries are now in a state of flux. Forcing borrowers to ``fire
    sale'' refinancing could place them at a competitive disadvantage,
    leading to higher electric rates for rural consumers.
        GAO believes that RUS' vulnerability to loan losses could be
    reduced through loan and debt limits, and by precluding loans to
    certain risky borrowers. I disagree. RUS cannot make a loan unless the
    agency determines that the borrower will be able to repay the loan
    according to its terms and conditions, and that the security for the
    loan is adequate. Imposing rigid limits on the size of individual
    loans, or the borrower's total debt could constrain the borrower's
    ability to take advantages of economies of scale, or to build
    facilities to serve consumers in areas of rapid growth.
        An absolute prohibition on loans to risky borrowers could adversely
    impact electric and telecommunications service to needy consumers in
    rural areas. RUS prefers its current individualized approach, one in
    which the agency can place conditions on certain loans to mitigate
    risks.
        Question. Please provide your views of the current trends in
    electricity deregulation and its effect on the rural electrification
    programs?
        Answer. RUS is concerned about the potential impacts of electric
    industry restructuring on RUS borrowers and on Federal financial
    interests in these borrowers. RUS is also concerned about the continued
    availability of reliable, reasonably priced, electricity in rural
    areas.
        Experience with deregulation in other industries has not been a
    positive one for many rural consumers. Too often, the unfortunate and
    unintended consequence of deregulation has been a decline in the
    quality and availability of service and an increase in costs in rural
    areas. Airline and railroad deregulation are prominent examples. If
    experience in other industries is any guide, the benefits and costs of
    electric industry restructuring will be spread unequally both
    geographically and among customer classes. This has prompted concern
    that if implemented too quickly and without adequate safeguards,
    electric utility restructuring could bring rural Americans higher
    prices and degradation of reliability and safety.
        The underlying premise of deregulation is that competition among
    suppliers will result in lower prices, technological innovation, and
    more choices for consumers. In many cases, powerful industrial
    consumers are already negotiating lower electric rates either from
    their historical providers, or by switching to lower cost providers. In
    either case, the historical provider is left with fixed costs that must
    be recovered from a shrinking revenue base. To the extent that the
    historical provider is unable, in a competitive market, to charge rates
    sufficient to recover these costs, the costs are stranded. Because
    almost all RUS borrowers are consumer-owned entities, there are no
    shareholders with which to share stranded costs.
        Competition in generation alone, is unlikely to significantly
    affect many of the factors that contribute to the higher costs of
    serving rural systems. To achieve the benefits offered by electric
    industry restructuring while preserving access to reliable and
    affordable electric service, the transition must take into account the
    special circumstances of rural electric systems and their customers.
        The Administration is continuing to develop its comprehensive
    policies on electric industry restructuring. RUS believes that rural
    areas can share in the benefits of a competitive retail electric market
    if adequate safeguards are provided to assist high-cost to serve rural
    areas, and reliability of service is ensured.
        Many RUS borrowers serve small, scattered, mostly residential loads
    that may not attract competitive interest to produce significant
    savings for most consumers. RUS is concerned that as a result of
    competition, larger customers will increasingly be ``cherry picked''
    from RUS borrowers, requiring these borrowers to raise rates to the
    remaining customers to meet fixed costs, including debt service
    payments. If rates rise too sharply for the remaining consumers, the
    economic base of the community could be threatened. If, however,
    competitive pressures prevent a borrower from charging sufficient
    rates, the borrower's ability to meet its debt service payments is
    threatened.
        It is almost impossible today to determine the magnitude of
    stranded cost exposure of RUS borrowers, except to say that all
    generation assets are potentially at risk, and that nuclear facilities
    and other high cost producers are at the greatest risk. Various
    proposals for retail choice transition have been introduced in the
    105th Congress and in various State legislatures and public service
    commissions. These proposals differ greatly in their likely impacts on
    power supply borrowers and on the extent of permissible recovery of
    stranded costs.
        USDA is also concerned that the future availability of investment
    capital for rural electric infrastructure can be jeopardized if current
    and future investments are allowed to become stranded.
        RUS currently has approximately $31 billion in outstanding electric
    loans. Typically, RUS loans are used to leverage two-thirds of
    investment capital from private sources. These loans are the lifeblood
    in maintaining and improving rural infrastructure. If these loans
    become stranded, the investment resources from federal programs as well
    as private sources could easily diminish.
        Question. Please explain why you think the ``universal service''
    concept should be applied to electrification programs?
        Answer. The universal service concept dictates that all customers,
    including those that are high-risk, and or costly to serve, will be
    assured access to reliable electric service at just, reasonable, and
    affordable rates. The obligation imposed on utilities to provide
    universal service to all customers within their territories at just and
    reasonable rates has long been a fundamental and highly-valued premise
    of electric utility regulation.
        Even today, providing electric service to rural areas requires more
    capital investment and higher costs of operation and maintenance and
    results in lower revenue per mile of line than service in most urban
    and suburban areas. The availability of universal service and the
    investment in a safe, reliable electric infrastructure in rural America
    should not be put at risk during or after the transition to a more
    competitive electric industry.
        In a ``deregulated'' competitive electric industry, retail electric
    providers will be able to pick and choose the areas and customers they
    serve based upon their expectation of profits to be won, and not on the
    customer's need for service. In a competitive environment, profit-
    maximizing retail electricity providers will be attracted first to
    high-volume, high-load factor industrial and large commercial
    customers. They may demand unacceptably high prices to serve low-
    volume, low-load factor residential and small commercial consumers, if
    they are willing to serve them at all.
        Question. Other than loan subsidy rates, why would the proposed
    Treasury rate direct loan program be an improvement over continued FFB
    activities?
        Answer. The proposed Treasury rate loan program would supplement,
    not replace, the FFB loan guarantee program. A Treasury rate loan
    program would offer a number of advantages. It would be a direct loan
    program, not a loan guarantee. The borrower would have only one federal
    agency to work with. FFB loans offer a complex range of options for
    long- and short-term interest rates, amortization schedules, and the
    ability to prepay or refinance the loan. These options confuse many
    borrowers while a new direct loan program could be simpler. FFB
    interest rates reflect Treasury's cost of money plus one-eighth of one
    percent. FFB also charges a small annual servicing fee to cover certain
    administrative costs. The Treasury loan program would not have the
    interest rate adder or the fee.
        The Treasury rate loan program would allow RUS to offer a range of
    financing options in a customer friendly format. FFB financing would
    still be available to power supply borrowers and to distribution
    borrowers that favor the range of choices offered by FFB.
        Question. In what ways might the Treasury rate proposal be harmful
    to electric utility borrowers?
        Answer. I do not believe the Treasury rate proposal could be
    harmful to electric utility borrowers, to rural Americans, or to the
    government.
        Question. Has RUS engaged in a survey to determine the problems and
    costs associated with ``an aging electric infrastructure'' and if so,
    would you provide that information to the Committee?
        Answer. RUS has not surveyed borrowers concerning the problems and
    costs associated with aging electric plant. Our understanding of the
    problems posed by aging electric system components is based on
    historical information on in-service dates of electric plant and trends
    in requests for loan funds and system upgrades. Electric systems, just
    like other forms of infrastructure, require maintenance and periodic
    replacement of components as the systems age. Demand for electricity
    has also been growing in many rural electric service areas thereby
    requiring distribution and transmission facilities to be upgraded to
    preserve safety and reliability.
       empowerment zones/enterprise communities (ez/ec)--delta initiative
        The USDA budget suggests legislation will be submitted to create
    additional rural Empowerment Zones. Additionally, the Appalachian
    Regional Commission is suggesting expansion of their activities to
    include the region of the Lower Mississippi River Delta.
        Question. Do you think the ARC initiative for the Delta could
    largely be conducted under the EZ/EC initiative? Have you discussed the
    Delta initiative with the ARC? Please describe how the benefits from
    the current EZ/EC program have helped the Delta.
        Answer. We believe that implementing the recommendations of the
    Lower Mississippi Delta Commission fits closely with the objectives and
    implementation methods of the EZ/EC Initiative. Two organizations in
    the Mississippi Delta region--the Lower Mississippi Delta Development
    Commission and the Southern EZ/EC Forum--have already taken major steps
    to build a coalition through which this can occur. We have met with the
    ARC to discuss the proposal to expand their service area to include the
    Delta. We are concerned about their proposal to increase the size of
    their organization and favor an approach that would direct a larger
    proportion of the funds to development projects in rural communities by
    using an organizational structure that is already in place. Since this
    Administration has come into office, USDA Rural Development has
    invested more than $446 million in the 219 counties of the Lower
    Mississippi Delta region. In addition, the EZ/EC Initiative will invest
    over $60 million in Social Services Block Grants. At the rate these
    dollars are being leveraged nationally, this will result in
    approximately $600 million in total investments in these poor
    communities.
        Question. Since you note the importance of assistance for children
    to attain appropriate educational levels in regions like the Delta, are
    you aware of the work of the Delta Teachers Academy and if so, would
    you provide your views on this program?
        Answer. I am not familiar with the Academy, I understand this is a
    project funded by the Extension Service.
                           centralized service center
        Last year, there was much discussion about the effect of budget
    cuts and FTE ceilings on the work force at the St. Louis Service
    Center.
        Question. Please provide an update on workload and FTE's currently
    employed and projected for fiscal year 1999 at the Service Center.
        Answer. September of 1997 marked the completion of the conversion
    of loans from the field to the new Dedicated Loan Origination and
    Servicing system and the transfer of servicing activities to the
    Centralized Servicing Center (CSC) in St. Louis. The CSC provides full
    servicing of these loans from closing to acceleration of the account,
    with a Full Time Equivalency (FTE) authorized level of 633 employees,
    we project our workload to remain constant in fiscal year 1999 and our
    FTE requirements to remain at 633.
        Question. What is the status or special needs of information
    technology at the Service Center?
        Answer. All information technology initially planned is in place
    and operational in the Centralized Service Center (CSC). With any
    portfolio conversion of this size, modifications to the current system
    is an ongoing process. These modifications to the software are unique
    because of the Congressional mandated Supervised Credit that must be
    available to our borrowers to preserve home ownership though economic
    or other hardships individuals and families may experience. For this
    reason, we have had to modify the private sector serving software we
    purchased to ensure these servicing options were handled in a
    consistent and efficient manner. These servicing features include: 7
    day a week, 24 hours voice response for detailed information on loans;
    nationwide consistency for servicing, including payment assistance,
    moratorium, reamoritization and other services; centralized cash
    management providing fiduciary control; a monthly statement sent to
    each borrower; escrow of taxes and insurance; and expanded (7:00 am-
    6:00 pm) customer service representatives to handle more complex issues
    for our borrowers.
        We will continue to monitor our program needs in conjunction with
    the constant changes in technology, increased use of technology, and
    the needs to respond quickly to requests for information and prepare a
    plan to achieve this result.
        Question. To what extent are you coordinating information
    technology for the Service Center with overall Department needs?
        Answer. The Centralized Service Center (CSC) identifies their
    program needs, prepares the proper documentation for approval by the
    Information Resource Management organization. Like every other
    organization in the Department of Agriculture, the CSC is currently
    under a $25,000 limit on any technology purchase without a wavier from
    the Department. The waiver requires concurrence by all USDA mission
    areas involved in the CSC initiative and also ensures that any and all
    technology is Year 2000 compliant, unless emergency situations exist.
                       section 502 single family housing
        You state 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.
        Question. What rate of program increase per year will we need to
    see in order to realize this goal?
        Answer. For fiscal year 1999, we estimate that we will provide home
    ownership to approximately 65,000 individuals or families in rural
    America. RHS is only one of the 65 national organizations working
    together to meet this goal. Increases in our direct and guaranteed home
    ownership programs would assist additional home ownership in rural
    America, however, we have not formulated our appropriation request
    fiscal year 2000 at this point.
        Question. What amount of this program do you intend to support
    through the direct and through the guaranteed program?
        Answer. As mentioned in the previous answer, the fiscal year 1999
    request would allow us to provide home ownership to approximately
    65,000 rural individual or families. This figures includes the entire
    request for both the direct and guaranteed 502 programs.
        Question. What is the policy rationale for the statutory
    prohibition of graduating a 502 ``direct'' borrower to the guaranteed
    program?
        Answer. The Department does not have a rationale for the
    prohibition, in fact we have transmitted proposed legislation to
    Congress to repeal the statutory prohibition. One of the RHS goals is
    to graduate borrowers to commercial credit. Additionally, the 502
    guaranteed program provides 100 percent financing which will enable
    direct borrowers to refinance who don't have the financial capability
    for a down payment.
                        section 515 multi-family housing
        Question. Please describe the status of Section 515 housing
    rehabilitation and include the number of projects and, to the extent
    possible, the number of units for which rehabilitation has been
    complete and the number of projects/units still in need of repair or
    upgrades.
        Answer. Since fiscal year 1995, the Agency has dedicated
    approximately $194 million in repairing and rehabilitating our existing
    portfolio, which equates to nearly 640 projects. Our most recent
    survey, conducted September 1997, indicated $106.4 million outstanding
    repair needs. For fiscal year 1998, we estimate approximately $50.5
    million will be used for this purpose.
        Question. The budget reduces the 515 program substantially and,
    instead, provides an increase for the Section 538 guaranteed program.
    What has been the response from developers in accepting the guaranteed
    program over the direct?
        Answer. The Section 538 program is not a replacement or
    substitution for the 515 program, which is, a below-market-interest-
    rate loan program. Loan guarantees cannot significantly lower the costs
    of borrowing enough to allow occupancy by the low- and very-low-income
    households which the 515 program serves. However, developers understand
    that the Section 538 will play an important role in providing rental
    housing in rural America for low to moderate-low income families.
        Question. Has shifting from the direct to the guaranteed program
    had any effect on the ability of developers to acquire tax credits?
        Answer. As previously stated, the Section 538 program is not a
    replacement or substitution for the 515 program; however, many
    developers expect to use the LIHTC program in conjunction with the
    Section 538 Program as the two programs are compatible. The combination
    of tax credits and a guaranteed loan achieves rents that are affordable
    to low-income households in those rural areas where median incomes are
    relatively high because the LIHTC program must be used for households
    with incomes at 60 percent of area median income, while households
    eligible for the Section 538 program are those whose incomes at the
    time of initial occupancy do not exceed 115 percent of the median
    income of the area.
                                galt, california
        Last year, there was substantial debate about an amendment that
    would have affected rural housing programs in Galt, California. Had
    this amendment been adopted, it would have served as a precedent USDA
    felt detrimental to its mission.
        Question. Please provide an update on continuing negotiations with
    the City of Galt regarding this problem.
        Answer. The Department has worked with a mediator from Sacramento
    State University to access the scope and cost for the full mediation
    process. The mediator has met with the principals and is preparing a
    preliminary analysis for the Department to review for consideration of
    a contract. The principals have agreed to work together to identify the
    goals of the mediation process.
        Question. Have other requests similar to those of Galt been brought
    to the Department's attention and if so, what is the status of those
    requests?
        Answer. The grantees of the Mutual Self-Help Grant Program and farm
    labor housing providers have reported instances where communities have
    resisted the construction of affordable low-income housing. Barriers
    include local building approvals and zoning restrictions. Many of these
    cases are resolved on the local level with negotiations conducted
    between the housing provider and the local community, including elected
    officials. We are currently not aware of a situation similar to Galt
    where a City or local government is attempting to halt all construction
    of RHS low-income housing. Our experience has been that after the RHS
    housing has been constructed and occupied, the community and neighbors
    are very supportive. The Agency strives to ensure the housing reflect
    the local building styles including amenities and we take great
    measures to ensure the high quality of our rental housing is
    maintained.
                       business and industry loan program
        You mention that since last December, the demand for the Business
    and Industry Guaranteed Loan Program has increased 300 percent.
        Question. What is the explanation for this rate of increase?
        Answer. This rate of increase is the result of three factors:
        1. The streamlined Business and Industry Guaranteed loan program
    regulations were implemented, which reduced these regulations by 50
    percent, reduced the number of forms required (from 19 to 6), and made
    the forms available to the public in an automated electronic format;
        2. An aggressive program outreach initiative was conducted by
    National and State Office staff; and
        3. The eligible loan purposes were expanded to include such
    purposes as the financing of hotels, motels, bed-and-breakfasts, and
    some recreational-type facilities.
        Question. What is the source of the additional $75 million in
    Business and Industry loans resulting from the Community Adjustment and
    Investment Program under NAFTA?
        Answer. In conjunction with the North America Free Trade Agreement
    (NAFTA), the U.S. Department of Treasury entered into a Memorandum of
    Understanding with USDA, which enabled USDA to administer a guaranteed
    loan program, with budget authority provided by funds available through
    the Community Adjustment and Investment Program (CAIP), using its RBS
    B&I Guaranteed Loan Program regulations. The funds for this program are
    available because of deposits made into the CAIP as the result of the
    provisions of NAFTA.
                            cooperative development
        You mention that the role of cooperatives might replace some of the
    support of the traditional farm price support programs that were
    discontinued in the 1996 Farm Bill.
        Question. What are some examples of cooperatives serving this
    function? Are any currently in place and if so, in what fashion? What
    are you doing to support this concept? Are you consulting with the
    Commission on 21st Century Agriculture on this issue?
        Answer. Cooperative strategies can be adopted by farmers to assist
    them in increasing net farm incomes and reducing their exposure to
    fluctuating prices. There are a range of roles that cooperatives can
    play, some strictly private sector initiatives that we in the public
    sector can encourage, and others requiring cooperatives to take on a
    more public role in the marketplace. These strategies have two basic
    dimensions: (1) Giving farmers more market power in negotiations
    relative to other players in the food sector, and (2) aiding farmers to
    get a larger share of the consumer's food dollar. Some of these
    strategies could include more use of pooling, value-added production,
    global marketing, enhanced bargaining, and operation of a cooperative
    managed supply control system. Cooperatives in some commodity areas,
    particularly non-program commodities, are currently involved in some of
    these activities. Cooperative investment in value-added processing has
    been particularly active in recent years.
        RBS has historically promoted use of cooperative strategies for
    improving farm income through its program of research, technical
    assistance and education. These activities continue. The Department is
    presently examining possible strategies and contingencies for the post-
    price support era, including strictly cooperative-base strategies and
    others. We want to be prepared, with well thought out options, to
    ensure that the well being of American farms will be sustained over the
    long run. We are in the beginning stages of this process and not yet to
    the point where we are consulting actively with outside groups. When we
    get to that stage, however, we will involve a broad range of
    individuals and organizations to insure that our policies are effective
    and address the needs of all American farmers.
              appropriated technology transfer rural areas (attra)
        The budget proposes $2 million for ATTRA, and increase of $700,000
    above the fiscal year 1998 level.
        Question. Please provide an update on the activities at ATTRA.
    Please describe any effects on ATTRA that have resulted from the
    program not receiving an increase for a number of years. Please
    describe the role ATTRA has served in USDA's overall strategy to attain
    sustainable farming methods on a national scale.
        Answer. In fiscal year 1997, ATTRA responded to and provided
    information to more than 18,000 requests about sustainable agriculture
    received through its national toll-free phone lines, its new Web page,
    and direct contacts at workshops and agricultural trade shows. Already
    in fiscal year 1998, ATTRA staff are struggling to respond to more than
    9,000 requests in the first 5 months of the fiscal year. ATTRA staff
    members provide leadership, technical training and materials to
    regional and national efforts on professional development in
    sustainable agriculture for extensionists, Natural Resources
    Conservation Service staff and others. The ATTRA newsletter updates
    8,000-10,000 groups, individual farmers, educators and others about
    sustainable agriculture news and resources of interest.
        The greatest impact of level funding has been on staffing. Key
    areas in the program are now severely understaffed because funding
    limitations have prevented filling positions to meet increased overall
    demand. The number of requests has more than doubled in 7 years while
    funding has remained level, but there has been no corresponding
    increase and, in some cases, reductions in the number of staff hours
    available to serve those needs. Especially hard hit have been the areas
    of pest management, marketing, livestock, and agronomy, as well as
    operational areas such as computer/information management and staffing
    for the toll-free phone lines. The program is now faced with
    implementing limitations on numbers and types of requests, and staff
    struggle with a backlog in updating of highly requested materials.
    Labor projections needed to meet current and future demands indicate
    that the program is understaffed by 50-60 percent, and the proposed
    increase would allow a modest staff increase to partially offset the
    impacts of chronic under staffing.
        With its toll-free (and now electronic) access, ATTRA continues as
    the unique sustainable agriculture information source available to
    farmers across the country, and is in a special position to promote and
    interpret USDA efforts in sustainable agriculture, such as the results
    of the Sustainable Agriculture Research and Education (SARE) program,
    to a broad audience. ATTRA has been a visible and easily accessible
    place for farmers to start or to deepen their practice of sustainable
    farming methods, no matter what their geographic location. Several
    editions of a national expertise directory and other ongoing contacts
    have been produced and maintained by ATTRA and publicized through the
    USDA-sponsored Sustainable Agriculture Network (SAN). These and other
    networking tools have helped those practicing, researching and learning
    sustainable farming methods to more easily find each other across the
    United States. Also, ATTRA staff are in a unique position to provide
    information to USDA and other Federal agencies on farmer interests and
    needs in sustainable agriculture.
      alternative agricultural research and commercialization corporation
                                    (aarcc)
        You mention that a number of companies which have participated in
    AARC have repaid over $200,000 to the AARC Corporation.
        Question. At what point do you think the program will be self-
    sustaining?
        Answer. AARCC's 10-year business plan projects three repayment
    scenarios. The low case has AARCC recovering its investments on a
    dollar:dollar basis. Even at that rate, the American taxpayers still
    gain, as jobs have been created and unused land put to use.
        In the intermediate case, the plan projects a 6 percent return on
    the money. The high case projects a 10 percent return. Presently, the
    repayments are tracking with the high case scenario.
        We believe AARCC will have the financial resources to be
    independent of appropriated funds by the end of fiscal year 2002. The
    business plan projects that to be the case, regardless of which
    repayment scenario is realized.
                            rural utilities service
        Your testimony refers to a letter which Secretary Glickman recently
    sent to Energy Secretary Pena expressing concern that, even if rural
    coops are permitted to recover their stranded costs associated with
    generation (as provided for in the Bumpers/Gorton bill), rural coops
    may not be able to ``maintain reasonably affordable rates for small
    consumers.'' As I understand this statement, Secretary Glickman is
    suggesting that a coop will not be able to recover all of its
    distribution costs.
        Question. While a coop may lose generation customers as a result of
    retail electric competition, it won't lose distribution customers. Why
    would a coop not be able to recover all of its distribution costs as
    long as it retained all of its distribution customers?
        Answer. Secretary Glickman did not assert, as a general matter,
    that a cooperative would not be able to recover all of its distribution
    costs under retail competition. Rather, the Secretary cautioned that
    ``wires charges'' imposed by distribution utilities to deliver another
    supplier's power may not be a sufficient replacement source of revenue
    to assure reasonably affordable electric service for smaller customers.
        Secretary Glickman's letter expressed the Department's concern that
    the benefits of cost averaging--a key tool for assuring affordable
    universal electric service--could be lost under retail competition.
    Electric systems and regulators would no longer be able to rely on the
    practice of averaging the costs of servicing high and low cost
    customers to support reasonably affordable rates for smaller customers.
    The operating efficiencies and revenues from larger customers have
    historically helped to lower average systems costs and benefited
    smaller customers. With the loss of generation revenues from large
    industrial customers, an important source of revenue support for
    affordable service could disappear. Moreover, utilities could face
    higher costs to provide power to remaining customers with less
    attractive load profiles. The result is likely to be upward pressure on
    rates for residential and small commercial customers. This threat is
    one reason why USDA believes that it is essential that an adequate
    safety net be assured for rural and other costly to serve customers as
    part of electric industry restructuring.
        Question. Secretary Glickman's letter seems to suggest that
    residential and commercial customers will have to pay more if a coop
    loses its industrial customers. However, a coop won't lose an
    industrial customer for distribution service and it will be able to
    recover all of its stranded costs from generation customer losses as a
    result of retail competition under the Bumpers/Gorton bill. Therefore,
    wouldn't you agree that rates charged to residential and small
    commercial customers should not rise when retail competition is
    implemented?
        Answer. We do not agree that rates charged to residential and small
    commercial customers should not rise when retail competition is
    implemented. There is already evidence that they could rise, which
    prompts USDA's concerns over consumer impacts. Most state retail choice
    plans would impose transition charges on retail customer bills for
    stranded cost recovery, in addition to the costs of electric service.
    Unless a regulatory device is adopted to defer these costs--as in
    California and Massachusetts--the retail choice transition could
    increase costs for many customers in the short term. Additional costs
    for unbundling, customer education, and creation of power exchanges and
    independent system operators will be ultimately passed through to
    retail customers. These costs are likely to be proportionately higher
    on a per customer basis for smaller utilities.
        Question. Please identify what you perceive to be the risks of
    retail electric competition, assuming the recovery of stranded costs
    from customers leaving a system, to residential and small commercial
    customers of rural coops.
        Answer. Under several state plans, and, as we understand it, the
    Bumpers-Gorton bill, stranded costs will be recovered from all
    customers, not just those leaving the system to obtain the benefits of
    competitive supplies. This one-time, up-front recovery of stranded
    costs, if spread to all customers over a short transition period, could
    substantially raise rates in the short-term for residential and small
    commercial customers. While larger customers leaving the system to
    obtain lower wholesale energy costs may see no net increase in service
    costs, USDA has yet to see any indication that small residential and
    commercial customers in scattered rural communities will attract the
    aggressive attention of competitive energy providers or are likely to
    do so in the future. The recovery of stranded costs from all consumers,
    therefore, will only tend to raise rates to rural residential and small
    commercial customers.
        Even today, providing electric service to rural areas requires more
    capital investment and higher costs of operation and maintenance and
    results in lower revenue per mile of line than service in most urban
    and suburban areas. The larger industrial loads have, in the past,
    provided rural electric cooperatives with a mechanism to average these
    higher costs of service, thereby allowing the cooperatives to provide
    residential service at rates that, while still higher than most urban
    and suburban areas, were more affordable rates. In a ``deregulated''
    competitive electric industry, retail electric providers will be
    attracted first to high-volume, high-load factor industrial and large
    commercial customers. If these lucrative consumers are ``cherry
    picked'' from the system, all cost averaging mechanisms will disappear
    and residential and small commercial rates will, most certainly, rise.
    USDA does not view short-term stranded cost recovery for investments in
    generation assets as a substitute for the support for affordable
    universal electric service.
                                     ______

                     Questions Submitted by Senator Harkin
      alternative agricultural research and commercialization corporation
                                    (aarcc)
        Question. AARC in some ways functions as a venture capital entity.
    To what degree do government accounting standards accurately reflect
    the AARC portfolio? How do those standards differ from the standards
    used in the private sector regarding the capture of audited financial
    statistics?
        Answer. AARCC functions very much as a private sector venture
    capital (VC) fund does. Our expectations of return on investment (R.I.)
    are not as high, given our other concerns for job creation and use of
    agricultural land. However, our basic investment strategy and deal
    structure closely resemble private sector arrangements. Thus, we own
    shares in a lot of companies that at present are difficult to value.
    Moreover, the value of our equity positions change over time.
        In the private sector, a venture capital firm receives its
    investment money from limited partners. In effect, AARCC has one
    limited partner--the U.S. taxpayer and their funds appropriated to the
    Corporation by Congress.
        Private sector limited partners have an expectation that the
    overall value of the fund will appreciate over time. When money is
    invested, an exit strategy is negotiated that gives the fund an overall
    expected return at the end point. Calculation of the value of the
    investment at any point preceding the exit, however, is problematic, as
    discussed above. Typically, a private sector firm values the investment
    by looking at the price it paid for its shares and comparing that to
    the most recent purchase by another party. Thus, if the VC firm paid
    $10 per share last year and the most recent sale this year was for $20
    per share, the firm would calculate its investment as having doubled in
    value. So, if the total investment was $1 million, the VC firm would
    show it to be worth $2 million today. From the perspective of the
    limited partners who provided the initial capital, their investment is
    appreciating in value, leading up to the exit.
        Auditors, however, do not view the calculation of a portfolio's
    current value in the same manner. Their concern is with dollars out and
    dollars in. Thus, an investment of $1 million will appear as a debit,
    until money is recovered. Furthermore, they calculate an allowance, or
    discount factor, which is essentially a measure of the probability of
    loss. The allowance is calculated based on a number of objective and
    subjective measures. An investment of $1 million last year, with zero
    allowance--i.e., a 100 percent probability of recovery--is carried
    forward as a $1 million debit. There is no room for calculating any
    appreciation.
        Thus, an investment will not show any record of appreciation until
    repayment begins, at which time income will be recognized. Because of
    the structure of venture capital investments, repayment may be several
    years in the future. AARCC's portfolio, then, may appear to be
    depreciating in the near-term, as it will show only debits.
        Independent of the financial audits performed on AARCC, we have
    made our own informal estimation of the portfolio's value, based on
    procedures discussed above as being typical of the VC industry. Based
    on that approach, we estimate AARCC's portfolio has increased in value
    by about 20 percent since 1993.
        Question. What is your assessment of the AARCC portfolio?
        Answer. The AARCC Board of Directors prepared a 10-year business
    plan for the Corporation. It shows no appropriations following 2002,
    and it projects repayments through that same year. There are three
    repayment scenarios: low; medium; and high. The high case scenario
    anticipates $300,000 being repaid by the end of fiscal year 1998. To
    date, AARCC has received $247,713.75 in repayments. Thus, the portfolio
    is performing at the high end of the financial projections.
    Additionally, as part of the Corporation's 10-year strategic plan, the
    Board set goals of 10,000 new jobs created as a result of AARCC
    investments and 500,000 acres of unused farmland being put back into
    production. We estimate that halfway through the 10-year plan,
    approximately 5,000 jobs can be attributed to AARCC investments and
    250,000 acres are in use as a result.
        Question. How is the AARCC portfolio performing at this time?
        Answer. The AARCC Board of Directors prepared a 10-year business
    plan for the Corporation. It shows no appropriations following 2002,
    and it projects repayments through that same year. There are three
    repayment scenarios: low; medium; and high. The high case scenario
    anticipates $300,000 being repaid by the end of fiscal year 1998. To
    date, AARCC has received $247,713.75 in repayments. Thus, the portfolio
    is performing at the high end of the financial projections.
    Additionally, as part of the Corporation's 10-year strategic plan, the
    Board set goals of 10,000 new jobs created as a result of AARCC
    investments and 500,000 acres of unused farmland being put back into
    production. We estimate that halfway through the 10-year plan,
    approximately 5,000 jobs can be attributed to AARCC investments and
    250,000 acres are in use as a result.
        Question. What is AARCC's capacity to effectively use a funding
    level of $20 million for fiscal year 1999?
        Answer. AARCC's vision of agriculture in the 21st century sees a
    diverse crop mix, with fibers available for numerous industrial uses.
    Some of the fibers will be from waste, e.g. wheat straw, others will be
    from plants grown specifically for the fibers. In order to use the
    fibers, they will require a variety of processing/pulping steps. What
    we envision are regionally placed mini- mills that can process a
    variety of fibers for a variety of uses. We have held several meetings
    with pulping experts and farmers during the past year, all of whom
    agree with the agricultural, technical, and economic soundness of our
    vision. With additional funding, AARCC would move to establish a pilot
    facility, in conjunction with a grower's group, to demonstrate the
    feasibility of the concept.
        Additionally, there is a group of companies that constitute the
    real financial opportunity in the AARCC portfolio. With additional
    funding we would make further investments in them, helping to move them
    towards an Initial Public Offering (IPO).
        Question. What effect can the work of AARCC have on rural America
    in 20 years?
        Answer. AARCC's role in the next 20 years will be part of its 100-
    year vision for the economy and rural America's role in that economy.
    Presently, the basic raw material for the world's economy is petroleum.
    We envision an economy where the basic raw material is derived from
    biological sources--primarily plants and animals. Given the physical
    and chemical nature of petroleum sources, it is profitable to extract
    the raw material from one part of the world, transport it halfway
    around the globe to process it, and transport it even further to
    manufacture a finished product. The physics and chemistry of biological
    raw materials do not allow for such economics, however. To be
    profitable, the processing and manufacturing of bio-based products must
    be done close to the source of the raw materials. Hence, the growth of
    jobs in this new bio-based economy takes place in rural America. As
    stated previously, our 10-year strategic plan estimates 10,000 new
    rural jobs as a result of AARCC investments.
        There are other advantages to shifting from an economy based on
    geology to one founded on biology. By their chemical structure, the
    waste and by-products will be largely biodegradable and eco-friendly.
    Moreover, the raw materials will be domestically produced and annually
    renewable. To borrow a phrase used by just one group of producers: The
    U.S. is the Saudi Arabia of corn. The further national security and
    geopolitical implications of such a bio-based economy are evident.
    Rural America will be the focal-point of this new economy.
        Question. Some ask: if investing in value-added enterprises in
    rural areas is such a good idea, why isn't the private sector doing
    just that? What is your answer to that question?
        Answer. AARCC's role has been and continues to be to serve as a
    catalyst for the development and manufacture of bio-based products,
    using the raw materials produced by our vast agricultural capacity. A
    catalyst is needed, because the price of petroleum still makes it
    difficult for such bio-based products to compete. However, with
    improvements in bio-processing, the cost differential is shrinking.
    Also, when two comparable products--one petroleum-based, the other bio-
    based--are subjected to life-cycle cost analysis, the disposal costs of
    the bio-based product usually make it more competitive. We are at the
    beginning of the transition from geology to biology, and AARCC's
    catalytic role is still needed.
        The private sector is not ignoring the transition. For every dollar
    that AARCC invests, approximately $3.50 of private sector money is
    invested in AARCC projects. In addition, there are several examples of
    follow-on multi-million dollar investments in AARCC companies, where
    the private sector investment was initially attracted by AARCC's ``USDA
    Seal of Approval'' on a project.
        The AARCC Board of Directors has a 10-year strategic plan and a 10-
    year business plan that do not anticipate appropriations after fiscal
    year 2002. During this transitional phase, however, it is the Board's
    view that AARCC needs to continue to identify and fund those companies
    that are the nucleus of the bio-based economy.
                       business and industry loan program
        Question. What is the current level of demand for the B&I loan
    guarantee program? What is the expected value of applications for
    fiscal 1998 that the Department is likely to not be able to fulfill
    because of budget limitations.
        Answer. As of March 6, 1998, there were 469 applications on hand
    for a total of $923,543,753, with approximately $500 million of the
    fiscal year 1998 $1 billion allocated amount either obligated or
    authorized for funding. The level of demand for the B&I Guaranteed Loan
    Program has remained relatively constant throughout the year. Based on
    the above, we expect $900 million of applications will not be funded
    due to funding limitations this fiscal year.
        Question. If the Department promoted the program to a significant
    degree, what would be the likely increase in B&I applications?
        Answer. Current efforts to promote the program are centered around
    informing lenders and local governments of its availability as well as
    responding to general inquiries from businesses. Since publication of
    the new regulation on December 23, 1996, the demand for the program has
    increased by over 300 percent. With increased promotion of the program,
    we can only anticipate the program will continue to grow at a
    significant rate.
        Question. What is the Department's belief concerning the loss of
    employment and economic growth in rural America because of the shortage
    in B&I loan funds?
        Answer. Based upon our response to your question 1. above and the
    expectation that $900 million of applications will not be funded in
    fiscal year 1998 due to the lack of available funding, we project
    34,200 will not be either created or saved due to the lack of
    sufficient funding.
        Question. In your personal opinion and based on your research, how
    critical is the need for enhanced credit in rural areas?
        Answer. Numerous studies, including one conducted by the USDA
    Economic Research Service and testimonies at the September 4, 1997,
    Senate Agriculture Committee hearing on Rural Credit, indicated that
    there are areas in rural America that have a lack of access to
    sufficient capital to meet their economic development needs. Without
    this credit, these areas do not have the same opportunities other rural
    areas have in providing economic opportunity for their residents.
        Question. What are your views concerning the proposal by Senator
    Bennett to expand the authority of the Farm Credit System and Farmer
    Mac to allow them to acquire business loans from rural banks?
        Answer. We are currently evaluating the proposal by Senator Bennett
    to expand the authority to Farmer Mac. If that proposal provides
    additional capital to rural businesses, then we support it. Recently
    the Under Secretary for Rural Development has been asked to chair a
    task force to evaluate ways the Department may work with Farmer Mac in
    order for Farmer Mac to expand its involvement in providing economic
    opportunities for rural commercial lenders and businesses.
                             rural housing service
        Question. What would the impact of an increase in the FHA loan
    limits, as proposed by the Administration, be on rural housing and on
    the rural housing programs of the Rural Housing Service?
        Answer. The base HUD 203(b) loan limit in much of rural America is
    currently $86,317. An increase in the loan limit, such as the one being
    proposed, could prompt an increase in lending activity. This is
    especially true for new construction type homes, where some have argued
    that the current base is not high enough to support building a new home
    in some areas.
        Regarding the impact to the rural housing programs of the Rural
    Housing Service, the Agency has a mandate to ensure that the dwellings
    being financed are modest in design and cost. The proposed uniform HUD
    203(b) level exceeds $200,000. Of course, given the incomes of the
    customers the Agency serves, it is unlikely that any could afford such
    a sizable loan. By statute, maximum loan limits for the Guaranteed
    Rural Housing loan program are tied to HUD 203(b) limits. The
    guaranteed program has an income gap that will constrain costs with an
    increased 203(b) limit. The section 502 Direct loan program currently
    uses 203(b) limits as an index for gauging maximum loan amounts and
    modest housing, and this philosophy may have to be examined if a
    single, uniform 203(b) limit is adopted. The Agency is currently
    exploring alternative definitions of modest housing and will publish
    the results in the Federal Register in the future.
                                     ______

                      Questions Submitted by Senator Kohl
                       section 502 single family housing
        Question. Section 502, Direct Single Family Program Housing, has
    seen a four-fold increase in funding for guaranteeing housing loans
    since fiscal year 1994 while, your Direct 502 funding has been cut in
    half over that same time period. Has the Agency analyzed how higher
    equity requirements that banks have for loan approval will impact
    lower-income users of the program?
        Answer. The Section 502 direct program serves low and very low-
    income rural residents who can not obtain commercial credit under
    similar terms. Additionally, we offer payment assistance which reduces
    the interest rate down to as little as 1 percent based on income. This
    program serves low and very low income residents under 80 percent and
    50 percent median income respectively. The Guaranteed Rural Housing
    loan program is designed to serve low and moderate income families,
    under 115 percent median income, and provides for 100 percent
    financing. The Agency's loan guarantee takes the place of the
    traditional down payment terms lenders require. Approximately 27
    percent of the Guaranteed loans made during fiscal year 1997 went to
    low income families primarily due to the prevailing low interest rates
    in the commercial market.
        Question. The State of Wisconsin is the only state that has changed
    their Section 502 formula that establishes ``targeted'' counties. They
    found that the allocations formula approved by USDA inadvertently
    targeted larger urban counties. I have two concerns with this
    situation; first, why did Rural Development's national office create a
    formula that targeting funds to areas that not completely rural?
    Second, if the formula is skewed, are funds currently targeted to the
    rapidly developing rural/urban area?
        Answer. The Agency's allocation formula is based on the following
    criteria for the Section 502 Housing Loan Program and the data source
    for each of these criteria is based on the latest census data
    available. The States use these same criterion adjusted with State and
    county census data to allocate to the filed offices:
      --State's percentage of the National number of rural occupied
            substandard units;
      --State's percentage of the National rural population;
      --State's percentage of the National rural population in places of
            less that 2,500 population;
      --State's percentage of the National number of rural households
            between 50 and 80 percent of the area median income; and
      --State's percentage of the National number of rural households below
            50 percent of the area median income.
        There are a number of factors that contribute to larger numbers of
    loans being made in rural areas adjacent to more metropolitan areas.
    The first factor is the higher income limits as determined by HUD, of
    families living in these areas. The second is the higher section 203(b)
    loan limits that are allowed in higher cost areas. Another contributing
    factor is the proximity of these rural areas to metropolitan areas
    offering good and plentiful job opportunities. Also affordable, new
    housing is more plentiful due in part to the more aggressive nature of
    the real estate market to serve the low-income population.
        The Agency has included in its goals providing outreach and
    targeting areas with the greatest need and that have historically been
    underserved. Another goal is to use 30 percent of the guaranteed funds
    in these targeted counties. We believe the Agency is making every
    effort to offer and use its home ownership programs in areas with the
    greatest need.
                            rural telecommunications
        Question. For the second year in a row, the Rural Utility Service
    hardship telecommunications loan program was cut. However, there is an
    increasing demand for loans from that program. Last year there was a
    $68 million backlog in requests, and for fiscal year 1998 the RUS is
    projecting a $60-$100 million backlog. With such high demands on the
    program, when can we expect funding to stabilize or increase?
        Answer. As of March 1, 1998, hardship loans approved for fiscal
    year 1998 totaled $65.1 million, with an additional $61.5 million in
    applications on hand. With an authorized lending level for fiscal year
    1998 of $75 million, we estimate that, based upon the number and amount
    of applications currently on hand and anticipated by the end of the
    fiscal year, the hardship program will have a backlog--or excess demand
    over available funding--of $79 million at the end of fiscal year 1998.
    As you are aware, the hardship loan program has a fixed interest rate
    of 5 percent per annum, thereby resulting in much higher subsidy
    appropriation per loan dollar than our Treasury or near Treasury rate
    programs.
                                     ______

                      Questions Submitted by Senator Leahy
               rural empowerment zones and enterprise communities
        Despite the fact that Vermont is the most rural state in the
    nation, no area of the state qualified for designation as a Rural
    Empowerment Zone or Enterprise Community during the 1994 competition. I
    support the EZ/EC program, which has done a great deal to revitalize
    the Old North End in Burlington, Vermont. However, I am concerned that
    the areas facing the greatest long-term and persistent problems of
    unemployment and poverty--our rural areas--can not even compete for
    this valuable funding. In particular, a three-county area of the state
    known as ``the Northeast Kingdom'' has consistently held some of the
    highest unemployment rates in the state, with residents held back by
    the lack of job opportunities, training and investments.
        As I mentioned in my questions last year, the National Science
    Foundation has shown that the way the government measures poverty
    today, a basic criteria for eligibility as an EZ/EC, is inaccurate and
    that shelter costs among other things should be factored into the
    measure. The findings of a 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.
        Question. How will the proposed Rural Empowerment Zones be funded?
    Will Enterprise Communities be considered again as well, or will this
    competition be limited to Zones? If it will be limited to Zones, is
    that based on requirements of the authorizing language or was it a
    choice of the Administration.
        Answer. Although new Zones have been authorized, funding
    legislation language has not been introduced as yet for Round II of the
    Empowerment Zone program. Since Round I was funded through Social
    Service Block Grant (SSBG) funds, it is assumed Congress may use the
    same vehicle for Round II.
        The Taxpayer Relief Act of 1997 authorized five (5) Rural Zones and
    no Enterprise Communities for Round II. The President's budget called
    for $200 million ($100 million for USDA and $100 million for Housing
    and Urban Development (HUD) for the Rural Zone program in Round II,
    giving a total of $40 million for each of 5 Zones over a 10 year
    period. Unless that is changed in the funding legislation the new
    designations will be limited to Zones only.
        Question. Can and will the Department take into consideration the
    National Science Foundation's recommendations and studies like the
    Vermont report I mentioned above when setting the eligibility criteria
    for the new round of awards?
        Answer. The Empowerment Zone & Enterprise Community legislation
    requires that we use the 1990 census figures along with the poverty
    levels in determining eligibility. The criteria are as follows:
    legislation limits the program to rural communities of 30,000
    population or less, and not exceeding 1,000 square miles in size. The
    pervasive poverty and distress criteria require a minimum poverty rate
    of 20 percent in each census tract, or 25 percent poverty rate in 90
    percent of the census tracts, or a 35 percent poverty level in 50
    percent of all census tracts used in the application. For Round II the
    authorizing legislation drops the 35 percent poverty level criterion,
    and adds criteria for selecting communities with out-migration
    concerns. New legislation would be required to change the basic
    criteria to include such factors as underemployment.
        Question. I understand that communities which applied for EZ/EC
    status during the 1994 competition but were unsuccessful, have still
    been able to tap into program funding that the Department has set-aside
    for EZ/EC's. Will that option continue to be available for unsuccessful
    applicants, and if so, please describe the programs affected and how
    communities can tap into them?
        Answer. It has been our experience that more potential designations
    provide greater incentives for community participation. Community
    participation is essential to the success of this program. With only
    five Rural Empowerment Zones in Round II the likelihood of small,
    impoverished rural communities taking the time, effort and money to
    prepare an in-depth proposal is greatly diminished. The new Round II
    legislation also allows, for the first time, tribal lands and the
    problem of out-migration to be addressed, thus further reducing the
    potential for success of an individual community.
        Even participating communities that are not designated end up
    winners by going through the rigorous strategic planning process
    required by the program. At USDA we call them our Champion Communities.
    In Round I, over 225 rural communities participated by pulling together
    community resources and developing a strategic plan, only 33
    communities were designated, the rest were champion communities.
        Champion Communities.--Today there are nearly 200 Rural Champion
    Communities who lost out in the Round I designation competition, yet
    they have been successful in attracting federal and state dollars to
    their communities over $100 million federal dollars in housing, water/
    sewer funding, business programs and other assistance. They have been
    successful because they had developed a strategic plan of action for
    the Round I EZ/EC Application. These were not special set-asides, they
    were normal USDA programs available to most rural communities, but
    these Champion Communities had strategic plans that put them a step or
    two up on competing rural communities for federal, state and private
    programs designed to improve their economic and social conditions.
                            venture capital program
        Question. Administration testimony indicates that rural America is
    losing business opportunities because we don't fund programs that help
    diversify local rural economies. Everyone acknowledges there is a lack
    of investment capital in rural areas. Yet the administration does not
    support a demonstration program which would work to get venture capital
    to rural America. Section 761 of the 1996 farm bill provides for the
    use of a limited amount of guarantee authority to attract private
    investor funding for rural venture capital pools. Why is no funding
    requested for this program in fiscal year 1999? On December 11, 1997 I
    wrote to Secretary Glickman clarifying the intent of the fiscal year
    1998 Agriculture Appropriations Report language regarding the Venture
    Capital funding and requesting that the Department proceed with the
    development of rules for this program. Three months later I have not
    yet received a response to that letter, and have received no indication
    that work on these regulations is proceeding. When does the Department
    expect regulations for the program to be published? Is the Department
    consulting with outside organizations with experience in venture
    capital in the development of those regulations?
        Answer. The Agency is considering options available for
    promulgating regulations to implement this program. As part of that
    process, an advanced notice of proposed rule making was published in
    the Federal Register on April 9, 1997, requesting comments for
    implementing this authority. Five comments were received and are being
    considered in the drafting of the regulation. The fiscal year 1998
    Appropriations Bill does not appropriate funding for this program, and
    the President's fiscal year 1999 Budget does not request funding for
    this program. However, we are in the process of developing a proposed
    rule. We anticipate publication of the proposed rule by early calendar
    year 1999.
        In addition, the Department has consulted with House and Senate
    staff on implementation of the program and have had limited
    consultation with outside organizations. Since regulations will be
    published as a proposed rule, with a public comment period, additional
    opportunities will be afforded to outside organizations with experience
    in venture capital funding to comment.
                           centralized loan servicing
        I am hearing from an increasing number of Vermonters about problems
    they have experienced with the USDA Centralized Loan Servicing program.
    Some have told of treatment at the hands of Rural Housing personnel
    that would not be acceptable in any lending situation. An example of
    these problems follow.
        One constituent initially wrote to me in January when RHS raised
    her payments from $300 to $451, even though her husband's income had
    decreased and she was not working. An RHS worker in St. Louis was rude
    to her on several occasions and told her the Vermont office had been
    doing the calculations wrong all along, resulting in a history of
    underpayment. The Vermont office advised her to apply for a review of
    interest credit and she got permission to continue paying the $300 a
    month. By February 10, RHS did reduce the payment amount to $210 a
    month, but the constituent no longer trusts RHS and wants to refinance
    because the fluctuating interest rates (up to 13\1/2\ percent) are hard
    to take. Her next problem was getting the information she needed
    regarding the recapture fee. When she finally got her payoff packet,
    she couldn't believe they still owed $48,000 recapture fee on a loan
    that was originally $43,000 sixteen years ago. When she called
    centralized servicing with questions, she couldn't find anyone who
    could answer her questions. A month later she finally found a bank to
    refinance her home, but the bank pulled out after all the paperwork was
    approved and the appraisal was scheduled. The reason given: the bank
    didn't agree to RHS subordination requirements. This came up after she
    had put the appraiser in touch with St. Louis to make sure he
    understood the specific requirements that RHS had been telling her. The
    branch manager told her the bank was afraid of being sued by RHS if,
    for instance, the bank had to foreclose on the mortgage and failed to
    contact RHS. Instead, the bank is only willing to finance the entire
    amount, including the amount subordinated by RHS, and option the
    constituent would not be able to afford. She is now searching for
    another lender who will refinance the home and work with RHS
    subordination requirements.
        Question. What is the current first year delinquency rate for loans
    serviced at the centralized servicing center?
        Answer. As of March 14, 1998, the first year delinquency rate at
    the Centralized Service Center (CSC) was 11.7 percent for borrower
    delinquency and 11.0 percent for loan delinquency. The borrower figure
    represents subsequent loans for repair or rehabilitation work on their
    homes. Some of these loans are delinquent due to the impact of
    conversion of all of the single family direct loans in the field to the
    CSC and the transition to a new system.
        Question. What is the current overall delinquency rate?
        Answer. As of March 20, 1998, the overall delinquency rate for all
    loans serviced at the CSC is 19.8 percent. This includes subsequent
    loans that many borrowers have taken for repair or rehabilitation work
    on their homes. In any conversion of a large portfolio, whether public
    or private, the delinquency rate is expected to spike initially as
    staff and customers adjust to a new system and implementation
    conversion problems are fixed. We expect the delinquency rate to fall
    significantly by the end of the fiscal year.
        Question. What were the first year delinquency rates and overall
    delinquency rates during the year preceding the switch to the
    centralized servicing system.
        Answer. The first year delinquency rate was 7.3 percent during
    1996. The overall delinquency rate on September 30, 1997, (the
    effective date of the last conversion) was 15.0 percent.
        Question. What is being done to correct problems which appear to be
    causing RHS personnel to contact loan recipients with inaccurate
    information on loan delinquency or payment levels?
        Answer. The Section 502 borrowers initially receive payment
    assistance which subsidizes the interest rate down to 1 percent based
    on income. Our regulations require that we verify the income for each
    borrower on an annual basis and make adjustments to the subsidy if
    there were changes in income. In the conversion of the loan portfolio
    to the Centralized Service Center (CSC), we experienced delays in
    recertifying the payment assistance to borrowers. Performance in the
    processing of expired payment assistance has improved significantly.
    There were many issues in obtaining complete subsidy renewal packages
    from borrowers. If necessary documentation for subsidy renewal was not
    forwarded to the CSC in a timely manner, the borrower would be billed
    at the note rate of their mortgage. Plans are under way to utilize
    field personnel to assist in those cases where the borrower has not
    sent in the complete package. Currently, approximately 70 percent of
    recertification packages received at the CSC are completed and
    processed immediately. The remaining 30 percent of incomplete packages
    require additional contact to obtain the necessary information needed
    to certify income. The 70 percent completion rate of recertification
    packages is a significant from when the CSC first began operations, as
    the borrowers adapted to the new system.
        Question. What difficulties are harried RHS loan recipients who
    seek to refinance their homes in the private market facing from RHS and
    what is RHS doing to make this transition smoother for clients who feel
    they can be better served in the private market?
        Answer. The Section 502 borrowers initially receive payment
    assistance which subsidizes the interest rate down to 1 percent based
    on income. Our regulations require that we verify the income for each
    borrower on an annual basis and make adjustments to the subsidy if
    there were changes in income. In the conversion of the loan portfolio
    to the Centralized Service Center (CSC), we experienced delays in
    recertifying the payment assistance to borrowers. Performance in the
    processing of expired payment assistance has improved significantly.
    There were many issues in obtaining complete subsidy renewal packages
    from borrowers. If necessary documentation for subsidy renewal was not
    forwarded to the CSC in a timely manner, the borrower would be billed
    at the note rate of their mortgage. Plans are under way to utilize
    field personnel to assist in those cases where the borrower has not
    sent in the complete package. Currently, approximately 70 percent of
    recertification packages received at the CSC are completed and
    processed immediately. The remaining 30 percent of incomplete packages
    require additional contact to obtain the necessary information needed
    to certify income. The CSC modified request forms to educate our
    borrowers when completing the recertification packages. This has
    resulted in a significant improvement from the 30 percent rate of
    completed forms received in the CSC in March of 1997 compared to the
    current rate of 70 percent.
                             fund for rural america
        Question. The Senate Agriculture Committee, on which I am also a
    member, is currently in conference with the House on a bill to
    reauthorize agricultural research programs. The Senate bill also
    corrected a technical error in the Farm Bill which eliminated funding
    for the Fund for Rural America in fiscal year 1998. If funding for the
    program is restored for fiscal year 1998, will the Department be ready
    to publish a Request for Proposals and administer a competition in
    fiscal year 1998, and when would that RFP be published? What division
    of funding between research and rural development would you anticipate?
    During the fiscal year 1997 competition virtually all of the funding
    for rural development was used to simply boost funding for current
    programs. The role of the Appropriations Committee has traditionally
    been to establish the appropriate program funding levels. I was very
    disappointed that the Department chose to dedicate such a large
    percentage of the rural development dollars in the Fund to changing
    those program levels. If funding is restored for fiscal year 1998 will
    the Department take a more creative approach to the rural development
    funding piece? In particular, there is a real need for funding for
    initiatives which do not fit neatly within a specific rural development
    program, but achieve the same goals such as economic and infrastructure
    development. Will the Department consult with the authorizing and
    appropriating committees when deciding on the focus of a potential
    fiscal year 1998 competition?
        Answer. The Department's ability to respond to restored funding for
    fiscal year 1998 will depend on the timing of the funding restoration
    and the legislation itself. The Department has made no decisions on the
    division of funding between research and rural development. Regarding
    the use of funds for rural development in fiscal year 1997, the statute
    required the funding to go through existing programs. Our ability to be
    innovative was constrained by the statute and existing program
    regulations. We chose to dedicate a significant amount of funding to
    Section 502 housing because of the decrease in the program level. If
    funding is restored for fiscal year 1998, the Department will still be
    restricted, by the statute and program regulations, in its ability to
    be creative. The Department would be pleased to discuss with the
    authorizing and appropriating committees your views on how the funds
    should be used.
                                 lan/wan/voice
        Question. Can you comment on how the Department is implementing the
    cost savings from a common computing and telecommunications environment
    in local USDA service centers?
        Answer. The Business Process Reengineering (BPR) efforts underway
    are the foundation for all Information Technology investments. The base
    infrastructure provided by Service Center implementation initiatives
    like the Common Computing Environment and the LAN/WAN/VOICE project are
    essential to implement reengineered business processes such as Rural
    Development's Dedicated Loan Origination and Servicing (DLOS) System.
    For example, LAN/WAN/VOICE installations at the DLOS sites permitted
    timely implementation of the DLOS system. The cost savings from DLOS
    implementation are already reflected in Rural Development's budget
    which has already been reduced by Congress to account for the DLOS
    reengineering effort. In the future, the Service Center
    implementation's BPR's underway will result in additional cost savings
    to Rural Development and the other partner Agencies. We are in the
    process of validating the cost savings resulting from BPR.
                          section 515 housing program
        I am very concerned with the continuing decline in funding for the
    Section 515 Multi-Family housing program. In fiscal year 1999 the
    Department is proposing a decrease in funding of approximately $30
    million.
        Question. What would the impact of this reduction be on the number
    of people served and the number of units created or rehabilitated in
    comparison to fiscal year 1998?
        Answer. With a program level of $150 million for the Section 515
    program, in fiscal year 1998, the Agency will use approximately $99.5
    million for new construction and $50.5 million for repair/
    rehabilitation purposes. At these levels, the Agency estimates that we
    will build 2,287 new units and repair or rehabilitate 5,012 existing
    units. A reduction of $50 million for fiscal year 1999 would result in
    only 1,667 new units and the repair or rehabilitation of 2,445 existing
    units, if costs remained constant. Consequently, less families will be
    served with the reduced funding.
        Question. Please provide me with this same data over a 10 year
    period of time--I am interested in seeing the comparative funding
    levels and number of units created over the past 10 years.
        Answer. The information follows:

                           SECTION 515 APPROPRIATIONS AND OBLIGATIONS--FISCAL YEARS 1988-1998
                                                [Run Date: March 9, 1998]
    ----------------------------------------------------------------------------------------------------------------
                                                                                         Obligations to
                                Fiscal year                                Allocations        date       Units built
    ----------------------------------------------------------------------------------------------------------------
    1998 \1\...........................................................    $150,000,000    $110,000,000        2,468
    1997 \2\...........................................................     153,132,327     152,497,187        1,913
    1996 \3\...........................................................     151,009,628     151,009,628        2,853
    1995...............................................................     183,319,000     182,037,517       11,542
    1994...............................................................     540,107,000     509,380,278       15,340
    1993...............................................................     573,900,000     569,704,650       14,787
    1992...............................................................     573,900,000     564,262,480       15,396
    1991...............................................................     576,185,201     573,904,776       16,063
    1990...............................................................     571,904,000     568,236,051       15,996
    1989...............................................................     554,934,000     551,503,713       16,465
    1988...............................................................     554,935,000     551,503,713       16,465
    ----------------------------------------------------------------------------------------------------------------
    \1\ The $110 million figure represents obligations to date including one subsequent loan. Approximately $94
      million will be used for new construction.
    \2\ $95.9 million was used for new construction. The balance was used for rehabilitation/repair.
    \3\ Approximately $74.4 million was used for new construction. The balance was used for critical health and
      safety and deferred maintenance.

                                     ______

                      Questions Submitted by Senator Byrd
                                water and waste
        Chairman Cochran, Senator Bumpers, members of the subcommittee, and
    Undersecretary 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. In
    particular, the Rural Utilities Service (RUS) programs provide small
    rural communities with grants and loans for water and waste disposal
    systems--infrastructure that I deem 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 $1
    billion dollars.
        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 slights the most basic needs of the people, and
    that we must take action to restore common sense to our budget
    priorities. This hearing is a welcome opportunity to renew attention to
    the critical need for federal investment in basic infrastructure, and I
    have several questions regarding the President's proposed budget in
    this regard.
        First, I am pleased that the proposed budget for water and waste
    water systems includes an approximately $100 million increase for the
    loan programs. You state in your prepared remarks that this proposed
    budget will provide new water service to about 500,000 rural residents.
    I would be interested in reviewing a state-by-state breakdown of the
    residents expected to benefit from this budget.
        Question. Do you have such a breakdown?
        Answer. The estimate was based upon nationwide averages. We can
    allocate this estimate, by state, using the amount of funds initially
    allocated per state and the same ratio of loan and grant dollars to
    people served.
        Question. If not, I would appreciate your providing me with such a
    chart.
        Answer. The following table is submitted for the record.

    RUS water systems--estimate of people to be serviced in fiscal year 1999

    Alabama.......................................................    12,061
    Alaska........................................................     1,172
    Arizona.......................................................     3,976
    Arkansas......................................................     9,148
    California....................................................    12,777
    Colorado......................................................     3,872
    Connecticut...................................................     3,173
    Delaware......................................................     1,010
    Florida.......................................................    11,310
    Georgia.......................................................    15,815
    Hawaii........................................................       899
    Idaho.........................................................     3,496
    Illinois......................................................    12,469
    Indiana.......................................................    11,554
    Iowa..........................................................     7,369
    Kansas........................................................     5,112
    Kentucky......................................................    14,376
    Louisiana.....................................................    10,022
    Maine.........................................................     4,443
    Maryland......................................................     4,459
    Massachusetts.................................................     3,884
    Michigan......................................................    16,931
    Minnesota.....................................................     8,858
    Mississippi...................................................    12,910
    Missouri......................................................    11,463
    Montana.......................................................     3,197
    Nebraska......................................................     3,123
    Nevada........................................................       965
    New Hampshire.................................................     3,043
    New Jersey....................................................     3,144
    New Mexico....................................................     3,982
    New York......................................................    14,489
    North Carolina................................................    19,548
    North Dakota..................................................     2,116
    Ohio..........................................................    17,152
    Oklahoma......................................................     7,819
    Oregon........................................................     6,013
    Pennsylvania..................................................    20,298
    Puerto Rico...................................................    21,008
    Rhode Island..................................................       742
    South Carolina................................................    10,131
    South Dakota..................................................     2,525
    Tennessee.....................................................    13,296
    Texas.........................................................    21,008
    Utah..........................................................     1,689
    Vermont.......................................................     2,403
    Virginia......................................................    11,889
    Virgin Islands................................................       515
    Washington....................................................     7,194
    West Pacific Areas............................................       515
    West Virginia.................................................     9,319
    Wisconsin.....................................................    10,126
    Wyoming.......................................................     1,373
    Unallocated...................................................    83,593
                        --------------------------------------------------------------
                        ____________________________________________________

          Totals..................................................   504,774

        It is my understanding that Water 2000 was designed to assist those
    communities with the most limited financial resources and highest
    poverty rates. I have been advised that many West Virginia communities
    awaiting federal assistance for water and waste disposal systems would
    require substantial grant funds to make water or waste water systems
    economically feasible for the community to operate.
        Question. Do you agree with this assessment? Does a similar
    assessment exist nationwide?
        Answer. We agree that there are rural communities in West Virginia
    and in other parts of the country that need substantial grant funds in
    order to construct or improve a water or waste disposal system.
    However, the majority of rural communities across the nation can afford
    to repay a loan to cover some, if not all, of the construction-related
    costs and successfully operate the system. We assist communities in
    constructing facilities that are modest in size, design and cost which
    helps lower the overall project cost and the need for grant funds.
    Additionally, the lowest income communities can qualify for a loan with
    an interest rate of 4.5 percent thereby helping to lower user rates. A
    majority of the loans made by the Agency were at the 4.5 percent rate
    or the intermediate rate, which is currently 4.875 percent. Higher
    income communities pay the market rate which is now 5.25 percent.
        If this assessment is accurate, the loan programs are effectively
    worthless to many small towns, unless accompanied by a grant.
        Question. Given this situation, why has there been no proposed
    increase in funding for the water and waste disposal grant program?
        Answer. The requested budget authority levels for water and waste
    disposal loans and grants reflects budgetary considerations and the
    funding needs of all Rural Development programs. The Rural Development
    State Directors have been given authority to transfer budget authority
    between the water and waste loan and grant accounts. This provides them
    with the flexibility necessary to match dollars with the needs of their
    States.
        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? In West Virginia?
        Answer. We see the policy initiative of Water 2000 as a continuing
    effort to help rural people achieve a better quality of life. Bringing
    clean water to rural households is only part of the battle. Once water
    is available, it must continue to meet Safe Drinking Water Act
    standards. Over 60 percent of the water and waste loan and grant funds
    is used for expansion, replacement, and renovation of existing systems,
    replacements and renovations necessary for the systems to provide
    quality service to their rural customers.
        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. The water and waste programs have over $3 billion in
    funding requests on hand. If additional funding were provided for Rural
    Development programs, the water and waste programs should receive
    consideration for these funds.
                                     ______

           Questions Submitted by Senator Bumpers for Senator Dorgan
                     rural area economic partnership (reap)
        In fulfillment of a promise made by the President in 1993 to
    address rural out migration and the resulting economic hardship, the
    USDA's Office of Rural Development signed a Memorandum of Understanding
    with several entities in North Dakota to create the Rural Area Economic
    Partnership (REAP) Pilot Program. The President made a commitment to
    the REAP zones because the standard EZ/EC programs did not work for
    areas of high out migration.
        I think the grassroots organization of the REAP zones is going
    well. However, I have some concerns that USDA is presenting what might
    be usual Department expenditures in these zones as commitments toward
    the President's promise of $10-$25 million for each of the zones as
    demonstration areas.
        Question. I have received a report from USDA on expenditures in the
    REAP zones, but I would like the Department to provide for the record a
    dollar figure on what it believes was provided to the REAP
    demonstration areas in fiscal year 1997 above and beyond the funds
    these areas would normally receive through USDA programs.
        Answer. USDA Rural Development assistance to participating North
    Dakota counties has risen sharply over the level for the period of
    1991-1995. The 14 county area encompassed within the two REAP zones
    show an average of less than $3 million a year in Rural Development
    funding dollars (not including single family housing) during 1991-95.
    During the fiscal years 1996 and 1997 and a small portion of fiscal
    year 1998 the annual average to the REAP counties is approximately $12
    million annually.
        Question. What formal planning and accounting mechanism is in place
    to assure that funding promised to the REAP zones is delivered?
        Answer. The Office of Community Development is in the process of
    completing a data base program for all related rural development
    programs that will provide an annual tabulation of all of this
    information for the future.
        Currently, applications for certain USDA grant and loan programs
    submitted from the REAP zones receive up to five additional points.
    These programs are the Rural Business Enterprise Grants (RBEG), Rural
    Economic Development Loan and Grant Program (REDLG), Business and
    Industry (B&I) and the Community Facilities (CF) Program.
        This means that the REAP zones receive no additional points for the
    Water and Waste Program, the Intermediary Relending Program, several
    important rural housing programs, and the Forest Service economic
    development programs.
        Question. What is the rationale for applying the additional points
    only to those four programs listed? What steps are being taken to
    incorporate the REAP zones into all aspects of Rural Development's
    portfolio?
        Answer. With the exception of the Forest Service economic
    development program, which is not in the North Dakota Rural Development
    portfolio, the North Dakota State Director for Rural Development gives
    maximum points to all Rural Development programs to the extent allowed
    by regulations.
        Currently USDA is working to establish the first ever rural
    Enterprise Zone (EZ) based on, in part, out migration. Rural North
    Dakota has suffered from staggering net outmigration (more than 15
    percent) and the accompanying economic stagnation.
        Question. How is USDA going to inform and involve local entities
    interested in pursuing the designation for the Rural EZ?
        Answer. In coordination with the official announcement of Round II
    during the month of April, USDA has tentatively scheduled 12 Regional
    Workshops strategically placed around the country. One workshop, which
    will have a large concentration of communities with problems of
    outmigration, is tentatively scheduled to be held in South Dakota.
        We will officially notify all Members of Congress with the specific
    dates, times and places of these workshops as they are finalized. We
    would hope that Members would provide this information to their
    communities and to other special interest groups within their states
    and Districts.
        All State Rural Development offices will be involved in contacting
    and informing state agencies, community interest groups, and others.
    The USDA Office of Intergovernmental Affairs.

                              Subcommittee Recess

        Senator Cochran. This will conclude our hearing today. We
    will continue to review the Department of Agriculture budget at
    another hearing on Tuesday, March 10 in this room 138 of the
    Dirksen Senate Office Building. At that time, we will be
    looking at the budget request for the Department's food,
    nutrition, and consumer services programs. Until then, the
    subcommittee stands in recess.
        Ms. Thompson. May I?
        Senator Cochran. Please.
        Ms. Thompson. Mr. Chairman, I do not know that I have
    appropriately thanked you for your leadership on rural
    development issues. I sort of went into my budget testimony
    without doing that. As I have traveled around the country and
    had an opportunity to meet with community leaders in
    communities that are really challenged, I know from firsthand
    experience talking with these leaders, these folks, that your
    leadership is truly making a difference. Your leadership here
    in the U.S. Senate is truly making a difference. Because I
    continue to live in a rural community and my husband sits on a
    local school board of a small school, I also know from that
    experience how valuable your leadership is. Thank you for the
    very strong support that you give to rural America.
        Senator Cochran. Well, I appreciate very much the kind
    remarks. I am grateful to you for saying that, and I look
    forward to continuing to work with you and your staff and
    associates in helping achieve even better success in the
    future. Thank you very much.
        The hearing is adjourned.
        [Whereupon, at 11:30 a.m., Tuesday, March 3, the
    subcommittee was recessed, to reconvene at 10:11 a.m., Tuesday,
    March 10.]

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 1999

                                  ----------

                            TUESDAY, MARCH 10, 1998

                                           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, Burns, and Bumpers.

                           DEPARTMENT OF AGRICULTURE

    STATEMENT OF SHIRLEY R. WATKINS, UNDER SECRETARY, FOOD,
                NUTRITION, AND CONSUMER SERVICES
    ACCOMPANIED BY DENNIS KAPLAN, BUDGET OFFICE

                           Food and Nutrition Service

    STATEMENT OF YVETTE JACKSON, ADMINISTRATOR
    ACCOMPANIED BY RONALD J. VOGEL, ASSOCIATE DEPUTY ADMINISTRATOR, SPECIAL
                NUTRITION PROGRAMS

                   Center for Nutrition Policy and Promotion

    STATEMENT OF RAJEN ANAND, EXECUTIVE DIRECTOR

                                Opening Remarks

        Senator Cochran. The subcommittee will please come to
    order.
        Today we continue our review of the budget request for
    fiscal year 1999 submitted by the President for the Department
    of Agriculture and related agencies. We are specifically
    reviewing today the request for programs and activities of the
    Food and Nutrition Service of the Department of Agriculture.
        The Under Secretary for Food, Nutrition, and Consumer
    Services is Ms. Shirley R. Watkins, whom we welcome to the
    hearing today. She is accompanied by others responsible for
    activities in the Service. We will invite her to introduce her
    associates and colleagues on the panel.
        I notice that this year's request represents about 68
    percent of the total budget authority proposed for all USDA
    programs and activities under the jurisdiction of this
    committee. Sixty-eight percent. Now, that ought to illustrate
    to everyone how important it is for us to review this budget
    proposal carefully and to understand the programs that are
    funded by this appropriations request.
        Some of the better known programs, of course, are the Child
    Nutrition Programs. We see a $1.5 billion increase in mandatory
    funding is required to support these programs for fiscal year
    1999. We have the Food Stamp Program; the Special Supplemental
    Nutrition Program for Women, Infants, and Children [WIC]; and
    other food assistance programs to review in this hearing.
        We appreciate very much the cooperation with the
    subcommittee of Ms. Watkins and others who have endeavored to
    stay in touch with us and keep us aware of problems and
    situations regarding the funding of these programs. We had a
    difficult time last year resolving some of these differences
    with our friends over in the other body, but nonetheless, we
    worked our way through a number of issues and we were happy to
    see the administration become creative, as we have suggested
    they might have to, in order to continue to carry out
    responsibilities that are required of them by law.
        I have been impressed with the work of Ms. Watkins and
    others who have tried very hard to see that those who do need
    assistance in meeting their own nutrition needs have that
    assistance available.
        We cannot do it all through these programs. There are many
    others who are involved, many private organizations,
    foundations, churches, neighbors, friends, and others who all
    are committed, I think, to the proposition that nobody in
    America ought to go without food. That we are a rich country;
    we are a caring country; and that working together, Federal,
    State, and local governments and private associations and
    charities surely can meet all these needs that exist out there.
        So, we are not in this alone. That is another point that I
    want to make. To assume the responsibility for trying to solve
    every problem that we have in this country and the world too
    through appropriations from this committee is probably a
    mistake from the beginning. But we do feel that we have a role
    to play and a very important one--a role of leadership.
        So, we will seek to work with the administration to define
    that role in a thoughtful way and a responsible way and to
    provide the funds that are available to us under the allocation
    process. We cannot generate money out of the air. We have to
    have it allocated to us under a budget resolution, and that is
    yet to be completed.
        So, with those realities in mind, we welcome Ms. Watkins
    and her associates. I am happy to now yield to my distinguished
    friend and colleague from the State of Arkansas, Senator
    Bumpers.

                          STATEMENT OF SENATOR BUMPERS

        Senator Bumpers. Thank you very much, Mr. Chairman.
        Do you know why you are impressed with Secretary Watkins?
    She is from Arkansas. [Laughter.]
        And you know what else? She is from Hope, AR.
        Senator Cochran. Oh, my goodness.
        Senator Bumpers. Is this nepotism? Did you go to school
    with you know who? [Laughter.]
        We are very proud of Secretary Watkins, and I agree with
    you, Mr. Chairman. She is doing an excellent job.
        I just wanted to welcome her and her colleagues to the
    hearing this morning. This is something that should not be
    terribly controversial, just a few questions about how some of
    these programs are working.

                               Prepared Statement

        With that, Mr. Chairman, I will ask unanimous consent that
    I be permitted to insert my opening remarks for the record.
        Senator Cochran. Without objection, it is so ordered.
        [The statement follows:]
                     Prepared Statement of Senator Bumpers
        It is a pleasure to welcome Secretary Watkins to our subcommittee
    not only as a representative of the Department of Agriculture, but also
    as a fellow native Arkansan. I also want to extend my welcome to the
    other USDA officials who are with us today.
        I am often asked by constituents why food stamps and other programs
    associated with ``welfare'' are included in ``farm'' legislation. It
    seems to make little difference to them whether that legislation is a
    farm bill or an agriculture appropriations bill. The more cynical
    answer to that question is that you have to include programs in farm
    legislation that have the support of urban Members of Congress in order
    to assure passage. In other words, if you want to pass legislation for
    agricultural research, conservation, or rural development, you had
    better include provisions to provide assistance to large numbers of
    people in the cities as well.
        As is usually the case, a more accurate answer can be found in
    history. In 1936, the forbearer of the Food Stamp program began as the
    Commodity Distribution to Needy Families Program. This New Deal era
    program was not designed primarily as a ``food assistance'' program.
    Instead, the main purpose of this program was to create markets for
    farm assistance purposes. The original federal food assistance program
    was a farm program. Gradually, the program evolved by 1975 into the
    nation-wide Food Stamp program it is today, by far the largest single
    program in this subcommittee's jurisdiction.
        The Food Stamp program may be the largest single program we fund
    every year, but it is by no means the only food assistance program in
    our appropriations bill. The Child Nutrition Programs, the WIC program,
    the various commodity distribution programs, and others, all contribute
    to our national standard that there is no place in the United States
    for hunger. These programs are expensive, but they go far to reduce
    future health care costs and to calm the national conscience in a
    recognition that the well being of all our people does matter.
        In recent times, the Congress has given much attention to so-called
    Welfare Reform and the concept that people need to take greater
    responsibility for themselves. To a large extent, Welfare Reform is
    tied to food assistance. Changes in the Food Stamp program were a part
    of Welfare Reform. We are now presented with proposals to revisit some
    of the reform provisions that have been concluded as overly harsh.
    There is certainly nothing wrong with expecting more responsibility,
    especially among our adult populations, but we must keep in mind our
    own responsibilities to children and other members of our society who
    may have nowhere else to turn but to a benevolent government.
        I do not mean to imply that food assistance is totally a
    governmental responsibility. For many years before the government
    linked farm and food assistance together in 1936, churches, synagogues,
    and numerous charities and civic groups joined together in a common
    cause to protect the most vulnerable among us. The USDA food assistance
    programs are not designed to replace the traditional charitable
    efforts, but supplement and support them. In fact, this subcommittee
    has provided funding to help with transportation and other
    administrative costs to facilitate the donation of food from various
    donors through the TEFAP program. In addition, the Secretary is now
    committed to develop a nation-wide food gleaning program to make use of
    the billions of pounds of food that is wasted every year at our retail
    and food service outlets. Just because the United States is a land of
    plenty does not excuse ours being a land of wastefulness.
        Concurrent with consideration with the fiscal year 1999
    appropriations bill is congressional attention to reauthorization of
    the Child Nutrition Programs and WIC. The purpose of that legislation,
    as with this subcommittee's responsibility, is to assure that national
    resources are put to best use and that all our people are given
    adequate opportunities to proper nutrition and a healthy life. I look
    forward to hearing today's testimony by our friends from USDA and to
    working with Senator Cochran and others on this subcommittee in
    crafting the coming year's appropriations bill to assure the mission of
    us all is properly achieved.

                        Statement of Shirley R. Watkins

        Senator Cochran. Ms. Watkins, we have a copy of your
    statement, which we appreciate very much. It will be printed in
    full in the record. We encourage you to make whatever comments
    you think would be helpful to the committee. Please introduce
    those who are with you.
        Ms. Watkins. Mr. Chairman and Senator Bumpers, thank you
    very much for letting us appear before you this morning. I
    would like to present the staff who are joining me today.
    Yvette Jackson, the Administrator for the Food and Nutrition
    Service. She has previously appeared before this committee as
    the Deputy Administrator for the Food Stamp Program. We also
    have to my right Ron Vogel who is the Associate Deputy
    Administrator for Special Nutrition Programs for the Food and
    Nutrition Service; Dr. Rajen Anand who is the Executive
    Director for the Center for Nutrition Policy and Promotion; and
    Dennis Kaplan who is the Department's Deputy Director for
    Budget, Legislative, and Regulatory Systems in the Office of
    Budget and Program Analysis. And in the audience, we also have
    the Deputy Under Secretary for the Food and Nutrition Service,
    Julie Paradis.

           Food and Nutrition Service Fiscal Year 1999 Budget Request

        Mr. Chairman, I appreciate so much this committee's support
    for these programs and you have shown that throughout the
    years.
        As you have indicated, I am submitting my written testimony
    for the record, and I do have a few comments that I would like
    to make.
        The fiscal year 1999 budget request for the Food and
    Nutrition and Consumer Services totals some $39.2 billion. This
    includes $25.1 billion for the Food Stamp Program, another $9.2
    billion for the Child Nutrition Programs, $4.1 billion for the
    WIC Program, $317.1 million for the Commodity Assistance
    Program, and $111.8 million for our Food Program
    Administration.
        The Food and Nutrition Service funds more than 100 million
    meals every day, and most of these go to poor families. We
    strive to enhance the public's confidence in these programs by
    ensuring that they are efficient, that they have program
    integrity, and that there is fairness in the programs.
        Additionally, these programs support American agriculture
    by providing families and individuals the means to purchase
    food products and by purchasing commodities for donation to
    many of the public and private cooperators at both the State
    and the local levels.
        We view the 15 food assistance programs--and I like to call
    them Nutrition Assistance Programs--collectively as the
    critical link to alleviating hunger in this country. Each one
    of these programs plays a significant role in the nutrition and
    health of children and families.

                             The Food Stamp Program

        I want to address first our largest program and that is the
    Food Stamp Program.
        The Clinton-Gore administration will submit legislative
    proposals to restore food stamp benefits to legal immigrants
    with certain exceptions and to ensure that common
    administrative costs are allocated fairly among TANF, food
    stamps, and Medicaid.
        In fiscal year 1997, FNS had significant success in the
    Food Stamp Program, and I would just like to cite some of
    those.
        Continuing the nationwide campaign to increase payment
    accuracy. In the last 5 years, there has been a steady decline
    in the overpayment error rate. The rate has fallen from 8.3
    percent in fiscal year 1993 to 6.9 percent in fiscal year 1996.
    This reduction has resulted in a savings of nearly $665
    million.
        Increasing recipient fraud disqualification from 94,000 in
    fiscal year 1996 to 105,000 in fiscal year 1997. This is an
    increase of about 12 percent.
        Some 28 States have implemented EBT, and 13 of those
    systems are statewide, as of the end of December 1997.
        We are going to contract for approximately 35,000 onsite
    and postauthorization store visits annually beginning in fiscal
    year 1998 to supplement FNS' oversight of retailers. We
    disqualified over 1,500 retailers for violations during fiscal
    year 1997. Of those, 933 were permanent disqualifications for
    trafficking violations. This represents a 23-percent increase
    from fiscal year 1996.

                          The Child Nutrition Program

        The next area I would like to address is the Child
    Nutrition Program whose authorization expires at the end of
    this fiscal year. We do have a legislative proposal to
    reauthorize WIC and several child nutrition programs as they
    expire at the end of this fiscal year. That should be in your
    hands sometime before the day is over.
        Beginning with the school meals, these programs we feel are
    the foundation in nutrition supplying children with food that
    they need and low-income adults with the help to meet their
    families' food budget. Every day we serve 26 million
    schoolchildren a nutritious school lunch, while about 7 million
    children eat a school breakfast.
        Low-income children served by the National School Lunch and
    School Breakfast Programs need basic nutrition assistance not
    just during the school year, but they also need that assistance
    in the summer as well. The Summer Food Service Program fills
    that critical need in providing meals at schools and at
    recreational sites during the summer. We have made a concerted
    effort to reach more children in the Summer Food Service
    Programs. Only a fraction of the needy children who eat a
    school lunch during the regular school year also receive a meal
    in the Summer Food Service Programs.
        In fiscal year 1999 we estimate that in excess of 149
    million meals will be served. That is an increase of about 8.6
    million meals over the fiscal year 1998 projections. In
    addition, we estimate that the summer program will serve almost
    2.6 million children. That is an increase of almost 150,000
    children over 1998.
        In our Nutrition Education and Training Program, that
    program has a 19-year history of delivering cost-effective
    nutrition education, training, technical assistance as a
    component of our Child Nutrition Programs. Funding NET at the
    requested $10 million level will enable State and local food
    authorities to use the established NET infrastructure to
    deliver nutrition education to students, educators, and
    parents, as well as our food service personnel in the schools
    and in child care centers. The NET infrastructure offers an
    effective and cost-efficient vehicle for reaching some 94,000
    schools across the Nation.
        The other area is our Child and Adult Care Food Program.
    That program provides assistance in reimbursements and
    commodities to child and adult care programs across the
    country. This includes providing nutritious meals to serve
    preschoolers and elementary school age children in child care
    arrangements, and also to impaired adults who need day care
    services. Last year our CACFP subsidized over 1\1/2\ billion
    meals to children in day care homes, children in family day
    care, and the impaired adults in the adult day care setting.

                                The WIC Program

        The other area I would like to comment on is our WIC
    Program. It is a program whose purpose is to improve the health
    and nutrition of at-risk, low-income, pregnant, breastfeeding,
    postpartum women, infants, and children up to their fifth
    birthday. This program is one of our stars. The fiscal year
    1999 budget request meets the President's full commitment to
    fully fund the WIC Program. The requested funding of $4.1
    billion will maintain the projected fiscal year 1998
    participation level of approximately 7.5 million participants.
        In the WIC Program, we are striving to improve the overall
    program management and again program integrity. This spring we
    plan to issue guidance to State agencies on more uniform
    application of science-based nutritional risk criteria. The
    core risk criteria were developed through a yearlong process
    with Federal-State partnerships. The criteria will ensure the
    consistency in the nutritional assessment of WIC applicants.
    This budget request also assumes the continued success of State
    agencies to obtain significant savings in the cost of infant
    formula to the program.
        In fiscal year 1997, an additional 1.9 million participants
    per month were served because of the great success States had
    in collecting almost $1.3 billion from infant formula
    manufacturers. This program continues to collectively save
    money and contribute to healthier mothers, babies, and children
    who will enter school unfettered by the consequences of poor
    nutrition and inadequate health care in their formative years.
        Mr. Chairman, every dollar that is spent on WIC services
    for low-income pregnant women saves $1.77 to almost $3.13 in
    Medicaid costs for the first 60 days after birth. That is a
    success.
        I am aware of this committee's concern about the level of
    funds that were carried over from one year to the next. Our
    fiscal year 1999 request assumes that $130 million will be
    carried into and out of fiscal year 1999. This level is about
    $20 million less than what we project as being carried into
    fiscal year 1998. We believe that these are the minimum levels
    necessary for our State and Indian tribal organizations to
    maintain the current participation levels in this grant
    program. These State and local operators must live within their
    budgets. Collectively these States underspend their available
    resources from about 3 to 4 percent so that they can ensure
    that they are on target.
        These carryover issues manifested themselves during the
    four WIC listening sessions I had around the country with a
    diverse group of recipients and program operators, health care
    providers, and State officials. They disclosed a variety of
    issues. Because the Federal grant is only one source, and
    sometimes the only source for WIC funds in most States, the
    States exercise extreme caution to ensure that they do not
    spend more than their Federal grant.
        In addition, because the States commonly distribute WIC
    food benefits to participants in the form of checks and
    vouchers, it is difficult for them sometimes to determine the
    program's cost until after those vouchers and checks have been
    redeemed and processed. So, the unspent funds relate to
    specific situations or circumstances that sometimes limit
    program participation.
        In one State, as an example, they described that they were
    installing a new computer system, so they wanted to use that to
    verify WIC eligibility and to issue WIC food vouchers
    temporarily. That reduced the amount of time that they had for
    the clinical staff to certify and serve new clients, because
    they instead had to spend more time learning the new software
    and operating procedures.
        Having unspent Federal WIC funds did not necessarily
    indicate a lack of need for the program benefits. Some States
    even reported that more eligible individuals could have been
    served by WIC had it not been for the reasons related to the
    program's structure and/or State-specific situations or
    circumstances.
        Another program area where we have made some changes is the
    WIC Farmers' Market Nutrition Program. It has been moved from
    our WIC account to the Commodity Assistance Program account.
    This was done to ensure that we had funds available for the
    operation of the program. We believe that this change will
    enable States to improve the program for WIC recipients as well
    as facilitate better program planning for our farmers.

                   Center for Nutrition Policy and Promotion

        Our budget supports the Center for Nutrition Policy and
    Promotion that was established in 1994. The focal point for
    this program is for USDA to promote the health of all Americans
    through good nutrition by linking the scientific research for
    the dietary needs of the consumer. The importance of this
    mission cannot be overstated particularly when 4 of the 10
    leading causes of death in our country are related to poor
    diet. That is a significant contributing factor. The budget for
    the Center is shown in our FPA account which is over some $2.5
    million.

                             Studies and Evaluation

        As I come to closure, Mr. Chairman, there are four more
    issues that I would like to address.
        One, the administration strongly believes the funding for
    studies and evaluation should be with the entity administering
    the programs in order to maximize the value of these efforts in
    our food assistance programs. As such, this budget proposes the
    return of funding for studies and evaluations to the Food and
    Nutrition Service agency.

                       Training and Technical Assistance

        Two, we are requesting $2 million to provide training and
    technical assistance to State and local school cooperators to
    promote safe food handling in our school meals preparation.

                                 Food Gleaning

        Three, one of Secretary Glickman's top priorities is
    ensuring that USDA does everything within its power to expand
    the recovery and food gleaning process so that we can have
    wholesome food for distribution to Americans in need. While
    this administration firmly believes that the fundamental
    Federal nutrition assistance program, such as food stamps and
    WIC and our National School Lunch and School Breakfast
    Programs, will continue to be the first line of defense for
    Americans facing hunger, recovered and gleaned food can
    increasingly provide nutritious additions to the diets of low
    income Americans and provide some access to food banks and soup
    kitchens.

                          Food Program Administration

        Finally, our budget request for our Food Program
    Administration account is $111.8 million. In recent years our
    FPA account has not been enough to keep demand with the rising
    demands made on this agency. As you indicated, Mr. Chairman,
    over 68 percent of Agriculture's budget is in food assistance
    programs, and these reduced administrative funds has required
    that more than 18 percent reduction be made in our staffing
    since 1993 and nearly a 40-percent reduction since the early
    1980's. Recent OIG and GAO audits have cited FNS for
    insufficient staff to ensure program compliance with statutory
    requirements in program areas. And clearly, ensuring proper
    program and financial management for an agency managing almost
    $40 billion in program funds must be a top priority.
        Mr. Chairman, I appreciate your allowing me to make these
    brief remarks. This concludes my oral presentation. I would be
    happy to answer any questions that you and the other members
    may have. Thank you very much.

                              Prepared Statements

        Senator Cochran. Thank you, Madam Secretary. We appreciate
    your comments and the full statements which you have submitted
    for our hearing record.
        [The statements follow:]
                    Prepared Statement of Shirley R. Watkins
        Mr. Chairman. Members of the Subcommittee, it is my pleasure to
    appear before you for the first time to discuss the President's Fiscal
    Year 1999 Budget Request for USDA's Food and Nutrition Programs. In
    July, 1997 I was confirmed as the Under Secretary for Food, Nutrition,
    and Consumer Services (FNCS), responsible for the Nation's domestic
    nutrition 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
    Special Supplemental Nutrition Program for Women, Infants, and Children
    (WIC). I am accompanied today by Yvette Jackson, the Administrator of
    the Food and Nutrition Service, who has previously appeared before you
    as the Deputy Administrator for the Food Stamp Program, George Braley,
    the Associate Administrator of the Food and Nutrition Service, Dr.
    Rajen Anand, Executive Director of the Center for Nutrition Policy and
    Promotion and Stephen Dewhurst, the Department's Director of the Office
    of Budget and Program Analysis.
        The Food, Nutrition and Consumer Services is responsible for
    ensuring that all Americans have access to healthful diets and
    nutrition information. We accomplish this by providing nutrition
    assistance to needy families, school-age children and women, infants
    and children at nutritional risk. We make available nutrition education
    and information to all Americans, regardless of income, and provide
    health referrals to certain program participants. FNCS sponsors and
    supports research aimed at improving the nutritional quality of diets
    consumed not only by the participants in our programs, but by all
    Americans. We strive to enhance the public's confidence in our programs
    by ensuring the efficiency, integrity and fairness of our programs.
    Finally, we support American Agriculture by providing families and
    individuals the means to purchase food and food products and by
    purchasing commodities for donation to our many public and private
    cooperators at the State and local levels. Together, these programs
    provide a nutrition safety net for low-income Americans. We view the
    food assistance programs collectively as the critical link in
    alleviating hunger in this country. They are absolutely crucial to many
    millions of Americans. I do not wish to forget for one minute the
    responsibility that this Administration and I have to ensure both the
    program and financial integrity of each program and that the delivery
    of benefits to all qualified recipients be accomplished with integrity
    and timeliness.
        The Department is the lead Federal Agency in human nutrition and is
    charged with the goal of promoting a healthy and well nourished
    population through research and nutrition education. The Center for
    Nutrition Policy and Promotion, established in 1994, serves as the
    focal point within USDA to promote the health of all Americans,
    including those participating in the food assistance programs, through
    good nutrition by linking scientific research to the dietary needs of
    the consumer.
        The importance of this mission cannot be overstated when one
    considers that in 4 of the 10 leading causes of death in our country,
    poor diet is a significant contributing factor: heart disease, cancer,
    stroke and diabetes account for 1.4 million deaths annually, nearly
    two-thirds of the total deaths in the U.S. Diet also plays a critical
    role in other health concerns such as obesity, hypertension, and
    osteoporosis. Taken together, these diet-related diseases cost society
    an estimated $250 billion each year in medical cost and lost
    productivity.
                                economic success
        Our Administration has led the Country to exceptional economic
    success. The Country is currently experiencing record job creation,
    extremely low unemployment rates and projections of continuing low
    inflation. Our budget projections reflect these strong economic
    conditions; notwithstanding these successes, there continue to be many,
    many people who genuinely need the food assistance these programs
    provide. FNS programs, particularly WIC, the Child Nutrition Programs
    and the Commodity Assistance Programs are in increasing demand insofar
    as they help low-income Americans transition from welfare to work.
                       program highlights and initiatives
                                  legislation
        The Clinton Administration will submit legislative proposals to
    restore food stamp benefits to legal immigrants with certain exceptions
    and to ensure that common administrative costs are allocated fairly
    among Temporary Assistance to Needy Families (TANF), Food Stamps and
    Medicaid. There will be proposals to reclassify recipient claims as
    State rather than Federal debt and to reauthorize WIC and several Child
    Nutrition Programs whose authorization expires at the end of this
    fiscal year.
                               food stamp program
    Restore Benefits To Legal Immigrants
        The Administration proposes to restore Food Stamp benefits for
    vulnerable groups of legal immigrants. Upon signing the 1996 welfare
    law, the President pledged to work toward reversing the harsh,
    unnecessary cuts in benefits to legal immigrants that had nothing to do
    with moving people from welfare to work. The President believes that
    legal immigrants should have the same opportunity, and bear the same
    responsibility, as other members of society. The fiscal year 1999
    budget would provide Food Stamp benefits to 730,000 legal immigrants at
    a cost of $2.5 billion over five years. The proposal expands access to
    Food Stamps for families with children, people with disabilities, the
    elderly, and refugees and asylees.
        The Balanced Budget Act of 1997 helped somewhat by restoring SSI
    and Medicaid eligibility to elderly and disabled legal immigrants who
    were already in the United States at time of enactment.
        This proposal would restore food stamp benefits to the most
    vulnerable groups of immigrants--children and their families; the
    elderly; and the disabled. This proposal also recognizes that refugees
    often need more than five years to become established in this country;
    thus, it lengthens eligibility from five years to seven for refugees
    and those granted political asylum. It also provides food stamp
    eligibility to certain Hmong and highland Lao tribal members who
    entered the United States after the Vietnam conflict. Finally, it
    restores eligibility to certain Native Americans in reservations that
    span United States/Canadian borders.
    Allocate Administrative Costs Fairly
        An unanticipated consequence of the landmark welfare reform
    legislation is the ability of States to gain a windfall by reallocating
    common administrative costs to the Food Stamp and Medicaid Programs.
    Prior to welfare reform, common administrative costs in the Food Stamp,
    Medicaid, and Aid to Families with Dependent Children (AFDC) programs
    were charged primarily to AFDC. These charges were included in the
    State TANF grants created by welfare reform. As a result, if States now
    share common administrative cost among the programs, they can claim
    additional payments from the Federal Government in the Food Stamp and
    Medicaid Programs without a reduction in their TANF grant thereby
    experiencing a windfall.
        To mitigate this windfall, starting in fiscal year 1999 States will
    be required to allocate common administrative costs among all three
    programs in a manner which results in each program paying its fair
    share. Costs will be shifted from TANF to Food Stamps and Medicaid;
    however, the TANF block grant will not be reduced. Instead, the Federal
    share of administrative costs for the Food Stamp and Medicaid programs
    will be reduced from 50 percent to 47 percent. This proposal is
    administratively simple to implement and it removes the incentive for
    inflated cost allocation by establishing a uniform Federal share of
    administrative costs.
    Recipient Claims
        Finally, we will be submitting legislation to reclassify claims
    against food stamp recipients for erroneous benefit issuance as State
    debt rather than Federal debt. We believe this proposal's effect to be
    cost-neutral in the near term; however, we think that if States respond
    to the incentives being proposed, it has great potential to
    substantially increase collections in the future.
                                reauthorization
        The authorization for several of our programs expires at the end of
    this fiscal year. We will be submitting cost-neutral legislation to
    reauthorize the WIC, Summer Food Service, Child Nutrition Commodity
    Distribution Program, and State Administrative Expense Programs. We
    will also submit proposals to improve the operation, management and
    integrity of the National School Lunch and School Breakfast Programs,
    the Child and Adult Care Food Program and the WIC Program.
                               program integrity
        In fiscal year 1997, FNS had success in combating fraud and abuse
    while promoting program integrity. In the Food Stamp Program, FNS
    aggressively continued its Nationwide campaign to increase payment
    accuracy and has been successful in obtaining commitments from many
    States to make payment accuracy a top priority. Since fiscal year 1993,
    there has been a steady decline in the overpayment error rate. During
    this period, that rate has fallen from 8.3 percent in fiscal year 1993
    to 6.9 percent in fiscal year 1996, resulting in a savings of nearly
    $665 million. The payment (overpayment and underpayment) error rate in
    fiscal year 1996 was 9.22 percent. This is down about 12 percent from
    the 1995 rate of 10.30 percent.
        FNS collected a total of $186 million in recipient claims in fiscal
    year 1997. Recipient fraud represented $60 million of the total, errors
    by households represented $104 million and errors by the State Agency
    represented $22 million of this total.
        The Federal Debt Collection processes (Federal Tax Refund Offset
    and Federal Salary Offset) resulted in collections of almost $60
    million in fiscal year 1997. This represents an approximate 50 percent
    increase from the previous fiscal year.
        Recipient fraud disqualifications have increased from 94,124 in
    fiscal year 1996 to 105,759 in fiscal year 1997, an increase of about
    12 percent over fiscal year 1996. Although Federal reimbursement and
    retention rates have dropped over time, States have continued to invest
    increasing amounts of State funds into fraud control.
        During fiscal year 1997, FNS' Compliance Branch completed intensive
    investigative efforts in several major urban areas--Detroit, New
    Orleans, Los Angeles, Jersey City, Miami, and Philadelphia--in which
    almost 1200 suspect stores were investigated. Approximately 550 of
    those stores were found to have committed food stamp violations and, of
    those, almost 200 were found to have trafficked in food stamp benefits.
    Based on Compliance Branch cases, Department of Justice (DOJ) levied
    penalties of over $1 million against retailers convicted of making
    false claims.
        Electronic Benefit Transfer (EBT) continues to be a positive means
    of combating food stamp trafficking. At the end of December 1997, 28
    States had implemented EBT systems, 13 of those being Statewide.
        During fiscal year 1997, FNS successfully deployed an automated
    anti-fraud profile system known as ALERT in all active EBT areas. The
    ALERT system analyzes individual EBT transactions for patterns of
    violations both for investigation selection and support as well as for
    taking direct administrative action against retailers found in
    violation.
        Funds provided by this Committee resulted in successful contracting
    for pre- and post-authorization visits to participating stores. In
    fiscal year 1997, FNS tested contracting for on-site store visits and
    will contract for approximately 35,000 on-site store visits annually
    beginning in fiscal year 1998 to supplement FNS oversight of retailers.
    This effort should significantly improve program integrity.
        FNS disqualified 1,561 retailers for violations during fiscal year
    1997; of those, 933 were permanent disqualification for trafficking
    violations. This represents a 23 percent increase over fiscal year 1996
    and reflects results from combining the use of EBT data, targeted
    sweeps and joint efforts involving FNS, USDA/Office of the Inspector
    General (OIG) and State Law Enforcement Bureaus (SLEB's).
        In the School Nutrition Programs, each school food authority must
    be reviewed over a 5-year cycle. In conducting these reviews, we assist
    States in determining whether Federal reimbursement is properly
    claimed. We believe this information indicates that these reviews are
    useful in recovering improperly paid Federal funds as well as providing
    a tool to improve the management of local food services.
        Also on the business side of the school food service programs, FNS
    has continued its review of dairy and other food vendors' pricing
    practices and has followed through with active suspension and debarment
    when warranted.
        In the WIC Program, we are striving to improve overall program
    management and integrity. This spring we plan to issue guidance to
    State agencies on more uniform application of science-based nutritional
    risk criteria. The core risk criteria were developed through a year-
    long Federal/State partnership and will ensure consistency in the
    nutritional assessment of WIC applicants. In the near future we will
    propose new vendor regulations that will establish mandatory uniform
    sanctions across WIC State agencies for the most serious WIC
    violations, and require the disqualification of any WIC vendor who has
    been disqualified from the Food Stamp Program. In addition, we plan to
    address issues of income documentation in policy as well as during the
    reauthorization process.
                                   highlights
    Child Nutrition Participation
        We are proud that the Child Nutrition Programs continue to be a
    source of nutritious meals for our Nation's children. We are also aware
    that a large portion of our participating children are needy, and in
    some cases the meals they receive in schools or child care facilities
    may be all that they have to eat all day. It is vital that sufficient
    funds continue to be available for these programs. In view of this, I
    wish to bring to the Committee's attention the fact that we are
    experiencing an increase in the total number of meals served in the
    School Lunch Program. After remaining stable through the 1980's and the
    first part of the decade of the 1990's, we have seen the total number
    of school lunches served rise by more than a million a year. This
    increase is attributable at least in part to increased enrollment in
    schools caused by our recent ``mini-baby boom'' and improved quality
    and service. Consequently, the total reimbursement in the Program will
    increase beyond the normal adjustment for changes in the Consumer Price
    Index, and our appropriation request reflects this.
                                  wic program
        Consistent with this Administration's long-standing goal, this
    budget proposes funding to continue WIC participation at its expected
    fiscal year 1998 level of 7.5 million women, infants and children every
    month. This budget request assumes the continued success of State
    agencies to obtain significant savings in the cost of infant formula to
    the Program. In fiscal year 1997, an additional 1.9 million
    participants per month were served because of the great success States
    had in collecting almost $1.3 billion in rebates from infant formula
    manufacturers. This program continues to collectively save money and
    contribute to healthier mothers and babies and children who will enter
    school unfettered by the consequences of poor nutrition and inadequate
    health care in their formative years. President Clinton and this
    Administration is committed to this continued success.
                     wic farmers' market nutrition program
        The funding request for this popular adjunct to the main WIC
    Program has been moved in the fiscal year 1999 budget from the WIC
    account to the Commodity Assistance Program account. This was done to
    ensure that funds for FMNP are not dependent on the WIC Program and can
    be allocated on a timely basis to ensure effective operation of the
    program. We believe this change will enable States to improve their
    program planning and development.
                            studies and evaluations
        In this budget, the Administration reiterates its belief that the
    studies and evaluations for the Food Assistance Programs should remain
    with the entity administering these programs. Both the President and
    the Secretary of Agriculture have stated their belief that the funding
    for studies and evaluations of the Food Assistance Programs belongs
    with FNS and this budget supports that belief.
        The three FNS 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. FNS
    research has a proven track record of improved government performance.
    For example, FNS research established a basis for future assessments of
    the efficacy of food assistance programs by developing the first
    credible measure of the food security of the American population;
    provided the foundation for historic changes in domestic nutrition
    programs by providing the only nationally representative data on the
    nutrients provided to children in the Child Care, School Lunch and
    School Breakfast Programs; made critical contributions to the emergence
    and expansion of EBT, supporting the first demonstrations of
    feasibility and cost-effectiveness; helped fight fraud and abuse and
    improve program operations; generated the only data-based estimates of
    the prevalence of food stamp trafficking and WIC overcharging; and
    documented the Federal cost savings associated with participation in
    the WIC Program.
        With the funding requested for fiscal year 1999, 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 Congressional questions about the
    impact of legislative changes and collect and analyze data to provide
    Congress with outcome measures of program performance.
        The relatively small investment made on FNS research will help to
    protect the $37 billion investment made in the Federal nutrition
    programs. This research is most effective when done in conjunction with
    food assistance program operations. Without such research support, we
    run the very real risk of making crucial policy decisions without
    adequate information which may lead to unforeseen consequences.
                                  food safety
        We are requesting $2 million to provide technical assistance to
    State and local school cooperators to promote and enhance safe food
    handling in school meals preparation. We would use these funds to
    provide training and technical assistance on safe food handling to
    cooperators. The funding would be used to enhance the health and safety
    of children participating in school meal programs by operating training
    workshops for local food service professionals and revise, print and
    distribute an updated version of ``Serving it Safe''.
                           food recovery and gleaning
        One of the top priorities of Secretary Glickman is ensuring that
    USDA is doing everything within its power to expand the recovery and
    gleaning of excess, wholesome food for distribution to Americans in
    need. While this Administration firmly believes that the bedrock
    Federal nutrition assistance programs--such as Food Stamps, WIC, and
    the National School Lunch and Breakfast programs--will continue to be
    the first line of defense for Americans facing hunger, recovered and
    gleaned food can provide nutritious additions to the diets of low-
    income Americans.
        In June of 1997, USDA released a study indicating that 96 billion
    pounds--or 27 percent--of the 356 billion pounds of food produced in
    this Country each year is lost to human consumption at the retail and
    food service levels. In response to the study, USDA joined with key
    non-profit organizations in co-sponsoring the first-ever National
    Summit on Food Recovery and Gleaning--at which we jointly set a
    National goal of increasing the amount of food recovered by 33 percent
    over the 1.5 billion pounds currently recovered by the year 2000, which
    will provide an additional 500 million pounds of food a year to feeding
    organizations. At a time when food banks across the Nation are
    reporting increasing need but decreasing donations, such a boost is
    vitally needed.
        USDA has taken a wide variety of steps to begin reaching the goal
    of a 33 percent increase, such as: working with the National Restaurant
    Association to produce a food recovery handbook for their members;
    facilitating the ability of hunters to donate venison to food banks;
    empowering schools to do more to donate excess food from the National
    School Lunch Program, encouraging airlines to donate meals not served;
    working with the Department of Transportation to develop a
    comprehensive way to boost the transportation of recovered foods;
    facilitating the donation of excess food from the Department of
    Defense; and providing technical assistance to thousands of community-
    based groups and private citizens across the Country who seek to help.
        As we have intensified these efforts, we have heard more and more
    requests from States and nonprofit groups for limited Federal funds to
    help implement and expand such efforts as a cost-effective way to
    supplement traditional ways of fighting hunger. That is why we are
    proposing the creation of a $20 million food recovery and gleaning
    grant program to provide limited seed money for such efforts; we
    anticipate this Federal money will leverage a great deal of matching
    funds from private, non-profit, and State and local governmental
    sectors. We are not seeking to create a large-scale Federal
    bureaucracy, but rather to empower community-based efforts. The funds
    are needed primarily to support start-up costs so that local
    communities can develop an infrastructure to begin their own food
    rescue operations.
                       food program administration [fpa]
        Our budget request for FPA is $111.8 million. In recent years, FPA
    funding has not been sufficient to keep up with the rising demands made
    on the Agency. Reduced administrative funding has required more than an
    18 percent reduction in staffing since 1993 and nearly a 40 percent
    reduction since the early 1980's.
        Recent OIG and GAO audits have cited FNS for insufficient staff to
    ensure program compliance with statutory requirements. Reported areas
    of insufficient oversight include retailer integrity and food stamp
    fraud, the Agency's financial statements, documentation and collection
    of food stamp recipient claims, frequency of management evaluations
    required by program regulations, oversight of the Child and Adult Care
    Food Program, oversight of State information technology, and State cost
    allocation and claiming.
        Clearly, ensuring proper program and financial management for an
    Agency managing almost $40 billion in program funds must be a top
    priority. It is imperative that FNS maintain a minimum work force to
    meet the challenges of program delivery and keep pace with new
    legislation and changing program needs. This budget is the bare minimum
    needed to effectively deliver our programs to children, needy families
    and individuals to help those less fortunate obtain access to a more
    healthful diet, and provide nutrition education to the American public.
        CNPP is charged with developing nutrition policy and providing
    research-based human nutrition education and information to all
    Americans, including those involved in Food Assistance Programs, and
    has become the Department of Agriculture's focal point for linking
    nutrition research to the consumer. Center staff develop integrated
    nutrition education research programs and assist policy makers in
    devising better strategies to target nutrition programs cost-
    effectively to different customers in order to assist all Americans in
    adopting healthy, nutritious eating patterns that match lifestyles.
        The CNPP staff strive to improve the dietary behavior of all
    Americans by translating nutrition guidance into consumer-oriented
    promotion programs. The Center has already accomplished many valuable
    activities that have helped Americans to gain a better understanding of
    good nutrition and proper diet. As an integral part of the FNS Food
    Program Administration budget, we are requesting $2.542 million to
    continue the work of the Center and help Americans enjoy healthier
    diets and lives.
                                   conclusion
        In conclusion, Mr. Chairman, I appreciate the support this
    Committee has shown throughout the years for these programs. I am also
    grateful for the opportunity to present the fiscal year 1999 budget
    proposals for the Food and Nutrition Assistance Programs. I will be
    happy to answer any questions that you or the other Members may have.
                                     ______

                      Prepared Statement of Yvette Jackson
        Mr. Chairman, thank you for the opportunity to appear before this
    subcommittee to discuss the fiscal year 1999 budget request proposed
    for the U.S. Department of Agriculture's Food and Nutrition Service
    (FNS).
                              1999 budget request
        The Food and Nutrition Service requests $39.2 billion in new budget
    authority in fiscal year 1999. This includes contingency reserves of
    $1.0 billion for the Food Stamp Program and $20 million for the
    Supplemental Nutrition Program for Women, Infants, and Children (WIC).
    The request is an increase of $1.5 billion above the fiscal year 1998
    appropriation level. The increase is driven by legislative proposals in
    the Food Stamp Program, food recovery and gleaning initiatives, program
    integrity initiatives, increased meal service and overall inflationary
    adjustments. Our budget request reflects this administration's
    continued commitment to providing access to healthful, nutritious diets
    to low income families and to maintaining effective and efficient
    program operations.
                               food stamp program
        The Food Stamp Program is the primary source of federal nutrition
    assistance for low-income Americans. The mission of this program is to
    assure access to a nutritious, healthful diet for low-income Americans
    and improve their knowledge of good nutrition, thereby improving the
    nutritional status of low-income households and strengthening the food
    and agriculture economy. We are requesting $25.1 billion for the Food
    Stamp Program, including a benefit reserve of $1.0 billion to ensure
    funding availability to meet any unforeseen economic disturbances,
    natural disasters and changes in the estimated savings due to welfare
    reform. The amount includes $1.2 billion for the Nutrition Assistance
    Program for Puerto Rico, as well as funds for nutrition assistance for
    the Northern Marianas, $75.0 million for the Food Distribution Program
    on Indian Reservations and $100 million for commodity purchases in the
    Emergency Food Assistance Program. Based on the current economic
    forecast for fiscal year 1999:
      --The average unemployment rate is projected to be 5.1 percent;
      --Food Stamp Program participation is projected to average 21.6
            million persons monthly; and
      --The average monthly benefit is projected to be $76.41 per person.
        In fiscal year 1998, all welfare reform changes have been fully
    implemented and unemployment is at a record low. As a result, average
    monthly participation is estimated to be 21.07 million compared to
    22.859 million in fiscal year 1997. However, beginning in fiscal year
    1999 we project that participation will rise slightly to 21.64 million
    due to a projected slight increase in both the unemployment rate and
    the overall population.
        Although we have requested a benefit reserve since the early
    1990's, the need for this reserve has become increasingly important
    given the Personal Responsibility and Work Opportunity Reconciliation
    Act (PRWORA) of 1996. More than one-third of all food stamp households
    receive Temporary Assistance for Needy Families (TANF), and these
    households receive over half of all food stamp benefits. The
    combination of these households encountering time limits on their TANF
    eligibility, the flexibility afforded States under Welfare Reform and
    the uncertainty of some of the effects of welfare reform makes it
    difficult to anticipate the direction and magnitude of changes in food
    stamp costs. This benefit reserve is necessary in the event of
    unpredictable changes and protects the program's ability to get food to
    people who need it.
                          food stamp program integrity
        In fiscal year 1999, FNS will continue its efforts for increased
    integrity in the Food Stamp Program. The budget request includes
    funding for increased investigative sweeps. Approximately 850 stores
    redeeming over $100 million in food stamps annually will be
    investigated during these sweeps. Funding is also requested for
    increased error reduction activities, as well as funding to support
    enhanced Integrated Quality Control and Disqualified Recipient Systems.
                    food stamp program legislative proposals
        The Food Stamp Program legislative proposals offer two changes to
    the Personal Responsibility and Work Opportunity Act of 1996 (PRWORA).
    The first proposal would provide exemptions to the restrictions on
    eligibility for permanent non-citizen residents. When the President
    signed welfare reform legislation in 1996, he indicated that some
    provisions were too harsh on some program participants. Legal
    immigrants are one such group being affected by the legislation. The
    Balanced Budget Act of 1997 helped by restoring SSI and Medicaid
    eligibility to elderly and disabled legal immigrants who were already
    in the United States at the time of enactment. The changes proposed in
    this budget would:
      --Restore food stamp eligibility to permanent resident families with
            children without regard to the date of entry into the U.S.;
      --Restore eligibility to permanent residents who are age 65 and over
            or who are disabled provided they had permanent resident status
            prior to passage of the PRWORA;
      --Extend the refugee and asylee exemption from the strict eligibility
            requirements for non-citizens from 5 years to 7 years from
            their date of entry;
      --Restore eligibility to Hmong immigrants who came to the U.S. after
            the Vietnam War; and
      --Restore eligibility to certain Native Americans whose reservations
            straddle the U.S. and Canadian borders.
        This proposal will increase spending on food stamp benefits by $535
    million in fiscal year 1999.
        Another unanticipated consequence of the welfare reform legislation
    is that it allows States to claim reimbursement for common
    administrative costs in the Food Stamp and Medicaid programs that are
    already included in the TANF block grant programs, thereby providing
    the States a financial windfall. Our second proposal would alter the
    allocation of administrative costs between the TANF, Medicaid, and Food
    Stamp Programs. The change will require States to allocate common
    administrative costs equally among all benefiting programs in fiscal
    year 1999. To address the windfall to States from the new cost
    allocation (costs will be shifted out of TANF to Food Stamps and
    Medicaid, but the TANF block grant will not be reduced), the federal
    share of food stamp administrative costs will be reduced from 50
    percent to 47 percent starting in fiscal year 1999. This proposal is
    administratively simple to implement and will save an estimated $180
    million in fiscal year 1999 in the Food Stamp Program.
        In addition, we intend to submit a proposal that would reclassify
    claims against food stamp recipients for erroneous benefit issuances as
    State debt rather than Federal debt. We estimate that this proposal
    will be cost-neutral in the immediate future; however, if States
    respond to our proposed incentives, collections may be substantially
    increased in the long run.
                       electronic benefits transfer [ebt]
        EBT continues to greatly assist the FNS effort to reduce food stamp
    trafficking. By December 1997, 28 states had implemented EBT systems--
    13 of them Statewide. FNS successfully deployed an automated anti-fraud
    profile system known as ALERT in all active EBT areas. The ALERT system
    analyzes individual EBT transactions for patterns of violations both
    for investigation selection and support as well as for taking direct
    administrative sanction action. The ALERT system helps us target
    limited resources to deal with the most egregious violators.
           food stamp participation under debt collection act of 1966
        FNS's early work with the Federal Tax Refund Offset Program (FTROP)
    as a debt collection initiative for Food Stamp State agencies has
    expanded in 1996 and 1997 to incorporate provisions of the Debt
    Collection Improvement Act. Under this Act and under the authority
    provided by the Food Stamp Act, FTROP is now a mandatory part of Food
    Stamp State agency operations. FNS is working with cooperating State
    agencies to implement Treasury's offset programs, which include the
    Federal Tax, Salary, and Administrative Offset Programs. In 1997, 43
    State agencies participated in the Federal Tax Refund Offset Program
    and as a result, collected almost $60 million. Since the effort began
    in 1992, Food Stamp State agencies have collected more than $170
    million in delinquent recipient claims using these two forms of offset.
    In December 1997, 47 State agencies submitted 380,000 records valued at
    $216 million to Treasury. Based on past collection trends, FNS
    conservatively projects 1998 collections to be about $85 million. FNS
    is working with the remaining nonparticipating State agencies to bring
    them into the effort for the fiscal year 1999 offset activity.
          the food distribution program on indian reservations [fdpir]
        FDPIR delivers benefits under the authority of the Food Stamp Act
    to needy Native Americans who do not have access to the regular Food
    Stamp Program. There is currently $75 million available in fiscal year
    1998 and $75 million is budgeted for fiscal year 1999. Participation
    estimates for fiscal year 1999 average 127,000 persons monthly.
    Participation in this program has increased in recent years and our
    budget request reflects this trend.
                            child nutrition programs
        The purpose of the Child Nutrition Programs is to assist State and
    local governments to deliver 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 $9.2 billion for the Child Nutrition Programs.
    The request is $1.5 billion more than the fiscal year 1998
    appropriation. The increase is largely attributable to growth in meals
    served in the National School Lunch Program, the School Breakfast
    Program, and the Child Care Program and an increase in the number of
    free meals served. 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 1999 the requested funds will
    support: 4.5 billion school lunches, 1.3 billion school breakfasts, 1.6
    billion meals in centers and family day care homes, 149.3 million
    summer food service meals, and 143.5 million half-pints of milk.
        FNS will continue its efforts to streamline the administration of
    the Child Nutrition Programs at the State and local levels through
    regulations and policy guidance.
        The Agency is not requesting major changes in the Child Nutrition
    account since authorization of the Summer Food Service Program, State
    Administrative Expense, Commodity Distribution and other Child
    Nutrition authorizations expire at the end of this fiscal year. We will
    be proposing some cost neutral simplification and integrity enhancing
    measures as part of a reauthorization package, which is forthcoming.
                       child nutrition program integrity
        Since 1988, the Department of Justice and a number of States have
    been investigating and prosecuting dairies for illegal bidrigging. The
    Food and Nutrition Service is committed to promoting integrity in all
    of its programs. The School Lunch Program is not an exception; for
    example, we established a task force dedicated to pursuing procurement
    and nonprocurement suspension and debarment activities whenever and
    wherever suitable cause is present. The Agency joined forces with the
    Department of Justice and the Defense Logistics Agency to identify
    offenders including companies involved in the food, juice, and dairy
    businesses, as well as Food Service Management Companies. In accordance
    with Child Nutrition Program regulations and the Federal Acquisition
    Regulation, FNS proposed debarment of those companies who have been
    convicted of a criminal offense, entered into a civil settlement or
    involved in illegal activities such as price fixing, bidrigging and
    food adulteration.
        At the time of our budget request, FNS had identified 199 companies
    and individuals subject to suspension and debarment. Of these, actions
    have been initiated against 161. FNS has taken final administrative
    action in 142 cases with 85 entities debarred for 3 years from future
    involvement on a nonprocurement or procurement basis with all Federal
    programs. Compliance agreements aimed at protecting the Federal
    interest have been signed or are under discussion for an additional 50
    corporations. Voluntary Exclusions have been signed or are under
    discussion with 6 corporations. Actions are currently pending on 38
    cases. FNS will continue to pursue appropriate debarment action as
    deemed necessary.
         school meals initiative, team nutrition and coordinated review
        The School Meals Initiative for Healthy Children involves a
    comprehensive, integrated plan for improving the nutritional standards
    of school meals, including dramatically improving the quality of USDA
    commodities provided to local school districts as well as improving
    their availability. On May 29, 1996, President Clinton signed the
    Healthy Meals for Children Act (Public Law 104-149), which further
    increases flexibility for local school meal planners and reaffirms the
    nutrition standards established in prior law and regulations. The new
    law authorizes schools to continue using the traditional meal pattern
    and authorizes States to approve schools to use ``any reasonable
    approach,'' within guidelines established by the Secretary. In fiscal
    year 1997, the Department initiated action to formalize regulations to
    allow the use of the traditional meal pattern. At the request of State
    agencies, FNS will be conducting extensive training in fiscal year 1998
    on how to conduct nutrition assessment reviews of school food
    authorities. These nutrition assessment reviews will determine how well
    school food authorities are progressing towards meeting the Dietary
    Guidelines for Americans and other nutrition standards. Training
    sessions are planned for all seven regions.
        In fiscal year 1999, we are requesting a total of $10.0 million for
    Team Nutrition. This represents an increase of $2.0 million over the
    fiscal year 1998 appropriation. The increase in funds will continue and
    expand training and technical assistance and nutrition education
    efforts begun under the School Meals Initiative. Training efforts will
    focus on assisting school food service authorities in improving
    business practices and extending nutrition education efforts to the
    Child Care and Summer Programs. Almost half of the requested funds will
    provide support directly to the school food service community through
    technical assistance materials and training provided by either the
    States or the Federal government.
        Our budget also requests $4.3 million for Coordinated Review. We
    are planning to make this program more effective, more user-friendly
    more useful for the schools.
     supplemental nutritional program for women, infants and 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
    fiscal year 1999 request meets the President's commitment to full
    funding in the WIC Program. The requested funding of $4.1 billion will
    maintain the projected fiscal year 1998 participation level of 7.5
    million participants. We have also requested a $20 million contingency
    reserve for WIC, to be used if unforeseen increases in food prices
    jeopardize maintenance of participation levels.
        We believe a major reason for WIC's success is its emphasis on
    nutrition education through the provision of educational materials, as
    well as, individual and group counseling. One-sixth of funds available
    for administrative and program services are earmarked for nutrition
    education activities which totaled over $165 million in 1997. Also,
    special emphasis is placed on alerting participants to the dangers of
    substance abuse during pregnancy, including smoking and alcohol use.
    During pregnancy, participants are also alerted to the benefits of
    breastfeeding their newborns. Breastfeeding is further promoted by
    providing an enhanced food package to women who receive no infant
    formula, by permitting breastfeeding women to participate for a longer
    period of time than other postpartum women, and by providing breast
    pumps and other aids that directly support breastfeeding. WIC also
    works in conjunction with the Centers for Disease Control and
    Prevention and other public and private organizations to increase
    access to immunization services and coverage rates.
                                    wic ebt
        FNS is engaging in activities complementary to the FSP to advance
    EBT systems to improve program benefit delivery and client services for
    the WIC Program. In April 1995, Wyoming implemented an EBT system which
    uses smart card technology and off-line authorization to deliver FSP
    and WIC benefits and to facilitate the exchange of client data during
    clinic visits. Current operations include WIC/FSP in Natrona County,
    Wyoming and WIC in six other counties, projected to total 2,100 FSP
    households and 3,000 WIC families, 39 WIC-authorized retailers and 45
    FSP-authorized retailers. Statewide expansion is being considered. Our
    strategic goal is to increase the number of States issuing WIC benefits
    via EBT to 4 in 1999.
                          cost containment initiatives
        In an effort to use their food grants more efficiently, all
    geographic WIC State agencies and most Indian Tribal State agencies
    have implemented cost containment activities. Savings generated by
    competitive bidding, rebates, least cost brands, use of economical
    package sizes, etc., as well as home delivery or direct distribution
    systems allow State agencies to provide benefits to more participants
    by reducing food package costs.
        The most successful strategy has been competitive rebate contracts
    between State agencies and infant formula companies. Rebates have
    enabled WIC Programs to dramatically decrease the cost of infant food
    packages. In addition, ten State agencies are involved in three multi-
    State contracts, relating to infant juice and cereal. Fiscal year 1997
    rebate savings were estimated to be almost $1.3 billion. The average
    monthly food cost has been kept stable for the past 10 years.
                            management improvements
        As part of WIC's reauthorization this year, we will be proposing
    several integrity improvement measures. For example, we are concerned
    that not all States are assessing WIC income eligibility evenly. We are
    proposing new laws to require that income documentation, sufficient to
    demonstrate eligibility, be presented at certification. We will also be
    proposing tighter controls over vendors.
                         commodity assistance programs
        The Commodity Assistance Program 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 Farmer's Market
    Nutrition Program, which was formerly included in the WIC appropriation
    and the Food Recovery and Gleaning Program. The budget requests:
      --$96 million in support of women, infants, and children and elderly
            caseload in CSFP,
      --$45 million for TEFAP administrative expenses plus the $100 million
            for commodity purchases available in the Food Stamp Account,
            allowing for a total program of $145 million.
      --$140 million for NPE which will fund an estimated 250.6 million
            meals at a payment rate of 55.86 cents per meal, and
      --$15.0 million for the Farmer's Market Nutrition Program.
      --$20.0 million for the Food Recovery and Gleaning Program.
                           food recovery and gleaning
        The budget includes $20.0 million for a new grant program to aid
    community-based gleaning and food recovery efforts. Given that a USDA
    study indicates that 27 percent of the food produced in this country is
    lost to human consumption at the retail and food service level, and
    given that food banks around the country are reporting an increasing
    need but a decreasing supply of food, there is an urgent need to
    intensify pubic/private partnerships to glean and recover excess food
    for distribution to Americans in need.
        Of the $20.0 million, about $19.5 million will be used for
    competitive grants, cooperative agreements, and other assistance to
    community-based food recovery efforts. Non-profit groups--as well as
    state, local, and Tribal governments--have increasingly indicated to
    USDA that they need additional resources to help the Nation reach the
    goal of increasing the amount of excess food recovered by 33 percent
    over the current baseline of 1.5 billion pounds a year. While such
    entities are willing to bring significant resources of their own to aid
    food recovery--and while volunteers will provide much of the labor for
    such efforts--additional Federal assistance is needed to help these
    entities pay for vital items such as: vehicles and fuel to transport
    recovered and gleaned food; salaries for volunteer coordinators and
    training programs for volunteers; heating and refrigeration equipment
    and facilities to ensure food safety; printing for handbooks and
    instructional materials; equipment to harvest, sort, load, and process
    food; computer programs to match up donors to recipients; offices from
    which to operate; containers to hold the food, etc.
        We anticipate this Federal money will leverage significant matching
    funds from the private, non-profit, and state and local governmental
    sectors. We are not seeking to create a large-scale Federal
    bureaucracy, but rather to empower community-based efforts and
    encourage community volunteerism.
                             studies and evaluation
        In fiscal year 1998 FNS' funds for research on our food assistance
    programs were transferred to Economic Research Service. The fiscal year
    1999 request includes restoration of research funds at FNS. Both the
    President and the Secretary of Agriculture have expressed their strong
    belief that funding for studies and evaluation should remain with FNS,
    the agency which administers the programs to be studied.
        Prudent use of these funds requires that research on our programs
    be based on expert knowledge of program detail. FNS needs relevant,
    practical and focused research to enhance our ability to manage our
    programs effectively, measure the effectiveness of program operations
    and alternatives, and identify reliable program performance measures.
    Therefore, we strongly urge you to restore this funding to FNS.
                     government performance and results act
        The FNS Annual Performance Plan (APP) has been submitted as part of
    the fiscal year 1999 budget request. The goals outlined in the APP are
    directly linked to the achievement of the Agency's strategic goals and
    objectives.
                          food program administration
        Funding for Food Program Administration (FPA) is requested in the
    amount of $111.8 million. The FPA appropriation funds the majority of
    salaries and administrative expenses of the Agency. In recent years,
    FPA funding has not been sufficient to keep up with the rising demands
    made on the Agency. In fact, reduced funding has required more than an
    18 percent reduction in staffing since 1993--a 37 percent reduction
    since 1980. FNS understands the importance of downsizing in the Federal
    government. Toward that goal, the Agency has been diligent in
    implementing efficiencies and met its fiscal year 1999 target quite
    some time ago.
        Since the FPA appropriation finances 90 percent of the work force
    administering FNS programs, it is the critical account that ensures
    program and financial integrity and effective use of other FNS program
    appropriations. Recent OIG and GAO audits, between 1995 and 1997, have
    cited FNS for insufficient staff to ensure program compliance with
    statutory requirements. Reported areas of insufficient oversight
    include retailer integrity and food stamp fraud, the Agency's financial
    statements, documentation and collection of food stamp recipient
    claims, frequency of management evaluations required by program
    regulations, oversight of the Child and Adult Care Food Program,
    oversight of State information technology, and State cost allocation
    and claiming. Many of FNS' functions are labor-intensive and require
    constant staff attention. Payment accuracy, store investigations, and
    on-site reviews are critical to our Agency's mission and require
    intensive staff focus and travel funding.
        The Food Stamp Program loses more than $1.4 billion a year in
    overpaid benefits. More dollars are lost through inaccurate State
    requests for federal administrative funds. Current staffing levels are
    clearly insufficient to provide adequate oversight, conduct claims
    collections reviews, and provide needed technical assistance to States
    to make improvements. Although we have made great strides in reducing
    error rates over the last three years, which saved approximately $660
    million during this period, reduced staff is making it difficult to
    continue these efforts. Management evaluations of state operations in
    all our programs require additional attention. For example, in WIC, we
    need to strengthen our review of state information systems, our review
    of administrative funds and state caseload management. These areas are
    essential to ensure the sound management of the resources Congress has
    made available for WIC. Additionally, new data analysis tools, EBT and
    new authorities in Welfare Reform provide the Agency with a tremendous
    opportunity to increase program integrity among food stamp retailers.
    Unfortunately our limited and overburdened staff cannot utilize these
    tools to crack down on fraud.
        New legislation and changing program needs have imposed significant
    new and ongoing administrative burdens on the already strained staff.
    Diminishing staff resources do not allow the Agency to keep pace with
    legislative changes, such as Welfare Reform, Government Performance and
    Results Act, the Chief Financial Officers Act, the Debt Collection
    Improvement Act, and the Healthy Meals for Healthy Americans Act, to
    name a few. At the same time, the Agency is called on to improve the
    nutrition of program recipients, strengthen program integrity, and
    implement EBT Nationwide.
        Clearly, ensuring proper fiscal and program management for an
    Agency managing almost $40 billion in program funds must be a top
    priority. It is imperative that FNS maintain a steady work force to
    meet the challenges of program delivery and keep pace with new
    legislation and changing program needs. Mr. Chairman, we strongly
    believe the request is the smallest budget feasible to ensure that we
    maintain adequate vigilance over the resources entrusted to us by the
    Congress on behalf of the American taxpayer.
        Included in the FPA request level of $111.8 million is $2.542
    million to continue the work of the Center for Nutrition Policy and
    Promotion.
                                   conclusion
        FNS is committed to providing food and nutrition assistance for the
    Nation's children and low-income families. Our fiscal year 1999 request
    reflects this commitment. Further, we believe that our request of $39.2
    billion is crucial to continued efficient program operations.
        Mr. Chairman, this summarizes the fiscal year 1999 FNS budget
    request. I will be happy to answer any questions that you may have.
                                     ______

                             Biographical Sketches
                               shirley r. watkins
        Shirley Robinson Watkins was nominated Under Secretary of Food,
    Nutrition and Consumer Services (FNCS) by President Clinton on May 19,
    1997. She was confirmed by the Senate on July 31, 1997. As Under
    Secretary, she has authority over the Food and Nutrition Service and
    the Center for Nutrition Policy and Promotion. In this position, she
    oversees a budget of over $40 billion for USDA's 15 food assistance
    programs, including the Food Stamp Program, the National School Meals
    Programs, and the WIC Program.
        Mrs. Watkins is the first African-American to be named FNCS Under
    Secretary, as well as the first person named with direct management
    experience in the school meals programs at the local level. She brings
    to this position a life-long commitment to the health and nutritional
    well-being of children and families.
        Prior to this appointment, Mrs. Watkins was USDA Deputy Assistant
    Secretary for Marketing and Regulatory Programs, where, from 1995 until
    1997, she oversaw 80 domestic programs and 8,000 domestic and
    international employees charged with protecting U.S. agricultural
    interests. From 1993 to 1995, she served as the FNCS Deputy Under
    Secretary, where she worked closely with all aspects of USDA-
    administered domestic food assistance programs.
        Before joining USDA in 1993, Mrs. Watkins served as Director of
    Nutrition Services for the Memphis (Tennessee) City Schools for 17
    years, where the school lunch program received national recognition.
    Previous positions within the school system included food service
    supervisor, home economics teacher, and elementary teacher. From 1960
    to 1962, she served as a home demonstration agent with the University
    of Arkansas Extension Service.
        Mrs. Watkins received a bachelor of science degree from the
    University of Arkansas at Pine Bluff, and master of education from the
    University of Memphis.
                                     ______

                                 yvette jackson
        Washington, Sept. 2, 1997--Agriculture Secretary Dan Glickman today
    announced he has named Yvette Jackson the Administrator of the U.S.
    Department of Agriculture's Food and Consumer Service. FCS oversees
    federal nutrition assistance programs.
        Jackson is the first African-American women to head the Food and
    Consumer Service. Since 1994, she has served as the agency's Deputy
    Administrator in charge of the Food Stamp Program. As FCS
    Administrator, Jackson will oversee USDA's 15 nutrition assistance
    programs, including the School Lunch and School Breakfast Programs, the
    Special Supplemental Nutrition Program for Women, Infants, and
    Children--the WIC program--and the Food Stamp Program. She will manage
    an agency budget of $40 billion and a staff of 1,700.
        ``I take great pleasure in announcing the appointment of Yvette
    Jackson as the Administrator of the Food and Consumer Service,''
    Glickman said. ``She has done an outstanding job directing the Food
    Stamp Program, and she has made a career out of helping people in need.
    I look forward to working with her to continue to make our programs
    even more responsive to the people who need them.''
        Jackson began her career with the Pennsylvania Department of Public
    Welfare 26 years ago as a caseworker in the Philadelphia County
    Assistance Office. She assumed increasing management responsibilities,
    culminating in her appointment as Pennsylvania's Deputy Secretary of
    Income Maintenance in March, 1991. As deputy secretary, Jackson oversaw
    the administration of the state's income security and medical
    assistance eligibility programs--including the Food Stamp Program, Aid
    to Families with Dependent Children, State General Assistance, Child
    Support Enforcement, and Medicaid.
        A native of Philadelphia, Jackson holds a bachelor's degree in
    social welfare from Temple University and a Masters of Social Work from
    Rutgers University.
                                     ______

                                ronald j. vogel
    Career Highlights
        Mr. Vogel has been with the Food and Nutrition Service for 17
    years. He is presently the Associate Deputy Administrator for Special
    Nutrition Programs. In this position, he has operational responsibility
    for programs such as WIC, the Child and Adult Care Food Program, the
    National School Lunch and Breakfast Programs, the Summer Food Service
    Program, and a variety of commodity distribution programs, including
    TEFAP and the Food Distribution Program for Indian Reservations.
        Prior to his current position, Mr. Vogel was Director of the
    Supplemental Food Programs Division, which includes WIC and the
    Commodity Supplemental Food Program. During his tenure in this
    position, he received the Secretary's Distinguished Service Award for
    promoting the health and well-being of low-income women, infants, and
    children and received a Public Health Service commendation for efforts
    to promote childhood immunization through WIC.
        Previous assignments included Director of the Program Information
    Division in which he was responsible for FNS' financial and program
    information management information systems. In this position he also
    developed and implemented the Agency's long-range Financial Management
    Automation Plan and the National Data Bank, an executive-level program
    information and reporting system.
        Before coming to FNS, Mr. Vogel was employed in the private sector
    as a program evaluation specialist. His work in this capacity focused
    on a variety of federal social service programs including Head Start,
    the Basic Educational Opportunity Grant Program (Pell Grants) and the
    Section 8 Public Housing Assistance Program.
    Education
        Mr. Vogel received his undergraduate degree from the University of
    Virginia. He holds a Master of Arts degree in sociology from Duke
    University. He pursued post-Masters studies at Duke as a James B. Duke
    Fellow.
                                     ______

                                 rajen s. anand
        Dr. Rajen S. Anand serves as the Executive Director and chief
    executive officer of the Center for Nutrition Policy and Promotion in
    the United States Department of Agriculture.
        The mission of the Center is to improve the nutritional status of
    all Americans by serving as the focal point for linking scientific
    research to the dietary and socioeconomic needs of the consumer. The
    Center coordinates the overall nutrition education policy within the
    Federal government.
        Before joining the Department of Agriculture in 1995, Dr. Anand was
    Professor of Physiology at the California State University, Long Beach,
    where he had taught physiology, pathophysiology and metabolism since
    1970. He served as the founding chair of the Department of Anatomy
    Physiology (1985-1989), which was started from scratch under his
    leadership. He served as chair of the Department of Communicative
    Disorders (1990-1992) on a special assignment. As the Department head,
    he was responsible for recruitment, evaluation and supervision of
    faculty and staff and served as an advocate and leader of the academic
    unit. He managed the fiscal resources, developed the budget, and
    carried out the administrative operation, space allocation and
    equipment maintenance.
        In 1994, Dr. Anand was appointed by Education Secretary Richard
    Riley to serve on the 11-member National Committee on Foreign Medical
    Education and Accreditation. He was reappointed for another 3-year term
    in 1997.
        He received his Ph.D. in human physiology, nutrition and
    biochemistry from the University of California, Davis in 1969. He also
    holds a doctorate in veterinary medicine (D.V.M). He completed post-
    doctoral fellowships at U.C. Davis in metabolism, and at the UCLA-
    Harbor Medical Center in pediatric endocrinology.
        Dr. Anand was honored with several academic awards including the
    Outstanding Professor Award at the Long Beach campus. He also was twice
    recipient of the Meritorious Performance and Professional Promise
    Award. At the University of California, Davis he was bestowed with the
    Outstanding Student Award in 1967 and 1968, and Hertzendorf Memorial
    Award in Physiology in 1969 (for outstanding academic achievements and
    humanitarian qualities).
        Dr. Anand is a member of the American Physiological Society, Sigma
    Xi, Phi Kappa Phi Honor Society and American Association for
    Advancement of Science.
        Dr. Anand has published more than 35 scientific research articles
    in national and international journals. He is also a freelance
    journalist and has written over 350 news stories and articles for
    various newspapers and magazines.

                           Food Gleaning and Recovery

        Senator Cochran. I am going to ask a couple of questions,
    then yield to my colleagues on the committee for any questions
    or additional comments that they have.
        You mentioned at the conclusion of your remarks the Food
    Recovery and Gleaning Program. When the Secretary was before
    our committee, he talked about this program too, and he
    indicated that the Government could be a facilitator without
    costing any money, but I noticed that the budget proposes that
    we spend $20 million on the program. That seems to me to raise
    a question as to why the administration has now determined that
    Federal funding is required for a program that appeared to be
    one where we would be a facilitator.
        There is also a statement in the prepared testimony talking
    about a Department study indicating that 27 percent of the food
    produced in the country is lost to human consumption at the
    retail and food service level. We would like to have a copy of
    that study if you could submit that for our review.
        What is your reaction to the question that we have to ask,
    and that is, what are you going to do with the money? How are
    you going to spend $20 million facilitating a gleaning and food
    recovery program?
        Ms. Watkins. Mr. Chairman, I appreciate you asking that
    question, and this is an area that both the Secretary and I are
    very concerned about. We will provide you with a copy of the
    study.
        [The information follows:]
                Estimating and Addressing America's Food Losses

     (By Linda Scott Kantor, Kathryn Lipton, Alden Manchester, and Victor
                                   Oliveira)

        The U.S. food supply is the most varied and abundant in the world.
    Americans spend a smaller share of their disposable income on food than
    citizens of any other country and choose from an average of 50,000
    different food products on a typical outing to the supermarket. In
    1994, the food supply provided an estimated 3,800 calories per person
    per day, enough to supply every American with more than one and a half
    times their average daily energy needs. Given this abundance, few of
    the Nation's resources have traditionally been devoted to measuring or
    reducing food waste.
        In recent years, growing concern about hunger, resource
    conservation, and the environmental and economic costs associated with
    food waste have raised public awareness of food loss. This in turn has
    accelerated public and private efforts to make better use of available
    food supplies by recovering safe and nutritious food that would
    otherwise be wasted.
        Of course, not all food that is lost is suitable for consumption
    (fig. 1). Some losses--like the condemnation of diseased animals at the
    slaughtering house, or the discard of moldy fruit from the produce
    shelf at the supermarket--are necessary to ensure the safety and
    wholesomeness of the U.S. food supply. Such foods are not recoverable
    for human use.

        ----------------------------------------------------------------

                                    figure 1
                  While Some Food Is Recoverable, Some Is Not
    Not recoverable for human consumption
      --Livestock condemned at slaughter because of disease.
      --Diseased or otherwise unsafe produce.
      --Spoiled perishable food, including meat, dairy, and prepared items.
      --Plate waste from foodservice establishments.
      --Losses of edible portions associated with processing, such as skin
            and fat from meat and poultry, and peels from produce.
    Recoverable for human consumption
      --Edible crops remaining in farmers' fields after harvest.
      --Produce rejected because of market ``cosmetics'' (blemishes,
            misshapen, etc.)
      --Unsold fresh produce from wholesalers and farmers' markets.
      --Surplus perishable food from restaurants, cafeterias, caterers,
            grocery stores, and other foodservice establishments.
      --Packaged foods from grocery stores, including overstocked items,
            dented cans, and seasonal.

        ----------------------------------------------------------------

        Likewise, plate scraps are appropriately discarded at eating
    establishments out of health considerations. In addition, not all food
    that is lost is economically recoverable. Food recovery efforts are
    often limited by financial and logistical constraints that make it
    difficult to match recovered food with potential recipients.
        Nevertheless, large quantities of wholesome, edible food, are lost
    at every stage of the marketing system. Examples of such losses include
    meats, bread, and other foods prepared by a restaurant or caterer but
    never served and the discard of blemished or overripe produce, which
    may be unmarketable for cosmetic reasons, but are otherwise nutritious
    and safe.
        Even a modest increase in the recovery of such wholesome foods
    could reduce hunger by supplementing existing food-assistance efforts;
    provide tax savings to farmers, supermarkets, and foodservice
    establishments that donate food; and lessen the environmental impacts
    of waste disposal. Understanding where and how much food is lost is an
    important step in reducing waste and increasing the efficiency of food
    recovery efforts.
        USDA's Economic Research Service (ERS) recently undertook a review
    of the current data on food waste and built on this knowledge to
    generate new estimates of food loss by food retailers (supermarkets,
    convenience stores, and other retail outlets), and consumers and
    foodservice establishments (storage, preparation, and plate waste in
    households and foodservice establishments). These losses were estimated
    by applying known waste factors, gathered from published studies and
    discussions with commodity experts, to the amount of edible food
    available for human consumption in the United States. However, losses
    of nonedible food parts such as bones, pits, seeds, and peels, were
    excluded (see box about measuring food loss).
        According to the new ERS estimates, about 96 billion pounds of
    food, or 27 percent of the 356 billion pounds of the edible food
    available for human consumption in the United States, were lost to
    human use at these three marketing stages in 1995 (fig. 2). Fresh
    fruits and vegetables, fluid milk, grain products, and sweeteners
    (mostly sugar and high-fructose corn syrup) accounted for two-thirds of
    these losses (fig. 3).
    [GRAPHIC] [TIFF OMITTED] T01MA10.004

    [GRAPHIC] [TIFF OMITTED] T01MA10.005

        ERS does not know the share of these losses that are recoverable.
    However, we can get an idea of the significance of loss by calculating
    the potential benefit of recovery. On average, each American consumes
    about 3 pounds of food each day. If even 5 percent of the 96 billion
    pounds were recovered, that quantity would represent the equivalent of
    a day's food for each of 4 million people. Recovery rates of 10 percent
    and 25 percent would provide enough food for the equivalent of 8
    million and 20 million people, respectively.
        The loss estimates presented here are tentative and are intended to
    serve as a starting point for additional research. Many of the studies
    on which these estimates are based date from the mid-1970's or before.
    Dramatic changes have occurred in the food marketing system since then,
    including innovations in food processing technology and unprecedented
    growth in the foodservice sector. While we made crude adjustments for
    these changes in our analysis, additional research--especially updated
    data on foodservice, processing, and household food losses--is needed
    to add precision to these estimates and to provide a more complete
    picture of food loss across the entire marketing system.
                      food losses begin on the farm . . .
        Food losses begin on the farm even before a commodity moves into
    the marketing system. Although ERS was not able to quantify food losses
    that occur on the farm or between the farm and retail levels, anecdotal
    evidence suggests that such losses can be significant for some
    commodities.
        Periodic preharvest losses occur, for example, because of severe
    weather, such as droughts and floods, or pest infestations. For
    example, each year an average 7 percent of U.S. planted acreage was not
    harvested during 1994-96. Freezes that periodically damage Florida's
    citrus crop and natural disasters like Hurricane Fran, which destroyed
    agricultural crops in North Carolina in the fall of 1996, are examples
    of causes of such losses. Most of these commodities are not recoverable
    for human use.
        On the other hand, many harvesting losses, especially losses of
    commodities like fruits and vegetables, are often well-suited for
    recovery efforts. Economic factors, which affect producers' willingness
    to bring their product to market, are the most common source of such
    losses.
        For example, minimum quality standards for fresh produce set by
    State and Federal marketing orders, bumper crops that reduce commodity
    prices, and consumer demand for blemish-free produce often result in
    the removal of safe and edible produce from the food marketing system.
    With such requirements in mind, fruit and vegetable producers often
    harvest selectively, leaving small, misshapen, or otherwise blemished
    produce in the field, since these commodities would likely be discarded
    in the packing shed or processing plant.
        Harvesting losses can also be attributed to technological factors,
    such as increased mechanization, equipment malfunction, and new
    management practices. Commodities can be lost because mechanized
    harvesters cannot retrieve the entire item or because the machines are
    unable to discriminate between immature and ripe products. However,
    these losses are often viewed as an acceptable tradeoff between field
    efficiency (lower production costs and faster operation) and increased
    yields.
        Many farmers mitigate harvesting losses by using leftover crops as
    fertilizer or animal feed. Harvesting losses are also reduced through
    gleaning efforts, in which volunteers collect leftover crops from
    farmers' fields where it is not economically profitable to harvest a
    crop or after a field has been mechanically harvested.
                . . . and continue into processing and marketing
        Food is subject to additional loss as it leaves the farm and enters
    the food marketing system.
        Some loss occurs in storage, due to insect infestations or mold,
    deterioration, or improper transportation and handling. Produce, dairy,
    meat, and other fresh items are subject to shrinkage (loss in weight or
    volume) due to inadequate packaging or simply the passage of time.
    Also, fresh foods stored or transported at improper temperatures can
    deteriorate, wilt, or suffer bacterial degradation or microbial growth.
    Frequent handling by food processors, brokers, and wholesalers can lead
    to additional losses. According to published studies, a typical food
    product is handled an average of 33 times before it is ever touched by
    a consumer in the supermarket.
        Food-safety regulations also divert some product from the human
    food chain. According to USDA's Food Safety and Inspection Service
    (FSIS), 0.2 percent of hogs, 1.7 percent of calves, and 0.4 percent of
    chickens and turkeys were ``condemned'' or otherwise rejected at
    slaughter in 1993 and could not be used for human food. After
    slaughter, some meat is trimmed away because of bruises and other
    defects. In addition, some viscera, especially livers, are condemned
    due to safety concerns. Although some of these losses may be
    preventable through improved farm management and marketing practices,
    once food becomes spoiled, it is no longer available for human use.
        Food losses also occur when raw agricultural commodities are made
    into final food products. Some of these losses, like removing edible
    skins from fresh produce, are a normal and necessary part of food
    processing. For example, about 20 percent of the weight of a fresh
    apple is lost when it is processed into applesauce. Other processing
    losses, such as the removal of skin and trimming of fat from meat and
    poultry, are due to consumer demand for more healthful food choices.
    Still others, like the increased trimming associated with precut
    produce, are the result of increased demand for convenience foods from
    consumers and the foodservice industry.
        Although such losses are usually not suitable for direct human
    consumption, they are often diverted for use in animal feed or as
    ingredients in other food products. For instance, fresh potatoes lose
    about half of their weight when they are processed into frozen french
    fries. Although this appears to represent a ``loss'' of edible fresh
    potatoes, most of the ``loss'' is actually recovered and used by
    processors for other potato products, such as dehydrated potato flakes
    and potato starch; and potato skins are often sold to renderers for
    animal feed.
     dairy products and fresh produce account for largest share of retail
                                  food losses
        An estimated 5.4 billion pounds of food, less than 2 percent of
    edible food supplies, was discarded at the retail level in 1995 (table
    1). Nearly half of these retail losses came from fluid milk and other
    dairy products and fresh fruits and vegetables. These findings are
    consistent with published studies on supermarket discard, which show
    that fresh produce, dairy products, and other perishable items make up
    the largest share of retail food losses. Overstocking, overtrimming,
    improper stock rotation, and post-holiday discard of seasonal items
    like Halloween cookies are the main reasons that retailers discard
    food.

              TABLE 1.--LARGE FOOD LOSSES OCCURRED AT THE RETAIL, FOODSERVICE, AND CONSUMER LEVELS IN 1995
    ----------------------------------------------------------------------------------------------------------------
                                                                     Losses from edible food supply--
                                                     ---------------------------------------------------------------
                                         Edible food   Retail food loss      Foodservice and        Total retail,
                                          supply,\1\ --------------------  consumer food loss     foodservice, and
                 Commodity                 million                       ----------------------  consumer food loss
                                            pounds     Million                                 ---------------------
                                                        pounds   Percent    Million    Percent    Million
                                                                             pounds                pounds    Percent
    ----------------------------------------------------------------------------------------------------------------
    Grain products.....................       45,606        912        2       13,682       30       14,594       32
                                        ============================================================================
    Fruit..............................       48,338        707        2       10,609       23       11,316       23
        Fresh..........................       22,389        448        2        6,717       30        7,165       32
        Processed......................       25,949        259        1        3,892       15        4,152       16
                                        ============================================================================
    Vegetables.........................       63,077        999        2       14,947       24       15,946       25
        Fresh..........................       36,830        737        2       11,049       30       11,786       32
        Processed......................       26,247        262        1        3,898       15        4,160       16
                                        ============================================================================
    Dairy products.....................       76,276      1,525        2       22,883       30       24,408       32
        Fluid milk.....................       54,474      1,089        2       16,342       30       17,431       32
        Other dairy products...........       21,802        436        2        6,541       30        6,977       32
                                        ============================================================================
    Meat, poultry, and fish............       51,466        515        1        7,720       15        8,235       16
        Red meat.......................       30,350        303        1        4,552       15        4,856       16
        Poultry........................       17,108        171        1        2,566       15        2,737       16
        Fish and seafood...............        4,008         40        1          601       15          641       16
                                        ============================================================================
    Eggs...............................        7,918        158        2        2,328       29        2,486       31
    Dry beans, peas, and lentils.......        2,263         23        1          336       15          359       16
    Tree nuts and peanuts..............        1,861         19        1          276       15          295       16
    Caloric sweeteners.................       38,827        388        1       11,473       30       11,861       31
    Fats and oils......................       20,250        203        1        6,564       32        6,767       33
                                        ----------------------------------------------------------------------------
          Total \2\....................      355,883      5,449        2       90,818       26       96,266       27
    ----------------------------------------------------------------------------------------------------------------
    \1\ Excludes nonedible food parts such as bones, hides, peels, skins, pits, cores, and seeds.
    \2\ Totals may not add due to rounding.
    Source: Economic Research Service, U.S. Department of Agriculture.

        Another important component of food loss is stock removed from
    retail shelves because it has reached its ``sell-by'' date. Such losses
    chiefly apply to fresh perishable items such as dairy and bakery
    products. A rise in the number of instore bakeries and freshly prepared
    specialty and deli items may mean that supermarkets are managing larger
    quantities of highly perishable food products with shelf lives as short
    as a few days. Some of these items, such as day-old bread and expired
    dairy products, are safe to eat for a short time and are potentially
    recoverable.
        Canned fruits and vegetables, breakfast cereals, pasta, and other
    nonperishable food products get discarded because of crushed, dented,
    or otherwise damaged packaging, and expired shelf dates. For example,
    losses of processed fruit and vegetables, including fruit juices (on a
    fresh-fruit equivalent basis), were estimated at 521 million pounds, or
    almost 10 percent of total retail food losses in 1995. Most of these
    losses occur in inventory control, storage, and handling.
        High failure rates for new food products may have increased retail
    food losses in recent years as the number of new product introductions
    has risen. More than 16,000 new food products--including new sizes,
    packaging, flavors, and brands of existing products--were placed on
    U.S. grocery store shelves in 1995, more than double the fewer than
    8,000 introduced in 1988. Although ERS does not know the success rate
    for such products, industry experts estimate that more than 90 percent
    of new food products are removed from the market.
        Food recovery programs, which collect such damaged or unmarketable
    products from food retailers and distribute them to charitable food
    organizations, can convert these safe but otherwise ``unsaleable''
    items into consumable food and provide a tax benefit to food retailers
    who donate their products.
                    plate waste contributes to large losses
        From foods forgotten and spoiled in the refrigerator to the uneaten
    vegetables tossed in the garbage, consumer and foodservice food waste
    is the single largest source of food loss in the marketing chain.
    Estimated at 91 billion pounds, this food loss accounted for 26 percent
    of the edible food available for human consumption in 1995. Fresh
    fruits and vegetables accounted for 19 percent of consumer and
    foodservice food losses, with an estimated 18 billion pounds discarded
    annually. An additional 16 billion pounds of fluid milk--the equivalent
    of one-third of an 8-ounce glass per person per day--and 14 billion
    pounds of grain products were also lost. Together these foods accounted
    for more than half of total estimated consumer and foodservice food
    losses in 1995, partially reflecting their relative importance in the
    diet when consumption is measured by the weight of food.
        Common sources of foodservice food losses include overpreparation
    of menu items, expanded menu choices (which can make management of food
    inventories more difficult), and unexpected fluctuations in food sales
    due to sudden changes in the weather or other factors beyond the
    control of foodservice operators. In addition, consumer plate loss may
    be on the rise at restaurants and other eating places due to a growing
    trend toward the ``upsizing'' of food portions.
        Unless consumers take home uneaten portions for later consumption,
    restaurants must discard such plate leftovers for health
    considerations, meaning that increasing amounts of food may be going to
    waste.
        Household food losses occur because of overpreparation, preparation
    discard, plate waste, cooking losses, spoiled leftovers, and breakage,
    spillage, and package failure, either in the home or en route from the
    point of purchase. A variety of factors, including household size,
    income, and food-safety concerns, influence the type and quantity of
    foods lost at this level.
        Archaeological examinations of household garbage by researchers at
    the University of Arizona's Garbage Project revealed that household
    waste is generally lower for frequently purchased staple items like
    bread, milk, and cereal than for less frequently used specialty
    products such as sour cream, hot dog buns, or items bought on impulse.
    They also concluded that large quantities of single food items, entire
    heads of lettuce, half-eaten boxes of crackers, and sprouted potatoes--
    rather than plate scraps--account for the largest share of household
    food loss.
        A 1987 study by the University of Oregon, which examined the
    reasons that households discard food, suggests that consumer education
    may play an important role in reducing consumer food loss. In the case
    of perishable food, knowledge of, or misconceptions about, food safety
    were the single most important determinants of household food discard.
    The study indicated that many main meal planners confused quality
    defects with edibility and were unable to accurately assess whether a
    food was safe to eat. Such assessments were particularly difficult for
    consumers under the age of 35. All households had difficulty
    interpreting package dating information, such as ``sell-by'' dates or
    expiration codes.
         looking for solutions: food recovery, recycling, and education
        Many public and private assistance groups, food retailers, food
    manufacturers, policymakers, and consumers have looked for ways to
    prevent food losses, recover lost food, and reduce solid waste. These
    efforts reach into every corner of the food marketing system. They
    include food recovery projects to feed the hungry, recycling projects
    to conserve resources and reduce waste disposal costs, and educational
    campaigns and economic incentives to prevent food loss.
                     food recovery efforts feed the hungry
        Despite the abundance of food in the United States, hunger is a
    reality for some Americans with limited financial resources. In 1995,
    36.4 million people in this country were living in poverty (annual
    income of less than $15,569 for a family of four). According to USDA
    food consumption data for the early 1990's, almost 12 percent of U.S.
    households with annual incomes below the poverty line reported that
    they sometimes or often did not get enough to eat. USDA spent almost
    $38 billion providing food assistance to an estimated 45 million
    people--about 1 in every 6 Americans--at some time during 1996. In
    addition, an estimated 150,000 nonprofit organizations, including food
    banks and neighborhood charity outlets, provided more than 10 percent
    of the U.S. population with a portion of their nutritional needs.
    However, even with the extensive network of Federal and private food-
    assistance programs, almost 20 percent of requests for emergency food
    assistance went unmet in 1995, according to the U.S. Conference of
    Mayors.
        Thus, other sources of food must be utilized.
        The term food ``recovery'' refers to the collection, or recovery,
    of wholesome food from farmers' fields, retail stores, or foodservice
    establishments for distribution to the poor and hungry. Food recovery
    programs operate across the United States and target many different
    levels of the food marketing system (see box on food recovery efforts).
    A few are large operations with offices in many States, but most are
    small local programs that depend largely on the efforts of volunteers
    from the surrounding community.
        ``A Citizen's Guide to Food Recovery,'' recently published by USDA,
    classifies these efforts into four major types:
        Field gleaning--the collection of crops from farmers' fields that
    have already been mechanically harvested or on fields where it is not
    economically profitable to harvest;
        Perishable food rescue or salvage--the collection of perishable
    produce from wholesale and retail sources such as supermarkets;
        Food rescue--the collection of prepared foods from the foodservice
    industry, including restaurants, hotels, and caterers; and
        Nonperishable food collection--the collection of processed foods
    with longer shelf lives.
        Once surplus food has been ``recovered'' or prevented from going to
    waste, volunteers pick up and deliver the food to groups that serve the
    needy, either directly through neighborhood charitable organizations,
    such as food pantries and soup kitchens, or indirectly through food
    banks. In addition to providing additional quantities of food to hungry
    people, food recovery efforts can also provide food banks with the
    ability to offer clients more variety and nutrients in their diets by
    adding fiber-rich fresh fruits and vegetables and grain products to the
    typical offerings of nonperishable canned and boxed goods.
        Food recovery also has benefits that extend beyond providing food
    to the needy. For example, the additional food supplied by recovery
    programs allows agencies that serve the disadvantaged to reallocate
    money to other needed services, money that they would have otherwise
    spent on food.
        These efforts also provide clean fields and tax savings for farmers
    who donate unharvested crops and reduce waste-removal fees for
    supermarkets and foodservice establishments. For example, if 5 percent
    of retail, foodservice, and consumer food losses in 1995 were recovered
    rather than discarded as solid waste, about $50 million dollars
    annually could be saved in solid waste disposal costs for landfills
    alone. If 10 percent of food losses were recovered, savings for
    landfill disposal costs would be about $90 million. These savings would
    increase to $200 million with a 25-percent recovery rate.
        In addition, large amounts of labor, energy, and other inputs are
    dedicated to producing food. For example, ERS estimated total U.S. farm
    production expenses--including seed, fertilizer, and other inputs, and
    labor, machinery, and other operating expenditures--to be $180 billion
    in 1995. Food recovery and other loss reduction programs can make more
    efficient use of these resources by reducing the amount of food that
    goes to waste.
        Food recovery, however, is not without cost. Recovery operations
    face a number of logistical and financial obstacles in the course of
    turning ``lost'' food into food suitable for consumption. At times,
    these obstacles are quite formidable. They include locating food donors
    and making them aware of organizations that channel donated food to the
    needy; obtaining financial resources for transporting, storing, and
    packaging donated foods; securing labor, whether paid or volunteer; and
    training those workers in safe food handling and preparation methods.
    Second Harvest, the Nation's largest domestic charitable hunger relief
    organization, spends more than $5 million annually transporting food
    from fields, restaurants, and supermarkets to local food banks that
    serve the needy.
        Until recently, many potential food donors were reluctant to
    participate in food recovery efforts because they feared legal
    liability if someone were to become ill from eating their donated
    foods. The Bill Emerson Good Samaritan Food Donation Act, passed by
    Congress and signed into law by President Clinton in 1996, promotes
    food recovery by limiting the liability of food donors to instances of
    gross negligence or intentional misconduct. It also establishes basic
    nationwide uniform definitions pertaining to the donation and
    distribution of nutritious foods, which will ensure that donated foods
    meet all quality and labeling standards of Federal, State, and local
    laws and regulations.
                     food waste recycling and byproduct use
        Technological advances in food processing and food byproduct
    development can reduce food loss. For example, many food parts that
    would have been discarded by food processors 10 years ago are finding
    new value in industrial raw materials or in other food products. These
    products include livestock feeds, biodiesel (a fuel made from vegetable
    oils and animal fats), adhesives and solvents derived from citrus oils,
    pharmaceutical products made from cow's and goat's milk, and juice
    products and vinegar made from apple peels.
        The large volume of shells from raw eggs processed into liquid egg
    products, for instance, can be used as a source of calcium in poultry
    feed or as fertilizer. Eggs taken out of their shells by processing
    machines may also mean lower rates of processing loss, since up to 30
    percent of the egg white can stay with the shell when shells from raw
    eggs are removed manually. Similarly, the introduction of frozen
    concentrated orange juice has reduced marketing losses for fresh fruit
    by enabling processors to use bruised or blemished fruit for juice and
    the nonjuice portions for cattle feed.
        Current research on alternative uses for recycled food waste is
    focusing on animal feed and compost. For example, research is being
    conducted on the efficient extraction of food waste materials, known as
    wash water solids, from dairy processing plants. Extraction of these
    solids reduces waste disposal fees and results in additional income for
    dairy processors who sell the recovered material for animal feed.
        Food waste can also be blended with other organic compounds, such
    as newspaper, and composted. The resulting organic material could be
    developed into a soil-conditioning product. Research is also being
    conducted on converting food waste into a biodegradable film similar to
    that used for plastic trash bags. The goal is to develop an organic
    film that would decompose rapidly and could be used in lawn waste
    composting operations.
                   consumer education and economic incentives
        While food recovery and recycling technologies may help to utilize
    food that would otherwise be discarded, programs designed to prevent
    food loss in the first place may be particularly useful in reducing
    consumer and foodservice food losses. A number of programs are
    currently being implemented.
        According to The Wall Street Journal, economic incentives are
    largely behind the Boston Market restaurant chain's recent adoption of
    a computer program that monitors food inventories. As menu items are
    sold and entered into the cash register, the program converts these
    items, such as cole slaw or mashed potatoes, into raw ingredients. At
    the end of each day, food inventories that remain in the kitchen are
    weighed and entered into the computer where they are compared with
    estimated food uses based on product sales. The difference between used
    and remaining inventories provides an instant estimate of preparation
    and storage losses. Since initiating the program, the chain's self-
    reported food loss has declined from 5 percent to 1 percent of food
    inventories.
        Some local communities are successfully reducing food and other
    waste by requiring households and businesses to pay for solid waste
    disposal based on the amount of trash that they generate, usually by
    charging higher fees for each additional trash container used.
    According to the U.S. Environmental Protection Agency (EPA), there are
    currently more than 2,000 such programs in place nationwide, with
    average reductions in household solid waste of 25 to 45 percent. A 1994
    study conducted for the EPA reported that food accounted for about 8.5
    percent of municipal solid waste collected from households and
    businesses.
        Education programs that help consumers change their food discard
    behavior may also be effective in preventing food loss. For instance,
    educational programs that help meal planners determine appropriate
    portion sizes and distinguish between spoiled and safe food can help
    consumers reduce plate waste and better utilize leftovers. Improved
    meal planning and purchasing skills--including information that helps
    consumers understand the meaning of manufacturers' expiration codes,
    and ``use-by'' and ``sell-by'' dates--can reduce the discard of food
    items.
        Government-sponsored initiatives, such as USDA's publication of A
    Citizen's Guide to Food Recovery, along with local efforts to train
    food recovery volunteers in the safe handling and preparation of
    rescued food, can increase the safety and efficiency of food recovery
    efforts. Recent legislation that reduces the liability of food donors
    has increased the amount of food recovered to feed the needy.
    Educational programs that increase the awareness of food loss by
    manufacturers, retailers, and consumers may reduce the amount of food
    loss and in turn the environmental and economic costs of waste
    disposal.
        Over the long run, the reduction and recovery of uneaten food in
    the United States is a complex undertaking requiring the involvement of
    public and private institutions, as well as consumers. Efforts to
    reduce or prevent food loss must be balanced against the cost of
    conserving and recovering food. However, successful food recovery
    programs can provide many benefits to society which can offset a
    portion of these costs. Among other things, food recovery programs can
    help to reduce hunger; provide tax savings to farmers, food
    manufacturers, retailers, foodservice operators, and others that donate
    food; conserve landfill space; and lessen the costs and environmental
    impact of solid waste disposal. While our estimates of food loss lack
    precision, they identify an important issue in the food system that
    deserves closer attention.
              food recovery efforts reach across marketing system
        A Citizen's Guide to Food Recovery.--USDA has recently published A
    Citizen's Guide to Food Recovery, a resource guide on food recovery
    programs for businesses, community-based organizations, private
    citizens, and local governments. The Guide is designed to support food
    recovery by showing communities, individuals, and businesses how to
    support existing food recovery efforts or to begin new programs in
    their communities. The Citizen's Guide and other sources of information
    about gleaning and food rescue efforts, including most of those listed
    below, are available free of charge by calling toll-free 1-800-GLEAN-IT
    or through the Internet at http://www.usda.gov/fcs/glean.htm.
        In addition to creating the Citizen's Guide, USDA has taken a wide
    variety of steps to promote citizen service related to food recovery
    and gleaning:
        Food Recovery Roundtables.--Secretary of Agriculture Dan Glickman
    has convened ``round tables'' around the country to bring together
    interested nonprofit groups, corporate leaders, social service
    agencies, and Government officials for collaborative action on food
    recovery.
        AmeriCorps Summer of Gleaning.--In the Summer of 1996, as one part
    of its AmeriCorps program, USDA sponsored a special AmeriCorps ``Summer
    of Gleaning'' program that implemented 22 food recovery projects in 20
    States. The program was based on the so-called ``volunteer generator''
    model, in which a handful of compensated AmeriCorps members recruit
    volunteers to help implement large-scale tasks. The 88 AmeriCorps
    members in the summer program recruited over 1,600 volunteers who
    helped pick, sort, deliver, and prepare recovered foods.
        USDA National Hunger Clearinghouse.--USDA has contracted with World
    Hunger Year, a national nonprofit organization, to develop the USDA
    National Hunger Clearinghouse. The Clearinghouse established a
    communications network and comprehensive database identifying all known
    organizations providing hunger and poverty-related services,
    particularly organizations supporting food recovery efforts.
        Food Safety Training for Food Recovery.--USDA's Cooperative State
    Research, Education and Extension Service (CSREES), in conjunction with
    the Cooperative Extension System, is helping local hunger groups
    recover food safely. Nationwide outreach programs like Purdue
    University's Safe Food for the Hungry and S.T.R.E.T.C.H. (Safety,
    Training, Resources, and Education to Combat Hunger) teach food-
    assistance workers how to transport, store, and prepare food safely.
    They also show groups dedicated to feeding the hungry how to create
    nutritious meals from the most commonly donated foodstuffs and bulk
    supplies.
        USDA's Food Safety and Inspection Service (FSIS) is working with
    the Chef and Child Foundation, the philanthropic arm of the American
    Culinary Federation, to expand food-safety training for people serving
    food to the needy at nonprofit feeding program sites, including soup
    kitchens and shelters.
        National Collaboration of Youth.--USDA signed a Memorandum of
    Understanding with NCY, an umbrella group for such youth organizations
    as the Boy and Girl Scouts, Big Brothers/Big Sisters, YMCA of America,
    and the Boys and Girls Clubs. The agreement specifies how the over 40
    million members of NCY organizations will be encouraged to volunteer to
    recover food.
        Federal Cafeterias, Schools, and Farmers' Markets.--In conjunction
    with USDA efforts, the Washington cafeterias of the Department of
    Justice, the Department of Energy, and the Office of Personnel
    Management are donating excess food to the DC Central Kitchen in
    Washington, DC. The DC Central Kitchen plans and distributes 3,000
    meals per day, 7 days a week, to 95 charity outlets across the
    Washington metropolitan area. The Kitchen is in part staffed by
    homeless workers 48 per year who receive 3 months of on-the-job
    training in food preparation and management from professional chefs who
    volunteer their skills.
        USDA is also helping school districts in both the Washington, DC,
    and Wichita, KS, areas to involve students in community service
    activities related to fighting hunger and recovering food. USDA is also
    working with the nonprofit groups Rock & Wrap It Up! and FoodChain to
    help students recover food from the School Lunch Program, restaurants,
    and concerts.
        In addition, USDA is helping to promote food recovery from farmers'
    markets nationwide, including markets held at Federal agencies.
        Public Service Announcements.--USDA worked with the Fox Television
    Network to air a plot-related public service announcement on the
    television show Party of Five that promoted food recovery and provided
    viewers with the 1-800-GLEAN-IT telephone number to obtain the
    Citizen's Guide and other information about gleaning and food rescue.
        National Summit on Food Recovery.--USDA, the Congressional Hunger
    Center, and the nonprofit groups Second Harvest and FoodChain will
    cosponsor a National Summit on Food Recovery, which will be modeled on
    President Clinton's Summit on America's Future. The Summit will bring
    together leaders from State, county, and city governments, Indian
    tribes, nonprofit organizations, religious groups, large corporations,
    and small businesses. All attendees will be asked to make specific
    commitments to increase food recovery prior to the event.
        National Week of Food Recovery.--President Clinton will declare a
    National Week of Food Recovery, during which food recovery volunteer
    projects will occur nationally.
        The Federal Government is not alone in its food recovery efforts.
    Foodservice operators, retailers, nonprofit organizations, and
    individual citizens are also involved.
        FoodChain.--FoodChain is the Nation's largest network of prepared
    and perishable food rescue programs. It opened its doors in 1992 with a
    staff of one. Today, 116 member programs and 22 associate programs
    participate in FoodChain, distributing nearly 100 million pounds of
    food to some 7,000 social service agencies each year.
        Foodservice.--Hundreds of nationwide and regional restaurant chains
    of various sizes, along with individual foodservice outlets, are
    channeling unsold food to local food recovery programs.
        Second Harvest.--Second Harvest, the largest domestic hunger relief
    organization, rescued 811.3 million pounds of food in 1995 from going
    to waste by soliciting donations of food and grocery products from the
    Nation's food industry.
        Society of Saint Andrew (SoSA).--The SoSA Gleaning Network has
    recovered more than 200 million pounds of fresh fruits and vegetables
    since its founding in 1979, and distributed them to food pantries and
    soup kitchens across the United States.
        ``Unsaleable'' Food Products.--The food industry has developed a
    Joint Industry Task Force on Unsaleables to develop new strategies and
    incentives to improve the condition of dented, bruised, or otherwise
    damaged food products for food banks. These ``unsaleables'' are
    channeled through Product Reclamation Centers, which help retailers
    recover the food for organizations that assist the needy.
             measuring food loss: about the estimates and the data
        Food is lost at every stage of the U.S. marketing system. However,
    due to the enormous size and diversity of the American food industry,
    few studies estimate aggregate marketing losses across the entire food
    sector. Typically, researchers report food losses as a percentage of
    food servings, household food stocks, or retail inventories at specific
    points in the marketing system, such as fresh fruit and vegetable
    losses in supermarket produce departments, household plate waste, or
    preparation and storage losses in foodservice operations.
        In this study, food loss was estimated by applying these loss
    factors, gleaned from published studies and discussions with commodity
    experts, to the amount of food available for human consumption in the
    United States in 1995. Losses at the retail, foodservice, and consumer
    level were estimated for 260 individual foods, which were aggregated
    into the food groups listed in table 1. However, preharvest, on-the-
    farm, and farm-to-retail losses were not measured.
        The amount of food available for human consumption was obtained
    from national food supply and utilization data, collected and published
    annually by USDA's Economic Research Service (ERS). These data measure
    flows from production to end uses of several hundred commodities. ERS
    commodity specialists construct supply and utilization data sets from a
    wide variety of sources within the Government and food industry. Food
    available for consumption is calculated as the difference between
    available commodity supplies (the sum of production, beginning stocks,
    and imports) and other uses (seed, feed, and industrial consumption,
    and exports). These components are either directly measurable or
    estimated by Government agencies using sampling and statistical
    techniques.
        In this study, the amount of food available for consumption was
    estimated by adjusting these food supply estimates for the removal of
    nonedible food parts--peels, skins, bones, pits, and seeds. These
    adjustments were based on ERS conversion factors that account for
    processing, trimming, and other weight reductions that occur as raw
    agricultural commodities are made into semiprocessed and final food
    products available for consumption at the retail, household, and
    foodservice levels. These reductions ranged from 5 percent for fresh
    fruit to more than 30 percent for meat, poultry, and processed
    vegetables.
        Limitations inherent in the food supply data suggest that the loss
    estimates for the consumer, retail, and foodservice sectors presented
    in table 1 understate total losses for most agricultural commodities.
    For example, the food supply data for dairy products measure the
    consumption of manufactured foods, such as ice cream, skim milk, and
    mozzarella cheese. As a result, the loss estimate for this group
    includes only the share of processed dairy foods lost to human use. It
    does not include the loss of raw milk that occurs earlier in the
    marketing system as the milk is shipped from the farm to the processing
    plant and used in manufacturing.
        Also, estimates of retail, foodservice, and consumer food losses
    are likely understated due to limitations in the published studies on
    which these estimates were based. Food loss, particularly at the
    consumer level, is by nature difficult to measure accurately.
    Participants in household surveys on food waste, for example, tend to
    be highly ``reactive''--changing their behavior during the survey
    period out of reluctance to acknowledge how much food they typically
    discard. Also, archeological examinations of household garbage may
    underestimate losses due to some food being fed to pets or being
    discarded in drains and garbage disposals. In addition, only a very
    limited number of studies, most of them conducted in school and
    university cafeterias, have successfully measured plate waste at the
    institutional and foodservice levels.
                                   references
        Fung, E.E., and W.L Rathje. ``How We Waste $31 Billion in Food a
    Year,'' Yearbook of Agriculture, U.S. Department of Agriculture, 1982,
    pp. 352-57.
        Gallo, Anthony E. ``Consumer Food Waste in the United States,''
    National Food Review, Fall 1980, pp. 13-16.
        Mathews, Ryan. ``Is the Damage Done?'' Progressive Grocer, June
    1994, pp. 35-38.
        Sugarman, Carole. ``Exploding Portions: America Sizes Up,'' The
    Washington Post, Food Section, Oct. 11, 1995.
        U.S. Department of Agriculture, Economic Research Service, Food
    Marketing Review, 1994-95. Agricultural Economics Report No. 743, Sept.
    1996.
        U.S. Department of Agriculture, Food Recovery and Gleaning
    Initiative. A Citizen's Guide to Food Recovery, 1996.
        U.S. Environmental Protection Agency. Municipal Solid Waste
    Factbook Version 3.0. Municipal and Industrial Solid Waste Division,
    Office of Solid Waste. http://www.epa.gov/epaoswer/nonhw/muncpl/
    factbook.htm, Oct. 8, 1996.
        U.S. Environmental Protection Agency. Pay-As-You-Throw. http://
    www.epa.gov/epaoswer/nonhw/payt/index.htm, Dec. 11, 1996.
        U.S. General Accounting Office. Food Waste: An Opportunity to
    Improve Resource Use. Report to Congress by the Comptroller General of
    the United States, Sept. 1977.
        Van Garde, Shirley J., and Margy J. Woodburn. ``Food Discard
    Practices of Householders,'' Journal of the American Dietetic
    Association, Vol. 87, No.1, March 1987, pp. 322-29.
        Zachary, Pascal G. ``Restaurant Computers Speed Up Soup to Nuts,''
    The Wall Street Journal, Oct. 25, 1995, p. B6.

                           Transportation and Storage

        Ms. Watkins. What we have done is that we have had
    opportunity, since the food recovery and gleaning summit that
    was held in September, to visit many gleaning centers and
    operations around the country and listen to the concerns that
    people are having. One of the things that we are finding is
    that 27 percent and sometimes greater amounts of food are being
    left in the fields and in other areas. Food banks and soup
    kitchens are having difficulty with transportation. They need
    some way to go in and recover those foods. Storage facilities
    and bins are another issue, as well as how do you get the food
    stored properly so it is safe and the handling done in the
    appropriate manner for those foods that are being gleaned.
        It is our opinion that if we are to facilitate the removal
    of all of this food and make it so that it is accessible to
    food banks and soup kitchens and to other entities in the
    communities, that we provide seed money to communities to
    actually provide the infrastructure that they need for food
    recovery and gleaning.
        We have heard people, even in the District, tell us that
    they would love to go out and glean the food, but they have no
    way to go out there to get it. They have no place to put it
    once it is returned. If you are gleaning perishable products,
    those products need to be stored in a safe and sanitary
    environment so that we would not have foodborne illnesses from
    food products that are recovered or gleaned.

                        Program and Financial Integrity

        Senator Cochran. One other provision of the budget that
    caught my attention is the proposal for appropriating a $1.45
    million increase over this year's level for program and
    financial integrity advancement. I noticed in your statement,
    in your comments too, that a new initiative is underway to try
    to crack down on abuse and fraud in the Food Stamp Program.
    This is an important undertaking and I commend you for that. I
    know that progress has been made in this area from meetings
    with the inspector general and looking at GAO audit reports. I
    think that is something we have to acknowledge and commend.
        But my question is, what are you going to do with the
    additional $1.45 million requested when the Inspector General's
    Office is also proposing an increase for the same thing? What
    is the Service going to do with this additional money?
        Ms. Watkins. The Inspector General's Office makes
    recommendations that we are to follow through on various
    program integrity issues. We are unable to follow up on either
    the inspector general or GAO's recommendations because of the
    staffing situation.
        We also have a need to provide technical assistance to both
    State and local personnel who are operating these programs. We
    need to make certain that we are providing people the
    appropriate and necessary means in which to operate a business.
    Mr. Chairman, I feel that we have a lot of work to do in that
    area, and we have not been able to do that. If we are going to
    maintain program integrity, it is critical that we help people
    in States and weed out the bad actors so that these programs
    are recognized as providing the benefits for those for whom
    they are critically needed.
        This is a big business and I do not take that lightly. I
    think if we are operating almost a $40 billion operation, it
    has to be operated as a nutrition business.

               Participation in Food Stamps and School Breakfast

        Senator Cochran. Senator Bumpers.
        Senator Bumpers. Thank you, Mr. Chairman.
        Madam Secretary, let me ask you. You have a proposal to
    expand food stamp benefits.
        Well, first of all, the budget request assumes an
    additional 572,000 food stamp participants. Now, the number of
    participants has been declining, has it not?
        Ms. Watkins. The number has been declining, Senator
    Bumpers.
        Senator Bumpers. The breakfasts in the school lunchrooms
    has been increasing I understand.
        Ms. Watkins. That has been increasing.
        Senator Bumpers. Incidentally, what is the cause for that,
    do you know? Just more kids going to school?
        Ms. Watkins. The cause for the increase in the breakfast
    program?
        Senator Bumpers. Increase for breakfast.
        Ms. Watkins. Well, we are working aggressively with our
    State and local partners to increase those programs and
    providing access to those programs. So, that is why you would
    see an increase. We have seen an increase over the years in our
    breakfast program. As people understand the real benefits of
    the program, more and more school food authorities and
    educators are looking at that program as a viable opportunity
    for them to help children be ready to learn.
        Senator Bumpers. If somebody gets kicked off welfare and
    they go into a minimum wage job, their children are still
    eligible for those things, are they not?
        Ms. Watkins. They still are eligible for both the school
    nutrition programs and the WIC Program.
        Senator Bumpers. Now, Madam Secretary, the 572,000 increase
    in food stamp recipients, is that mostly illegals?
        Ms. Watkins. I am going to ask Yvette if she would answer
    your question, Senator Bumpers.
        Ms. Jackson. Illegal immigrants have never been eligible to
    participate in the Food Stamp Program. The President's proposal
    will not change that. Instead the President's proposal is to
    restore food stamp eligibility to certain categories of legal
    immigrants who lost eligibility as a result of----
        Senator Bumpers. Of legal immigrants?
        Ms. Jackson. Of legal immigrants.
        Senator Bumpers. The illegals have never been eligible for
    food stamps.
        Ms. Jackson. Illegals have never been eligible for food
    stamps. That is correct.
        The category of legal immigrants that the President is
    proposing to restore benefits for includes families with
    children. We are anticipating that that would cover about
    540,000 legal immigrants, also disabled and elderly immigrants
    who had their SSI and Medicaid restored as part of the Balanced
    Budget Act but not their food stamps. Also the proposal would
    extend the exemption for refugees from 5 to 7 years. That would
    affect an additional 105,000 legal immigrants.
        So, the proposal is to restore benefits to certain
    categories of legal immigrants who lost their eligibility as a
    result of welfare reform.

                       Administrative Savings and Offsets

        Senator Bumpers. Secretary Watkins, the administration
    proposal, their new initiatives. You are asking for $2.5
    billion to implement those. Is that correct?
        Ms. Watkins. That is correct.
        Senator Bumpers. My question is, You list offsets to make
    up for that which are estimated at $1.2 to $1.4 billion. Staff
    tells me they think those are the same offsets that have been
    identified for funding of the agriculture research title. Is
    that correct?
        Ms. Watkins. Dennis?
        Senator Bumpers. My question is, If that is correct and the
    conferees to the research title use those savings for new
    research programs, do you have any alternative plans for how
    you are going to pick up that money? It looks to me like it is
    kind of a race for jurisdiction here, whoever meets first and
    uses those offsets. I think they are the same. Do you follow my
    question?
        The administration is asking for $2.5 billion. You are
    saying that the savings required in other programs to achieve
    this is going to come from certain administrative savings
    totaling $1.2 to $1.4 billion. My question is, I think these
    are the same savings that have been targeted for offset as a
    part of the conference discussion in the agricultural research
    title. We cannot use those offsets in two places obviously.
        Ms. Watkins. I am going to ask Dennis Kaplan to address
    that.
        Senator Bumpers. He does not act like he wants to.
        Ms. Watkins. I know it. [Laughter.]
        That is the reason why I thought I would tell him.
        Senator Burns. In fact, he wants to borrow your hardhat.
        Mr. Kaplan. They are the same offsets. It is the
    administration's position they ought to go to food stamps, and
    if the research bill conference comes out first, we are going
    to have to relook at the issue.
        Senator Bumpers. You are going to be looking for something
    else.
        Mr. Kaplan. Yes, sir.
        Senator Bumpers. Well, I thought that was the right answer.

                      Food Stamp Program and WIC Reserves

        Madam Secretary, when was the last time we had a food stamp
    reserve that was triggered? You are asking for $1 billion
    reserve in the food stamp account, and my question is, When was
    the last time we triggered the reserve account? Mr. Kaplan,
    anybody?
        Ms. Watkins. Late 1970's.
        Senator Bumpers. Pardon?
        Ms. Watkins. More recent than late 1970's? Mr. Chairman,
    Senator Bumpers, let me get back to you on that.
        Senator Bumpers. That might be a place to find some of
    those offsets. I do not think you really need that reserve if
    you have not used it since the 1970's.
        Ms. Watkins. Let me get back with you. I am not sure that
    that is the correct answer, and I want to make sure I am giving
    you the right answer. I do not want to give you a wrong answer.
        [The information follows:]

        Fiscal year 1992 was the last time that the food stamp
    reserve was triggered. At that time, $0.9 billion of a $1.5
    billion reserve was used to cover increased program
    participation.

        Senator Bumpers. OK.
        While we are on reserves, I wanted to ask you about the WIC
    reserve. You are asking for what?
        Ms. Watkins. $20 million.
        Senator Bumpers. $75 to $100 million. How much are you
    asking for--just a moment.
        What kind of carryover did we have in the WIC fund last
    year?
        Ms. Watkins. We had $150 million approximately last year in
    carryover/carryout.
        Senator Bumpers. And what do you anticipate this year?
        Ms. Watkins. $130 million.
        Senator Bumpers. $130 million?
        Ms. Watkins. Right.
        Senator Bumpers. Why do we always have this big carryover
    in the WIC Program?
        Ms. Watkins. Well, that was one of the things that I tried
    to explain in my oral presentation. One of the things that
    happens is that the States try very carefully not to overspend.
    At the same time it becomes very difficult for them, as they
    move through the year, not knowing how many actual participants
    they are going to have in that program. So, they try not to
    overspend, and as a result they end up sometimes at the end of
    the year with carryover money. These carryover funds can vary
    because of a wide variety of issues in a State. For example,
    they do not know what that food cost is going to be because of
    the manner in which the coupons and the checks are redeemed.
        As someone said to me, it is not an exact science. It is a
    very, very cumbersome and a difficult process. So, they try not
    to overspend, and we want to make certain that we have adequate
    moneys in our carryover funding so that they serve the number
    that we have. They have moneys, but they are bound not to
    overspend. So, they are not going to overspend.
        Senator Bumpers. But you are asking for a $20 million
    reserve in the WIC.
        Ms. Watkins. That is right.
        Senator Bumpers. Senator Cochran and I are going to be
    desperate, when we sit down to mark this thing up, trying to
    find money because we are going to be way short, close to $1
    billion.
        Ms. Watkins. It is very difficult for us to get the exact
    number in WIC State or local participants that we are going to
    have each month. If you cut it back, we would not be able to
    serve the 7.5 million that we estimate----
        Senator Bumpers. My guess is if you ran short in the WIC
    Program, we would have a second or a third supplemental in a
    New York minute because it is a very popular----
        Ms. Watkins. In a New York minute----
        Senator Bumpers. I do not think we are ever going to let
    WIC run out of money.
        Ms. Watkins. Well, the only problem, Senator Bumpers, is
    that sometimes we are criticized severely if we do not have the
    exact numbers and come back and ask for a supplemental. So, we
    take our bet on trying to have the money in advance, rather
    than have to come back to you and ask for a supplemental.

                        Studies and Evaluation Transfer

        Senator Bumpers. This next question is not the sexiest
    question in the world. My staff insists I ask it, so I will.
    [Laughter.]
        In 1998 we transferred the studies and evaluation
    activities of the Food and Nutrition Service to the Economic
    Research Service. Now this year you are asking that it be
    transferred back. Why?
        Ms. Watkins. The administration asked that that money not
    be transferred initially, and it was. We are requesting that
    those funds be returned to FNS so that we can control the
    surveys, the research, and the studies that are done for those
    programs. They are program specific. ERS is an outstanding
    organization that is in the economic research service area.
    Their research expertise does not necessarily lie in the
    nutrition research area.
        So, we think it is critically important that that area be
    returned back to FNS so that we also can request research and
    thereby make adequate program decisions. It is a little
    difficult for me to go to another mission area in another
    agency to request a variety of research that I need done if I
    am going to make solid management decisions. That is why the
    administration is requesting that those funds be returned to
    FNS.
        Senator Bumpers. I do not have any objection to that.
        Ms. Watkins. Thank you, Senator Bumpers.
        Senator Bumpers. I have a couple of questions that I will
    submit in writing, one probably on the WIC farmers' market,
    another one on TEFAP, another one on the WIC immunization
    program. That is something that I got started several years ago
    and I have been trying to monitor it as closely as I could to
    see how well it is working. When I go down and visit these
    conferences where CDC and the WIC administrators--they do not
    like each other very well or very much, but they have sort of
    made a peace. I think that program is working reasonably well,
    but I am still a little bit troubled about the role USDA has in
    that compared to CDC and so on.

                  Electronic Benefit Transfer Cards and Fraud

        But my final question to you this morning is on the EBT
    cards. For years some of us have thought that was going to be a
    panacea to fraud. Apparently you are still experiencing, in the
    25 States that use EBT cards, close to a 10-percent fraud. Is
    that correct?
        Ms. Watkins. In that neighborhood, Senator Bumpers.
        Senator Bumpers. How does most of that occur? Does somebody
    just give their card to somebody else for money and they go in
    and buy the groceries?
        Ms. Watkins. Some of it. In some instances, that is the way
    it happens. Yvette may want to elaborate more on that.
        Senator Bumpers. Ms. Jackson?
        Ms. Jackson. EBT does not eliminate fraud. It gives us, for
    the very first time, an electronic tracking, a record, of every
    single transaction so that we can go back and identify
    suspicious or fraudulent activity that we never had the
    capacity to identify in the past. What we are able to do with
    EBT is to identify both the retailers who are committing fraud,
    as well as for the very first time the recipients who are also
    abusing their benefits. As a result, we are able to take swift
    action that we were only able to do in the past through actual
    onsite, undercover investigations. So, we think this is a
    tremendous tool for us.
        We also have implemented an automated tracking system that
    provides us with profiles to help us identify suspicious
    activity with the help of a vendor. That computer system is
    available not only to the FNS staff, but it is also available
    to the Office of the Inspector General and available to States
    so that we can collectively work together in identifying and
    prosecuting food stamp fraud. Certainly this is above the
    capacity that we were able to do prior to EBT.
        Senator Bumpers. Ms. Jackson, do you save anything
    administratively? Do you save administrative expense with these
    cards?
        First of all, how often do you send out a card to a
    recipient?
        Ms. Jackson. Most States are issuing a card one time. They
    do make replacements if the person should lose the card. One of
    the benefits of the card is that if a person should misplace or
    lose their card, it can be electronically deactivated
    immediately with no more than a phone call from the recipient.
    So, it is much more secure than the paper coupons.
        We save Federal dollars because with EBT we are no longer
    dealing with the cost of printing, distribution, storing, and
    then the cost of ultimately destroying the coupons because they
    only get used one time. So, we have savings to the Federal
    Government in terms of the paper process.
        We also reduce losses due to theft and loss of the coupons
    because, again, the card is more secure. Of course, as I said,
    it gives us a much, much better tool to identify and crack down
    on fraud.
        Senator Bumpers. Madam Secretary, you must be doing a good
    job. This subcommittee has jurisdiction over $57 billion and 70
    percent of it is yours, and there are only three Senators here
    and not a single reporter. [Laughter.]
        So, you must be doing OK.
        Ms. Watkins. Senator Bumpers, my goal is to stay out of the
    Washington Post. [Laughter.]
        Senator Bumpers. Well, if you were in my position, you
    would be trying to avoid subpoenas. [Laughter.]
        I am the only person in Arkansas that has not been
    subpoenaed so far. [Laughter.]
        Senator Burns. We will see if we cannot take care of that
    this afternoon.
        Senator Bumpers. And I am knocking on wood.
        Senator Cochran. Senator Burns.
        Senator Burns. Thank you very much, Mr. Chairman.
        I want to continue on with the EBT card. I was around when
    we started that program, and I am very supportive of it.
        I do not think you quite answered--went to length in
    Senator Bumpers' question. How is fraud committed with these
    cards?
        Ms. Jackson. Generally it is committed at the retailer site
    where there is collusion between the recipient who holds the
    card and the retailer. So, the retailer will swipe the card and
    input information that would indicate, for example, that they
    sold 100 dollars' worth of food, when, in fact, what they did
    was they gave $50 cash to the recipient and then came back, of
    course, and got reimbursed as if they had actually sold 100
    dollars' worth of food. So, it is collusion between the person
    with the card and the retailer.
        Senator Burns. On that card is there a picture of the
    recipient, a personal picture just like a driver's license or
    something like that?
        Ms. Jackson. A photo is not required. It is allowed. Many
    States do not include the photo on the card because of the
    cost. However, the individual has to use the card in
    conjunction with a personal identification number so that they
    have to input that personal identification number in addition
    to presenting the card.
        Senator Burns. The only people that we had complaints from,
    Senator Bumpers, when we put the card in is it cost some people
    at the county courthouse because they did not have near as many
    people counting out stamps and storing the darned things. I
    just knew that it had to be a pretty fair program that needed
    to be looked into. So, I appreciate its continuing.
        I think you are right. It probably does give you a better
    paper trail when fraud is committed when you have to identify
    the retailer or the merchant and the recipient.
        Also, I want to just pledge my support in my county when I
    was commissioner in Yellowstone County, MT. My wife is a
    schoolteacher and it is unbelievable to me--of course, I was
    raised on a farm, so everything is unbelievable to me.
    [Laughter.]
        The number of young people that go to school in the morning
    without breakfast. I will tell you in some schools in
    Yellowstone County, when we started feeding kids breakfast, all
    at once we have seen a different kind of student because I just
    do not think hungry kids learn. I am a bigger supporter of the
    breakfast than I am of lunch, to be right honest with you. I
    think it does more for the young person. But I cannot believe
    the amount of people that send their kids to school without
    breakfast.
        Of course, I have always been very supportive of the WIC
    programs, and I believe in those a lot.
        There are other areas I do not agree with you, but that
    does not make any difference. You stay out of that Washington
    Post and you will always be a hero to me. [Laughter.]
        Thank you very much.
        Is the card continuing to grow in acceptance in other
    States? Now, you have it in place in 25 States. I remember the
    pilot program started out in Baltimore and Cleveland and they
    had some troubles at first, but then they really got ironed
    out. So, you are doing a very good job.
        Ms. Jackson. We anticipate, Senator, that by the end of
    this calendar year over 50 percent of the food stamp caseload
    will be receiving their benefits electronically, and we do not
    anticipate any difficulty in States meeting the congressional
    mandate to have EBT nationwide by the year 2002.
        Senator Burns. Good enough.
        I thank the chairman. I appreciate that very much.
        Senator Cochran. Thank you, Senator Burns, for your
    contribution to the hearing and your helping the work of this
    committee. It is very important, and we appreciate it very
    much.

                             WIC Full Participation

        Madam Secretary, there is an indication in the budget that
    we are trying to fund the WIC Program to achieve this level of
    full participation. I have heard that every year. We use it,
    and I try to convince Senators to support our appropriation
    figure based on our effort to achieve this longstanding goal of
    full participation.
        Where do we get the 7.5 million we say is the full
    participation level? Is there any evidence that you know of
    that supports 7.5 million as the full participation level for
    the WIC Program?
        Ms. Watkins. Mr. Chairman, I am going to ask Ron Vogel to
    explain that for you.
        Mr. Vogel. Thank you. [Laughter.]
        Senator, we believe, given the estimation methodologies
    that we use, that there are approximately 9 million people,
    women, infants, and children, in this country that are fully
    eligible for the WIC Program. That means they are both income
    eligible and demonstrate some form of nutritional risk. We
    believe, that of that number, it is reasonable to assume that
    about 7.5 million individuals on a monthly basis will avail
    themselves of WIC services. So, when we say that 7.5 million
    represents a fully funded program, we mean that is the number
    of people that we expect in any given month that would need the
    services of the program and seek those services.
        Senator Cochran. That is good. I needed that because if I
    get asked that question, I did not know what I was going to say
    when I am managing the bill on the floor. So, I am fully armed
    now with an answer. Thank you.

                       WIC Food Package Costs Reductions

        Secretary Glickman in his prepared statement before the
    committee said that efforts continue to reduce the overall cost
    of WIC food packages, and he set that at 10 percent by 2002.
    That is his goal. Could you describe for us what the Food and
    Nutrition Service or your office is doing to achieve that goal?
    When did that effort begin and what have we achieved up to this
    date to cut the overall cost of the package?
        Ms. Watkins. Mr. Chairman, one of the things that we are
    doing is working with States on their bidding practices. We are
    very proud of what States have done on the WIC food packages
    and reducing those costs. Obviously, as they reduce their food
    package cost, they are doing a variety of things at the State
    and the local level to reduce those costs. I am going to ask
    Ron to share some of the kinds of things that the agency has
    done over the past several years that will give you the
    indication of what those States have actually done in reducing
    those costs. Ron?
        Mr. Vogel. First of all, I would like to point out that
    that is a goal, in terms of reducing the food package costs by
    the year 2002 by 10 percent, that we have committed to and we
    will be working with our States to achieve that.
        The kinds of things that we intend to do to try to meet
    that goal, Senator, is to continue to seek ways to reduce the
    cost of infant formula in the program. States have done a
    remarkable job to this point, but we believe there are still
    some additional things that can be done. To that extent, we
    intend to propose a rulemaking very shortly that we think will
    increase the savings in this area.
        Likewise, we are going to be working with our State
    cooperators to improve vendor management. You are aware that,
    depending on the vendors that participate in this store, the
    food package costs can fluctuate significantly. So, we are
    working with our State cooperators to improve vendor
    management, and we will have two rulemakings that we are going
    to be proposing this year that will help States improve vendor
    management. We expect that that will also have an effect in
    reducing food package costs.
        Of course, we always encourage States to look at ways to
    reduce the food package costs by emphasizing store brands and
    economical package sizing. States are very aggressive in this
    area, Senator, and given that the situation that confronts us
    with a tight budget situation in the years ahead, States will
    have to be more aggressive in looking at food package cost
    savings if they intend to expand participation.
        Senator Cochran. Is competitive bidding one of the
    techniques?
        Mr. Vogel. Competitive bidding with respect to infant
    formula is required by law and all States are engaged in that
    practice. There are other States that on their own have engaged
    in competitive bidding for other foods, infant juices, infant
    cereals, and the State of Delaware actually competes their
    vendor positions on the program.
        Senator Cochran. At the administration's request, we
    remember including that language in the appropriations bill,
    the legal authority to require the competitive bidding. I
    notice that you suggest that we ought to make that permanent
    law in our bill. There is a reauthorization bill coming down we
    understand, but we do not know when it is coming and what it is
    going to have in it.
        Is that one of the things that you might consider putting
    in your bill that will be proposed by the administration to
    Congress?
        Mr. Vogel. There is already a requirement in existing law
    to competitively bid for infant formula. Our reauthorization
    proposal will suggest no other extension of that practice in
    maintaining WIC food package costs, but we will have a
    rulemaking, as I indicated, so that we will regulatorily
    enhance the effectiveness of the competitive bidding for infant
    formula.
        Senator Cochran. What is your expectation for presenting
    the reauthorization bill to Congress?
        Ms. Watkins. We would expect that you would have that
    before the day is over.
        Senator Cochran. Wow.
        Ms. Watkins. We thought you were going to have it before I
    got here this morning. I was just going to give it to you, but
    we did not get the transmittal letter for the Secretary to sign
    before I left the office. So, we will do that as soon as we get
    back. You will have it before the day is over.
        Senator Cochran. Could you tell us anything about what the
    impact is going to be if Congress approves your reauthorization
    request on the appropriations needs?
        Ms. Watkins. It is a cost neutral reauthorization package.
        Senator Cochran. That sounds good. That means it is not
    going to cost any more than it would have if you had not asked
    for reauthorization. It is just going to cost the same as
    projected under current law.
        Ms. Watkins. That is exactly right. There are some
    differences in the out-year costs, but as balanced over the 5-
    year period, it is going to be cost neutral.

                        WIC Electronic Transfer Program

        Senator Cochran. Tell me how the electronic benefit
    transfer program works in the WIC Program. I understand the
    Food Stamp Program. But when I was reading my notes in
    preparation for the hearing, I understand from your testimony
    that FNS is engaging in activities that complement the Food
    Stamp Program. I am not sure I understand what that means. ``To
    advance electronic benefit transfer systems to improve program
    benefit delivery and client services for the WIC program.'' I
    did not know we had an EBT program for WIC.
        Ms. Watkins. We do have some pilots going on now in EBT for
    WIC that are very similar to the food stamp model. It will be
    very similar to that program.
        Senator Cochran. Are there funds being used in this fiscal
    year's budget that we appropriate for this purpose, and have
    you included a request for next fiscal year for that program?
        Ms. Watkins. We have included funds for the 1999 budget in
    this budget year's request. There are some funds in there for
    States to implement the WIC EBT program, and we are working
    with those States that are doing the pilot currently.
        Senator Cochran. I understand in your budget notes that you
    hope to increase the number of States to four that are going to
    be participating in that program. What States are they, do you
    know?
        Ms. Watkins. Do you want to give the name of the States,
    Ron?
        Mr. Vogel. The only State right now, Senator, that has an
    actual operative WIC EBT system is the State of Wyoming.
        Senator Cochran. But there are not many WIC recipients out
    there either.
        Mr. Vogel. No, sir; there are not that many. But the
    technological challenges, therefore, are probably a lot greater
    for a State like Wyoming than they would be for a more populous
    State. We are pleased with what Wyoming has managed to
    accomplish here.
        There are 10 other States, Maine, New Hampshire, Texas, New
    Mexico among those, that are close to putting a pilot version
    of WIC EBT into place. And that is really our goal, by the year
    2002 is to have another three States join Wyoming in being able
    to deliver WIC benefits through an EBT system.

                   Food Stamp Program Employment and Training

        Senator Cochran. There were some questions I was going to
    ask you that Senator Bumpers has already asked and there are
    other questions that I intend to submit and ask you to respond
    to for the record.
        There is one question though that I do want to ask and that
    is about a request for $6.7 million for employment and training
    in the Food Stamp Program. I assume this means for recipients
    rather than administrators. What kind of employment and
    training program do you have going on that costs $6.7 million
    or that you hope to have going on?
        Ms. Watkins. Yvette is going to answer that for you.
        Ms. Jackson. I was confused because I was not aware that we
    were going after any additional money. It is just an inflation
    adjustor for fiscal year 1998. Basically in the Food Stamp
    Program, as part of the balanced budget agreement, additional
    funds were added to the Food Stamp Employment and Training
    Program to allow States to offer work slots to any able-bodied
    adult who is subject to the work requirement. That means that
    for anyone between the ages of 18 and 50 who is considered
    able-bodied, they can only receive food stamps for 3 months out
    of any 36-month period unless they are working 20 hours a week,
    involved in a workfare program, or in an employment and
    training program of 20 hours per week. So, we have a request
    from the balanced budget agreement that extends over a 5-year
    period to increase State employment and training funds to
    guarantee that anyone who is willing to work is given that
    opportunity in order to continue to be eligible for the food
    stamp programs.
        Senator Cochran. Who gets the money? Do you contract this
    out or do the States contract it out? Do you manage the
    program? How does it work?
        Ms. Jackson. States use a combination. Many of them do
    contract out. Many of them are using other governmental and
    nonprofit organizations to act as work sites for workfare. We
    anticipate that most States will be creating workfare slots to
    offer work opportunities for their able-bodied adults.
        Senator Cochran. You do not manage the program from here
    though. You let the States manage the program.
        Ms. Jackson. Yes; it is managed at the State level.

                              CNP Reauthorization

        Senator Cochran. On the child nutrition programs, I
    understand that the reauthorization there will be cost neutral
    as well, improving operation and management, integrity of the
    national school lunch and school breakfast programs, and the
    child and adult care food programs. Is that going to be
    included as a part of the overall package for reauthorization?
        Ms. Watkins. Yes, sir; it is.

                   National Food Service Management Institute

        Senator Cochran. What funding, if any, is included in the
    budget request for next year for the National Food Service
    Management Institute?
        Ms. Watkins. We have included $2 million. Let me just be
    sure that I have got that actual for you. We have asked for an
    additional $1 million for the Institute. They started out and
    they have had the same amount since its inception, and we asked
    for an additional $1 million this year, in addition to over
    $500,000 that we would provide to the Institute out of our team
    nutrition funding stream. That would be provided to the
    Institute.
        In addition, we are looking at possibly using the Institute
    to do the training for food safety for our food service
    personnel in schools and child care facilities.
        Senator Cochran. That sounds like a good idea to me, and I
    hope that we are able to get the funding approved to meet that
    request. This involves the handling and management of the food
    stuffs so as to lessen the likelihood of contamination and
    problems with respect to the school lunch programs and other
    feeding programs run by the schools.
        Ms. Watkins. That is exactly right, Mr. Chairman. One of
    the things we did a couple of years ago was to begin the
    process of developing food safety materials and food handling
    materials for school nutrition personnel. We have completed
    that handbook, but we did not have the resources in which to
    offer the training for the staff, and that is what the $2
    million is for. Obviously, we want to look at areas where there
    are already instruments in place, people in place, facilities
    in place to actually do that training, and we would not do it
    from the Federal level. If we are going to do it, we think the
    best place to do it is through the Institute and working with
    States and local school nutrition staff.

                              Submitted Questions

        Senator Cochran. As I indicated, there are additional
    questions that we will submit for the record, and any
    elaboration on questions that we have asked you that you feel
    would be helpful to the committee, we encourage you to include
    as additional statements with that submission when you respond
    to our written questions.
        [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
                      food and nutrition program research
        Question. When signing the fiscal year 1998 Appropriations Act last
    November, the President noted his concern about the provision in the
    bill transferring funding for research on nutrition programs from the
    Food and Nutrition Service to the Economic Research Service. The
    President's fiscal year 1999 budget now proposes to restore this
    funding to the Food and Nutrition Service.
        Why does the Administration believe that the Food and Nutrition
    Service can better oversee and administer these research funds?
        Answer. The best place to house research responsibilities for food
    assistance programs is with the agency, the Food and Nutrition Service
    (FNS), that administers the programs. It is the proximity of research,
    program, and policy staff that ensures a research program that is
    practical and relevant to program operations and policy development.
    Housing the research function within FNS achieves the critical balance
    between independence and effective communication with the programs
    served, taking advantage of FNS' ongoing, operational relationship with
    State and local administrative agencies and other related Federal
    agencies.
        In addition, the range of issues surrounding FNS programs is very
    broad. They demand techniques that go beyond typical economic analyses
    if we are to reliably address the concerns of Congress and States. We
    are often required to initiate new nationally representative data
    collection efforts as well as complex demonstration activities (such as
    those that established the viability of Electronic Benefit Transfer).
    While the Economic Research Service (ERS) is a capable research
    organization, the expertise to administer such activities has been
    developed over the years in FNS.
        FNS has managed one of the strongest applied policy research
    programs in all of government with a proven track record of conducting
    research relevant to program needs. The time it would take to replicate
    this in ERS seems a poor use of government resources. Moreover, efforts
    to coordinate between ERS and FNS and its program cooperators seems to
    introduce an unnecessary complexity into USDA operational procedures.
        Question. How has the Food and Nutrition Service been involved in
    the food assistance and nutrition research program being carried out by
    the Economic Research Service for fiscal year 1998?
        Answer. The Food and Nutrition Service (FNS) entered into a working
    relationship with the Economic Research Service (ERS) shortly after the
    fiscal year 1998 appropriation was signed into law. Meetings to outline
    the terms of this relationship took place between the FNS
    Administrator, Associate Administrator, other senior FNS staff, and ERS
    leadership. There have been extensive briefings between FNS research
    and program staff and ERS research staff on FNS food assistance program
    operations and the Agency's policy information needs. We gave ERS a
    complete description of our research priorities for fiscal year 1998
    and we have worked hard to respond to all of ERS' information needs. We
    have also given ERS extensive background materials on our previous
    research projects and the competitive contracting process, as well as
    appropriate staff points of contact within FNS.
        Question. Is the fiscal year 1998 food assistance and nutrition
    research program reflective of the Food and Nutrition Service's
    priorities?
        Answer. To help the Economic Research Service (ERS) start off in
    the right direction the Food and Nutrition Service (FNS) provided them
    with a detailed description of FNS' information needs. ERS is now in
    the final stages of preparing a plan of action. Indications are that
    they will initiate research on many, but not all, of our priority
    information needs.
        It is too soon to tell whether the implementation of the research
    will remain practical and relevant to FNS program operations and policy
    development. When study funding and authority were located with FNS we
    were able to make mid-course adjustments quickly so that studies were
    able to reflect current FNS priorities while the effect on study
    budgets was minor. While the need to coordinate across agencies is a
    challenge, we expect to work closely with ERS to achieve the best
    results possible.
        Question. What is the Economic Research Service doing specifically
    that the Food and Nutrition Service does not agree with or would do
    differently?
        Answer. The Economic Research Service (ERS) put a lot of hard work
    into their response to our priorities and many aspects of it are good.
    The most significant area of disagreement concerns whether ERS is
    underinvesting in work of immediate relevance in favor of data
    development efforts that will not require funds until future years.
    Specifically:
        1. Given the substantial policy interest in ensuring the success
    and measuring the consequences of welfare reform, the Food and
    Nutrition Service (FNS) would invest more in research aimed at helping
    States overcome potential barriers in creating work opportunities for
    persons subject to a three-month time limit on food stamp participation
    and at determining outcomes for the two groups most affected by new
    restrictions on eligibility for food stamps, legal immigrants and able-
    bodied adults without children. We are concerned that the approach
    taken by ERS as well as the funds budgeted may not be sufficient.
        2. ERS' proposal was unable to pursue the full range of policy and
    program issues contemplated in our proposed study of the Summer Food
    Service Program. Recognizing that resource constraints often force
    difficult decisions, we have suggested that further discussion of the
    scope and scale of this study is warranted to ensure that it produces
    information of greatest relevance to FNS. We are urging ERS to focus on
    nutrient quality and the characteristics of program sponsors, sites and
    beneficiaries. No previous work has examined the nutrient quality of
    Summer Program meals; previous research efforts, albeit somewhat dated
    now, have dealt with the issue ERS intends to pursue (the
    characteristics of program sponsors and providers).
        3. ERS proposed to allocate nearly twenty percent of their budget
    to data development. While FNS understands and supports ERS' interest
    in this area, we wonder if the resources proposed to expand survey
    samples in the future for the Continuing Survey of Food Intake of
    Individuals (where current plans call for the next round of data
    collection no earlier than fiscal year 2000) and the National Health
    and Nutrition Examination Survey might not be better used as described
    above as well as to support relevant analyses of recently released data
    from these surveys, which remain underutilized.
     supplemental nutrition program for women, infants, and children (wic)
        Question. The explanatory notes indicate that the Administration is
    seeking an increase of $145.5 million for fiscal year 1999 to ``meet
    the long-standing bi-partisan commitment to funding in the WIC Program
    at a full participation level of 7.5 million.''
        Please summarize the methodology used to estimate the 7.5 million
    WIC ``full participation'' level.
        Answer. The President's Budget proposes to fully fund the WIC
    Program and serve 7.5 million women, infants, and children throughout
    fiscal year 1999. The full funding participation level, providing
    adequate funding to serve all eligible persons who would choose 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 the Food and
    Nutrition Service's (FNS) full participation estimate produced in 1996
    using 1994 WIC eligibles data.
        Previous estimates of full participation have assumed that, on
    average, approximately 80 percent of all persons fully-eligible for the
    program would participate. We now know that higher participation rates
    by the target population can be achieved. This is supported by the
    experience of the Food Stamp Program, where participation rates for
    families with children under 5 are over 90 percent, and the Aid to
    Families with Dependent Children (AFDC) program, where participation
    rates since 1990 have ranged from 82 percent to 86 percent.
        Given that the estimated number of fully-eligible persons is 9
    million, and that actual participation in WIC and other low-income
    assistance programs serving children exceeds the 80 percent previously
    assumed, a full funding participation target for fiscal year 1999 of
    7.5 million remains reasonable and prudent.
        The full participation estimate is based on the number of
    individuals who are income-eligible for WIC. First, the number of
    infants, and children income-eligible is taken directly from the most
    recent Current Population Survey (CPS). The number of pregnant women is
    estimated as 75 percent of the number of infants, taking into account
    the fact that women are only pregnant for 9 months out of a year.
    Postpartum and breastfeeding women are estimated as 37 percent and 17
    percent, respectively, of income-eligible infants. These factors were
    empirically derived from analyses of 1990 Census data, and the 1988
    National Maternal and Infant Health Survey (NMIHS). The result is the
    total number of women, infants, and children income-eligible for WIC.
    We estimate, based on 1996 data, that 11.1 million persons are income-
    eligible for the Program.
        Second, the total number of women, infants and children income-
    eligible for WIC is used to estimate the number who are also at
    nutritional risk, and therefore fully eligible for WIC using factors
    derived from the National Health and Nutrition Survey II (NHANES II).
    Overall, we assume that approximately 4 out of 5 income-eligible
    persons are also at nutritional risk, which indicates that 9 million
    persons are fully eligible for the Program.
        The third step is to estimate how many of those fully eligible
    would actually participate in the Program, assuming no funding
    constraints. As noted above, FNS previously arrived at an estimate of
    7.5 million women, infants, and children, by combining the above
    methodology with the assumption that, on average, 80 percent of those
    fully eligible would choose to enroll in the Program. Since then, FNS
    has learned that a participation rate of 80 percent is likely to be
    low, based on the participation rates for comparable types of
    individuals in the Food Stamp and AFDC Programs. Therefore, even though
    the estimated fully eligible population has declined somewhat in recent
    years, FNS has maintained constant its estimate of full participation
    at 7.5 million to account for increasing participation rates among
    those eligible. In the Food Stamp Program, the participation rate for
    families with children under 5 is over 90 percent. In the AFDC program,
    participation rates since 1990 have ranged from 82 percent to 86
    percent.
        A copy of USDA's most recent WIC eligibility update is provided for
    the record.
        [The information follows:]
    Special Supplemental Nutrition Program for Women, Infants and Children
                                     (WIC)
    eligibility and coverage estimates 1996 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., $29,693 for a family of four as of July 1,
    1997). In addition, individuals are automatically considered income-
    eligible if they receive benefits under the Federal Medicaid, Aid to
    Families with Dependent Children (AFDC),\1\ or the Food Stamp 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.
    ---------------------------------------------------------------------------
        \1\ The Personal Responsibility and Work Opportunity Reconciliation
    Act of 1996 (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.
    ---------------------------------------------------------------------------
        (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.

                                              1996 ESTIMATE OF WIC ELIGIBLE
                                                 [Numbers in thousands]
    ----------------------------------------------------------------------------------------------------------------
                                                                        Postpartum
                                                           Pregnant        and
                                                            women     breastfeeding   Infants    Children    Total
                                                                          women
    ----------------------------------------------------------------------------------------------------------------
    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
    1996:
        Income eligible................................        1,262           903       1,697      7,235     11,097
        Fully eligible.................................        1,148           822       1,612      5,426      9,009
        Participation (CY).............................          712           963       1,835      3,769      7,279
        Coverage (CY) (percent)........................           62           117         114         69         81
    ----------------------------------------------------------------------------------------------------------------

        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 1997 Current Population Survey (CPS), FNS estimates
    that 9 million women, infants and children were fully eligible for the
    WIC Program in 1996, a 2 percent decrease from the number estimated
    eligible in 1995. A total of about 11.1 million women, infants and
    children fell below the WIC income eligibility limit in 1996, vs. an
    estimated 11.3 million in 1995.
    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 six percentage points, from 75 percent in 1995 to 81
    percent in 1996. This coverage estimate does not factor in increases in
    participation that have occurred since 1996.
        Estimated coverage of pregnant women is approximately 62 percent
    for 1996. 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 1996. 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. Recent Medicaid expansion and income
    variability during pregnancy and the postpartum period may also be
    important factors. Newly available and ongoing research sponsored by
    USDA will provide additional information on these aspects of WIC
    participation dynamics. However, these data do strongly suggest that
    the program has likely achieved virtually full coverage of persons in
    these categories at the national level. Estimated coverage of children
    also rose substantially from 1995 to 1996, from 64 percent to 69
    percent.
        The estimate of 9 million WIC eligible persons in 1996 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 throughout fiscal year
    1999. The full funding participation level, providing adequate funding
    to serve all eligible persons who would choose 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 the Food and Nutrition Service's
    (FNS) full participation estimate produced in 1996 using 1994 WIC
    eligibles data.
        Previous estimates of full participation have assumed that, on
    average, approximately 80 percent of all persons fully-eligible for the
    program would participate. We now know that higher participation rates
    by the target population can be achieved. This is supported by the
    experience of the Food Stamp Program, where participation rates for
    families with children under 5 are over 90 percent, and the AFDC
    program, where participation rates since 1990 have ranged from 82
    percent to 86 percent.
        Given that the estimated number of fully-eligible persons exceeds
    7.5 million, and actual participation in WIC and other low-income
    assistance programs serving children exceeds the 80 percent previously
    assumed, a full funding participation target for fiscal year 1999 of
    7.5 million remains reasonable and prudent.
        Question. Is this the same methodology that was used for the full
    participation estimates for each of the past 6 years (fiscal years 1993
    through 1998)? If not, please describe the differences in the
    methodology and set of assumptions for the WIC full participation
    estimates used in each of these years and the reasons for those
    differences.
        Answer. No, it has been revised. We have changed our assumptions
    about full participation in the absence of funding constraints.
        In fiscal year 1993, the Food and Nutrition Service (FNS) estimated
    that 8.6 million persons were fully eligible for the WIC Program in
    1991. This estimate was based on data from the 1992 Current Population
    Survey (CPS). While FNS did not specifically estimate a full
    participation level that year, the participation target produced that
    year for the fiscal year 1995 budget was 7.5 million participants. This
    estimate was based in part on FNS' eligible analysis as well as a
    separate analysis produced by the Congressional Budget Office (CBO).
        No WIC eligible or participation estimates were released in fiscal
    year 1994. In fiscal year 1995, FNS substantially revised its
    methodology for estimating the WIC eligible population. The major
    changes made were:
      --To incorporate newly-released demographic data from the 1990 Census
            (previous estimates used 1980 Census information)
      --To include an adjustment for the 1990 Census undercount.
        In addition, FNS developed an explicit estimate of the number of
    persons who would participate if no funding constraints existed, i.e.,
    if WIC were full-funded. This was based on an assumption that 80
    percent of fully-eligible persons would participate.\1\ Using this
    assumption, we estimated that 7.9 million persons would participate if
    funds were available, based on a fully-eligible estimate of 10.1
    million persons.
    ---------------------------------------------------------------------------
        \1\ It was also assumed that a small portion of these participants
    would participate in the Commodity Supplemental Food Program (CSFP).
    ---------------------------------------------------------------------------
        In fiscal year 1996, using the same methodology as in fiscal year
    1995, FNS estimated that 7.5 million persons would participate in a
    fully funded program, based on an estimated fully-eligible population
    of 9.4 million persons.
        In fiscal year 1997, we estimated that the fully eligible
    population was 9.2 million, using the same methodology as the two
    previous fiscal years. However, we now know that participation rates
    higher than 80 percent can be achieved by the target population. This
    is supported by the experience of the Food Stamp Program, where
    participation rates for families with children under 5 are over 90
    percent, and the Aid to Families with Dependent Children program, where
    participation rates since 1990 have ranged from 82 percent to 86
    percent.
        Our current estimate is that 9.0 million persons are fully eligible
    for WIC, based on 1996 data. Given that the estimated number of fully-
    eligible persons exceeds 7.5 million, and actual participation in WIC
    and other low-income assistance programs serving children exceeds the
    80 percent previously assumed, a full funding participation target for
    fiscal year 1999 of 7.5 million remains reasonable and prudent. Thus,
    FNS has supported a participation target of 7.5 million in fiscal year
    1999 and continues to do so.
        Question. What would be the full participation levels for each of
    fiscal years 1998 and 1999 using the same methodology used for the
    fiscal year 1994 full participation estimate?
        Answer. FNS typically has used the most recent WIC eligibles data
    to identify an appropriate participation target for the budget year.
    The agency does not project this eligibles data for future years. Thus,
    our 1999 budget target would be associated with 1996 eligibles data,
    and no separate estimate for 1998 exists. Our most recent available
    data indicate that 9 million women, infants, and children were fully
    eligible for WIC in 1996. Using the same methodology used for fiscal
    year 1994, including the assumption that 80 percent of fully eligible
    women, infants, and children would choose to participate yields a full
    participation estimate of 7.2 million for 1998 using 1996 income data.
    However, we now know that this estimate is low.
        The President's Budget proposes to fully fund the WIC Program and
    serve 7.5 million women, infants, and children in fiscal year 1998 and
    fiscal year 1999. The full funding participation level, providing
    adequate funding to serve all eligible persons who would choose 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 the Food and
    Nutrition Service's full participation estimate produced in 1996 using
    1994 WIC eligibles data.
        Previous estimates of full participation have assumed that, on
    average, approximately 80 percent of all persons fully-eligible for the
    program would participate. We now know that higher participation rates
    by the target population can be achieved. This is supported by the
    experience of the Food Stamp Program, where participation rates for
    families with children under 5 are over 90 percent, and the AFDC
    program, where participation rates since 1990 have ranged from 82
    percent to 86 percent.
        Given that the estimated number of fully-eligible persons exceeds
    7.5 million, and actual participation in WIC and other low-income
    assistance programs serving children exceeds the 80 percent previously
    assumed, a full funding participation target for fiscal year 1999 of
    7.5 million remains reasonable and prudent.
        Question. Secretary Glickman indicated in his prepared testimony
    before this Committee that efforts continue to reduce the overall cost
    of WIC food package by 10 percent by 2002.
        Please describe this effort. Are you seeking to reduce each part of
    the package--food costs and administrative expenses--by 10 percent? If
    no, why? When did this effort begin and what was the overall cost the
    WIC food package at the time (please give separate breakout of food and
    administrative cost portions of package). In other words, what are the
    base WIC package food and administrative cost levels from which the 10
    percent reduction you hope to achieve by 2002 will be measured?
        Answer. The proposal to reduce the cost of the WIC food package by
    10 percent was introduced in the Food and Nutrition Service (FNS)
    submission to Congress regarding the Government Performance Review Act
    (GPRA) in fiscal year 1997. Although this is a new initiative, it is
    important to note that the fiscal year 1997 food package cost is just
    0.5 percent higher than it was in fiscal year 1990 mainly due to the
    cost containment achievements of infant formula rebate contracts.
    During the same period inflation of the cost of the Thrifty Food Plan
    for a family of four, which is based on actual average retail food
    prices, was 21 percent.
        FNS is in the process of preparing a WIC policy memorandum to State
    agencies that will reiterate the GPRA initiative to reduce the WIC food
    package by 10 percent by 2002. This correspondence will remind State
    agencies of the various methods they can employ to reduce WIC food
    costs without negatively impacting the nutritional integrity of the WIC
    food packages. For example, in addition to continuing WIC infant
    formula rebate contracts, State agencies could also enter into rebate
    contracts with manufacturers of other WIC foods such as cereals and
    juices. FNS has two rules in Departmental clearance now that will
    provide further guidance for States agencies. One rule addresses
    maximization of WIC infant formula rebate savings through use of
    contract bid criteria which should yield the greatest savings. The
    other rule addresses improvements in WIC vendor management which
    emphasizes selection of low-risk vendors and vendor training and
    monitoring methods useful in reducing fraud and loss prevention. In
    addition, the Department has facilitated cost-containment discussion
    sessions at several program management/integrity meetings and
    conferences to encourage State agencies to explore and pursue various
    methods of food cost containment. Most recently FNS co-sponsored with
    the National Association of WIC Directors the Electronic Benefits
    Transfer/Program Integrity Meeting in December 1997. This meeting
    featured a spokesperson from the General Accounting Office (GAO) who
    addressed GAO's recent study of how the WIC Program could lower its
    costs.
        As explained in FNS instruction 804-1, State agencies also have the
    authority to make administrative adjustments in the WIC food packages
    for the purpose of cost containment that would affect the brands, types
    and forms, but not the prescribed quantities, of WIC foods. Quantities
    of WIC foods prescribed may only be adjusted on a case by case basis
    for nutritional reasons. For example, State agencies could limit WIC
    food selections on the basis of the lowest cost brands or store brands
    that generally cost less than national brands; lowest cost packaging of
    WIC foods; and, the lowest cost forms or alternatives within WIC food
    categories.
        Question. Secretary Glickman also indicated in his testimony before
    this Committee that the Department is working with states to expand
    other promising cost control activities and is undertaking a series of
    management reforms to improve WIC program integrity.
        Would you summarize the cost control activities and management
    reforms which have been implemented or are planned.
        Answer. There are a number of measures that the Food and Nutrition
    Service (FNS) encourages States to employ to reduce their operating
    costs, and states continue to pursue others to the extent possible
    given their unique circumstances. States have used, both individually
    and in conjunction with other States, competitive bidding to attract
    rebate contracts from manufacturer of infant formula and, more
    recently, other WIC approved foods. Restrictions on the number of food
    retailers permitted to participate in the program has also helped hold
    costs in check for states. In addition, limiting authorized food
    selections has contributed sizably to containing food package costs.
        FNS will continue to actively promote among States the adoption and
    expansion of any and all appropriate cost containment measures. One
    recent example of our effort to promote and propagate the adoption of
    various measures was the inclusion of several cost containment sessions
    at the FNS/National Association of WIC Directors (NAWD) co-sponsored
    National Program Integrity conference in December 1997. Specifically,
    one such session featured a spokesperson from the General Accounting
    Office (GAO) who addressed GAO's recent study of how the WIC Program
    could lower its costs.
        One management reform recommended in GAO's study was ensuring state
    agencies are requiring participants to provide evidence that they
    reside in the states where they receive WIC benefits and provide
    identification when their eligibility is certified and when they
    receive food or food vouchers. To this end, the Department has issued a
    draft policy memorandum underscoring these state obligations and
    emphasizing their significance for ensuring the program's integrity.
    FNS has also issued draft policy which will make nutritional risk
    eligibility assessments more consistent from state to state.
        In addition to the aforementioned policy and/or procedural reforms,
    the WIC Program has initiated the following program integrity assurance
    efforts over the last year.
        Program Integrity Conference.--In December 1997, FNS co-sponsored
    with NAWD a national conference to focus States attention on the
    program's potential vulnerability to participant and/or employee fraud
    and abuse. State and local agency WIC staff were trained on ways to
    detect and prevent such abuses.
        Program Integrity Profile.--FNS recently compiled data from a
    survey sent to states in 1997, requesting information on their
    integrity assurance policies and procedures, for the purpose of
    producing a National summary or profile of the many safeguards States
    employ to ensure program integrity. Thirty-one State agencies responded
    to the survey. FNS is currently seeking responses from the remaining
    State agencies so that a National program integrity profile can be
    produced.
        Income Eligibility Assessment Study.--FNS has contracted for a WIC
    Participant Characteristic study to be performed, a portion of which
    will examine participant income levels to validate participant income
    eligibility.
        Integrity Reporting System.--After working with states on revising
    their vendor data collection systems, the WIC Program expects to
    produce a more detailed and informative National vendor integrity
    monitoring profile in 1999. The annual profile report should better
    reflects the many vendor management and monitoring efforts of state
    agencies.
        Infant Formula Rebate Rule.--This rule revises current regulations
    by requiring States to utilize the lowest net wholesale cost bid
    criteria, unless retail prices do not vary by more than 5 percent, as
    mandated in fiscal year 1998 appropriations language. In addition, this
    rule will ensure that infant formula rebate contracts are competitively
    bid.
        Question. The WIC program is up for reauthorization this year. The
    prepared testimony indicates that the Administration will propose a
    cost-neutral reauthorization bill.
        When will this legislative proposal be submitted to the Congress
    for consideration?
        Answer. The legislative proposal was submitted on March 10, 1998.
        Question. Would you please outline for the Committee the reforms/
    changes that the Administration will propose be made in the WIC
    program.
        Answer. The Administration's proposal would:
      --Eliminate authority allowing State agencies to spend forward food
            funds. These funds would be returned to the Department on the
            established schedule and then reallocated to those State
            agencies which have indicated that they would be able to use
            them by the end of the current fiscal year. These changes would
            make unused funds available for allocation to State agencies
            that can use them and would help reduce the level of program
            funds that are carried over into subsequent fiscal years.
      --Allow State agencies to spend forward an additional 4 percent of
            unspent Nutrition Services and Administration (NSA) funds are
            for developmental costs of Electronic Benefit Transfer (EBT)
            with prior approval from the Food and Nutrition Service.
      --Extend through fiscal year 2002 the authority to use unspent NSA
            funds, up to $10 million, to support infrastructure--including
            management information systems--breastfeeding promotion and
            support projects, and special grants to State agencies for
            projects with regional or national significance.
      --Require State agencies to offer infant formula rebate contracts to
            the bidder offering the lowest net price unless the State
            agency demonstrates to the satisfaction of the Secretary that
            the weighted average retail price for different brands of
            formula in the State does not vary by more than five percent.
            This provision would codify a limitation found in the WIC
            appropriation in recent years.
      --Require all applicants to present documentation of household income
            or of participation in one of the adjunctive programs--
            Medicaid, Food Stamps, or Temporary Assistance for Needy
            Families--at the time of certification. This change would
            strengthen and clarify the Department's authority to require
            State agencies to review income documentation when making
            initial income eligibility determinations and increase overall
            program integrity and accountability. This provision would also
            require the Secretary to promulgate regulations governing when
            and how income verification would be required. State agencies
            currently have the option to verify income eligibility
            information. This proposal would not eliminate optional
            verification in addition to the verification requirement by the
            Secretary under this proposal.
      --Require that individuals be physically present in order to be
            certified for program benefits. Most State agencies already
            require applicants to be present at certification. However, a
            few States certify applicants, especially children, solely on
            the basis of referral data presented by the parent/primary
            caregiver without the child's presence at the time that the
            application is made. This proposal would require that all
            applicants appear in person to be certified for WIC
            participation. While referral data can provide basic
            information by which nutritional risk can be determined, the
            competent professional authority should be able to observe the
            applicant for critical health or developmental problems, or
            situations of abuse not necessarily detectable exclusively
            through referral data from a clinic or other health care
            provider at the time of application. Physical presence can also
            facilitate the immediate delivery of important referral
            services--such as age-appropriate immunization--by the WIC
            local agency. Finally, physical presence guards against
            fraudulent certifications of nonexistent (``ghost'')
            applicants, a problem identified by auditors in past years.
      --Require permanent disqualification of WIC vendors who have been
            convicted of trafficking in WIC food instruments. This proposal
            would require State agencies to permanently disqualify, except
            in hardship situations, WIC vendors who have been convicted of
            trafficking in WIC food instruments, or of the sale of
            firearms, ammunition, explosives, or controlled substances--as
            defined in 21 U.S.C. 802--in exchange for WIC food instruments.
            Such disqualification would become effective upon receipt of
            the notice of disqualification. The vendor would not be
            entitled to compensation for any revenues lost, even if the
            disqualification is subsequently reversed through
            administrative or judicial review. Whenever the State agency
            identifies a hardship situation, the State agency would be
            required to assess a civil money penalty in lieu of
            disqualification. This proposal would ensure greater integrity
            in WIC vendor management.
      --Allow WIC-developed nutrition education and breastfeeding promotion
            materials to be distributed at WIC expense to Commodity
            Supplemental Food Program (CSFP) State agencies. This proposal
            would allow nutrition education materials, including
            breastfeeding promotion materials, developed with WIC Federal
            funds to be provided in bulk quantity to State agencies
            administering the CSFP at no cost to the CSFP. This sharing
            would reduce duplication of effort, assure consistency of
            nutrition messages to similar populations, and represent a more
            cost-effective use of limited resources for the two programs.
        Question. The WIC Directors Association recommends that USDA, in
    consultation with States and the Association, establish a national
    plan, including funding mechanisms, for WIC Management Information
    Systems development, WIC Electronic Benefit Transfer (EBT) pilot
    development, and for full implementation of these systems.
        What is your view on the need for this plan?
        Answer. The Department is planning a meeting with the National
    Association of WIC Directors (NAWD) and State representatives in the
    near future to further discuss Management Information Systems (MIS) and
    Electronic Benefit Transfer (EBT) system development issues, cost
    efficiencies, and funding support strategies. The Department is always
    eager and prepared to work with States and the NAWD on any plans
    affecting program performance.
        Since 1990, the Food and Nutrition Service (FNS) has hosted four
    National meetings devoted to technology, the most recent being a
    meeting in December 1997 co-hosted with NAWD. In 1993, the Department
    prepared a technology action plan which outlined three major goals as a
    road map to development of MIS including, system foundation, systems
    innovation, and system integrity. The Department has demonstrated its
    commitment to the area of technology for many years and has assigned
    MIS development a high priority when allocating regional discretionary
    funds and infrastructure grants. Since 1995, States have spent an
    average of approximately 45 percent of their infrastructure grants or a
    total of $12,155,962 on automated information systems. As a result of
    these initiatives and emphasis, all States and most Indian Tribal
    Organizations are automated and many are in the process of upgrading
    their systems. However, while we believe progress in this area has been
    substantial, there is need for more consistency in MIS system
    development across States.
        In 1994 WIC issued an EBT vision statement jointly with the Food
    Stamp Program, which begins with the pledge that WIC and the Food Stamp
    Programs will work together to create user-friendly benefit delivery at
    food retail stores using EBT systems which are cost effective and
    efficient. WIC State agencies interested in pursuing EBT systems
    development have had to rely on competitive grants to help support
    development of pilot EBT projects. Since 1994, the WIC Program has had
    only one State, Wyoming, pilot an EBT system, and this was in one
    county of the State. Information gathered via this project has been
    helpful to some six other WIC States which plan to pilot EBT systems
    within the next 2 years. The WIC Program will be monitoring these
    States during this period and developing its overall plan for EBT,
    given the unique characteristics and requirements of the Program. To
    date, $6.7 million in Federal funding has been provided by FNS to 11
    State agencies for EBT systems design, development, pilot
    implementation, and evaluation.
        Question. Would you please summarize your current plans for the
    delivery of WIC benefits using EBT, and what funds are being used in
    fiscal year 1998 and included in your fiscal year 1999 budget for this
    purpose and where they are found.
        Answer. The Food and Nutrition Service's (FNS) plans for the
    delivery of WIC benefits using Electronic Benefit Transfer (EBT),
    reflects WIC States plans for system development and implementation. In
    August 1997, FNS submitted four-year goals to the Vice President's
    Reinvention Impact Center Initiative which included an increase in the
    number of States issuing WIC electronic benefits from 1 in 1997, to 7
    in 2000. Currently, there are at least seven States which are planning
    to pilot EBT systems before the year 2000.
        In fiscal year 1998, FNS has earmarked about $3,200,000 of multi-
    purpose funds for EBT systems design and development. The Department
    fiscal year 1999 legislative proposal included a $10,000,000 line item
    for infrastructure funding, from which some support to States EBT
    development efforts would be drawn. Additionally, the Department has
    proposed legislation to permit States to spend up to 5 percent of their
    NSA grant for EBT systems design and development costs.
        Question. Please summarize what success we are experiencing in the
    WIC program with (1) the promotion of breast feeding; (2) the delivery
    of nutritional services to WIC clients; and (3) increasing immunization
    services and coverage rates in conjunction with the Centers for Disease
    Control.
        Answer. The following describes the successes we are experiencing
    in the WIC Program in these three areas:
    Breastfeeding Promotion
        WIC is making steady progress towards reaching the Surgeon
    General's goal to increase to at least 75 percent the proportion of
    mothers who breastfeed their babies in the early postpartum period, and
    to maintain at least 50 percent the proportion who continue
    breastfeeding until their babies are five to six months old.
    Nationally, WIC State agencies reported spending approximately $50
    million last year on breastfeeding. These efforts are showing a
    positive trend in WIC breastfeeding rates.
        The Department plans to begin gathering national data on actual
    incidence and duration of breastfeeding in the WIC Program from WIC
    State agencies in 1998. Past traditional sources of information have
    been the WIC monthly Financial Management and Participation Report and
    proprietary data from the Ross Laboratories Mothers Survey, the only
    source and duration information available. Based on the WIC monthly
    Financial Management and Participation Report, in 1996 an average of
    292,273 breastfeeding women participated in the WIC Program each month,
    or 36 percent of the postpartum women served by WIC. Data from the 1995
    Ross Survey indicated that of infants participating in WIC whose
    mothers responded to the survey, 46 percent were breastfed in the
    hospital, and nearly 13 percent were breastfed at 5 to 6 months.
        The Ross data as well as other information suggest that WIC
    breastfeeding rates are growing, and are growing at a faster rate than
    non-participants. For example, the Ross data showed that between 1989
    and 1995, the percentage of WIC mothers breastfeeding in the hospital
    increased by more than 36 percent, while the percentage of non-WIC
    mothers breastfeeding in the hospital increased 12.9 percent. Duration
    of breastfeeding among WIC participants is also increasing: the
    percentage of WIC infants breastfeeding at 6 months of age increased by
    51.2 percent between 1989 and 1995. During the same period, the percent
    of non-WIC infants breastfeeding at 6 months increased 22.7 percent. We
    believe the substantial efforts directed at improving breastfeeding
    rates in WIC by Federal, State and local personnel are responsible for
    this encouraging trend.
        State and local WIC Programs have implemented several different
    types of breastfeeding promotion initiatives that influence feeding
    choices aimed at the different audiences (e.g. women, their doctors,
    other health professionals, and family members). The major Federal
    initiatives are:
        A Breastfeeding Promotion Consortium.--A consortium representing
    over 25 government, advocacy, and health professional organization that
    meets regularly to exchange ideas on how the Federal government and
    private health interests can work together to promote breastfeeding.
        A National Breastfeeding Campaign.--A project being conducted by
    USDA in cooperation with Best Start Social Marketing, Inc. to increase
    the initiation and duration of breastfeeding among WIC participants
    based on social marketing research. Forty WIC State agencies are
    currently participating.
        Physician Training.--Food and Nutrition Service (FNS) has
    cooperated with the department of Health and Human Services to provide
    training for physicians to increase their effectiveness in promoting
    breastfeeding among their patients.
        A Physician's Breastfeeding Promotion Kit.--FNS is cooperating with
    Best Start and the Department of Health and Human Services to develop a
    kit with patient education and outreach materials to assist physicians.
    Delivery of Nutritional Services
        The WIC Program has repeatedly demonstrated its effectiveness in
    improving the nutritional status of low-income women, infants and
    children. Improved pregnancy outcomes, such as increased full-term
    gestations, higher birth weights and greater head circumferences in
    newborns, have been directly linked to the decrease in infant mortality
    in the United States. A recent study by Dr. Jean-Pierre Habicht of
    Cornell University, released in early March, indicates that household
    participation in the WIC Program has significant positive effects on
    the nutrient intake of preschool-aged children. Of the 15 nutrients
    examined in this study, WIC participation increased the intake of 10 of
    them, most notably iron and zinc.
    Immunization Services
      --Because WIC is the largest single point of access to primary health
            care services for low-income preschool children, there are many
            immunization studies, evaluations, and demonstrations in WIC
            clinics throughout the Nation. They range from the cost
            effectiveness of immunization assessment in WIC to validating
            the accuracy of manual versus automated immunization assessment
            tools. All show that collaboration and resource sharing between
            WIC and Immunization Programs improve the service delivery
            capacity and quality of both programs.
      --Studies about the WIC and immunization linkage have been conducted
            by CDC in Chicago, Boston, and Chattanooga in 1995/96 (see
            attached abstracts). Each of these studies showed increases in
            immunization coverage rates among WIC participants. Increases
            ranged from 17 to 26 percentage points over baseline within 12
            months of program implementation. These findings were reported
            by Walter Orenstein, MD, Director of CDC's National
            Immunization Program before the Subcommittee on Public Health
            and Safety of the Senate Committee on Labor and Human
            Resources.
      --CDC, in conjunction with WIC State agencies, conducted
            demonstration projects in Chicago, New York, and San Antonio 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.
      --In Oregon, the Department of public Health has teamed with
            AmeriCorps VISTA's to provide assistance to the WIC and
            immunization programs. This assistance has enabled both
            programs to provide the best possible solutions to the
            immunization barriers in their area. The percentage of fully
            immunized children has risen dramatically in Oregon due to the
            involvement of these volunteers in immunization promotion
            activities in WIC.
      --Outreach workers in Milwaukee make immunization reminder calls to
            WIC participants and the child is followed until the completion
            of the primary immunization series. In addition to outreach,
            six WIC sites have a special program that places the family on
            monthly food voucher pick-up if the WIC infant's immunizations
            are incomplete. Coordination with other outreach programs in
            Milwaukee decreases duplication of efforts and increases access
            to other resources. The project has reduced the number of
            children without immunization records up to 17 percent.
      --In April 1996, seven Michigan WIC clinics pilot tested a WIC
            automated immunization assessment system. These sites found
            that the availability of an automated assessment system has
            drastically increased the number of WIC infants and children
            receiving an immunization assessment and referral for needed
            vaccinations.
        Question. The fiscal year 1999 budget proposes that permanent
    authority be granted to State agencies through the Appropriations Act
    to procure infant formula using competitive bidding systems based on
    the lowest net price. At the Administration's request, this language
    has been carried in the Appropriations Act for the past two years and
    is now the practice of State agencies. Why are you proposing to make
    this permanent law through the Appropriations Act rather than through
    the WIC reauthorization bill or by regulation?
        Answer. As the Committee on Appropriations requested in report
    language, the Department is publishing a proposed regulation in April
    of 1998 with a final rule to be published September 1998, that will
    make permanent the requirement for State agencies to procure infant
    formula using competitive bidding systems based on lowest net price. We
    are also seeking permanent statutory authority in the reauthorization
    bill.
        Question. The Appropriations bill is also carrying language
    requested by the Administration last year to grant the Secretary of
    Agriculture the discretion to allocate WIC funds recovered from the
    previous fiscal year outside the regulatory funding formula. The fiscal
    year 1999 budget requests that the Appropriations Act language be
    revised to allow the Secretary the discretion to provide a portion of
    WIC food funds to states to meet inflation, and a portion to states
    receiving less than their fair share of funds, unless the Secretary has
    published a revised funding formula regulation prior to the allocation
    of fiscal year 1999 funds.
        Why isn't authority allowing the Secretary the discretion to
    allocate WIC funds outside the current regulatory formula being sought
    through the WIC reauthorization rather than the appropriations bill?
        Answer. The Department is currently clearing a proposed regulation
    revising both the food and nutrition services and administration
    funding formulas. While we fully anticipate publishing a final rule
    prior to the allocation of fiscal year 1999 funds, we wanted a
    mechanism in place in the event the final rule is not published in time
    to allow the Secretary discretion in allocating the funds.
        The appropriations bill has been used in the past for providing
    such discretion. We did not include this in our reauthorization bill
    because we do not anticipate needing this authority on a continuing
    basis once the funding formulas are revised.
        Question. When does the Secretary plan to publish a new funding
    formula regulation for the WIC program? Is there reason to believe that
    this new regulation will be in force in time for use in the fiscal year
    1999 funds allocation?
        Answer. The Secretary anticipates publishing a proposed funding
    formula regulation in the Spring of 1998 and the final rule prior to
    the allocation of fiscal year 1999 funds.
        Question. Can you tell us what revisions in the funding formula
    will be proposed?
        Answer. The proposed WIC food funding formula will help to ensure
    food funds are allocated to States that can utilize the funds to
    maintain current participation as well as to direct additional funds,
    if available, to States that are serving a lesser proportion of their
    WIC eligible population as compared to other States. The proposed
    nutrition services and administration funding formula simplifies the
    funding formula by deleting obsolete components and will update
    existing components to more equitably distribute funding among WIC
    State agencies.
        Question. Did the Secretary use the flexibility granted to him by
    the Appropriations Act to allocate fiscal year 1998 WIC funds to
    States? If not, why? If yes, how were the funds allocated, and provide
    a comparison of the amount each State received versus what the state
    would have received under the provisions of the current regulations.
        Answer. The Secretary has not used the flexibility granted to him
    by the Appropriations Act. The Act provides the Secretary the authority
    to allocate funds recovered from fiscal year 1997 first to States to
    maintain stability funding levels, as defined by regulation, and then
    to give first priority for the allocation of any remaining funds to
    States whose funding is less than their fair share of funds, as defined
    by regulations, in such a manner as he deems appropriate. The
    allocation would be based on the State agency's ability to effectively
    utilize and manage the funds. It is estimated that the total available
    fiscal year 1998 funds will be adequate to bring States to stability
    funding and only a very small amount to fund States that have received
    less than their fair share of funds. Since there will be very little
    money available for those States receiving less than their fair share
    of funds, we do not anticipate that it will be necessary to utilize the
    provision.
        Question. What is the difference between States' spend-forward and
    carryout?
        Answer. State spend forward authority is authorized by law and
    allows States to retain a specified percent of unspent food and
    Nutrition Services and Administration (NSA) funds and utilize them in
    the subsequent year. These funds remain at the State level and can not
    be recovered by the Food and Nutrition Service. WIC carryout is the
    term used to refer to unspent recoverable food and NSA funds. These
    unspent funds are recovered from WIC State agencies and reallocated
    through the funding formula to those States eligible to receive
    additional funds.
        Question. The participation estimates in the fiscal year 1999
    budget assume that States will reduce their level of spend-forward in
    fiscal year 1998 from $50 million to $30 million. What evidence is
    there that this reduction in the projected spend-forward estimate will
    occur?
        Answer. The fiscal year 1998 appropriations language directed the
    Department to recover fiscal year 1997 food spendforward funds for
    reallocation to States in fiscal year 1998 for maintenance of
    participation. Because these funds would be recovered and reallocated
    in fiscal year 1998, we expect States to spend a greater proportion of
    their total fiscal year 1998 funds to support participation in fiscal
    year 1998, thus reducing spendforward into fiscal year 1999 by at least
    $20 million.
        Question. Please provide for the record for each of fiscal years
    1989 through 1999 the actual/proposed WIC carryover and spend-forward
    balances from the previous fiscal year.
        Answer. The information is provided for the record.
        [The information follows:]

                           UNITED STATES DEPARTMENT OF AGRICULTURE, FOOD AND NUTRITION SERVICE
                         SPECIAL SUPPLEMENTAL NUTRITION PROGRAM FOR WOMEN, INFANTS AND CHILDREN
    ----------------------------------------------------------------------------------------------------------------
                                                      Proposed total                                   Actual total
                                                          unspent                                         unspent
                                                        recoverable   Actual unspent      Actual        recoverable
                       Fiscal year                          and         recoverable    Spendforward         and
                                                       spendforward        funds           funds       spendforward
                                                         funds \1\                                         funds
    ----------------------------------------------------------------------------------------------------------------
    1988-89.........................................  ..............      $9,252,000     $18,893,644     $28,145,644
    1989-90.........................................  ..............      25,608,000      24,997,867      50,605,867
    1990-91.........................................  ..............      28,072,000      26,646,077      54,718,077
    1991-92.........................................  ..............      73,382,000      27,429,625     100,811,625
    1992-93.........................................  ..............      66,232,294      34,662,544     100,894,838
    1993-94.........................................  ..............      97,256,535      35,658,673     132,915,208
    1994-95.........................................  ..............     136,766,131      39,498,515     176,264,646
    1995-96.........................................    $150,000,000     137,478,745      47,203,091     184,681,836
    1996-97.........................................     245,000,000     121,623,106      63,411,766     185,034,872
    1997-98 \2\.....................................     150,000,000  ..............  ..............  ..............
    1998-99.........................................     130,000,000  ..............  ..............  ..............
    ----------------------------------------------------------------------------------------------------------------
    \1\ Total unspent recoverable and spendforward estimates based on the President's Budget Requests. These amounts
      are not available for fiscal years prior to 1995.
    \2\ Based on information provided by WIC State agencies as of February 1998, the actual amount of unspent
      recoverable and spendforward funds going from 1997 into 1998 will be $149,686,793.

        Question. The fiscal year 1999 budget requests a $20 million WIC
    contingency fund to avoid participation reductions from unexpected food
    price increases. Last year, when a $100 million contingency fund was
    proposed, the Committee was told that the Administration had ``not
    established a fixed technical approach'' for determining the
    circumstances under which contingency funds would be spent. Can you now
    tell us under what circumstances contingency funds would be spent if
    the proposed reserve is approved?
        Answer. The Department would spend the requested contingency funds
    to cover any unanticipated food price increases some State agencies may
    experience which would jeopardize their ability to maintain their
    caseload levels.
        Question. Please provide detail on how the $10 million for WIC
    infrastructure, special projects, and breast feeding promotion/support
    is being used. Provide a list of specific projects funded and the
    amount provided for each for each of fiscal years 1996, 1997, and 1998.
        Answer. The breakout of expenditures for the multi-purpose grants
    in fiscal years 1996, 1997, and 1998 is provided for the record.
        [The information follows:]
                     fiscal year 1996 multi-purpose grants
        The following table summarizes the breakout of expenditures for
    multi-purpose grants in fiscal year 1996:

    Infrastructure grants to State agencies.................      $7,828,467
    Special project grants to State agencies................       1,811,533
    Breastfeeding promotion and support and infrastructure..         360,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................      10,000,000

        To date, the Department has allocated a total of $7,828,467 to WIC
    State agencies for State-specific infrastructure grants to help support
    the overall goal of reaching more participants and providing quality
    program service. Each of our 7 regional offices received $1 million for
    allocation to WIC State agencies in January 1996 and an additional
    $828,467 was awarded in September 1996. A total of 45 WIC State
    agencies received infrastructure grants that were awarded on a
    competitive basis. The following table summarizes the breakout of the
    categories of how the funds are being expended.

                                                                 Total funds
            Categories of infrastructure funds expenditures        allocated
    Automated management information and integrated data
        sys-
        tems................................................      $2,505,270
    Electronic benefit transfer (EBT) projects..............       1,629,237
    Immunization data systems...............................         129,885
    Breastfeeding promotion and support.....................         125,600
    Management technologies and improvement of access to
        services............................................       1,043,351
    Facility renovation and non-ADP purchase................       2,395,124
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................       7,828,467

        The Food and Nutrition Service (FNS) awarded $1,766,324 to five
    State agencies to support special state projects in fiscal year 1996.
    These special state projects are of national or regional significance
    and are relevant to current WIC policy issues, designed to produce a
    demonstrable impact and be transferable to other WIC programs. The
    projects also suggest innovative or creative approaches to improving
    the delivery of WIC services. The following table summarizes fiscal
    year 1996 special project grants.

                                                                      Amount
            State agency/project                               allocated \1\
    Arkansas: Methods for defining local clinic costs.......        $501,806
    California: Evaluation of the effectiveness of nutrition
        education methodology...............................         450,844
    Minnesota: Develop/implement a store-based nutrition
        education strategy for high-risk participants.......         254,129
    Missouri: Develop/implement nutrition education strategy
        for Farmer's Market Nutrition Program local agencies         256,706
    Nebraska: Evaluation of integrated approach to grants
        management at the service delivery level............         302,839
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................       1,766,324

    \1\ Funds in the amount of $45,209, the balance of the $1,811,533
    special project grant funds, were utilized for technical support to
    State agencies for developing grant requests.

        The final $360,000 of the $10 million total was used to support a
    variety of efforts to promote and support breastfeeding and
    infrastructure in the WIC Program. Several publications were developed
    and produced and other promotional efforts have been conducted, as well
    as coordination with and support of the Healthy Mothers/Healthy Babies
    Coalition's breastfeeding efforts.
                     fiscal year 1997 multi-purpose grants
        The following table summarizes the breakout of expenditures for
    multi-purpose grants in fiscal year 1997:

    Infrastructure grants to State agencies.................      $7,000,000
    Special project grant to State agencies.................       2,000,000
    Breastfeeding promotion and support and infrastructure
        projects............................................       1,000,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................      10,000,000

        To date, the Department has allocated a total of $7 million to WIC
    State agencies for state-specific infrastructure grants to help support
    the overall goal of providing quality program service. Each of our 7
    regional offices received $1 million for allocation to WIC State
    agencies and grants were awarded to 33 State agencies on a competitive
    basis. The following table summarizes the breakout of the categories of
    how the funds will be expended.

                                                                 Total funds
            Categories of funds expenditures                       allocated
    Automated management information and integrated data
        sys-
        tems................................................      $4,711,921
    Electronic benefit transfer (EBT) projects..............         772,951
    Service integration, coordination and co-location.......         166,700
    Breastfeeding promotion and support.....................         152,888
    Management technologies and improvement of access to
        services............................................         312,612
    Facility renovation and non-ADP purchase................         882,928
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................       7,000,000

        FNS set aside $2.0 million to support special state projects in
    fiscal year 1997. FNS funded six special state projects of national or
    regional significance that are relevant to current WIC policy issues,
    designed to produce a demonstrable impact, be transferable to other WIC
    programs and suggest innovative or creative approaches to improving the
    delivery of WIC services.

            State agency/project                                      Amount
    Illinois: Feeding with Love: The Impact of Nutrition
        Education on the Bottle Feeding Habits of WIC
        Preschoolers........................................        $182,111
    Mississippi: Breastfeeding promotion and support........         399,745
    Montana: WIC/IDEA: Integrated data for evaluation and
        assessment..........................................         600,000
    New York: Effects of WIC participation on children's
        growth and readiness to learn.......................         215,198
    North Carolina: A model for evaluating and monitoring
        the effectiveness of the WIC Program for children...         508,808
    Virginia: Distance training on community-based nutrition
        education for WIC professionals: Implementation and
        evaluation..........................................          94,133
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................       1,999,995

        The final $1.0 million of the $10 million total is being used to
    support breastfeeding promotion and support activities and
    infrastructure projects of national significance, including Electronic
    Benefit Transfer projects. The utilization of these funds is being
    monitored to insure that the agency's goals are effectively addressed.
                     fiscal year 1998 multi-purpose grants
        The following table summarizes the breakout of expenditures for
    multi-purpose grants in fiscal year 1998:

    Infrastructure grants to State agencies.................      $3,675,000
    Special project grant to State agencies.................       2,000,000
    Breastfeeding promotion and support and infrastructure
        projects............................................       1,125,000
    EBT grants to State agencies............................   \1\ 3,200,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................      10,000,000

    \1\ Estimated.

        To date, the Department has approved for allocation a total of
    $3.675 million to WIC State agencies for state-specific infrastructure
    grants to help support the overall goal of providing quality program
    service. Each of our 7 regional offices received $525,000 for
    allocation to WIC State agencies and grants were awarded to 26 State
    agencies on a competitive basis. The following table summarizes the
    ---------------------------------------------------------------------------
    breakout of the categories of how the funds will be expended.

                                                                 Total funds
            Categories of funds expenditures                       allocated
    Automated management information and integrated data
        sys-
        tems................................................      $1,887,503
    Electronic benefit transfer (EBT) projects..............         475,735
    Breastfeeding promotion and support.....................         352,833
    Management technologies and improvement of access to
        services............................................         467,158
    Facility renovation and non-ADP purchase................         491,771
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................       3,675,000

        FNS has set aside $2.0 million to support special State projects in
    fiscal year 1998. As in fiscal year 1997, FNS will fund special State
    projects of National or Regional significance that are relevant to
    current WIC policy issues, designed to produce a demonstrable impact
    and be transferable to other WIC programs. The projects should also
    suggest innovative or creative approaches to improving the delivery of
    WIC services.
        The final $4.325 million of the $10 million total will be used to
    support breastfeeding promotion and support activities and
    infrastructure projects of significance, including Electronic Benefit
    Transfer (EBT) projects. At this time, we anticipate approximately $3.2
    million will be used to fund State EBT projects.
        Question. Please provide monthly WIC participation levels, and food
    and administrative costs for fiscal year 1997 and for fiscal year 1998
    to date.
        Answer. Monthly WIC participation levels, and Food and Nutrition
    Services and Administration (NSA) costs for fiscal year 1997 and for
    fiscal year 1998 to date are provided for the record.
        [The information follows:]

    ------------------------------------------------------------------------
                                                        Food cost   NSA cost
             Fiscal year/month           Participation     per        per
                                                          person     person
    ------------------------------------------------------------------------
    1997:
        October.......................       7,485,231     $32.12     $11.65
        November......................       7,419,915      31.54       9.02
        December......................       7,287,742      33.06      13.43
        January.......................       7,500,710      32.23       9.61
        February......................       7,442,551      31.15      11.01
        March.........................       7,448,023      31.69      12.28
        April.........................       7,449,767      31.14      11.94
        May...........................       7,385,190      30.77       9.46
        June..........................       7,367,474      30.45       8.24
        July..........................       7,378,422      30.68      13.10
        August........................       7,346,892      31.39      13.16
        September \1\.................       7,370,476      33.49      13.17
    1998:
        October \1\...................       7,425,011      31.82      10.87
        November \1\..................       7,292,317      32.22       8.77
        December \1\..................       7,261,451      32.18      13.14
    ------------------------------------------------------------------------
    \1\ Indicates these amounts are not yet final; obtained from preliminary
      State reports for months in which financial activity is not closed-out
      (verified and reconciled).

        Question. Do you have any thoughts on how the WIC program could be
    improved to increase the nutrition of at-risk mothers and children?
        Answer. The last review of the WIC food packages was completed in
    1992. The Department's Center for Nutrition Policy and Promotion is
    conducting a current comprehensive review of the WIC food packages to
    determine if all of the nutritional aspects of the packages are still
    appropriate for the WIC population. This review will recommend
    refinements, if needed, that would best serve WIC Program objectives.
    The review will assure that the food packages are consistent with the
    Dietary Guidelines for Americans jointly published by USDA and DHHS in
    1995, subsequent to the last WIC food package review. This review is
    expected to be completed by early summer. The Department is also
    issuing a policy memorandum to allow WIC State agencies greater
    flexibility in designing foods packages to that better accommodate food
    preferences.
        The Department has also recognized that nutrition education for
    preschoolers has not been as prominent as that provided to women for
    themselves and their infants. Therefore, the Department has recently
    produced a nutrition educator's kit for children entitled Tickle Your
    Appetite. The kit is designed to communicate key nutrition messages to
    WIC preschool participants in WIC clinics, at home, and in communities.
    The lively video segments, catch songs, engaging lessons, and
    attractive handouts offer a variety of ways to effectively communicate
    with children and their caregivers about nutrition. The Department is
    also conducting a National Breastfeeding Campaign with Best Start
    Social Marketing, Inc. to increase the initiation and duration of
    breastfeeding among WIC participants. In addition, a new publication
    has just been distributed entitled After You Deliver which contains
    sections on good nutrition, role/sources of folic acid in the diets of
    women of child-bearing age; and the benefits of breastfeeding to both
    mother and infant.
        The Department will continue to develop and promote initiatives to
    educate WIC participants about nutrition and how it relates to their
    overall good health. Since WIC is supplemental, WIC will continue its
    efforts to refer participants to other nutrition sources such as the
    Food Stamp Program, National School Lunch and Breakfast Programs,
    Summer Food Service Program for Children, Child and Adult Care Food
    Program, and the Farmers' Market Nutrition Program.
        Question. Has there been any evidence that there has been a decline
    in the amount of breakfast cereal consumed by WIC participants? Does
    this have any impact on the program's ability to increase the nutrition
    of at-risk mothers and children?
        Answer. The Department does not collect data on cereal consumption
    by WIC participants. However, we are aware that there are more than 80
    WIC-eligible cereals. Numerous WIC agencies also have submitted letters
    to USDA stating that the current number of cereals available to WIC
    participants provide them an adequate selection to meet their
    individual food preferences and nutritional needs. Therefore, there is
    no reason to believe that WIC participants are not eating the cereals
    they receive in their WIC food packages that deliver iron as one of the
    target nutrients.
        Question. Is there any evidence that indicates that women decline
    to participate in the WIC program or that their consumption of
    nutritious breakfast foods decreases if the food package does not
    include branded products or preferred brands?
        Answer. The Department does not have any data that addresses this
    question. However, the current selection of WIC cereals and juices,
    that includes both national brands and store brands, offers sufficient
    variety to provide broad appeal to participants. If the selection of
    WIC foods were severely restricted to only store brands, without
    including some National brand types, this limitation may impact
    participant usage. Like any other nutritious food, WIC foods can only
    benefit participants if they consume them. The ability to include
    several leading national brands as well as store brands helps to ensure
    that the majority of participant food preferences will be met.
        Question. Are states trying to expand enrollments and broaden the
    definition of nutrition vulnerability while restricting food choices
    for WIC participants? If so, do you think this is a good idea?
        Answer. WIC State agencies work hard to serve as many eligible
    applicants as possible within the funding levels that are allocated to
    them each year. By law, States are required under cost containment
    strategies to reduce food costs. At the same time, they must be mindful
    that WIC food packages maintain their appeal to participants in order
    to assure that they are consumed. While cost containment may result in
    placing some limitation on the brands of WIC foods that participants
    may obtain with their food instruments, the actual range of foods that
    comprise the prescribed WIC food package must continue to be available.
        For example, of the 80 cereals that meet Federal regulations, a
    State might allow 10 of the less expensive yet still popular cereals
    from which WIC participants might choose, based on personal preference.
    All participants must have access to all food in the package--for
    example, for a pregnant women: cereal, juice, eggs, peanut butter, or
    beans, peas or lentils, milk, or cheese in lieu of some milk.
        In addition, rather than broadening the definition of nutrition
    risk, the Food and Nutrition Service (FNS) (working closely with the
    National Association of WIC Directors) has just issued a draft WIC
    policy memorandum which when final, will make the criteria used to
    determine an applicant's nutrition risk status consistent from State to
    State, and will eliminate from use any nutrition risk criteria that are
    not supported by scientific documentation.
        FNS will continue to initiate and support program improvements that
    empower WIC State agencies to target WIC program benefits to those with
    the greatest need, while making the most efficient use of available
    funds to serve as many eligible women, infants and children as possible
    without compromising the integrity or negatively impacting the
    credibility of the WIC Program overall.
        Question. Is there evidence that young children who eat nutritious,
    healthy breakfasts continue these habits through their teenage years?
        Answer. In order to determine that young children who eat
    nutritious, healthy breakfasts continue these habits through their
    teenage years data would have to be collected on the same group of
    children from early childhood through their teenage years. The Food and
    Nutrition Service (FNS) is not aware of any such longitudinal study
    that has been conducted to date which focused particularly on
    breakfast.
        However, a 1994 article published in the American Journal of Public
    Health does address general food choice behaviors in children. The
    article titled Longitudinal Tracking of Adolescent Smoking, Physical
    Activity, and Food Choice Behaviors was reviewed in Nutrition Education
    for School-Aged Children: A Review of Research released by FNS in 1994.
    According to FNS report the article concluded that ``the children that
    are making poor food choices in early elementary grades are likely to
    be the children that are making poor food choices in junior and senior
    high.''
        Data that compares the prevalence of eating breakfast for younger
    students to that of older students is also available. The School
    Nutrition Dietary Assessment Study (SNDA), released in October 1993,
    found that younger students are more likely to eat breakfast than older
    students. After controlling for other characteristics, SNDA found that
    94 percent of 6- to 10-year-old students eat breakfast, compared with
    87 percent of 11- to 14-year-olds students, and 77 percent of 15- to
    18-year-old students.
        It is important to note that the SNDA data is cross-sectional and
    not longitudinal. The SNDA data did not track children's eating habits
    over time, it compared the eating habits' of children in different age
    groups at one point in time.
        FNS is currently supporting a study of the National Center for
    Education Statistics to examine the relationship between children's
    nutritional status and their cognitive performance and school progress.
    This study will also examine the possible links of participation in
    school nutrition programs to learning in the early and middle
    elementary school years. This study is longitudinal and will track the
    same group of children's participation in the School Breakfast Program
    from when they are in kindergarten to when they are in fifth grade.
        Question. When determining which infant formula manufacturer offers
    the lowest net price to the WIC program, FNS limits states to
    considering only those rebates offered on the traditional milk-based
    and soy-based formulas. This policy could discourage the use of
    innovative formulas that would provide infants with optimal nutritional
    value, and could impede the development and introduction of new
    formulas that can be used to meet specific dietary needs.
        Isn't it in the best long-term interest of WIC infants and the
    program to encourage and properly account for any and all rebates paid
    on formulas used in the program?
        Answer. It has always been a priority in the WIC Program that
    infants receive the infant formula that best meets their nutritional
    needs. It is the Department's belief that the nutritional needs of the
    vast majority of infants can be met by the infant formula product line
    offered by each infant formula manufacturer. As a result of expanded
    infant formula product lines, the Department is updating the current
    rebate regulations to address these new products to ensure rebates are
    maximized to the extent possible. The revised regulation will promote
    competitively-bid infant formula rebate contracts which will ensure
    contracts are awarded to the bidder with the lowest net price. This
    regulation will also ensure that infants continue to receive the infant
    formula that best meets their nutritional needs.
                      wic farmers market nutrition program
        Question. Why does the fiscal year 1999 budget propose to fund the
    WIC Farmers Market Nutrition Program through the Commodity Assistance
    Program rather than the WIC program? Why not simply request a change in
    the WIC account language to allow these funds to be allocated at the
    beginning of the fiscal year?
        Answer. As you know, recent Agriculture Appropriations Acts have
    made FMNP funding available only if not needed to maintain WIC
    caseloads. The Department believes the FMNP is a valuable program and
    that its funding should not be contingent on maintenance of WIC
    participation. As such, the FMNP was placed in the commodity account in
    an effort to ensure that funding for the program is continued
    uninterrupted, and to clearly disassociate its funding from that of the
    WIC Program.
        Question. Funding for the WIC Farmers Market Nutrition Program was
    increased from $6.75 million to $12 million for fiscal year 1998. I
    understand that this additional funding allowed five states to join the
    program. How was the funding increase allocated to expand the number of
    markets in States participating program versus bringing additional
    States into the program? How many requests were not met?
        Answer. In accordance with the authorizing law, all current State
    agencies were first provided with a base grant amount equal to their
    previous year's funding level which totaled $7,494,721. After base
    amounts were satisfied, consistent with the law, remaining funds of
    $4.5 million were divided in a ratio of 75 percent for current States
    for expansion and 25 percent for new States that would like to begin a
    program. These funds represent the level of opportunity for program
    growth and expansion through which more persons and more markets are
    able to participate in the program above last year's levels.
        The amount of funds appropriated for the program was sufficient to
    satisfy the full funding requests of the five new States that were
    seeking to initiate the program. In addition, funding was sufficient to
    immediately fully satisfy the requests of all State agencies that were
    seeking expansion funding, except New York. New York requested almost
    $1 million, a substantially higher amount than requests of other State
    agencies. New York has been allocated $748,563 and will receive the
    balance of its funding request once we have completed the close-out
    process and recovered unspent funds from fiscal year 1997.
        Question. Please provide detail for the record on how the
    additional funds were allocated, by state, and the requests from states
    which were not funded.
        Answer. All State agencies received their full expansion requests
    except New York which received $748,563 of its requested amount of
    $930,668. A table showing Farmers' Market Nutrition Program Grants is
    provided for the record.
        [The information follows:]

                                           FMNP FISCAL YEAR 1998 GRANT AMOUNTS
    ----------------------------------------------------------------------------------------------------------------
                                                                        Fiscal year
                                                         Expansion       1998 base       Expansion      Total grant
                          State                           request          grant         allocated       allocated
                                                                         allocated
    ----------------------------------------------------------------------------------------------------------------
    Alaska..........................................  ..............        $106,050  ..............        $106,050
    Arkansas........................................  ..............         140,000  ..............         140,000
    California......................................        $254,202         168,131        $254,202         422,333
    Chickasaw, Ok...................................  ..............          40,000  ..............          40,000
    Connecticut.....................................         116,623         293,256         116,623         409,879
    District of Columbia............................          53,600         163,267          53,600         216,867
    Florida.........................................  ..............         129,759  ..............         129,759
    Georgia.........................................  ..............          65,858  ..............          65,858
    Illinois........................................          70,066         116,600          70,066         186,666
    Indiana.........................................         107,968          32,897         107,968         140,865
    Iowa............................................         130,125         412,981         130,125         543,106
    Kentucky........................................          21,618          86,382          21,618         108,000
    Maine...........................................  ..............         103,686  ..............         103,686
    Maryland........................................         106,836         196,497         106,836         303,333
    Massachusetts...................................         141,198         529,040         141,198         670,238
    Michigan........................................         188,407         303,783         188,407         492,190
    Minnesota.......................................         244,631         205,367         244,631         449,998
    Missouri........................................         129,568          31,173         129,568         160,741
    Mississippi.....................................  ..............          55,767  ..............          55,767
    MS Choctaw......................................  ..............          10,121             715          10,836
    New Hampshire...................................  ..............          95,213  ..............          95,213
    New Jersey......................................          63,940         153,149          63,940         217,089
    New Mexico......................................          67,985          83,462          67,985         151,447
    New York........................................         930,668       1,617,332         748,563       2,365,895
    North Carolina..................................         295,244         124,756         295,244         420,000
    Ohio............................................          92,565         107,062          92,565         199,627
    Oregon..........................................          84,886          55,114          84,886         140,000
    Pennsylvania....................................         357,194         758,192         357,194       1,115,386
    Rhode Island....................................          42,228          90,900          42,228         133,128
    South Carolina..................................  ..............         111,762  ..............         111,762
    Texas...........................................         600,611       1,049,389         600,611       1,650,000
    Vermont.........................................  ..............          74,676  ..............          74,676
    Washington......................................  ..............         151,472  ..............         151,472
    West Virginia...................................           1,985          68,015           1,985          70,000
    Wisconsin.......................................          87,087         261,046          87,087         348,133
                                                     ---------------------------------------------------------------
          Total.....................................       4,189,235       7,746,105       4,007,845      12,000,000
    ----------------------------------------------------------------------------------------------------------------

        Question. The fiscal year 1999 budget requests $15 million for the
    WIC Farmers' Market Nutrition Program, a $3 million increase from the
    fiscal year 1998 level. How will these additional funds be allocated?
        Answer. In accordance with the authorizing law, we must first
    provide all current State agencies with a base grant amount that is
    equal to their previous year's funding level. After base amounts are
    satisfied, the law provides for any remaining funds to be divided in a
    ratio of 75 percent for current States for expansion and 25 percent for
    new States that would like to begin a program.
        Question. How many WIC participants, by state, are currently
    receiving farmers market benefits through this program?
        Answer. The information is submitted for the record.
        [The information follows:]

      Fiscal year 1997 WIC participants receiving farmers' market benefits

    Alaska........................................................   ( \1\ )
    Arkansas......................................................   ( \1\ )
    California....................................................    10,991
    Chickasaw, OK.................................................     2,119
    Connecticut...................................................    38,481
    District of Columbia..........................................     8,915
    Florida.......................................................   ( \1\ )
    Georgia.......................................................   ( \1\ )
    Illinois......................................................    16,908
    Indiana.......................................................    12,842
    Iowa..........................................................    35,264
    Kentucky......................................................    11,301
    Maine.........................................................    13,048
    Maryland......................................................    21,850
    Massachusetts.................................................    86,725
    Michigan......................................................    20,884
    Minnesota.....................................................    23,690
    Missouri......................................................    75,090
    Mississippi...................................................   ( \1\ )
    Choctaw, MS...................................................       681
    New Hampshire.................................................    15,623
    New Jersey....................................................     9,236
    New Mexico....................................................     5,949
    New York......................................................   232,930
    North Carolina................................................    13,832
    Ohio..........................................................    13,133
    Oregon........................................................    19,393
    Pennsylvania..................................................    95,834
    Rhode Island..................................................     9,946
    South Carolina................................................    14,262
    Texas.........................................................   210,987
    Vermont.......................................................     4,351
    Washington....................................................    26,058
    West Virginia.................................................     4,985
    Wisconsin.....................................................    55,557
                        --------------------------------------------------------------
                        ____________________________________________________

          Total................................................... 1,110,865

    \1\ New State for fiscal year 1998.

        Question. How many farmers markets, by state, have been established
    through this program?
        Answer. We do not know how many farmers' markets have been
    established as a direct result of this program. We do know how many
    farmers' markets are participating by State, in the program and that
    information is provided for the record.
        [The information follows:]

                 Fiscal year 1997 participating farmers' markets

    Alaska...........................................................( \1\ )
    Arkansas.........................................................( \1\ )
    California........................................................    51
    Chickasaw, OK.....................................................     4
    Connecticut.......................................................    45
    District of Columbia..............................................     2
    Florida..........................................................( \1\ )
    Georgia..........................................................( \1\ )
    Illinois..........................................................     6
    Indiana...........................................................    13
    Iowa..............................................................    69
    Kentucky..........................................................    22
    Maine.............................................................    53
    Maryland..........................................................    44
    Massachusetts.....................................................    97
    Michigan..........................................................    78
    Minnesota.........................................................    15
    Missouri..........................................................     3
    Mississippi......................................................( \1\ )
    Choctaw, MS.......................................................     1
    New Hampshire.....................................................    29
    New Jersey........................................................    38
    New Mexico........................................................     8
    New York..........................................................   180
    North Carolina....................................................    19
    Ohio..............................................................    34
    Oregon............................................................    16
    Pennsylvania......................................................   300
    Rhode Island......................................................     7
    South Carolina....................................................    22
    Texas.............................................................    40
    Vermont...........................................................    27
    Washington........................................................    18
    West Virginia.....................................................    10
    Wisconsin.........................................................    15
                            -----------------------------------------------------------------
                            ________________________________________________
          Total....................................................... 1,266

    \1\ New State for fiscal year 1998.

        Question. What changes, if any, are you proposing be made in the
    WIC Farmers' Market Nutrition Program as part of the WIC program
    reauthorization?
        Answer. We are proposing two changes as part of the
    reauthorization. They are:
        1. Elimination of criteria for ranking new State Plans. This
    proposal would eliminate the legislatively-specified criteria for
    ranking new State Plans. Current law requires the Secretary to
    establish objective criteria for the approval and ranking of the
    Farmers' Market Nutrition Program (FMNP) State plans. The law also
    requires that certain factors, some of which are unclear and others
    that have become outdated, be considered in the ranking process. This
    proposal would continue to require the Secretary to establish objective
    criteria for ranking new State Plans, but would eliminate the specific
    factors currently stipulated for this process, thus enabling the
    Department to use more appropriate measures of a State's potential
    success in managing a program.
        2. Revise the 30 percent match requirement to apply only to the
    administrative portion of FMNP costs, rather than to the total cost of
    the program. This proposal would revise the matching requirement for
    participating FMNP State agencies (currently 30 percent for geographic
    States and 10 percent for Indian Tribal Organizations (ITO's) with
    demonstrable financial hardship) so that it is applied only to the
    administrative portion of FMNP program costs, rather than to the total
    cost of the program. This revision would result in a reduced match
    amount for States and ITO's, and would be applied on a similar basis
    with the match requirement for other programs, such as the Food Stamp
    Program, that are administered by the Department through the Food and
    Nutrition Service. It will also enable more States to participate in
    the FMNP that have heretofore been unable to do so because they could
    not meet the larger match requirement.
                           food recovery and gleaning
        Question. Would you please explain the program you propose--what it
    will achieve, who will be eligible for the funding and for what
    purposes, whether it requires legislative authority, how the funds for
    the program will be allocated, and how you will ensure these grants
    will enhance efforts rather than replace existing funding for states,
    local or nonprofit groups for existing efforts.
        Answer. The basic idea of the program is provide a small amount of
    Federal seed money to non-profit groups, as well as State, local, and
    Tribal governments, to allow such entities to build the local
    infrastructures needed to dramatically expand the amount of excess yet
    wholesome food that is recovered and gleaned and distributed to
    Americans in need. This assistance would allow entities to get new food
    recovery programs off the ground, as well as to expand the successful
    food recovery efforts that many organizations are already operating. We
    intend to require non-Federal matching funds for any project to which
    USDA provides Federal funds. We anticipate this Federal money will
    leverage a great deal of matching funds from the private, non-profit,
    and state and local governmental sectors. $20 million in Federal
    spending has the ability to generate the eventual donation of hundreds
    of millions of dollars worth of food. We are not seeking to create a
    large-scale Federal bureaucracy, but rather to empower community-based
    efforts and encourage community volunteerism.
        In June of 1997, USDA released a study indicating that 96 billion
    pounds--or 27 percent--of the 356 billion pounds of food produced in
    this country each year is lost to human consumption at the retail and
    food service levels. In response to the study, USDA joined with key
    non-profit organizations in co-sponsoring the first-ever National
    Summit on Food Recovery and Gleaning--at which we jointly set a
    National goal of increasing the amount of food recovered by 33 percent
    by the year 2000. This would provide an additional 500 million pounds
    of food a year to feeding organizations. At a time when food banks
    across the Nation are reporting increasing need but decreasing
    donations, such a boost is vitally needed.
        While community organizations are willing to bring significant
    resources of their own to aid food recovery--and while volunteers will
    provide much of the labor for such efforts--additional Federal
    assistance is needed to help these entities pay for vital items such
    as: vehicles and fuel to transport recovered and gleaned food; salaries
    for volunteer coordinators and training programs for volunteers;
    heating and refrigeration equipment to ensure food safety; printing for
    handbooks and instructional materials; equipment to harvest, sort,
    load, and process food; computer programs to match up donors to
    recipients; offices from which to operate; containers to hold the food,
    etc.
        We anticipate that aid would be given out in the forms of grants,
    cooperative, agreements, and technical assistance. We do not believe
    that separate legislation is needed to give USDA authority to do so,
    however it would be necessary for the fiscal year 1999 Agriculture
    Appropriations Bill language to specifically state that USDA has the
    authority to ``provide food recovery and gleaning-related grants,
    cooperative agreements, technical assistance, and other assistance to
    national and local non-profit groups, as well as State, local, and
    Tribal government agencies.''
        We are in the process of obtaining input from non-profit groups and
    from states about the details of how the program should be structured .
    We would also greatly welcome input from the Committee and other
    Members of Congress on this matter.
                   center for nutrition policy and promotion
        Question. The Administration transferred responsibilities of the
    Human Nutrition Information Service from the Agricultural Research
    Service to create the Center for Nutrition Policy and Promotion within
    the Food and Nutrition Service in 1994. The prepared testimony
    submitted to this Committee indicates that the Center is the ``focal
    point'' within USDA to promote the health of all Americans.
        Please provide examples of how the Center, since its creation, has
    promoted good nutrition linking scientific research to the dietary
    needs of participants in each of USDA's food assistance programs.
        Answer. The U.S. Department of Agriculture (USDA) established the
    Center for Nutrition Policy and Promotion to improve the nutritional
    health of all Americans, including participants in USDA's food
    assistance programs, by linking scientific research to the consumer.
        The Center links scientific research with food assistance program
    participants and other consumers in several ways. One basic way it
    accomplishes this is by coordinating USDA's efforts to integrate
    information from scientific research with the nutrition education
    messages and implementation policies of the Center and other government
    agencies. Center staff study key scientific reports and other
    scientific literature, conduct consumer research in-house or by
    contract, and use the findings to develop consumer-oriented guidance
    materials. Some specific examples are described below.
        The Center served as the lead within USDA to coordinate with HHS
    the review of the Report of the Dietary Guidelines Advisory Committee
    and the preparation of the 1995 Dietary Guidelines for Americans. Title
    III of the National Nutrition Monitoring and Related Research Act of
    1990 (Public Law 101-445) requires that USDA and HHS update the dietary
    guidelines every five years. The Dietary Guidelines provide the best,
    most current advice from health and nutrition experts, based on the
    latest scientific research. They serve as the basis for Federal
    nutrition policy, and are used in developing food and nutrition
    standards for nearly all food assistance programs, including the
    National School Lunch and Breakfast Programs; the Special Supplemental
    Nutrition Program for Women, Infants, and Children (WIC); the Food
    Stamp Program, and the Child and Adult Care Food Program (CACFP).
        The 1995 Dietary Guidelines were the first to include the Food
    Guide Pyramid graphic. The Food Guide Pyramid, released by USDA in
    1992, is a tool that consumers can use to implement Dietary Guidelines
    recommendations in their own diets. The Pyramid graphically illustrates
    USDA's research-based food guidance system that translates nutrient
    recommendations into recommendations on food intakes, and provides a
    framework for selecting the kinds and amounts of foods to provide a
    nutritionally adequate diet. The Center is updating the research that
    supports the food guide to incorporate changes in food composition,
    food consumption, nutrition recommendations, and food technologies that
    have occurred since the original research was conducted. In addition,
    the Center has initiated development of a food guide pyramid adapted
    specifically for children from two to six years of age. As part of this
    effort, the Center has analyzed children's current diets and compared
    their food and nutrient intakes to Food Guide Pyramid recommendations.
    CNPP has also sponsored qualitative research with children, parents,
    and caregivers to obtain suggestions for prototype products and
    materials that would be useful for this audience. This adaptation of
    the Food Guide Pyramid for young children is anticipated to be widely
    used by participants in USDA's CACFP and WIC Programs.
        The Food Guide Pyramid has already been used extensively by Federal
    agencies, including USDA, in nutrition education programs and
    materials. Many food assistance programs have developed and/or utilize
    materials that incorporate nutrition messages based on the Dietary
    Guidelines and the Food Guide Pyramid. Programs include the National
    School Lunch Program (through Team Nutrition and additional efforts),
    WIC, and the CACFP.
        Other examples of Center projects that promote the health of
    participants in USDA's food assistance programs include the Healthy
    Eating Index (HEI), an aggregate measure of overall diet quality
    released by the Center in 1995. The HEI provides a picture of the foods
    people are eating, the amount of variety in the diet, and their
    compliance with specific dietary recommendations. The HEI report showed
    that the diets of most Americans need improvement; the average score
    was 64 of a possible 100 points. Follow-up analysis has shown that low-
    income individuals are more likely to have poor HEI scores, as are
    individuals from the teen years to middle adulthood. From this initial
    research, the Center plans to expand the use of the HEI by creating a
    ``consumer-friendly'' version of the HEI that will allow consumers to
    evaluate their own diets and identify behaviors that will improve their
    dietary status. Access to a summary measure of healthful eating will
    help consumers, particularly those participating in food assistance
    programs, to adopt dietary practices that will meet recommendations of
    the Dietary Guidelines for Americans and the Food Guide Pyramid. With
    minor modifications, the consumer-friendly HEI could also be used by
    States and localities to quickly monitor and assess the dietary status
    of their populations.
        The Center is also responsible for the development of USDA food
    plans, including the Thrifty Food Plan (TFP) which serves as the
    nutritional basis for food stamp benefit levels. Currently the Center
    is updating the 1983 TFP to reflect current dietary guidance, including
    the 1995 Dietary Guidelines for Americans and the Food Guide Pyramid.
    Phase I of this update involves generating a market basket showing
    amounts of foods in different food groups that food stamp households
    can use to prepare a week's worth of nutritious, low-cost menus. Phase
    II, which has been initiated under contract with the Pennsylvania State
    University, involves testing sample menus based on the TFP market
    basket for overall acceptability with food stamp households. Results of
    this evaluation will provide valuable information that can be used in
    developing nutrition education materials for food stamp program
    participants and other low-income consumers.
        Finally, the Center also conducts research and analysis related to
    the Personal Responsibility and Work Opportunity Act of 1996 (Public
    Law 104-193). Projects include:
       study of the use of food stamps to purchase vitamins and minerals
        The Center has a lead role in a study of the use of Food Stamps to
    purchase vitamins and minerals. The Personal Responsibility and Work
    Opportunity Act of 1996 (Public Law 104-193) directs the U.S.
    Department of Agriculture to study the potential consequences of
    allowing the use of food stamps to purchase vitamins and minerals in
    consultation with the National Academy of Sciences, and the Center for
    Disease Control and Prevention. Along with the Food and Nutrition
    Service, the Center is participating in this study and taking the lead
    in analyzing two major data sets: the Consumer Expenditure Survey of
    the Bureau of Labor Statistics and the USDA Continuing Survey of Food
    Intakes by Individuals to better understand the extent of purchases and
    the effect of these purchases on food expenditures and nutritional
    status. A third survey, NHANES III by the Centers for Disease Control
    is also being analyzed.
      estimated impacts of welfare reform on household food expenditures,
                    food consumption, and nutritional status
        Two Center studies conducted within the past year built on the
    economic and nutrition literature on the relationships among household
    food expenditures, food consumption, and nutritional status in
    different types of households to better understand the impact of
    potential changes in household income, food stamp receipt, and labor
    force participation. Representative households affected by welfare
    reform provisions were identified, their sources of income, food
    expenditures, and nutritional status as characterized by the Healthy
    Eating Index explored, and estimated changes were assessed. Results
    were disseminated in the form of two presentations and two papers at
    the American Agricultural Economics Association, and the American
    Statistical Association Annual Meetings. A third paper entitled
    ``Maintaining Food and Nutrition Security: The Role of the Food Stamp
    Program and WIC'' was submitted for publication in the Center's peer
    reviewed journal, the Family Economics and Nutrition Review.
                        welfare reform and child support
        Two additional studies conducted by the Center explored current
    policy relating to child support in the wake of Welfare Reform. The
    Child Support Enforcement Amendments of 1984, as well as the Family
    Support Act of 1988, emphasized the importance of enforcing child
    support measures given the large percentage of non-custodial parents
    who do not pay child support. Welfare reform continued and strengthened
    this theme. The studies compared Center estimates of the costs of
    raising children to state awards of child support and to actual child
    support payments in order to better understand the relationship between
    adequate awards and the poverty rate among single parent households
    with children as well as their participation in welfare programs.
    Results will be disseminated in two papers: ``Child Care and Welfare
    Reform,'' and ``Do Child Support Awards Cover the Cost of Raising
    Children?'' to be published in the Spring/Summer 1998 issue of the
    Family Economics and Nutrition Review.
        Question. Please provide examples of how the Center, since its
    creation, has promoted the health of all Americans through good
    nutrition linking scientific research to the dietary needs of the
    consumer.
        Answer. The U.S. Department of Agriculture (USDA) established the
    Center for Nutrition Policy and Promotion (CNPP) in 1994 to provide a
    mechanism for improving the nutritional health of all Americans by
    linking nutrition research to the dietary needs of the consumer. Center
    staff develop integrated nutrition education, promotion and research
    programs for all consumers including, but not limited to, customers of
    food and nutrition assistance programs. Some specific examples of how
    the Center seeks to fulfill its mission are described below.
        The Center is called upon by media, nutrition educators, and policy
    makers to provide leadership in developing, interpreting, and promoting
    Federal dietary and nutrition guidance. This guidance is currently
    embodied in the Dietary Guidelines for Americans and the Food Guide
    Pyramid. The Dietary Guidelines for Americans serve as the basis for
    Federal nutrition policy. They provide nutrition guidance for the
    general public, based on the preponderance of current scientific and
    medical knowledge. Title III of the National Nutrition Monitoring and
    Related Research Act of 1990 (Public Law 101-445) requires that USDA
    and the Department of Health and Human Services (HHS) update the
    dietary guidelines every five years. The Center served as the lead
    within USDA to coordinate with HHS the review of the Report of the
    Dietary Guidelines Advisory Committee and the preparation of the 1995
    Dietary Guidelines for Americans.
        In preparation for Dietary Guidelines 2000, the Center worked with
    the Agricultural Research Service and HHS during 1997 to prepare the
    charter to establish a Dietary Guidelines Advisory Committee. To assist
    the Committee in its deliberations, the Center is also coordinating
    production of a ``basebook'' of information analyzing current dietary
    patterns in light of the most recent dietary guidance.
        The Food Guide Pyramid, released by USDA in 1992, is a tool that
    consumers can use to implement Dietary Guidelines recommendations in
    their own diets. The Pyramid graphically illustrates USDA's research-
    based food guidance system that translates nutrient recommendations
    into recommendations on food intakes, and provides a framework for
    selecting the kinds and amounts of foods to provide a nutritionally
    adequate diet. Because the process of providing science-based dietary
    guidance must be dynamic in order to stay current, the Center is
    updating the research that supports the food guide to incorporate
    changes in food composition, food consumption, nutrition
    recommendations, and food technologies that have occurred since the
    original research was conducted. In addition, in 1997 the Center
    developed a decision-making framework for revising the Food Guide
    Pyramid based on changes in dietary standards, using the newly released
    Dietary Reference Intakes for calcium and related nutrients.
        Building upon recommendations from a 1996 working session focusing
    on the Dietary Guidelines and children, the Center has initiated
    development of a food guide pyramid and Pyramid-based nutrition
    messages specifically for children from two to six years of age. As
    part of this effort, the Center has conducted a comprehensive analysis
    to identify the target audience, and examined children's current food
    and nutrient intakes in light of existing Pyramid recommendations. CNPP
    has also held a series of discussions with leading nutrition educators
    on key behavioral and developmental factors in feeding young children,
    and sponsored qualitative research with children, parents, and
    caregivers to obtain suggestions for prototype products and materials
    that would be useful for this audience.
        The Center vigorously promotes use of the Dietary Guidelines and
    the Food Guide Pyramid in all nutrition education programs within USDA
    and in the Federal and private sectors. The Dietary Guidelines Alliance
    represents one such effort. CNPP acts as a USDA liaison to this
    coalition of food industry, health, and government organizations that
    strives to assist consumers in putting the Dietary Guidelines into
    practice. In 1996, the Center participated in a presentation on the
    Alliance's consumer research findings related to reaching consumers
    with meaningful health messages. In 1997, the Center also initiated a
    popular factsheet series, ``Nutrition Insights,'' to highlight dietary
    guidance issues with health professionals who work with the media and
    consumers. In addition, the Center has conducted a seminar series since
    1995 to provide a forum for policy makers and professionals to discuss
    current nutrition research and policy issues.
        The Center also responds directly to requests from the public.
    Specifically, during fiscal year 1997, the CNPP received 264 telephone
    calls from reporters, editors, and fact checkers; approximately 50
    calls from television and radio producers; 15 from news services; 32
    from book authors and publishers; some 60 advertising agencies and food
    companies; 70 professional nutrition and dietetic associations; 50
    calls from universities/colleges; approximately 100 Federal and State
    agencies; 48 congressional offices; 8 international calls (research and
    government); and over 100 calls from the general public. The Center
    also received over 5,000 calls on its Publications Hot Line for
    publications. In addition, the Center's Internet website receives
    approximately 20,000 hits per week or the equivalent of over 1 million
    downloads per year.
        Also, for the past three years since the Center for Nutrition
    Policy and Promotion was formed, the Center has sponsored a seminar
    series known as ``Nutrition Issues for the 21st Century.'' The theme
    for last year's series was ``Improving the American Diet Through
    Successful Nutrition Intervention.'' During the year the Center held
    six seminars where some of the Nation's leading experts in nutrition,
    diet, nutrition education and related fields spoke to a diverse
    audience of nutrition professionals, food industry representatives,
    Capitol Hill committee staff, advocacy organizations, and Federal
    policy makers.
        The Center publishes and contributes to the peer reviewed quarterly
    journal, Family Economics and Nutrition Review, which is currently in
    its 55th year of publication. Publication of the Journal further
    contributes to the Center's mission to link research to the consumer by
    mainly reaching information multipliers in the fields of Family
    Economics, Extension, and Nutrition.
        The Center participates in other Government efforts to improve the
    nutritional status of the population. For example, the Center
    contributed to the re-formulation of the Healthy People 2000
    Objectives. It is also an active contributor to the Healthy People 2010
    Objectives effort.
        CNPP also provides leadership in research and analysis of food,
    nutrition, and economic data critical to national policy decisions.
    Projects include:
                          healthy eating index project
        In 1995, CNPP released the Healthy Eating Index (HEI), an aggregate
    measure of overall diet quality. This and follow-up activities are
    responsive to the mandates of Public Law 101-445, The National
    Nutrition Monitoring and Related Research Act (7 U.S.C. 5301 et seq.),
    which directs the HHS and USDA to ``improve the methodologies and
    technologies, including those suitable for use by States and
    localities, available for the assessment of nutritional and dietary
    status and trends;'' and to ``develop uniform standards and indicators
    for the assessment and monitoring of nutritional and dietary status,
    for relating food consumption patterns to nutritional and health
    status, and for use in the evaluation of Federal food and nutrition
    intervention programs;'' (7 U.S.C. 5313, Sec. 103(b)6-7). The HEI used
    data from USDA's 1989-90 Continuing Survey of Food Intakes by
    Individuals (CSFII) to provide a picture of the foods people are
    eating, the degree of variety in the diet, and their compliance with
    specific dietary recommendations. In a press release, the HEI was
    hailed by the American Dietetic Association as ``the most accurate
    measurement to date of how Americans eat.'' The HEI report showed that
    the diets of most Americans need improvement; the average score was 64
    of a possible 100 points. Follow-up analysis has shown that low-income
    individuals are more likely to have poor HEI scores, as are individuals
    from the teen years to middle adulthood. Because the HEI is based on
    data from CSFII, updates are possible only when that data set becomes
    available. USDA's Agricultural Research Service collected CSFII data
    for 1994, 1995 and 1996. Center staff are in the process of producing
    updates to the HEI for those three years.
           project to determine expenditures on children by families
        Since 1960, the U.S. Department of Agriculture has provided
    estimates of food and other major expenditures (housing, clothing,
    etc.) on children from birth through age 17 by husband-wife and single-
    parent households. The expense estimates are provided by age of child,
    family income, and region of residence. The most recent estimates are
    based on the 1990-1992 Consumer Expenditures Survey updated to 1997
    costs using the Consumer Price Index for various budgetary components.
    The 1997 update of the average percentage of household expenditures
    attributable to children in husband-wife households reflects a 2-3
    percent increase. For the overall United States, child-rearing expense
    estimates ranged between $8,060 and $9,170 per year for a child in a
    two-child, married-couple family in the middle income group. The
    report, Expenditures on Children By Families, is updated annually.
    Results are used in developing State child support guidelines and
    foster care payments to help ensure that children receive an adequate
    standard of living. A survey by the American Public Welfare Association
    found that approximately half the States in the U.S. used the results
    in setting foster care payments.
       project to maintain and update the national food supply database
     management system and to publish updated nutrient content of the u.s.
                                  food supply
        The Center publishes periodically a report on food supply nutrient
    per capita estimates, and is responsive to food supply activities
    specified in the Ten Year Comprehensive Plan for the National Nutrition
    Monitoring and Related Research Program of the National Nutrition
    Monitoring and Related Research Act (7 U.S.C. 5301 et seq.). The newest
    Update of the Nutrient Content of the U.S. Food Supply was published in
    October 1997. Future work will involve updates of the food supply
    fortification files to be more reflective of current fortification of
    such commodities as cereal products, fruit juices and drinks, and milk-
    based meal replacements. In addition, plans are to improve per capita
    estimates of edible offals, and low-fat or fat reduced commodities.
        Question. Please explain how the Center links scientific research,
    including research conducted by federal agencies (e.g., Department of
    Health and Human Services' agencies such as NIH and CDC, the FDA, and
    USDA's research agencies, including the Human Nutrition Centers of the
    Agricultural Research Service) to the dietary needs of the consumer and
    uses that information to promote the health of all Americans. Please
    explain how this information is transmitted directly to Americans.
        Answer. The Center works with USDA's Agricultural Research Service
    (ARS) and the Department of Health and Human Services (HHS) to produce
    Nutrition and Your Health: Dietary Guidelines for Americans. Title III
    of the National Nutrition Monitoring and Related Research Act of 1990
    (7 U.S.C. 5341) requires the Secretaries of Agriculture and HHS to
    jointly publish every five years a report entitled, Dietary Guidelines
    for Americans. The Dietary Guidelines represent the Federal
    Government's policy on nutrition. They provide nutritional and dietary
    information and guidelines for the general public, based on the
    preponderance of current scientific and medical knowledge, including
    research originating from ARS and HHS. In 1997, the Center worked with
    ARS to develop and finalize a Memorandum of Understanding with HHS to
    provide a framework for cooperation between USDA and HHS for preparing
    the fifth edition of Nutrition and Your Health: Dietary Guidelines for
    Americans to be released in the year 2000. The Center vigorously
    promotes use of the Dietary Guidelines in all nutrition education
    programs within the Department and in the Federal and private sectors.
    The Center has made copies of the bulletin Nutrition and Your Health:
    Dietary Guidelines for Americans available to consumers via the
    Consumer Information Center in Pueblo, Colorado and over the Internet.
    The Center initiated a popular fact sheet series, Nutrition Insights,
    targeted to nutrition and media professionals. The series is designed
    to respond in a timely manner to consumer confusion over ``junk
    science'' or other current issues, based on Federal dietary guidance.
    Center staff also build Federal dietary guidance principles into
    speeches, articles, and numerous interviews with the popular press on
    Dietary Guidelines concepts.
        The fourth edition of Nutrition and Your Health: Dietary Guidelines
    for Americans, released in 1995, included the Food Guide Pyramid
    graphic for the first time. The Food Guide Pyramid was developed by
    USDA and released in 1992 as a tool that consumers can use to implement
    Dietary Guidelines recommendations in their own diets. The Food Guide
    Pyramid has been extensively used by Federal Agencies in nutrition
    education programs and materials. The Food Guide Pyramid brochure is
    available to consumers via the Government Printing Office and over the
    Internet. A recent survey of consumers by the American Dietetic
    Association found that about 70 percent of respondents are familiar
    with the Food Guide Pyramid graphic. The Center is continually updating
    the science base that supports the Food Guide Pyramid, to incorporate
    significant changes in food composition, food consumption, and food
    technology, as well as changes in nutrition recommendations such as the
    new Dietary Reference Intakes being issued by the National Academy of
    Sciences' Food and Nutrition Board.
        The Center serves as Acting Chair of and provides staff for the
    Dietary Guidance Working Group (DGWG) of the Human Nutrition
    Coordinating Committee. The Center's leadership fulfills USDA's
    responsibility to ensure that the Federal Government ``speaks with one
    voice'' when issuing dietary guidance, as mandated by Title III of the
    National Nutrition Monitoring and Related Research Act of 1990. The
    DGWG reviews all USDA and HHS publications and materials that contain
    dietary guidance for the general population to ensure consistency with
    the Dietary Guidelines for Americans. In fiscal year 1997, fifteen
    draft publications produced by USDA and DHHS Agencies were reviewed.
        The Center is a liaison member of the Dietary Guidelines Alliance.
    The Alliance is a coalition of food industry, health organizations, and
    government agencies to help consumers implement the Dietary Guidelines.
    The Alliance is an example of how the Center has been able to extend
    its limited resources to promote the Dietary Guidelines. The Alliance
    represents a unique public-private partnership to improve the dietary
    behavior of Americans. The messages and materials developed through the
    partnership will be used by health professionals, industry, and
    government in education, counseling, and communications initiatives.
        Question. The fiscal year 1999 budget requests an additional
    $252,000 to support the Publication of the Dietary Guidelines for
    Americans, which the law requires USDA and the Department of Health and
    Human Services (HHS) to publish every five years. How does USDA and HHS
    share this cost? And, which USDA agency was responsible for the cost of
    publishing Dietary Guidelines for Americans in each of the past years
    it was published (prior to the creation of the Center)?
        Answer. The cost of publishing the Dietary Guidelines for Americans
    can be broken down into two categories. The first category is the cost
    of reviewing research and completing supporting documents for the
    Dietary Guidelines Advisory Committee (DGAC) and publishing the
    Committee's report. The DGAC is a panel of eleven nationally-recognized
    experts in nutrition and health. Authority for the Committee is
    provided by 42 U.S.C. 217A, Section 222, of the Public Service Act, as
    amended. Committee members serve without pay, but do receive
    reimbursement for travel and per diem. This cost has been shared
    between USDA and HHS, with each Department alternating in taking the
    lead responsibility for these expenses. For example, in 1995 HHS was
    primarily responsible for these costs, and for the 2000 DGAC, USDA will
    bear the primary responsibility for these costs.
        The second category is the cost of publishing and distributing the
    consumer bulletin, Nutrition and Your Health: Dietary Guidelines for
    Americans. This cost has always been primarily borne by USDA, with HHS
    contributing funds by riding the print order for the bulletin. In 1980,
    1985, and 1990, USDA's Human Nutrition Information Service paid for
    this cost. In 1995, the Center for Nutrition Policy and Promotion paid
    for this cost, as it will do again in 2000.
        In 1995, the costs for design and printing of the bulletin were
    approximately $115,000. The Center is requesting $252,000 in additional
    funds for fiscal year 1999 to support development and publication of
    the Dietary Guidelines bulletin because additional consumer research is
    essential before the next edition of the Dietary Guidelines is
    released. There has been little research conducted to assess consumer
    understanding and perceived usefulness of the Dietary Guidelines
    bulletin since the mid-1980's. The 1995 DGAC specifically requested in
    its report that the Departments gather information about consumer
    understanding of the Dietary Guidelines messages prior to convening the
    next DGAC. The Center has requested funds to conduct a comprehensive
    study to focus on: (1) a thorough review of the available research data
    and information on consumer understanding and use of the bulletin and
    Dietary Guidelines concepts; (2) telephone interviews with nutrition
    educators to assess uses of the Dietary Guidelines concepts and the
    1995 bulletin; and (3) market research with consumers. Results of this
    research will be made available to the next DGAC and will also be used
    by the Center in its nutrition guidance efforts.
        Question. Please explain the U.S. Action Plan on Food Security
    which I understand is being developed by the Center for Nutrition
    Policy and Promotion.
        Answer. The domestic section of the U.S. Action Plan is being
    jointly developed by Under Secretary for Food, Nutrition, and Consumer
    Services, and the Assistant Secretary for Health of the Department of
    Health and Human Services (HHS). A technical working group is co-
    chaired by a USDA representative from the Center for Nutrition Policy
    and Promotion and a HHS representative and includes representation from
    the Department of Veterans Affairs, Bureau of Indian Affairs, Census
    Bureau, Bureau of Labor Statistics, Administration on Aging,
    Environmental Protection Agency and other agencies. The domestic
    section of the Plan builds on the Center's September 1996 report,
    Nutrition Action Themes for the United States, and the World Food
    Summit's Declaration and Plan of Action adopted in Rome in November
    1996. The papers in the Plan are for discussion purposes and draw views
    from the Federal government, States, and private entities. The Action
    Plan presents no new government commitments and is to be completed by
    Spring, 1998.
        Question. I understand that the Center for Nutrition Policy and
    Promotion has been assigned the responsibility of redesigning the Food
    Stamp Program Thrifty Food Plan. Please explain this effort and, if it
    requires any funding, whether these costs are being borne by the Center
    or the Food Stamp Program and why.
        Answer. The Center is responsible for the development of the USDA
    food plans, including the Thrifty Food Plan (TFP) which serves as the
    nutritional basis for food stamp benefit levels. The TFP specifies
    quantities of different types of food that households may use to
    provide nutritious meals and snacks at relatively low cost. Currently,
    the 1983 TFP Market Basket is used as the basis of the food stamp
    allotment and its cost is updated each year for inflation. The Center
    is updating the 1983 TFP to reflect current food in the market place
    and current dietary guidance including dietary recommendations for
    total fat, saturated fat, and cholesterol. An interagency working group
    consists of representatives of the Center, the Food and Nutrition
    Service (FNS), and the Economic Research Service (ERS) was convened and
    met periodically to provide overall guidance.
        Phase I of the revision uses a mathematical programming model and
    incorporates current dietary guidance along with information on current
    consumption patterns to generate, a market basket providing the foods
    with which a low cost nutritious menu can be prepared.
        Phase II utilizes these market basket foods to develop two weeks of
    household menus. To this end, CNPP nutritionists and economists are
    working with researchers from Penn State University to test whether it
    is feasible to produce menus and recipes that meet the nutritional and
    costs constraints of a revised TFP and, at the same time, are
    acceptable to the intended audience. In particular, the researchers
    have developed several recipes, tested them in a food laboratory for
    sensory acceptability and incorporated them into one-week menus. The
    menus and recipes for one week are currently being tested for overall
    acceptability with 4 food stamp households. It is anticipated that
    additional menus should be completed in the next few months at which
    time they will also be field tested.
        The TFP revision is scheduled for completion in fiscal year 1998.
    Most costs are borne by the Center which (as its predecessors) has been
    charged with this responsibility. Contract costs of $169,481 to support
    the Penn State University work and a $50,000 transfer of funds to ERS
    to develop a price data base needed for the update of the TFP were
    borne by FNS, even though the Center directed these subprojects.
        Question. Please provide a separate object class breakdown for each
    of fiscal years 1997, 1998 and 1999 for the Food and Nutrition Service
    food program administration account, and, separately, for the Center
    for Nutrition Policy and Promotion.
        Answer. The information is provided for the record.
        [The information follows:]

              FOOD AND NUTRITION SERVICE--CLASSIFICATION BY OBJECTS
                       [1997 and estimated 1998 and 1999]
    ------------------------------------------------------------------------
                                           1997         1998         1999
    ------------------------------------------------------------------------
         Personnel compensation:
          11 Total personnel              76,341       76,939       79,278
              compensation
          12 Personnel benefits           14,805       14,923       15,371
          13 Benefits for former              57           58           59
              personnel
                                    ----------------------------------------
               Total pers. comp.          91,203       91,920       94,708
                and benefits
                                    ========================================
         Other objects:
          21 Travel                        2,422        2,577        2,814
          22 Transportation of               135          144          157
              things
        23.1 Rent payments to GSA    ...........  ...........  ...........
        23.2 Rental payments to              307          326          357
              others
        23.3 Communications,               1,828        1,945        2,123
              utilities, and misc.
              charges
          24 Printing and                    258          274          300
              reproduction
        25.1 Advisory and                      2            2            2
              assistance services
        25.2 Other services                4,056        4,313        4,711
        25.3 Purchase of goods and         1,044        1,111        1,212
              services from
              Government accounts
        25.4 Operation and                   295          314          342
              maintenance of
              facilities
        25.5 Research and            ...........  ...........  ...........
              development contracts
        25.7 Operation and                   574          611          667
              maintenance of equip
          26 Supplies and materials        1,361        1,448        1,582
          31 Equipment                     2,409        2,563        2,797
          41 Grants, subsidies and   ...........  ...........  ...........
              contributions
          42 Insurance claims and             57           62           67
              indemnities
          43 Interest and dividends            8            9            9
                                    ----------------------------------------
               Total other objects        14,756       15,699       17,140
                                    ========================================
               Total direct              105,959      107,619      111,848
                obligations
    ------------------------------------------------------------------------

    CENTER FOR AND NUTRITION POLICY AND PROMOTION--CLASSIFICATION BY OBJECTS
                       [1997 and estimated 1998 and 1999]
    ------------------------------------------------------------------------
                                           1997         1998         1999
    ------------------------------------------------------------------------
         Personnel compensation:
          11 Total personnel               1,648        1,648        1,685
              compensation
          12 Personnel benefits              379          379          385
          13 Benefits for former     ...........  ...........  ...........
              personnel
                                    ----------------------------------------
               Total pers. comp.           2,027        2,027        2,070
                and benefits
                                    ========================================
         Other objects:
          21 Travel                           20           20           20
          22 Transportation of                 2            2            2
              things
        23.1 Rent payments to GSA    ...........  ...........  ...........
        23.2 Rental payments to      ...........  ...........  ...........
              others
        23.3 Communications,                   8            8            8
              utilities, and misc.
              charges
          24 Printing and                     91           91           91
              reproduction
        25.1 Advisory and            ...........  ...........  ...........
              assistance services
        25.2 Other services                   36           36          317
        25.3 Purchase of goods and   ...........  ...........  ...........
              services from
              Government accounts
        25.4 Operation and           ...........  ...........  ...........
              maintenance of
              facilities
        25.5 Research and            ...........  ...........  ...........
              development contracts
        25.7 Operation and           ...........  ...........  ...........
              maintenance of
              equipment
          26 Supplies and materials           11           11           11
          31 Equipment                        23           23           23
          41 Grants, subsidies and   ...........  ...........  ...........
              contributions
          42 Insurance claims and    ...........  ...........  ...........
              indemnities
          43 Interest and dividends  ...........  ...........  ...........
                                    ----------------------------------------
               Total other objects           191          191          472
                                    ========================================
               Total direct                2,218        2,218        2,542
                obligations
    ------------------------------------------------------------------------

                               food stamp program
        Question. Would you please give us a summary report on the progress
    we've made to date with the electronic benefits transfer (EBT) delivery
    of Food Stamps--what we've achieved; what problems, if any, we've
    encountered; and when you expect the rest of the states to implement
    EBT Food Stamp delivery systems.
        Answer. Currently, there are 30 States with operating Electronic
    Benefit Transfer (EBT) systems and 16 of these systems are Statewide.
    Approximately 43 percent of all Food Stamp Program benefits are now
    delivered through EBT systems. If all State plans are met, we expect
    there to be 41 States (including the District of Columbia) with
    operating EBT systems by the end of fiscal year 1998. We also expect to
    meet the legislative mandate to have all States operating EBT systems
    by October 1, 2002.
        As States move forward and implement their EBT systems, they have
    benefited from those States that have gone before them, and
    implementation has become more routine. Nevertheless, a substantial
    effort is still required of any State to actually get these systems up
    and running. Issues each State must continue to address include
    achieving cost neutrality while providing satisfactory service to their
    recipients, and entering into agreements with the food retailers in
    their State that are mutually satisfactory to both the State and the
    retailers.
        Question. The fiscal year 1999 request for the Food Stamp Program
    includes $6.7 million for employment and training. What success have we
    had with Food Stamp Program employment and training activities?
        Answer. The $6.7 million increase is to cover basic inflation that
    State's Food Stamp Employment and Training (E&T) Programs will
    experience in fiscal year 1999.
        Federal E&T funding was fixed at $75 million a year through fiscal
    year 1996. Funding in fiscal year 1997 increased to $79 million and
    then in fiscal year 1998 to $212 million to meet the challenges of the
    Balanced Budget Act. States have generally chosen to serve as many
    recipients as possible through the relatively low cost job search
    component. Annually, this has resulted in over 1 million recipients
    being asked to take responsibility in seeking employment in order to
    participate in the Food Stamp Program.
        Question. In each of the past three fiscal years, and in fiscal
    year 1998 to date, how many Food Stamp recipients have been trained and
    employed? What has been the cost per participant of these activities?
        Answer. A table is provided for the record that depicts the number
    of mandatory and volunteer participants placed into Food Stamp
    Employment and Training (E&T) Program activities. The cost per
    participant figure represents total Federal 100 percent E&T grant
    expenditures, plus total Federal and State administrative expenditures
    over and above the 100 percent grant, divided by the number of
    participants. The fiscal year 1998 numbers are taken from preliminary
    first quarter data (October, November, December 1997).
        [The information follows:]

    ------------------------------------------------------------------------
                                                                   Cost per
                    Fiscal year                   Participants   participant
    ------------------------------------------------------------------------
    1995.......................................       1,474,796        $143
    1996.......................................       1,377,148         163
    1997.......................................       1,221,219         164
    1998.......................................         252,825         154
    ------------------------------------------------------------------------

        While most of the above E&T participation includes job search, the
    Food and Nutrition Service does not collect information on the outcome
    of the job search activity.
        Question. The prepared testimony indicates that the Administration
    will submit a proposal to reclassify claims against food stamp
    recipients for erroneous benefit issuances as State debt rather than
    Federal debt. You indicate that this proposal will be cost-neutral in
    the immediate future but, if States respond to proposed incentives,
    collections may be substantially increased in the long run. What
    response would be necessary from the States and what level of
    collections could be achieved in the out-years?
        Answer. We are working on the details of a proposal to enhance
    state incentives to collect food stamp claims. The proposed incentives
    allow certain States to retain an increased share of collected claims.
    Some States would be rewarded for improved claims collections. Other
    States with exceptionally high claims collection rates would also be
    rewarded. It is reasonable to expect that States will respond to the
    opportunity to retain a higher share of collections by increasing their
    claims collections efforts.
        However, at this point the incentive plan is structured so that
    incentives are paid only if total collections increase from the base
    year. Thus, there is no risk to the Federal government if claims
    collection increases fail to materialize. On the other hand, if States
    do increase their claims collection efforts and successfully collect a
    higher share of their overissuance, both the States and the Federal
    government share in the increased collections.
        This proposal is still under development within the Administration
    so some of its features may change as additional discussion takes
    place.
                            child nutrition programs
        Question. Secretary Watkins, you indicate that you will be
    submitting cost-neutral legislation to reauthorize the Child Nutrition
    programs, which will include proposals to improve the operation,
    management and integrity of the National School Lunch and School
    Breakfast Programs, and the Child and Adult Care Food Programs. Please
    summarize your major proposals to improve the operation, management and
    integrity of these programs.
        Answer. The Department's reauthorization legislation submitted to
    the Congress on March 10, 1998 contains a number of proposals which
    would improve the management and integrity of these programs. First,
    State agencies would be given the authority to retain up to one-half of
    the funds recovered in State conducted audits or reviews to be used for
    program improvements under the Child Nutrition Programs. This proposal
    is being made in conjunction with one under which the current authority
    for funding of State audits under the Child and Adult Care Food Program
    (CACFP) would be removed. The CACFP is the only Child Nutrition Program
    in which separate funding for audits is available and it has been the
    Department's experience that numerous States have not been able to use
    this funding effectively and as much as 30 percent has not been used at
    all. We believe that these two proposals combined will result in
    improved program oversight and increased management effectiveness at
    the State level.
        The Department is also proposing to remove beginning in fiscal year
    2001 the requirement in current law that the Department directly
    administer local level Child Nutrition Programs. States would be
    required to assume administration of these programs if they wished to
    have them available within their States. The Department believes that
    local level program operators and program beneficiaries would be better
    served by State agencies that are closer to and more knowledgeable
    about the organizations and individuals participating in these
    programs.
        With regard to State Administrative Expense (SAE) funding, the
    proposals would eliminate the ten percent transfer limitation which
    unnecessarily ties the hands of State agencies and, if removed, would
    allow States to determine where such funds can be best utilized.
        With regard to the National School Lunch and School Breakfast
    Programs, the Department is proposing to require that all schools
    participating in the National School Lunch and School Breakfast
    Programs obtain twice yearly health and safety inspections covering
    their food service operations. This is intended to help ensure that
    meals provided to school children are prepared and served in the most
    suitable environment, consistent with State or local standards.
        In the CACFP, the Department is proposing that categorical
    eligibility for free meals for Even Start participants be reinstated to
    avoid duplicative eligibility determinations; timeframes for State
    approval of institution applications be relaxed somewhat to allow for
    better State-level evaluations of applications; timeframes for
    participation by institutions ``moving towards tax exempt status'' be
    revised to enhance State oversight of participation by such
    institutions; and the Department be authorized to reserve a small
    amount of funds each year to help ensure proper implementation of the
    family day care home tiering requirements and to provide for overall
    improved program quality and integrity.
        Question. What funding is included in the fiscal year 1999 request
    for the National Food Service Management Institute (NSFMI)?
        Answer. The budget includes two million dollars for the NSFMI in
    1999.
        Question. The National Food Service Management Institute (NFSMI)
    has played an important role in the school meals initiative. Please
    describe the cooperative agreements with NSFMI funded with the $500,000
    provided for this purpose for fiscal year 1998.
        Answer. The cooperative agreements funded with the $500,000
    provided in fiscal year 1998 are continuations of two ongoing projects:
    the Hands On Team and the Customer Service Help Desk. The Hands on Team
    is a two year pilot project which supports the implementation of the
    nutrition goals of the School Meals Initiative for Healthy Children by
    providing a cadre of consultants who will assist school food
    authorities with technical assistance in all areas of food service,
    including menu planning, nutrient analysis, standardized recipes, food
    preparation, food storage, food purchasing, equipment, action plans,
    merchandising ideas and nutrition education. Site visits began in the
    Fall of 1997 and preliminary evaluations show overwhelming interest
    from school food authorities. Funding of this pilot project included
    100 site visits, and as of October 31, 1997 requests for assistance had
    exceeded this number. Since a number of these requests for assistance
    had to be declined, 1998 funds will be used to fund site visits to some
    of those schools beyond the 100 initially included in the pilot project
    who had requested assistance.
        The Customer Service Help Desk project, which provides technical
    assistance and materials via a toll free telephone number and Internet
    site, is entering its fourth year. Currently the Help Desk averages 250
    questions per month.
        Question. Of the $10 million requested for the school meals
    initiative for fiscal year 1999, how much is for cooperative agreements
    with the NSFMI and what work is planned for fiscal year 1999?
        Answer. While the specific amount which will be available in fiscal
    year 1999 has not been determined, we anticipate an additional $500,000
    in funds for cooperative agreements with the National Food Service
    Management Institute (NFSMI). Several projects have been identified for
    possible funding. It is anticipated that the Customer Service Help Desk
    would continue through 1999, although the level of funding may be
    reassessed based on service levels. The NFSMI, in cooperation with the
    Food and Nutrition Service (FNS), is expanding their current
    publications role to include the distribution on a cost recovery basis,
    of a number of FNS publications. One of the publications which will be
    turned over to the NFSMI for distribution is Serving It Safe, an
    extremely popular food safety guide. There is a need for this
    publication to be updated regularly in order for the food safety
    guidance to remain current, and the NFSMI has agreed to assume this
    task. Distance based training in the area of cooperative purchasing,
    with concurrent Internet chat rooms are also being considered. In
    addition, the NFSMI is currently working on some financial management
    materials for school food service, which could be adopted by State
    agencies. These would be instructional materials which would provide
    standardization of documentation and consistency in reporting and
    record keeping at the local level.
        The NFSMI and FNS work together with the NFSMI's National Advisory
    Committee to determine major projects and priority needs. The National
    Advisory Committee is comprised of representatives from State agencies,
    local programs, professional organizations, universities, food
    industries and Federal agencies. The yearly meeting of the committee is
    scheduled for March 27-29, 1998.
        Question. Please provide a detailed accounting on how the funds
    made available for the school meals initiative have been used in each
    of fiscal years 1996, 1997 and 1998, and what is proposed for fiscal
    year 1999. Identify and include the use of any unobligated balances
    from funds provided in previous fiscal years.
        Answer. The following information is submitted for the record.
    Table 1 identifies spending categories by year in which the funds were
    appropriated. The fiscal year 1998 allocations represent the current
    spending plan and the fiscal year 1999 allocations are projected. Table
    2 provides a breakdown of funds obligated in the year in which
    appropriated and funds carried over into the next fiscal year.
        [The information follows:]

                                 TABLE 1.--SCHOOL MEAL INITIATIVE: SPENDING BY CATEGORY
    ----------------------------------------------------------------------------------------------------------------
                                                                               Fiscal year--
                                                     ---------------------------------------------------------------
                                                                                           1998            1999
                                                           1996            1997         (estimate)      (estimate)
    ----------------------------------------------------------------------------------------------------------------
    I. Food service training and technical
     assistance:
        Technical assistance materials..............      $1,914,756      $1,105,027      $1,682,192      $3,200,000
        Print and electronic food service resource            97,755         385,200         400,000         400,000
         systems....................................
        NFSMI cooperative agreement for food service         250,000         800,000         500,000         500,000
    II. Children's education resources: In-school          3,640,958       1,163,500         868,913   \1\ 1,300,000
     education materials and community education
     materials......................................
    III. Food service training grants to States.....       1,965,703       4,000,000       4,000,000       4,000,000
                                                       \2\ 1,629,278   \2\ 2,120,722  ..............  ..............
    IV. USDA/FCS direct training and education......          12,663         360,200          27,050          50,000
    V. Children's communications and technology.....          91,600           5,000  ..............  ..............
    VI. Team nutrition partnership support:                  168,080          54,475          15,525          50,000
     Resources for team nutrition schools and
     partnership network support....................
    VII. Evaluation and administration..............         685,451           5,876         506,320         500,000
                                                     ---------------------------------------------------------------
          Total.....................................      10,456,244      10,000,000       8,000,000  \3\ 10,000,000
    ----------------------------------------------------------------------------------------------------------------
    \1\ Includes resources for the Child and Adult Care Food Program (CACFP) and Summer Food Service Program (SFSP).
    \2\ $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. Both fiscal year 1996
      Carryover funds and fiscal year 1997 Current year funds were used.
    \3\ Includes $2 million to fund School Food Service Systems Improvement Initiative to improve business practices
      in school food service.

                                     TABLE 2
    ------------------------------------------------------------------------
                                                               Funds carried
                                                   Funds         over and
            Fiscal year appropriated           obligated in    obligated in
                                                   year          the next
                                               appropriated     fiscal year
    ------------------------------------------------------------------------
    1996....................................      $4,794,060      $5,662,184
    1997....................................       7,955,722       2,044,278
    1998....................................       8,000,000  ..............
    1999....................................      10,000,000  ..............
    ------------------------------------------------------------------------

        Question. The budget proposes a decrease of $4 million reflecting
    expiration of the Kentucky/Iowa demonstration projects. Why? What
    impact will this have on those now being served through each of these
    projects?
        Answer. The Department's budget submission for the Child Nutrition
    Programs was a ``current services'' proposal. However, the Department's
    reauthorization bill for the Child Nutrition Programs, which was
    submitted to the Congress after the budget request, proposes that the
    Kentucky/Iowa demonstration projects be made a permanent part of the
    Child and Adult Care Food Program (CACFP) in those two States. If this
    proposal is approved, the benefits currently available to children in
    Kentucky and Iowa under the demonstration project would continue to be
    available under the CACFP.
        Question. For each of fiscal years 1997 and 1998, please provide
    detail on the food service training grants awarded to states,
    identifying the state, the amount of the grant award, a brief
    description of the project. For each of these years, please list the
    projects which have been awarded food service training grants.
        Answer. The information is submitted for the record.
        [The information follows:]
               1997 team nutrition (tn) training grant summaries
    Arizona, $162,780
        Arizona Department of Education in collaboration with a training
    coordinator will develop a three-day train-the-trainer module that will
    include principles of adult learning, development and implementation of
    school-based comprehensive health and nutrition programs, overview and
    practical application of recommended nutrition education curriculum and
    instructional strategies for classroom and food service staff to
    support the classroom to cafeteria link of nutrition education and
    healthy food choices. They will also establish a cadre of trainers/
    mentors to provide a minimum of two additional TN Training workshops
    and technical assistance to school districts developing comprehensive
    school health programs to promote lifelong healthy eating habits in
    children and adolescents. They also plan to provide Local Level TN
    Training Grants to a minimum of 15 school districts with the majority
    of their schools enrolled as Team Nutrition Schools for the development
    of model comprehensive school health programs to promote lifelong
    healthy eating habits in children and adolescents.
    California, $270,400
        The California Department of Education will utilize funding for
    three separate projects: Local TN Training Grants; a CD-ROM Development
    for Nutrient Standard Menu Planning (NSMP) Training; and a Portable
    Computer Lab for NSMP Training. The Local TN Training Grants will be
    designed to provide comprehensive, action-oriented delivery of training
    programs at the district and school level to provide training for
    teachers on the use of Team Nutrition curriculum; develop garden-
    enhanced nutrition education projects; and provide professional
    development opportunities for school nutrition staff. Development of a
    NSMP Course on CD-ROM will facilitate hands-on computer experience and
    will improve the status of the school meals by training school
    nutrition directors and menu planners to comply with the School Meals
    Initiative for Healthy Children and meet the goals identified by the
    USDA. California will also establish a cost-effective portable computer
    lab to enable the Department of Education, Nutrition Education and
    Training (NET) Program to significantly increase its ability to offer
    NSMP Training in support of the School Meals Initiative for Healthy
    Children.
    Illinois, $168,520
        The Illinois Team Nutrition Training Grant involves three distinct
    activities aimed at assisting Illinois schools in adopting a school
    wide approach to promoting healthy eating. The first activity, the
    comprehensive healthy education project, will be a collaborative effort
    between Illinois NET and the Illinois Department of Public Health.
    School staff will be provided with essential information on how to
    develop and implement a school health program that promotes healthy
    eating through two training workshops. NET will also provide
    competitive local grants to 10 school districts in order to enable them
    to plan and implement health programs that will serve as models for all
    schools. The second activity will provide Illinois elementary and
    junior high schools with access to fun, interactive, educational
    exhibits through the use of mobile education units. The third activity,
    development of a NET web site, will increase the access of educators
    and food service staff to NET resources, information and services. The
    web site will also contain up-to-date information on Team Nutrition
    activities and grant opportunities in Illinois.
    Iowa, $299,000
        Iowa's proposal seeks to expand the availability of training
    opportunities as well as the number of trainers. The project will
    accomplish these goals by applying the energy, resources and broad
    connections of a Statewide coalition of public sector agencies and the
    resources of the State NET Program to develop and provide the food
    service training/coalition building capacity of an existing,
    sustainable framework, i.e., Area Education Agencies (AEA's). Three
    strategies will be used in this grant. First, the NET Coordinator and
    Iowa Nutrition Education Network staff will develop and implement a
    competitive grant program for AEA's. Six AEA's will be chosen to assist
    at least five school districts in their area to implement TEAM
    Nutrition. A second strategy will be to provide direct training to food
    service staff in the 30 school districts that implement TEAM Nutrition
    as part of this grant. They will contract with the National Food
    Service Institute to conduct the master trainer workshop. The Iowa
    School Food Service Association has agreed to organize a cadre of 30
    members who will also complete this training and conduct ten hands-on
    training sessions around the State. The third strategy will be to seek
    private funding to develop a Statewide media campaign that will build
    on and feature the TEAM Nutrition concepts being developed at the
    local, Regional and National levels.
    Kansas, $192,260
        Kansas is implementing activities to enhance and expand Team
    Nutrition and the Kansas Comprehensive Training System (KCTS) for
    School Nutrition Professional Development. These activities will
    include: (1) developing a standardized, comprehensive, job-category-
    based framework for Kansas' formal training program; (2) forming a
    State organization of Team Nutrition Supporters to provide a
    comprehensive directory of resources and an annual Team Nutrition Event
    packet; (3) implementing and supporting 10 model programs to
    demonstrate healthy school meals based upon the ``Keys to Excellence:
    Standards of Practice for Nutrition Integrity''; and (4) providing
    incentives to 200 additional Kansas schools to implement nutrition
    education which supports the cafeteria-classroom link.
    Maine, $94,562
        The Maine Department of Education will coordinate with the Maine
    Technical College System to enhance the delivery of a sustainable
    training program for school nutrition personnel Statewide and offer
    expanded training opportunities. The program will offer three levels of
    training. The first level of basic instruction will be expanded to
    include an orientation to school food service course. The second level
    of skill development will use 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. Level three, continuing
    education, will be expanded to recognize the expanded skill training
    courses in the tri-annual certificate renewal process. Maine will also
    provide Local TN Training Grants to eight school systems to develop a
    team approach to implementing the Team Nutrition Schools principles in
    their educational programs. Also, Maine will continue their partnership
    with the Maine Nutrition Network and expand their efforts targeted to
    low income schools by providing parallel resources to any Team
    Nutrition Schools.
    Maryland, $300,000
        The Maryland Team Nutrition Training Project will develop a
    Statewide cadre of trained resource professionals to assist schools to
    conduct effective nutrition education activities. At least 50
    Cooperative Extension and school food and nutrition service
    professionals will be trained to assist Team Nutrition schools in five
    geographic regions of the State. Other project objectives include:
    increasing the number of Team Nutrition schools in Maryland to 40
    percent of all public schools; conducting comprehensive training in
    nutrition education, food safety and the School Meals Initiative;
    developing a sustainable relationship with the Maryland Cooperative
    Extension Service in order to increase available technical assistance
    to schools and awarding a minimum of eight competitive training mini-
    grants to both local educational agencies and community organizations.
    Michigan, $299,952
        The Michigan Department of Education in collaboration with Michigan
    State University Extension (MSUE) and the Michigan Team Nutrition
    Steering Committee has integrated a two component strategy of peer
    mentor/coaching to assist and support school food service directors
    train their staff (on-site) with the Healthy Cuisine for Kids (HCK)
    curriculum; and comprehensive multi-dimensional support for Michigan
    Team Nutrition Schools. This grant project is designed to increase the
    number of Team Nutrition schools, and further assist enrolled Team
    Nutrition schools build strong partnerships with communities, as they
    continue to actualize Team Nutrition. They plan on accomplishing this
    by training peer mentor/coaches in HCK, training 420 food service teams
    in a one day train-the-trainer workshop, offering on-site technical
    support, using newsletters to train and sustain Team Nutrition
    Partners, offering five school districts Demonstration Training Mini-
    Grants, enhancing Team Nutrition through Partnering and Support with
    MSUE, and developing and using a World Wide Web for Team Nutrition
    sustainability.
    Minnesota, $292,220
        The purpose of this grant is to address a wide range of local
    training needs in order to implement the Healthy School Meals
    Initiative. The project consists of three parts. First, the development
    and provision of effective, local-use training resources, which
    includes the development of a videotape training resource packet, and
    conducting 20 statewide workshops for school food service managers,
    supervisors and directors on the requirements and successful
    implementation of Food Based Menus and NuMenus. Second, development of
    improved resource materials and services using new technologies,
    including a website to provide access to digital versions of the
    materials developed. Third, through a competitive grant process,
    provide four to six local Team Nutrition Training grants to school
    districts to develop and implement model district-wide training plans
    and nutrition education programs.
    New Hampshire, $107,143
        The New Hampshire Department of Education plans to provide between
    2 and 20 grants to local school districts for innovative district-wide
    training programs which meet Team Nutrition Training Grants criteria.
    They also plan to establish a partnership with the New Hampshire
    Dietetic Association and provide a training session for dietitians
    regarding the School Meals Initiative and encourage their involvement
    in assisting schools with nutrition committees, developing nutrition
    policies and Team Nutrition projects. Other projects include expanding
    services which began through a partnership with the Vermont Department
    of Education by providing a management seminar for New Hampshire and
    Vermont food service directors and managers. The partnership with the
    New Hampshire School Food Service Association will be strengthened by
    having them provide the management seminar and provide the materials
    and training for ``Meeting the Challenge'' to school food service
    staff. In addition, New Hampshire plans on contracting with the
    National Food Service Management Institute for three additional
    components of a NET needs assessment to expand the information
    available to the NET Coordinator when planning future training efforts.
    New Jersey, $189,640
        The New Jersey proposal is a joint venture involving two major
    partners: the Nutrition Education and Training Program and the Bureau
    of Child Nutrition. A number of secondary partners including the
    Academy of Professional Development, the Dairy Council, the American
    Cancer Society, the New Jersey Parent Teacher Association and the New
    Jersey School Food Service Association are also involved. The proposal
    has three goals: strengthen the State's training capacity, establish
    classroom-cafeteria link, and improve project management techniques.
    The building training capacity objectives are: expanding the New Jersey
    Professional Development and Training Cadre; conducting statewide
    training for school food service personnel; establishing and
    maintaining three regional computer assistance menu analysis sites and
    USDA Internet site access; developing and disseminating a quarterly
    newsletter; conducting statewide and regional school food service
    institutes; and developing and disseminating user-friendly handbook for
    Food Based Menu Planning Options. The classroom-cafeteria link will
    involve expanding the Power 3 Club Manual and developing quarterly
    newsletters and linking parents to Power 3 Club by regional Super
    Saturdays and TN Calendars and academic activities.
    North Dakota, $77,144
        The training project designed by the North Dakota Department of
    Public Instruction will utilize several approaches which will allow the
    agency to continue and enhance the sustainable training infrastructure
    initiated with funding received under the 1995 Team Nutrition Training
    Grant. The training activities proposed in the grant proposals are: (1)
    conduct focused technical assistance/training meetings for school
    nutrition personnel; (2) conduct enhanced training for cadre members;
    (3) conduct culinary skills workshops for school nutrition personnel;
    and (4) develop and broadcast a third satellite training seminar. In
    addition, provide funds to assist in providing nutrition information to
    students.
    Oregon, $129,020
        Oregon's TN Training Grant proposes to conduct train-the-trainer
    workshops to strengthen the NETPRO Oregon training cadre in order to
    provide a series of three comprehensive, interrelated School Meals
    Initiative (SMI) training and technical assistance events for Oregon's
    school food authorities. The first event is Healthy School Meals
    Workshop which is an eight hour train-the-trainer workshop for food
    service directors/managers and key food service staff to improve
    knowledge and skills in the areas of resources, nutrition, culinary
    skills, and menu planning. The second event is Mission: Nutrition!
    which is a day long nutrition extravaganza involving the entire school
    community. The goal is to create a nutrition awareness culture
    throughout the school community which supports the production of
    quality meals meeting USDA nutrition requirements and promotes
    nutrition education for students. The third event is a school food
    authorities SMI review which focuses on each school food authorities
    progress towards meeting SMI regulations.
    Rhode Island, $299,886
        The Rhode Island grant project will expand on the current Team
    Nutrition Training Program by launching the TNT Institute. The
    Institute will be a resource for school districts to use for food
    service training and the development of nutrition education activities
    in the classroom. It will be able to address the training needs of
    school food authorities. The Institute will also be responsible for
    increasing the involvement and empowerment of parents and community
    members to play an active role in improving the diet of children
    through schools.
    South Carolina, $300,000
        The South Carolina grant will expand and refine the training
    infrastructure to support systematic and consistent training and
    technical assistance by establishing 12 training centers to provide
    training for directors, operators and managers for continuous
    improvement of meal quality and service to students and coordination of
    technical assistance. The project is also designed to establish
    community-based allowances to advocate for community and media support
    for Healthy School Meals through training school food service directors
    in social marketing and social learning techniques. It will also
    establish a demonstration program in four middle schools for building
    collaborate program and partnerships that support healthy school meals
    to serve as models to be replicated by other middle schools. Also, they
    will deliver Target Your Market training to assist directors and
    managers in marketing school nutrition programs.
    South Dakota, $299,886
        The South Dakota Department of Educational and Cultural Affairs
    proposes a three-pronged program to meet the intended purpose of the
    Team Nutrition Training Grant for Healthy School Meals. The Program
    design includes: (1) a ``Summer Institute'' experiential training
    program offering academic credit for school-based teams to receive
    comprehensive training in team-based nutrition education with a
    continued follow-along technical assistance component to assist teams
    to carry out school-based programs; (2) a supplemental grants program
    for the selected team schools in South Dakota to develop and implement
    their team-based solutions for nutrition education; and (3)
    comprehensive enhancement of nutrition education activities for Food
    Service Certification Programs.
    Utah, $275,520
        This project--Going for the Gold in School Nutrition--aims at
    creating long-range training plans for the State and for each
    individual school district. Training will be geared towards kitchen
    managers, and it will focus on implementing the School Meals
    Initiative, particularly NuMenus. Some of the topics to be covered
    include standardization of recipes, nutrient analysis, menu planning,
    and food preparation techniques. The project is divided into four
    levels. The first level is the Olympic Organizing Committee, which will
    set up a five year integrated delivery plan to reach all levels of the
    school nutrition programs. The Bronze Medal Level, the second level,
    will develop a district wide training program for school food service
    personnel. The third level, Silver Medal Level, will support training
    at the local level, while the fourth level, Gold Medal Level, will
    create a one week high-level manager training program at a local
    college.
    Vermont, $94,471
        The goal of this proposal is to increase support for the School
    Meals Initiative by drawing educators and school leaders into the
    project while continuing to enhance the capacity of managers to operate
    high quality school meal programs. Six major activities are planned,
    including a series of seminars for managers of school food authorities
    comprised of single schools serving grades K through 12; a management
    conference to provide concrete management skills for food service
    managers and directors; a 5-A-Day-Project designed to provide schools
    with training and materials to conduct classroom hands-on activities
    with fruits and vegetables; awarding Local TN Training Grants to
    schools to implement action plans to strengthen comprehensive health
    programs in their schools; create a Team Nutrition Schools Network to
    increase awareness of the School Meals Initiative; and hold a School
    Leaders Conference to attract school administrators and school board
    members to learn about their roles in operating a high quality
    nutrition program.
    West Virginia, $155,803
        The West Virginia Department of Education project aims at providing
    training to enable site managers and head cooks to implement changes in
    their schools' nutrition programs to reflect healthy meal standards.
    Five 10-hour regional workshops covering all 55 school districts will
    be conducted throughout the state. The proposal also aims at expanding
    the state's training infrastructure by identifying Health Meals Mentors
    and developing their abilities to transfer knowledge and skills to
    other cooks. Twenty class participants will be selected as mentors/
    trainers. The Department will also maintain a network of local trainers
    to support the development and delivery of project training and
    monitoring activities.
                      1998 team nutrition training grants
        On January 5, 1998, 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 the Food and Nutrition
    Service April 1, 1998, and grant awards will be announced on July 10,
    1998.
        Question. For each of fiscal years 1997 and 1998, please provide
    detail on how the Nutrition Education Training funds are being spent,
    including the amount awarded to each state under the program, and a
    list of the projects/activities being funded by each respective state,
    including the cost of each project/activity.
        Answer. In fiscal year 1997 each State Nutrition, Education and
    Training (NET) program was awarded $66,951 out of the Team Nutrition
    appropriation since no funds were appropriated for NET in 1997. In
    fiscal year 1998 State NET programs received apportioned NET funding
    based on the State student enrollment. Funding levels for all 50 States
    and the U.S. territories is submitted for the record.
        The Food and Nutrition Service (FNS) does not gather information on
    specific projects/activities funded by NET on a yearly basis. At the
    State level, the NET program is not a centralized bureaucratic program.
    A high proportion of the grant funds, and most of the programmatic
    activity is conducted by a variety of educational institutions,
    consultants, local authorities and professional associations. Less than
    40 percent of NET funds are used for program administration and
    coordination. The remainder of NET funds is generally used for service
    delivery including mini-grants to local schools, program activities and
    program products. Program activities include teacher training,
    provision of classroom resource materials, evaluations and needs
    assessments. Program products include curriculums, print and other
    media materials, training materials, promotional materials, and
    education program materials.
        [The information follows:]

            State                                                 1998 funds
    Alabama.......................................................   $50,000
    Alaska........................................................    50,000
    American Samoa................................................    50,000
    Arizona.......................................................    50,000
    Arkansas......................................................    50,000
    California....................................................   313,804
    CNMI..........................................................    50,000
    Colorado......................................................    46,271
    Connecticut...................................................    50,000
    Delaware......................................................    50,000
    District of Columbia..........................................    50,000
    Florida.......................................................    28,405
    Georgia.......................................................    73,569
    Guam..........................................................    50,000
    Hawaii........................................................    50,000
    Idaho.........................................................    50,000
    Illinois......................................................   118,097
    Indiana.......................................................    55,399
    Iowa..........................................................    50,000
    Kansas........................................................    50,000
    Kentucky......................................................    50,000
    Louisiana.....................................................    50,000
    Maine.........................................................    50,000
    Maryland......................................................    50,000
    Massachusetts.................................................    55,879
    Michigan......................................................    94,909
    Minnesota.....................................................    50,000
    Mississippi...................................................    50,000
    Missouri......................................................    51,465
    Montana.......................................................    50,000
    Nebraska......................................................    50,000
    Nevada........................................................    50,000
    New Hampshire.................................................    50,000
    New Jersey....................................................    73,166
    New Mexico....................................................    50,000
    New York......................................................   169,544
    North Carolina................................................    67,035
    North Dakota..................................................    50,000
    Ohio..........................................................   111,986
    Oregon........................................................    50,000
    Pennsylvania..................................................   110,239
    Puerto Rico...................................................    50,000
    Rhode Island..................................................    50,000
    South Carolina................................................    44,678
    South Dakota..................................................    50,000
    Tennessee.....................................................    50,404
    Texas.........................................................   209,628
    Utah..........................................................    50,000
    Virgin Islands................................................    50,000
    Virginia......................................................    60,527
    Washington....................................................    53,539
    West Virginia.................................................    50,000
    Wisconsin.....................................................    52,415
    Wyoming.......................................................    50,000

    Note: $50,000 is the minimum grant amount for States set in the
    authorizing statute.
    ---------------------------------------------------------------------------
                      commodity supplemental food program
        Question. As we achieve full participation in the WIC program,
    there should be a corresponding decline in WIC-type participation in
    the Commodity Supplemental Food Program (CSFP). You indicated that the
    number of WIC participants in the program decreased in fiscal years
    1995 and 1996. What was the decrease in CSFP WIC-type participation in
    fiscal year 1997 and what decreases are projected in each of fiscal
    years 1998 and 1999?
        Answer. The decrease in participation in WIC-type participation in
    the Commodity Supplemental Food Program in fiscal year 1997 was
    approximately 8 percent. The Department is not projecting a decrease in
    participation for fiscal year 1998 or 1999. The Department is expecting
    a small increase of 6 percent in participation in fiscal year 1998 and,
    as in the WIC program, no increase in fiscal year 1999.
        Question. What growth have we witnessed in elderly participation in
    the Commodity Supplemental Food Program in each of the past two fiscal
    years? What participation levels are projected for each of fiscal years
    1998 and 1999? Please provide for each of these years (1996-1998) the
    number of elderly participating in the program who also were eligible
    for Food Stamp Program assistance.
        Answer. In fiscal year 1996 there was an increase in participation
    in elderly participation in the Commodity Supplemental Food Program
    (CSFP) of approximately 10 percent. In fiscal year 1997 the increase
    was approximately 11 percent. The Department is projecting an increase
    of 11 percent in fiscal year 1998 and a decrease of 2 percent in fiscal
    year 1999. The income eligibility standard for the elderly for the Food
    Stamp Program is 100 percent of net income, which is considered to be
    less stringent than 130 percent of gross income. The standard for the
    CSFP is 130 percent of income as defined for local benefit programs.
    Therefore, most elderly persons participating in the CSFP are likely to
    be eligible for the Food Stamp Program. However, we do not have any
    data reflecting the percentage of CSFP participants who also
    participate in the Food Stamp Program. In 1995, 199 thousand elderly
    persons participated in the CSFP, in 1996 and 1997, 219 and 243
    thousand, respectively, participated.
                     government performance and results act
        Question. How are the agency's annual performance goals linked to
    the agency's mission, strategic goals, and program activities in its
    budget request?
        Answer. The agency's strategic goals are those goals that the
    agency plans to achieve incrementally by the year 2002. The annual
    performance goals are those goals and activities for fiscal year 1999
    that the agency believes will lead to the achievement of the year 2002
    goals. The plan also specifies the fiscal, capital and human resources
    required to achieve these goals and ongoing program obligations. As a
    result, the fiscal year 1999 budget request is linked directly to
    agency's goals for that fiscal year.
        Question. Could you describe the process used to link your
    performance goals to your budget activities? What difficulties, if any,
    did you encounter, and what lessons did you learn?
        Answer. The Food and Nutrition Service (FNS) Annual Performance
    Plan (APP) identifies the strategic and annual performance goals and
    management initiatives the agency plans to achieve in fiscal year 1999.
    The fiscal, capital and human resources required to achieve these goals
    and initiatives are provided in the APP at the strategic goal level.
    Using a matrix format, FNS linked these resources directly to the major
    program activities in the Program and Financing Schedules. This
    crosswalk provides a clear picture of how the FNS budget and program
    activities relate to and support achievement of the strategic
    performance goals and initiatives.
        In terms of difficulties encountered, the effort to resource load
    the specific annual performance goals is a difficult one. Insofar as
    the FNS budget structure is not presently aligned with the Strategic
    Plan/APP, the resource loading of annual performance goals will, of
    necessity, have to be done in an ``off-line'' manner.
        Question. Does the agency's Performance Plan link performance
    measures to its budget? Does each account have performance measures?
        Answer. The Food and Nutrition Service (FNS) Annual Performance
    Plan measures are indirectly linked to the budget. Currently, the
    fiscal year 1999 FNS budget is linked to the strategic plan goals and
    objectives. The annual plans goals and measures are derived directly
    from the strategic plan. Thus, while the performance plan linkage to
    the budget is not perfect, it does cover a major portion of program
    activity accounts.
        Question. To what extent does your performance planning structure
    differ from the account and activity structure in your budget
    justification?
        Answer. The Food and Nutrition Service (FNS) Annual Performance
    Plan structure differs slightly from the account and activity structure
    in the budget justifications in that it reflects strategic and annual
    goals that may span more than one program account. However, the basic
    structure is similar. We are prepared to discuss these slight
    differences with Committee staff.
        Question. Do you plan to propose any changes to your account
    structure for fiscal year 2000?
        Answer. At this time, the Food and Nutrition Service (FNS) is
    exploring ways of achieving an ever closer alignment between
    performance planning and the budget account structure. Insofar as
    fiscal year 1999 was the first year of performance planning, FNS has
    yet to gain full understanding of all of the implications of annual and
    strategic planning relative to the budget account structure and to the
    eventual achievement of our objectives and goals. We believe that the
    congruence between the two will occur as the agency gains more
    experience with strategic and annual planning.
        Question. How were performance measures chosen?
        Answer. The Food and Nutrition Service (FNS) developed or chose
    performance measures based on two criteria. First, the measures had to
    be direct, that is, to the extent possible, the agency chose measures
    that assessed program outcomes directly and, to the extent possible,
    avoided proxy measures. Second, the measures had to be feasible, i.e.,
    data were already available or could be collected at a reasonable cost.
    Following the Government Performance and Results Act guidelines, FNS
    chose or developed measures that were both outcome-based and
    quantitative for all its strategic objectives.
        Question. How did the agency balance the cost of data collection
    and verification with the need for reliable and valid performance data?
        Answer. The agency plans to use outside data sources for the
    verification of the Food and Nutrition Service (FNS) performance data.
    For example, these sources include state monitoring reports.
    Consequently, there will likely be no cost to the agency to obtain this
    data. The agency plans to use several approaches in obtaining the
    needed original performance data. First, FNS plans to use data already
    collected by other federal agencies, when appropriate. With this
    approach, FNS obtains the data it requires with minimal cost.
        Second, the agency originally planned to use its existing research
    funds to collect data that cannot be obtained through other agencies.
    This approach would have allowed the agency to collect needed
    performance data using existing funds. However, the shifting of food
    assistance program study funding to the Economic Research Service (ERS)
    for fiscal year 1998 has caused us to adjust our plans. We are working
    with ERS to meet some of our annual performance plan needs, and look
    forward to restoration of funding to FNS in fiscal year 1999 (as
    requested in the fiscal year 1999 FNS budget) to continue information
    development for the Annual Performance Plan as had been envisioned.
        Question. Does your plan include performance measures for which
    reliable data are not likely to be available in time for your first
    performance report in March 2000?
        Answer. The Food and Nutrition Service (FNS) will have reasonably
    reliable data for most of the performance measures contained in the
    fiscal year 1999 Annual Performance Plan. The agency does, however,
    need to develop data sources for some measures, particularly for the
    Child and Adult Care Feeding Program and Special Supplemental Nutrition
    Program for Women, Infants, and Children (WIC). The agency originally
    planned to develop some of these data sources through its research and
    evaluation activities. However, the shifting of food assistance program
    study funding to the Economic Research Service (ERS) for fiscal year
    1998 has caused us to adjust our plans. We are working with ERS to meet
    some of our annual performance plan needs, and look forward to
    restoration of funding to FNS in fiscal year 1999 (as requested in the
    fiscal year 1999 FNS budget) to continue information development for
    the Annual Performance Plan as had been envisioned.
        Question. What are the key performance goals from your fiscal year
    1999 Annual Performance Plan that you recommend this subcommittee use
    to track program results?
        Answer. In writing the agency's Annual Performance Plan, the Food
    and Nutrition Service (FNS) went through a careful, extensive,
    comprehensive process involving the entire agency, to develop
    appropriate performance goals. The agency believes that the goals in
    the final plan accurately reflect the priorities of the agency for
    fiscal year 1999 and that achievement of these goals will assist the
    FNS in accomplishing its strategic goals. Therefore, FNS believes that
    all of the goals in the plan are important and that individual goals
    cannot be singled out as more important than others.
        Question. In developing your Annual Performance Plan, what efforts
    did your agency undertake to ensure that the goals in the plan include
    a significant number of outcome measures?
        Answer. The majority of the annual performance goals in the
    agency's fiscal year 1999 Annual Performance Plan are stated as
    outcomes. The Food and Nutrition Service (FNS) chose measures that will
    directly measure these goals and, as a result, the measures are also
    outcome-oriented. For the limited number of annual performance goals
    that are process-or output-oriented, the agency chose or developed
    appropriate output measures. For example, for its Food Distribution
    Program, FNS plans to conduct a customer satisfaction survey in fiscal
    year 2000. In fiscal year 1999, our goal is to develop and test the
    survey instrument and procedures (an output goal). The performance
    measure for this goal is an output measure.
        Question. Do you believe your program managers understand the
    difference between goals that measure workload (output) and goals that
    measure effectiveness (outcome)?
        Answer. Yes, the Food and Nutrition Service (FNS) believes that
    program managers understand the difference between output and outcome
    goals. In writing the Annual Performance Plan, FNS involved all of the
    agency's program managers in developing the annual goals. Program
    managers were assisted in this process by staff with expertise and
    experience using different types of performance measurement, including
    output and outcome measures. As a result of this process, FNS believes
    that all managers involved, understand the difference between workload
    and effectiveness goals.
        Question. What are some examples of customer satisfaction measures
    that you intend to use? Please include examples of both internal and
    external customers.
        Answer. The Food and Nutrition Service (FNS) plans to survey its
    external customers regarding their satisfaction with the agency's
    performance in a variety of areas including service provision,
    responsiveness to inquiries, timeliness of food deliveries, and program
    streamlining and simplification. Internally, FNS will query
    satisfaction with the budgeting process and availability of program and
    financial data.
        Question. How were the measurable goals of your fiscal year 1999
    Annual Performance Plan used to develop your fiscal year 1999 budget?
        Answer. The measurable strategic and annual performance goals
    provided in the fiscal year 1999 Annual Performance Plan represent some
    portion of the priorities the Food and Nutrition Service (FNS) plans to
    achieve in the various FNS program areas. The fiscal year 1999 budget
    information, fiscal, capital and human resources, reflected in the plan
    justification identifies the resources needed (1) to achieve both the
    annual performance goals and (2) to achieve all other program
    activities that are not applicable to any specific annual performance
    goal.
        Question. If a proposed budget number is changed, up or down, by
    this committee, will you be able to indicate to us the likely impact
    the change would have on the level of program performance and the
    achievement of various goals?
        Answer. Because the individual resource loading of any particular
    annual performance goal would be accomplished apart from the budget
    account structure, the Food and Nutrition Service would have to assess
    the impact (of any budget level change) to a particular annual
    performance goal off-line from the budget structure.
        Question. Do you have the technological capability of measuring and
    reporting program performance throughout the year on a regular basis,
    so that the agency can be properly managed to achieve the desired
    results?
        Answer. The Food and Nutrition Service (FNS) plans to obtain
    performance data from several sources. First, the agency intends to use
    data already collected by other federal agencies, where appropriate.
    Obtaining this data will not be affected by FNS' technological
    capability. Second, FNS originally planned to use its existing research
    funds to obtain data that could only be obtained through large data
    collection efforts. Obtaining performance data using this method also
    would not have been affected by FNS' technological capability. Because
    these funds were eliminated for FNS and transferred to the Economic
    Research Service (ERS) for fiscal year 1998, FNS is working with ERS to
    address some of the FNS Annual Performance Plan information needs. The
    fiscal year 1999 FNS budget proposed restoring of these research funds.
    Third, FNS planned to use the agency's existing administrative data
    where appropriate. For most performance data, FNS' current
    technological capability is adequate to obtain this data.
        Question. The Government Performance and Results Act requires that
    your agency's Annual Performance Plan establish performance goals to
    define the level of performance to be achieved by each program activity
    set forth in your budget.
        Many agencies have indicated that their present budget account
    structure makes it difficult to link dollars to results in a clear and
    meaningful way.
        Have you faced such difficulty?
        Answer. Yes. The Food and Nutrition Service (FNS) does recognize
    this as a problem. It is true that the present budget structure does
    not directly align with the annual performance goals and results. In
    developing its Government Performance and Results Act plans, FNS
    aligned the budget with the strategic plan goals. FNS then derived the
    annual plan goals directly from the strategic goals. Although the
    annual goals were derived from the strategic goals, they are not the
    same. Since the results are based on annual performance goals, the
    linkage between the budget and the results is similar.
        Question. Would the linkages be clearer if your budget account
    structure were modified?
        Answer. The Food and Nutrition Service is currently exploring ways
    of how to achieve an ever clearer linkage between the budget account
    structure and performance results although they are similar. We believe
    that as the agency gains more experience in strategic and performance
    planning, ways will be found to improve the alignment between
    performance results and the budget account structure.
        Question. If so, how would you propose to modify it and why do you
    believe such modification would be more useful both to your agency and
    to this committee than the present structure?
        Answer. As indicated in response to a previous question, the Food
    and Nutrition Service (FNS) is exploring ways to achieve an improved
    linkage between the budget account structure and performance results.
    Should our efforts to do so prove less than satisfactory, then FNS may
    wish to consider some changes to our overall strategic planning/annual
    planning/budget process, including possible modifications to the budget
    structure.
        Question. How would such modification strengthen accountability for
    program performance in the use of budgeted dollars?
        Answer. At this time, the Food and Nutrition Service has no
    definitive plan in modifying the present budget structure and therefore
    is not in a position to predict how any modification would strengthen
    accountability in program performance.
        Question. Does your fiscal year 1999 performance plan--briefly or
    by reference to your strategic plan--identify any external factors that
    could influence goal achievement?
        Answer. Following instructions received on preparing Annual
    Performance Plans, the Food and Nutrition Service did not identify any
    external factors that could influence goal achievement. These factors
    are, however, included in the agency's strategic plan.
        Question. If so, what steps have you identified to prepare,
    anticipate and plan for such influences?
        Answer. While the agency has not included the influence of external
    factors in its annual performance plan, we have taken them into account
    elsewhere (i.e., the strategic plan) and have identified some steps to
    deal with them should they arise.
        Question. What impact might external factors have on your resource
    estimates?
        Answer. Changes in the economy, unemployment, number of persons in
    poverty, and changes in food cost are all external factors that
    significantly could change program finance needs. However, the Food and
    Nutrition Service does not anticipate that external factors will have
    significant effects on our resource estimates.
        Question. Through the development of the Performance Plan, has the
    agency identified overlapping functions or program duplication? If so,
    does the Performance Plan identify the overlap or duplication?
        Answer. In developing the both the strategic plan and the
    Performance Plan, the Food and Nutrition Service (FNS) has identified
    areas where FNS' achievement of its goals is dependent upon the
    activities and cooperation of other programs. For example, one of FNS'
    annual goals is to increase the availability of nutrition and
    nutrition-related information for low-income households. The Food Stamp
    Program encourages States to provide nutrition messages and information
    to low-income households. FNS cooperates with the USDA Extension
    Service and others in the development, production and distribution of
    these nutrition education materials. This needed cooperation, as well
    as other areas where cooperation is needed, is identified in the
    Performance Plan.
        Question. Future funding decisions will take into consideration
    actual performance compared to expected or target performance. Given
    that:
        To what extent are your performance measures sufficiently mature to
    allow for these kinds of uses?
        Answer. The majority of our performance measures are sufficiently
    mature to assess the level of achievement in our fiscal year 1999
    Annual Performance Plan. In the majority of cases we have identified
    baseline and target measures that will allow the agency to assess
    annual goal achievement as well as progress toward meeting its
    strategic goals and objectives.
        Question. Are there any factors, such as inexperience in making
    estimates for certain activities or lack of data, that might affect the
    accuracy of resource estimates?
        Answer. The Food and Nutrition Service (FNS) believes that it has
    sufficient experience to make reasonable accurate resource estimates.
    It will be, however, constrained in making the estimates largely
    because of the unavailability of timely and reliable data on some of
    the measures identified for the strategic and annual performance plans.
    A significant portion of the latter will be due to the elimination of
    funding for the agency's research and evaluation activities for fiscal
    year 1998. FNS planned to use some of these resources to collect data
    directly related to the measurement of achievement of annual and
    strategic objectives.
        Question. Based on your fiscal year 1999 performance plan, do you
    see any need for any substantive revisions in your strategic plan
    issued on September 30, 1997?
        Answer. The Food and Nutrition Service (FNS) believes that its
    strategic plan is a flexible, evolving document. As such, FNS is
    prepared to revise its plan in the future if the need arises. However,
    having just completed writing the fiscal year 1999 performance plan,
    and not yet implementing it, it is too early for FNS to tell what form
    any future revisions might take.
                                     ______

                     Questions Submitted by Senator Bumpers
                                  food stamps
                              participation levels
        Question. The budget request includes an increase of 572,000 Food
    Stamp participants. However, economic indicators suggest Food Stamp
    roles should continue to decline.
        Please explain why Food Stamp participation should increase during
    a period of economic improvement?
        Answer. The primary indicator of Food Stamp Program participation
    is unemployment level or the actual number of people who are unemployed
    at any time. The unemployment level varies with unemployment rate and
    with the number of people in the work force. During periods of stable
    unemployment rates, unemployment level will still rise as population
    rises. The Office of Management and Budget currently forecasts that the
    unemployment rate and the total number of unemployed persons will
    increase in fiscal year 1999--thereby increasing the number of
    eligibles and consequent participation in the Food Stamp Program.
                     proposed program expansion legislation
        Question. The Administration is proposing legislation to expand
    eligibility of Food Stamp benefits to certain populations. It is
    suggested the legislative proposal would cost an additional $2.5
    billion over five years. The savings required in other programs to
    achieve this expansion is identified as coming from certain
    administrative savings (estimated at $1.2 to $1.4 billion).
        Are these savings not the very same savings now targeted for
    offsets as part of the conference discussion on the Agricultural
    Research Title legislation?
        Answer. Yes. The President's proposal and the Agricultural Research
    Title legislation both seek to recapture a possible windfall to States
    as a result of switching from a primary to benefiting method of State
    administrative cost allocation between the Temporary Assistance to
    Needy Families, Food Stamp and Medicaid Programs.
        Question. If the conferees to the Research Title use these savings
    for new research programs, does the Administration have plans for
    alternative savings for Food Stamps.
        Answer. It is a priority of the Administration to restore
    eligibility to many of the legal immigrants made ineligible for food
    stamps due to welfare reform. The cost of the Administration's proposal
    is included in the President's balanced budget for fiscal year 1999.
    The budget funds these initiatives by continued cuts in government
    programs, by closing unwarranted tax loopholes, and from the passage of
    tobacco legislation. The Administration understands that as Congress
    reviews the submitted budget, a certain level of give and take will be
    necessary. We look forward to working with Congress on this subject.
        Question. If the savings estimates are correct (not to exceed $1.4
    billion) what other offsets have been identified to achieve the full
    $2.5 billion cost?
        Answer. The Administration has submitted a balanced budget for
    fiscal year 1999--the first time in 30 years that such a budget has
    been proposed. Within tight constraints, the budget proposes major
    initiatives that will continue the President's investments in high
    priority areas--from helping working families with child care expenses
    to allowing Americans age 55 to 65 to buy Medicare. These initiatives
    include restoring eligibility to many of the legal immigrants made
    ineligible for food stamps by welfare reform. The budget funds these
    initiatives by continued cuts in government programs, by closing
    unwarranted tax loopholes, and from the passage of tobacco legislation.
                                program reserve
        Question. The budget proposes a $1 billion reserve for the Food
    Stamp account.
        When was the last time a Food Stamp reserve was triggered and what
    was the cause?
        Answer. Fiscal year 1992 was the last time any of the reserve funds
    were used. The President's fiscal year 1992 Budget Request estimated
    the average program participation would be 22.4 million persons per
    month. However, during the course of the fiscal year, participation in
    the program was greater than anticipated and averaged 25.4 million
    persons per month for the fiscal year. In fiscal year 1992 $900 million
    of $1.5 billion was actually needed and used in fiscal year 1992 to
    cover increased program participation. Thus, the President's 1993
    Budget included a formal request for $1.5 billion appropriated subject
    to such a specific request for fiscal year 1992.
        Question. What projections for fiscal year 1999 suggest a reserve
    is needed now?
        Answer. The reserve would be used to cover the costs of any
    unforeseen economic or other circumstances that cause an increase in
    required program payments. The reserve is important given the Personal
    Responsibility and Work Opportunity Reconciliation Act of 1996
    (PRWORA). Over one-third of all food stamp households received Aid to
    Families with Dependent Children (AFDC), which PRWORA replaced with
    Temporary Assistance for Needy Families (TANF), receive over one half
    of all food stamp benefits. As these households encounter time limits
    on their TANF eligibility, and with the effects of welfare reform still
    largely unknown, it becomes increasingly difficult to anticipate the
    future course of food stamp costs.
        Question. If the purpose of the reserve is to meet changing
    conditions resulting from Welfare Reform, what ``changes'' have been
    identified since passage of that legislation?
        Answer. A benefit reserve is important given the Personal
    Responsibility and Work Opportunity Reconciliation Act of 1996
    (``welfare reform''). Welfare reform has given States broad new
    authority under the TANF block grant. The choices States continue to
    make about the level and form of benefits provided can affect Food
    Stamp Program costs dramatically. Over one-third of all food stamp
    households receive AFDC--which welfare reform replaced with Temporary
    Assistance for Needy Families (TANF)--and they also receive over half
    of all food stamp benefits. In addition, as these households encounter
    time limits on their TANF eligibility, it becomes increasingly
    difficult to anticipate the effect on food stamp costs. To the extent
    that they replace lost welfare benefits with increased earnings, food
    stamp benefits may fall. But to the extent that they remain
    sufficiently poor to retain food stamps while losing TANF, food stamp
    costs may increase.
                            savings from enforcement
        Question. For several years, the Food Stamp program has been moving
    toward EBT cards to protect program integrity and to promote program
    efficiency. Also, efforts such as ``Operation Talon'' have been
    reported as being successful in stopping Food Stamp fraud. It is also
    stated that during fiscal year 1997, 1200 suspect stores were
    investigated of which approximately 550 were found to have committed
    violations.
        What program savings have been achieved due to these efforts?
        Answer. Operation Talon is a law enforcement initiative in which
    information of law enforcement agencies is matched with food stamp
    caseload data to detect and apprehend individuals who are fleeing
    felons or parole/probation violators. The Food and Nutrition Service
    (FNS) has supported this initiative by encouraging State cooperation
    with the USDA Office of Inspector General (OIG) and local law
    enforcement agencies. Further, we are continuing to work with OIG and
    are providing program guidance to the State agencies regarding follow-
    up to the identification of fleeing felons as it affects program
    eligibility, claim establishment, fair hearings and appropriate
    disqualification action. While the results of Operation Talon collected
    by OIG show the initiative is successful, FNS does not have specific
    program data about savings resulting from Operation Talon.
        State agencies are required by law to operate Electronic Benefit
    Transfer (EBT) systems in a cost-neutral manner. That is, in a way that
    the Federal cost of issuing benefits in the State using an EBT system
    does not exceed the Federal cost of delivering coupon benefits under
    the previous coupon issuance system. Based on measurements of cost
    neutrality among State agencies currently operating EBT systems, the
    Department expects that program costs will decrease with the
    implementation of EBT Nationwide.
        There is no dollar cost to the Program when retailers commit
    violations. Food stamp benefits have already been issued to the
    recipients who then choose to violate the program by dealing with a
    retailer who will violate program regulations. However, retailers
    removed from the program as a result of an investigation are no longer
    able to provide an avenue to divert funds from the intended purpose of
    the program. Removing violating retailers from the program also impacts
    on other retailers who may be considering violating and improves
    program image.
        Question. What savings are projected for the coming fiscal year?
        Answer. The major thrust of Operation Talon is to use Food Stamp
    Program data to allow law enforcement agencies to identify, locate, and
    arrest fugitives from justice. The results of Operation Talon collected
    by OIG show this initiative is successful. State agencies are not
    required to report specific program data about savings resulting from
    Operation Talon. Therefore, while information available to the
    Department indicates that program savings do occur. FNS has not
    projected reductions in program for the coming fiscal year.
        State agencies are required by law to operate EBT systems in a
    cost-neutral manner. That is, in a way that the Federal cost of issuing
    benefits in the State using an EBT system does not exceed the Federal
    cost of delivering coupon benefits under the previous coupon issuance
    system. Based on measurements of cost neutrality among State agencies
    currently operating EBT systems, the Department expects that program
    costs will decrease with the implementation of EBT nationwide. Food
    stamp printing, shipping and processing costs are projected to decrease
    by $19 million in fiscal year 1999. Most of the decreases are
    attributed to EBT implementation.
        Question. Have these efforts and their resulting efficiencies
    provided any reductions in program costs as reflected in appropriations
    requests? If not, why?
        Answer. No, because the savings either can not be projected or do
    not occur. The exception is food stamp printing, shipping and
    processing costs which are projected to decrease by $19 million in
    fiscal year 1999, as reflected in our appropriation request. Most of
    the decreases are attributed to EBT implementation.
        Question. What information led to the 1200 stores being deemed
    ``suspect'' and does the high rate of violations among those stores
    indicate a much larger problem nation-wide?
        Answer. In fiscal year 1997, the Food and Nutrition Service (FNS)
    conducted 4,627 investigations of retailers authorized to accept food
    stamp benefits, 2,084 of which were found to have committed program
    violations. Retailer investigations conducted by FNS are based on
    specific information that indicates potential fraud and are not
    selected as part of a random sample. Various statistical information,
    automated analyses, complaints from the public and leads developed by
    investigators from sources outside of the agency are used to target
    suspect retailers for investigation. Therefore, to take a high rate of
    violation among a group of specifically selected retailers and project
    it nationwide would be inappropriate. Retailers that redeem the
    majority of food stamp benefits have not proven to be a problem.
                        other effects of welfare reform
        Question. In certain states and local jurisdictions, ``cash-out''
    benefits have been provided in lieu of Food Stamp coupons or EBT cards.
    This effort has been largely underway as experiments in Welfare Reform
    as ways to make welfare recipients more responsible for their actions.
        What effect have these changes had on USDA programs?
        Answer. Cash-out projects have been very limited and, therefore, we
    have not seen a significant effect on the administration of USDA
    programs. We see EBT as the preferred means of providing food stamp
    assistance. However, wage supplementation programs, a form of cash-out
    in which the cash value of the food stamp allotment is provided to a
    private employer to subsidize the food stamp recipient's wages, may be
    more difficult to administer than other forms of cash-out. This
    distinct form of cash-out is not a matter of simply providing a
    household with cash instead of coupons, but rather an opportunity to
    move recipients into actual employment. In a wage supplementation
    program, the State agency must work with the employer to track the cash
    paid to the employer, and the amount of wages paid to the food stamp
    recipient in order to ensure that the wage subsidy is used properly.
        Question. Have ``cash-out'' benefits had an effect on levels of
    nutrition or health generally within the population of traditional Food
    Stamp beneficiaries?
        Answer. In the early 1990's the Food and Nutrition Service
    conducted scientifically rigorous evaluations of the effects of cashing
    out food stamps on the food expenditures and/or the nutrients available
    to households in four demonstration sites.
        The findings of these studies suggest that cash-out reduces
    household food expenditures. The ``slippage effect'', the amount by
    which retail food spending will decrease when the same level of
    assistance is provided as cash rather than as food stamp coupons, is
    between 15 to 30 percent of every dollar of benefits. At the benefit
    levels in the President's 1999 Budget Request this is a $3 to $6
    billion reduction in food expenditures with no reduction in program
    costs.
        During the demonstrations there was some evidence that cash-out
    reduced the availability of some nutrients. For many nutrients the
    average nutrient availability remained above the Recommended Dietary
    Allowances for both cash and coupon recipients. The demonstrations were
    not designed to assess the long-term nutritional consequences of cash-
    out. The substantial reduction in food expenditures coupled with the
    evidence that cash-out reduced some nutrient availability during the
    demonstration suggest that cash-out may increase nutritional risk over
    time, at least for some households. Electronic Benefit Transfer offers
    a superior alternative, for it maintains the linkage to food while
    reducing stigma for participants.
                            child nutrition programs
                                      net
        Question. Prior to Welfare Reform the Nutrition, Education and
    Training Program (NET) was included in mandatory spending at $10
    million annually. Since the conversion of these programs to
    discretionary spending, the funding levels have fallen.
        What is the current status of the NET program?
        Answer. Historically the Nutrition Education and Training Program
    (NET) has delivered quality and cost-effective nutrition education,
    training and technical assistance as a component of the Child Nutrition
    Programs. The NET infrastructure offers an effective and cost efficient
    vehicle for reaching the 94,000 schools across the Nation. State and
    local school food authorities use the established NET infrastructure to
    deliver nutrition education to students, educators, and parents as well
    as food service training in schools and child care centers. NET's
    infrastructure and quality standards also assist local schools in
    providing nutritious meals and improving the health and nutrition
    behavior of our Nation's children. Recently, State and local NET
    cooperators have been responsible for much of the local success of the
    Team Nutrition effort that Food and Nutrition Service launched to
    support its Schools Meals Initiative.
        The NET infrastructure consists of:
        1. Established program structures that allow for maximum State
    flexibility in meeting the diverse needs of their target audiences;
        2. Five year NET Strategic Plan which established a National
    framework;
        3. State action plans based on assessed local needs;
        4. Program monitoring and evaluation component;
        5. Local resource centers which efficiently disseminate
    instructional materials; and
        6. Cadre of nutrition education and food service training
    professionals.
        The reduction in NET funding levels over the past two years has
    hampered NET's efforts to fully support the infrastructure that it
    created and provide the level of quality services that had previously
    been offered. However, State NET Coordinators have continued their
    successful long-term working relationships with local school districts,
    parent-teacher organizations, public health agencies, county extension,
    local head start agencies, community colleges and the private sector.
    The extent of NET's local, State, and Federal support was demonstrated
    in 1997 by the more than 400 letters received by USDA from teachers,
    food service personnel, nurses, principals, and public health officials
    at the local, State, and Federal levels in support of continued funding
    for NET at the $10 million level.
        Question. What problems, if any, have resulted from the lower
    funding levels?
        Answer. The reduced level of funding of $3.75 million that occurred
    in fiscal year 1997 and fiscal year 1998 has had a negative impact on
    State agencies' ability to maintain the valuable infrastructure which
    delivers technical assistance, education and training services required
    to support the implementation of the School Meals Initiative. Some
    States have suffered loss of qualified and experienced trainers and
    resources that provided teacher training and support nutrition
    education instruction for children in local schools. Unless funding is
    restored to the $10 million level this trend will continue with fewer
    State and local NET cooperators available to support School Meals
    Initiative and the local successes of the Team Nutrition effort.
        Question. Is the Administration doing anything to try and restore
    NET as a mandatory item?
        Answer. The Administration is confident that Nutrition, Education
    and Training (NET) can continue its excellent record of service as a
    discretionary program if it receives the requested level of funding.
    Therefore, the Administration is not seeking to restore NET as a
    mandatory item.
                        food safety technical assistance
        Question. The budget request includes $2 million to provide
    technical assistance to state and local school cooperators to promote
    and enhance safe food handling.
        Are these activities being coordinated as part of the
    Administration's Food Safety Initiative?
        Answer. Yes. The current request for funds will be used for
    training and technical assistance to the School Food Authorities to
    assist them in expanding and reinforcing the safe food handling
    practices of school food service production staff. The form this
    training takes will be coordinated with projects under development by
    the Food Safety Training and Education Alliance (FSTEA), of which the
    Food and Nutrition Service is a member. FSTEA is a group made up of
    members from Federal, State and local governments, from trade
    associations and from professional organizations. FSTEA is currently
    identifying existing training and education materials, including multi-
    lingual materials, and combining them with the USDA/Food and Drug
    Administration Foodborne Illness Education Information Center.
        Question. If not, what efforts are being taken to avoid any
    duplication of effort?
        Answer. Duplication is being avoided because the Food and Nutrition
    Service (FNS) food safety technical assistance is being coordinated as
    part of the Administration's Food Safety Initiative. FNS previously
    developed and distributed Serving It Safe, a comprehensive training
    package covering food service sanitation and safety, to 23,000 School
    Food Authorities. This publication was based on the Food Code developed
    by the Food and Drug Administration. The current request for funds will
    be used for training and technical assistance to the School Food
    Authorities to assist them in expanding and reinforcing the safe food
    handling practices of school food service production staff.
                                      wic
                                 wic carryover
        Question. Much of the debate of the WIC program in recent years has
    been the size of the carryover of funds from one fiscal year to the
    next. Better management of the program is important to reduce the size
    of the carryover as a means of achieving better program efficiency and
    making better use of limited Committee resources.
        What is the expected WIC carryover for the current fiscal year?
        Answer. It is estimated there will be $100 million in recoverable
    funds and $30 million in spend forward funds at the end of fiscal year
    1998.
        Question. What is the projected WIC carryover for the coming fiscal
    year?
        Answer. It is estimated there will be $100 million in recoverable
    funds and $30 million in spend forward funds at the end of fiscal year
    1999.
        Question. What steps are being taken to better manage the size of
    the carryover?
        Answer. The Food and Nutrition Service (FNS) has submitted a
    participation and expenditure monitoring plan to the Office of
    Management and Budget and to its Regional offices. The plan
    incorporates the continuation of monitoring/guidance which is a routine
    part of FNS' oversight activities including close review of monthly
    participant and expenditure data. Any State reflecting a significant
    increase or decrease in participation will have its situation reviewed
    and appropriate action will be taken, if necessary.
        The agency has drafted proposed regulations revising both the food
    and nutrition services and administration funding formulas to better
    allocate WIC Program funds in a more stable funding environment. The
    revised food funding formulas should help ensure food funds are
    allocated to States that can utilize the funds to maintain current
    participation as well as to direct additional funds, if available, to
    States that are serving a lesser proportion of their WIC eligible
    population as compared to other States. The proposed rule is in the
    clearance process.
        FNS is also proposing legislation to limit the spendforward
    authority for food funds. The elimination of food funds spendforward
    would make additional funds available for allocation to State agencies.
    In turn, this should reduce the amount of unspent funds.
        Question. Since eight states and the District of Columbia provide
    their own funds to supplement federal WIC appropriations, do those
    states have large carryover amounts?
        Answer. The information providing carryover amounts for WIC State
    agencies which received State funding in fiscal years 1996 and 1997 is
    provided for the record.
        [The information follows:]

    ----------------------------------------------------------------------------------------------------------------
                                                                               Fiscal year--
                                                     ---------------------------------------------------------------
                      State agency                      1996 State    1996 carryover    1997 State    1997 carryover
                                                       Appropriation        \1\        Appropriation        \1\
    ----------------------------------------------------------------------------------------------------------------
    Alaska..........................................         $26,000        $660,383         $26,600        $363,510
    Wash., DC.......................................  ..............         513,222         452,000         519,067
    Indiana.........................................         190,000       2,687,946  ..............       3,955,339
    Maryland........................................  ..............       2,391,383          40,000       1,137,881
    Massachusetts...................................      16,200,000       1,354,529      13,783,217       2,742,793
    Minnesota.......................................       2,950,000  ..............       2,950,000         303,337
    Nebraska........................................          24,985          35,177          16,760       2,205,642
    New Mexico......................................       1,431,600          68,493       1,379,600         963,795
    New York........................................      21,000,000       2,530,092      21,000,000       2,623,557
    North Carolina..................................       1,200,000       3,306,536       1,350,000       2,990,252
    Pennsylvania....................................       4,884,000       5,800,374       2,000,000       6,478,993
    Texas...........................................  ..............      17,015,684       1,540,094      17,098,204
    Washington......................................       3,438,911       8,767,714       2,161,089       6,117,054
    ----------------------------------------------------------------------------------------------------------------
    \1\ Includes unspent recoverable and spendforward funds.

        Question. If more states provided funds of their own, would that
    reduce the fear of states running out of federal funds and, thereby,
    reduce the annual program carryover?
        Answer. Generally, States provided with significant amounts of
    State appropriated funds for the WIC Program, such as New York and
    Massachusetts, had little or no Federal funds available for recovery.
    They do, however, spend forward Federal funds. For other States there
    appears to be no correlation between the provision of State funds and
    the level of Federal carryover.
                                  wic reserve
        Question. Similar to the Food Stamp request, the budget proposes a
    reserve for WIC. However, the WIC program continues to hold carryover
    funds from one fiscal year to the next. It is understood that the
    nature of the WIC program requires there will always be a
    ``structural'' carryover between $75 and $100 million.
        Why would an additional reserve be necessary when carryover
    continue to exceed $75 to $100 million?
        Answer. The Department has requested the contingency reserve to
    cover any unanticipated food expenditures some State agencies may
    experience which would jeopardize their ability to maintain their
    caseload levels. As the Department expects food cost inflation to
    generally remain modest, it is believed that a $20 million reserve is
    sufficient to resolve any special situations that might occur in fiscal
    year 1998.
        The $75 to $100 million carryover amounts are unspent funds that
    are identified at closeout and recovered and reallocated through the
    funding formula the year after appropriated. These funds are part of
    the overall budget process and are used to support participation
    estimates. The contingency fund, however, would be additional funds
    made available to support current WIC caseload when appropriated food
    funds are insufficient to support participants already receiving WIC
    benefits due to unexpected events such as sudden increases in food
    costs or natural disasters.
                                wic immunization
        Question. Promoting childhood immunization is a purpose of the WIC
    program. A provision of the Labor-HHS appropriations act requires that
    15 percent of CDC grants to states (approximately $21 million) for
    immunization activities should be directed through the WIC program. The
    budget justification materials indicate that only $950,000 was
    transferred to the WIC program in fiscal year 1997 and no funds are to
    be transferred in fiscal year 1998 or fiscal year 1999.
        What is the status of WIC immunization activities?
        Answer. The Food and Nutrition Service (FNS), the Centers for
    Disease Control and Prevention (CDC), the Department of Health and
    Human Services (DHHS), the National Association of WIC Directors
    (NAWD), the Association of State and Territorial Health Officials
    (ASTHO) and the American Academy of Pediatrics (AAP) have an ongoing
    cooperative effort to increase immunization rates among preschool-aged
    participants in the WIC Program. Through a strong partnership, these
    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 WIC Program has regulatory responsibility to coordinate with
            immunization services and the degree of coordination is
            dictated by the priorities of State and local WIC agencies.
            Many WIC local agencies are located on site with health care
            services where immunizations are available. Other local
            agencies refer participants to health care services in the
            community.
      --FNS, CDC, NAWD, ASTHO and AAP are developing a National Strategic
            Plan as a general guideline for States to consider 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 and evaluations 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.
      --FNS 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. FNS 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 WIC and other food assistance programs, FNS cooperates with
            CDC and many other national organizations to actively promote
            the annual National Infant Immunization Week.
      --NAWD, ASTHO, CDC, and FNS co-hosted a WIC immunization promotion
            conference, entitled ``Working Together for Healthier
            Children,'' on 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.
      --FNS, 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 strategies that improve
            vaccination coverage rates among WIC participants.
      --The Administration's Childhood Immunization Initiative has provided
            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 WIC
            State agencies use the funds to extend clinic hours, hire more
            staff, increase education efforts, and help create a national
            tracking system.
      --During 1995, the Senate Committee on Appropriations, submitted the
            following in a report to accompany the 1996 DHHS Appropriation
            Bill: 1) The Committee directs 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; 2) Immunization
            grantees must use the funds for WIC linkage unless the grantee
            can document that assessment and referral are taking place in
            WIC sites without the need for specific funds.
      --FNS 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
            FNS 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.
      --During 1997, the 31st National Immunization Conference, held in
            Detroit, Michigan, the WIC Program was a prominent point of
            discussion. Representatives from FNS and State and local WIC
            staff presented workshops and poster sessions. The conference
            provided 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. It also provided an
            opportunity to further showcase WIC as the most important
            program to coordinate with to raise immunization coverage
            rates.
      --FNS has developed a new publication, entitled ``After You Deliver--
            Health Tips for Moms,'' which has just come off press in March,
            1998. It contains a section ``Immunize Against Disease'' which
            emphasizes that shots are needed from birth through adulthood;
            why they are needed; and where they may be obtained. This
            publication is being distributed to all WIC State and local
            agencies for use in educating participants about the importance
            of age-appropriate immunizations.
        Question. What level of funds are being transferred to WIC state
    agencies that are not reflected in the USDA budget justification
    materials?
        Answer. In fiscal year 1996, approximately $1 million in funding
    was provided from the Center for Disease Control (CDC) 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 levels. No additional funds were designated
    to be transferred from CDC in fiscal years 1997, 1998, and 1999.
        Although CDC was not able to provide these specific resources in
    these years, it is important to note that WIC nutrition services and
    administrative funds may be expended on a wide range of immunization
    activities for WIC participants. Such expenditures are allowable WIC
    expenditure because they enhance WIC's role as an adjunct to health
    care, and immunization is certainly one such example of the kind of
    health service to which WIC refers on a routine basis. Such efforts
    range from comprehensive immunization screening and referral procedures
    and media campaigns to sending immunization reminders to clients to
    reimbursable activities an example of this is the actual administration
    of shots to WIC children, for which WIC receives compensation from
    immunization resources. The WIC regulations do not set standards on the
    level of effort that must be expended by WIC agencies. Instead, the
    type and intensity of immunization activities being carried out is at
    the discretion of individual WIC State agencies and other offices
    within State Health Departments based on their priorities and
    resources.
        Question. Would it be advisable to transfer funds directly from CDC
    to USDA rather than to the states? If so, why?
        Answer. In fiscal year 1996, approximately $1 million in funding
    from the Center for Disease Control (CDC) 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 levels. No additional funds were designated
    to be transferred from CDC in fiscal years 1997, 1998, or 1999.
        CDC considers the WIC Program one of its most important allies in
    raising and maintaining immunizations coverage rates among children at
    risk of vaccine-preventable disease. As such, a well coordinated
    ongoing cooperative effort has been developed between CDC and WIC at
    the Federal, State and local level. Since CDC has the primary
    responsibility for and is the leading expert on immunizations, and has
    an established working relationship with the Food and Nutrition
    Service, it would be desirable to maintain any available funding
    pertaining to immunizations under the direct management of CDC.
                             wic program management
        Question. As we approach full funding for WIC, it becomes more
    difficult to provide fine-tuned management for the program. Among the
    larger challenges for the program is bringing states with low
    participation rates (the so-called low ``Fair Share'' states) up to the
    same level with states (so-called ``Stability Grant states) that
    maintain high, if not full, participation rates.
        What is USDA doing to help Fair Share states increase their
    participation rates?
        Answer. The proposed regulation revising the funding formulas will
    contain a provision that will direct additional funds, if available, to
    States that are serving a lesser proportion of their WIC eligible
    population as compared to other States--under fair share States. Over
    time, under fair share States will receive additional funding so that
    they have the opportunity to add participants to bring them closer to
    the level of service provided by State agencies that have received
    allocations above their fair share--the stability grant States.
        Question. What are the budget implications of these activities?
        Answer. There are no budget implications associated with the
    provision in the proposed funding formula regulation that would
    allocate additional funds, if available, to the under fair share
    States. The President's Budget Request for the WIC Program for fiscal
    year 1999 continues to support a full participation level of 7.5
    million. The revised funding formula has no impact on the requested
    budget amount or the estimated number of participants to be served by
    the WIC Program.
        Question. If more funds are directed to Fair Share states as a
    percentage of total funding, what steps will USDA take to protect the
    levels of Stability Grant states?
        Answer. The proposed funding formula will continue to retain the
    stability component as part of the food funding formula. Stability will
    be defined as the prior year grant, and adjustments for inflation will
    occur if funds are available. In a stable funding environment, the vast
    majority of available funds will be allocated as stability funding,
    which will allow for consistent participation levels from year to year
    for most State agencies.
                               wic farmers market
        Question. The budget request proposes an increase and to move the
    WIC Farmers Market program to the Commodity Assistance Program account.
        Will the increase allow program expansion to new states or will it
    be used to increase activities in states already part of the program?
        Answer. In accordance with the authorizing law, we must first
    provide all current State agencies with a base grant amount that is
    equal to their previous year's funding level. After base amounts are
    satisfied, the law provides for any remaining funds to be divided in a
    ratio of 75 percent for current States for expansion and 25 percent for
    new States that would like to begin a program. This split guarantees
    that a quarter of any funds available for program expansion will always
    be reserved for new State agencies.
                         commodity assistance programs
      temporary emergency food assistance program (tefap) donations/food
                                    gleaning
        Question. USDA continues to provide funding for food and
    administrative costs of food donations. At the same time, the
    Department is actively supporting food gleaning activities. In fiscal
    year 1997, TEFAP food purchase activities totals $130.2 million for 268
    million pounds of food. That same year, the donated food only accounted
    for $29.5 million for 49.7 million pounds.
        Is USDA's Gleaning Initiative expected to increase the amount of
    bonus commodities available through TEFAP?
        Answer. No. Given that the USDA Food Recovery and Gleaning
    Initiative focuses on the free donation of excess food, it will not
    have any direct impact on the purchase of food through the bonus
    commodities program. However, it is important to note that much of the
    food provided to food banks, food pantries, food rescue groups, and
    other emergency feeding organizations through the Food Recovery and
    Gleaning Initiative will often be very similar to the types of food
    provided through bonus commodity purchases.
        Question. What factors determine state allocations for TEFAP?
        Answer. Section 214(a) of the Emergency Food Assistance Act of 1983
    (EFAA) mandates the allocation of TEFAP commodities to States through a
    formula based 60 percent on the number of persons in the State with
    incomes below the poverty line, relative to national figures, and 40
    percent on the average monthly number of unemployed persons in the
    State, again relative to national figures. Section 204(a)(1) of the
    EFAA in turn mandates that TEFAP administrative funds be allocated
    among the States on the same basis.
        Question. What are the projections for food donations in fiscal
    year 1998?
        Answer. While we cannot provide an accurate projection of foods to
    be donated to the Emergency Food Assistance Program (TEFAP) given that
    bonus purchases depend on rapidly changing market conditions, thus far
    in fiscal year 1998, the Department has donated to TEFAP $16.6 million
    in bonus canned salmon, frozen turkey, dry beans, dried fruit, and
    instant nonfat dry milk. In addition, purchases for food donations to
    TEFAP estimated at $5 million are currently in progress for fresh and
    frozen fruits and additional dry beans. Further, the Department has
    authorized up to $30 million to procure pork products to be donated
    primarily through TEFAP. Additional substantial purchases for food
    donations are currently under consideration.
        Question. To what extent will the Gleaning Initiative play a part
    of TEFAP donations in fiscal year 1998?
        Answer. The Food Recovery and Gleaning Initiative donations will
    have no direct impact upon the distribution of TEFAP commodities
    because they will be distinctly different programs with different
    focuses. The Food Recovery and Gleaning Initiative will focus on aiding
    community-based efforts to distribute food that is donated from the
    private sector for free directly to emergency feeding organizations,
    while the TEFAP program will continue to focus on purchasing
    commodities that are distributed through state agencies. However, it is
    important to note that many of the emergency feeding agencies that will
    be the ultimate recipients of food distributed through the Food
    Recovery and Gleaning Initiative will be the same emergency feeding
    organizations that ultimately receive TEFAP commodities.
        Question. If the Gleaning Initiative is to become part of TEFAP,
    will there need to be an increase in the funds appropriated for TEFAP
    administrative costs?
        Answer. We do not intend to make the Food Recovery and Gleaning
    Initiative a formal part of TEFAP, but rather to treat it an
    independent effort. We intend to ensure that the grants, cooperative
    agreements, technical assistance, and other assistance provided through
    the $20 million requested are utilized, in part, to cover some costs
    that are often handled by TEFAP Administrative funds, such as
    transportation, processing, packaging, sort, heating and refrigeration,
    and distribution of gleaned and recovered food. Thus, state TEFAP
    should not need additional funds--other than any funds they might
    receive from the $20 million--to benefit from this Initiative.
        Question. Is it anticipated that the Gleaning Initiative will ever
    supplant or reduce the level of funding needed for USDA food assistance
    programs?
        Answer. No. The Food Recovery and Gleaning Initiative is intended
    as a cost-effective supplement to, not a replacement for, existing
    Federal nutrition assistance programs. While USDA firmly believes that
    the bedrock Federal nutrition assistance programs, such as Food Stamps,
    WIC, and the National School Lunch and Breakfast programs, will
    continue to be the first line of defense for Americans facing hunger.
    There is so much potential for gleaned and recovered food to provide
    nutritious additions to the diets of millions of low-income Americans.
    We see a terrific opportunity that we should capitalize on. We expect
    this relatively small investment to make a big difference in food
    recoveries and improve nutritional intakes of the needy far beyond its
    modest cost. Recovered food, like TEFAP food, helps needy families
    through temporary hard times, supplementing Food Stamps for some, and
    providing necessary sustenance on an occasional basis for others.
                          food program administration
                            studies and evaluations
        Question. The fiscal year 1998 Appropriations Act transferred the
    studies and evaluations activities of the Food and Nutrition Service to
    the Economic Research Service (ERS). The request for fiscal year 1999
    would return them as prior to fiscal year 1998.
        What has been the effect of not having these programs housed with
    the Food and Nutrition Service?
        Answer. It is too soon to tell. Food and Nutrition Service (FNS)
    provided Economic Research Service (ERS) with a detailed description of
    FNS' information needs. They are now in the final stages of preparing a
    plan of action. Indications are that they will initiate research on
    many, but not all, of our priority information needs. It is also likely
    that ERS will pursue some lines of inquiry that are of lesser
    importance and relevance to the FNS.
        It is also too soon to tell whether the implementation of the
    research will remain practical and relevant to FNS program operations
    and policy development. When study funding and authority were located
    with FNS we were able to make mid-course adjustments quickly so that
    studies were able to reflect current FNS priorities while the effect on
    study budgets was minor. While the need to coordinate across agencies
    is a challenge, we expect to work closely with ERS to achieve the best
    results possible.
        Question. How many studies or evaluations have been conducted by
    ERS?
        Answer. Economic Research Service (ERS) has not had time to
    complete any studies or evaluations funded in fiscal year 1998. On
    January 29, 1998 the General Accounting Office (GAO) released a report
    listing food assistance-related research projects conducted by the Food
    and Nutrition Service (FNS) and ERS during the past 3 fiscal years
    (``Food Assistance: Information on USDA's Research Activities,'' GAO/
    RCED-98-56R). After meeting with FNS and ERS officials to discuss their
    research activities during this period, the GAO identified 23 nutrition
    and food assistance projects conducted by ERS during the past 3 fiscal
    years.
        Question. How many studies or evaluations did the Food and
    Nutrition Service conduct in fiscal year 1997?
        Answer. The Food and Nutrition Service (FNS) started 9 studies
    during fiscal year 1997. On October 1, 1997 FNS had a total of 57
    ongoing and new research projects underway.
        Question. Please explain your reasons for returning these programs
    to the Food and Nutrition Service.
        Answer. The best place to house research responsibilities for food
    assistance programs is with the agency, the Food and Nutrition Service
    (FNS), that administers the programs. It is the proximity of research,
    program, and policy staff that ensures a research program that is
    practical and relevant to program operations and policy development.
    Housing the research function within FNS achieves the critical balance
    between independence and effective communication with the programs
    served, taking advantage of FNS' ongoing, operational relationship with
    State and local administrative agencies and other related Federal
    agencies.
        In addition, the range of issues surrounding FNS programs is very
    broad. They demand techniques that go beyond typical economic analyses
    if we are to reliably address the concerns of Congress and States. We
    are often required to initiate new nationally representative data
    collection efforts as well as complex demonstration activities (such as
    those that established the viability of Electronic Benefit Transfer).
    While the Economic Research Service (ERS) is a capable research
    organization, the expertise to administer such activities has been
    developed over the years in FNS.
        FNS has managed one of the strongest applied policy research
    programs in all of government with a proven track record of conducting
    research relevant to program needs. The time it would take to replicate
    this in ERS seems a poor use of government resources. Moreover, efforts
    to coordinate between ERS and FNS and its program cooperators seems to
    introduce an unnecessary complexity into USDA operational procedures.
                                 funding levels
        Question. The budget request includes an increase in Food Program
    Administration funding over the fiscal year 1998 amount. In fiscal year
    1998, an increase was provided above fiscal year 1997 after having been
    kept level for several years.
        What additional activities in Food Program Administration did the
    increase in fiscal year 1998 provide?
        Answer. The fiscal year 1998 appropriation provided an additional
    $1,591,000 for the Food Program Administration account above fiscal
    year 1997 levels. This increase was designated for funding 50 percent
    of the combined anticipated fiscal year 1998 pay raise and the
    annualization of the fiscal year 1997 pay raise.
        Even with the $1.6 million increase, the agency was forced to
    further reduce staff by 27 staff years to cover the remaining 50
    percent of the pay raise. The Food and Nutrition Service (FNS) cannot
    sustain additional cutbacks in staff without serious impediment to its
    mission. For example, activities that ensure program integrity, such as
    payment accuracy, store investigations, and on-site reviews, are labor-
    intensive, require a great deal of staff attention and travel funding,
    and are critical to our agency's mission in both the Food Stamp and
    Special Nutrition Programs. Keeping error rates low, which saves the
    government millions of dollars, can only be accomplished with staff
    attention. Changing program needs and new legislation have imposed
    significant, new, and ongoing administrative responsibilities at the
    same time that the agency has been called to improve the nutrition of
    program recipients, strengthen program integrity, and implement EBT
    nationwide. The agency also requires staff to take advantage of the new
    data analysis tools, EBT and new authorities in Welfare Reform that
    have provided a tremendous opportunity to increase program integrity
    among food stamp retailers.
        The budget request is necessary to maintain staffing levels. It is
    imperative that FNS preserve a steady work force to ensure adequate
    oversight for fiscal and program integrity, reduce fraud and abuse,
    keep pace with changing legislation and program needs, progress towards
    improving the nutrition of program recipients, and still accomplish its
    mission.
        Question. What other activities would you perform if the fiscal
    year 1999 request was provided?
        Answer. The request budget increase of $4,150,000 will provide
    support for the Food and Nutrition Service (FNS) food assistance
    programs.
        After providing for mandatory personnel costs, such as the pay
    raise, the requested increase will allow the agency to implement
    several important initiatives. FNS will implement an agency-wide Civil
    Rights Program Complaint Prevention Program, manage the agency's
    diversity effort, and fund reasonable accommodations for disabled
    individuals. FNS will also be able to support the publication of the
    Dietary Guidelines for Americans. With a very modest request of $1.45
    million for the Program and Financial Integrity Advancement Initiative,
    the agency can work towards improving integrity in both the program and
    financial areas. These areas are essential to preserving billions of
    taxpayer dollars and have been under increased scrutiny from both the
    General Accounting Office and the Office of Inspector General. The
    focus on program integrity would concentrate on meal claiming and
    participant eligibility in both the Child and Adult Care Food Program
    and the National School Lunch Program; improved integrity of the Food
    Stamp Quality Control System; and vendor management and strengthening
    eligibility determination procedures within the Women, Infants and
    Children Program. Funding for financial integrity will allow the agency
    to enhance information and financial systems, as well as program
    oversight of State agencies. FNS would perform reviews of State
    agencies to prevent improper Federal charging and claims for
    reimbursement; examine expenditure validation; oversee special program
    activities; ensure consistent and efficient implementation of program
    policy; and train State agency personnel.

                              Subcommittee Recess

        Senator Cochran. This concludes today's hearing, and I
    appreciate very much the cooperation of all witnesses.
        The next hearing we will have will be on Tuesday, March 17,
    at 10:30 a.m. in this room, 138 of the Dirksen Senate Office
    Building.
    We will hear from the Department witnesses on the budget
    request for the food safety, marketing, and regulatory programs
    of the Department of Agriculture.
        Until then, we stand in recess.
        [Whereupon, at 11:16 a.m., Tuesday, March 10, the
    subcommittee was recessed, to reconvene at 11:22 a.m., Tuesday,
    March 17.]

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 1999

                                  ----------

                            TUESDAY, MARCH 17, 1998

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 11:22 a.m., in room SD-138, Dirksen
    Senate Office Building, Hon. Thad Cochran (chairman) presiding.
        Present: Senators Cochran and Bumpers.

                           DEPARTMENT OF AGRICULTURE

    STATEMENTS OF:
            CATHERINE WOTEKI, PH.D., R.D., UNDER SECRETARY, FOOD
                SAFETY
            MICHAEL DUNN, ASSISTANT SECRETARY OF AGRICULTURE, MARKETING AND
                REGULATORY PROGRAMS
    ACCOMPANIED BY DENNIS KAPLAN, BUDGET OFFICER

                       Food Safety and Inspection Service

    STATEMENT OF THOMAS J. BILLY, ADMINISTRATOR

                   Animal and Plant Health Inspection Service

    STATEMENT OF TERRY L. MEDLEY, ADMINISTRATOR

                         Agricultural Marketing Service

    STATEMENT OF ENRIQUE FIGUEROA, ADMINISTRATOR

            Grain Inspection, Packers and Stockyards Administration

    STATEMENT OF JAMES R. BAKER, ADMINISTRATOR

                                Opening Remarks

        Senator Cochran. The subcommittee will please come to
    order.
        I apologize to all of our witnesses and those who are here
    for the subcommittee hearing about our conflict this morning
    with the markup of the supplemental appropriations bill which
    we have undertaken to address.
        We have statements from all of our witnesses, and I am very
    pleased with your attendance at our hearing and the furnishing
    of the statements for our review.
        Our hearing focuses specifically this morning on the
    request submitted by the President for funding of programs and
    activities of the Department of Agriculture's Food Safety and
    Inspection Service and Marketing and Regulatory Programs. We
    are pleased that Under Secretary for the Food Safety and
    Inspection Service, Catherine Woteki, and the Assistant
    Secretary for Marketing and Regulatory Programs, Michael Dunn,
    are here to lead our discussion of this budget request. There
    are others who accompany them. We appreciate the attendance of
    all witnesses.
        Because we have the statements, we will print them in the
    record. I have questions which I will submit for your attention
    and review and timely response. We will print that all in the
    record, but because of the shortage of time and the
    encroachment on our schedule of the full committee's
    activities, we will not undertake a full discussion of all of
    these issues. I hope you agree that this is appropriate. There
    are other things on the schedule later this morning that
    require witnesses' attention and also Senators'.
        Senator Bumpers, the ranking minority member of the
    subcommittee, sends his regrets. He is still at the full
    committee markup. I escaped so I could come here and give this
    subject our attention for the time that we do have available.

                               User Fee Proposal

        So, I am going to stop talking except to make one
    observation about the budget submission, and that is my very
    serious disappointment with the continued insistence by the
    administration to submit a budget request for activities under
    the jurisdiction of these witnesses and assume that Congress is
    going to enact massive new user fees to fund the budget
    request.
        Just to give you an example of the seriousness of this
    situation as it affects the budget of the Food Safety and
    Inspection Service, the budget request is for $150 million.
    That is $440 million below the current fiscal year appropriated
    level. When you look at the other sections of the bill, for
    example, the Agriculture Marketing Service, or Grain
    Inspection, Packers and Stockyards Administration, we have a
    $31 million shortfall in the budget for those activities
    because of the proposal from the administration assuming that
    user fees will be enacted to recover those needed funds, to
    operate the programs, to do the things that are required by law
    under the statutes by these agencies.
        So, if you add all that together, what you have got here is
    a budget request that is over $600 million short of the
    necessary level to do the work required by these agencies.
        We start out in our appropriations process without the
    authorizing legislation even being proposed by the
    administration, and we know it is not going to be enacted. It
    has been proposed in the past and has not been enacted, but it
    is proposed again with a straight face that this is a
    legitimate budget process. Of course, it is a disgrace to put
    the committee in that kind of position at the outset.
        What if the committee just said, OK, we will appropriate
    the request submitted by the President for these activities and
    we presume the administration will present legislation to
    correct the shortfall and lobby the Congress effectively
    between now and the beginning of the fiscal year to enact the
    legislation, impose the user fees on whomever and at whatever
    cost to pay these fees and expenses for these activities? That
    is one option. This is the most irresponsible option and we
    will not do that.
        So, we will take from other programs either in the
    administration's budget request and provide funds from those
    other programs or come up with funds from programs that other
    members of the committee might suggest that we cut to provide
    the funds needed here.
        These are important areas. Food safety is something that is
    important to every American citizen, not just those who are in
    the business of processing meat and poultry, marketing those
    products or growing those products. It is important to
    everybody, and we are not going to put in jeopardy the lives
    and the safety of American citizens by being irresponsible with
    the way we deal with this challenge.
        But having said that, I am going to stop and let the
    witnesses make whatever comments they would like to make about
    the subject at issue and make whatever comments you think would
    be helpful to the committee as we approach this interesting
    challenge.

                              Prepared Statements

        We have prepared statements from Senators Bumpers and Burns
    which will be made part of the hearing record. Shall we start
    with Ms. Woteki?
        [The statements follow:]
                     Prepared Statement of Senator Bumpers
        I would like to thank Secretary Woteki and Secretary Dunn for
    appearing before our subcommittee. I also want to extend a welcome to
    the other USDA officials here today representing the various agency
    missions under the larger umbrella of food safety, marketing, and
    regulatory functions. I would also be remiss if I did not give special
    recognition to fellow Arkansan, Jim Baker, who is with us today as head
    of the Grain Inspection, Packers and Stockyards Administration (GIPSA).
    Welcome to you all.
        Last week we heard from the USDA agencies charged with protecting
    our people from the tragedy of hunger. Their budget request, by the
    represents the single largest segment of this subcommittee's annual
    appropriations bill. However, unless the food they make available by
    their efforts is safe, their entire mission fails as do those of us
    all. Ensuring a safe food supply for the American people is one of the
    most important responsibilities of the federal government and of this
    subcommittee.
        Our commitment to food safety has come a long way since that day,
    almost a century ago, when President Teddy Roosevelt read Sinclair
    Lewis' description of food processing and reportedly threw his
    breakfast out a White House window. Along with our commitment has come
    technology and through the combination of these two driving forces we
    are able to maintain strong consumer confidence and the ability to lay
    claim to the fact that the United States has the safest food supply in
    the world.
        In fact, we are now engaged in a new technological breakthrough in
    the realm of food safety. For years, the primary tools of FSIS
    inspectors were their very senses, literally. The system of food safety
    inspection on which we have relied for decades, the organoleptic
    system, is based on the simple perceptions of sight, smell and touch.
    While tests based on these senses can reveal much, there is certainly
    much that remains hidden. To replace this antiquated system we now have
    in place the Hazard Analysis at Critical Control Points (HACCP) system
    which, finally, brings the arbiter of science to the task.
        The HACCP system was implemented two months ago for the 300 largest
    meat and poultry operations in the nation. Over the next two years, the
    small and very small operations are to be brought into HACCP as well.
    Once complete, the entire U.S. meat and poultry supply will reach
    consumers only after being submitted through a process based on
    scientific method and which should achieve the highest levels of safety
    reasonably attainable.
        That is not to say that this new system will not be wrought with a
    series of growing pains as the old system is replaced by the new. I
    and, I am sure, many of my colleagues have already heard of problems
    with the new system and the costs associated with them. I am told that
    if these problems in program administration are not worked out before
    HACCP is mandated for the smaller companies, there are many small firms
    that won't survive the business disruptions that will befall them. I
    fully expect Secretary Woteki, Mr. Billy, and others associated with
    implementing HACCP to see the process is handled properly and fairly.
        In my view, the key to the new system is sound science. The
    capability of HACCP in protecting our food supply is only as good as
    the science used in its process. As highly as I expect USDA to ensure
    fairness in administering HACCP, I am adamant about the use of the best
    science available in the program's implementation. Not long ago, a food
    safety issue was raised in my state and I quickly learned that various
    federal and state agencies all had different views on what had been and
    would be considered safe levels for human consumption. That is
    unacceptable. By finally bringing all parties to the table we were able
    to achieve a consensus, but science should be the final arbiter when it
    comes to food safety and we must settle for only the best.
        Currently, the Senate is considering regulatory reform legislation.
    I intend to closely examine that bill as it comes to the Senate floor
    and I may offer an amendment better to ensure that regulatory actions
    related to science are tied to sound science. For example, if we were
    to ask the regulated community and the regulators to comment on the
    science now employed in the HACCP system, we might very well get two
    different views. If that is the case, it may be appropriate to assign
    certain decisions to a more objective analysis. A story in the
    Washington Post last week noted that a recent EPA brochure on
    ``Pesticides on Food: Consumer Information'' was considered
    ``alarmist'' by the grocery industry and ``milquetoast'' by
    environmental and consumer groups. There may be times when taking
    action that pleases no one may be evidence you have done your best.
    When it comes to science, we must always ask why not the best?
        In previous hearings, this subcommittee has made pretty clear it's
    collective views on the various user fee assumptions in the fiscal year
    1999 budget. By far, the largest single user fee proposal is that of
    FSIS to cover the costs of all inspection activities, a proposal that
    goes beyond any similar proposal previously submitted. It has been
    suggested that opposition to FSIS users fees is some indication of
    caving to the interests of the meat and poultry companies. I wish to
    set the record straight.
        Regardless of the economic importance of the meat and poultry
    industries to a state like mine, which is substantial, there are issues
    tied to the user fee proposals that go far beyond the imposition of
    higher production costs for the hundreds of companies around the
    country. The programs of FSIS maintain the basic protections of food
    safety for all Americans. Although the President's budget this year
    seems lush with various user fee proposals, I don't see anyone rushing
    forward to propose user fees for basic police or fire protection. There
    are certain functions of government that should be borne by the public
    they serve. Food safety is and must remain at the top of that list.
    That is a matter of policy that must always transcend economics.
        But if we want to talk about the economics of the user fee
    proposal, lets at least be honest about it. With all due respect to
    USDA, I find the analogy of the user fees to an almost unmeasurable
    price increase at the consumer level disingenuous. The meat and poultry
    industries are highly competitive, especially at the consumer level. To
    pretend that the companies are going to pass on the cost of user fees
    to consumers is ludicrous. The meat case in your local grocery store is
    the last place you are going to pay for FSIS user fees. Therefore,
    let's stop pretending that the ``public'' is still going to pay for the
    costs of inspection.
        It is equally unrealistic to assume that the companies themselves
    are going to absorb these costs as long as they have someone else on
    which to pass them. Enter the producer. Of all federal agencies, USDA
    should be familiar with the long-held view that the agricultural
    producer is the one member of our economy who always buys his inputs at
    retail and sells his products at wholesale. Due to the nature and
    structure of the farm economy, anyone who is honest will quickly
    acknowledge that this user fee proposal will not be borne by the
    consumer or the companies. It will be borne, as always, by the sector
    of the economy least capable of absorbing it, the farmer. In fact, I
    have been told that some poultry grower contracts contain provisions
    that will adjust downward the price paid to the grower in the event
    these fees are enacted. I am not willing to tell the beef producer or
    contract poultry grower in my state to brace themselves for another
    economic hit in the name of ``public policy''.
        As our marketplaces become more and more ``global'', we must be
    ever vigilant about the health and safety of the products that cross
    our borders. In my own state and across much of the South, the Imported
    Fire Ant is showing us how damaging newly introduced species to this
    country can become. In fact, the Fire Ant came to this country many
    years before the age of supersonic jets that can now carry bacteria,
    disease, and pests across the planet in a matter of hours.
        The Fire Ant is only one example. The people of Hawaii are
    constantly on guard against the introduction of Brown Tree Snakes which
    have already, by accident, taken over the island of Guam. Imported, as
    well as native, pests and diseases continue to be a threat to our
    agricultural base as well as human health and safety.
        We have seen some success. Brucelosis in cattle is nearly
    eradicated from the country. In many states, the boll weevil has been
    eliminated. But even with these goals in sight, we must stay vigilant.
    Until a disease is truly eliminated or a pest is eradicated completely,
    we remain at risk from reintroduction or resurgence. We can easily
    recognize the economic and public health benefits of these efforts and
    they must continue.
        Just as our markets must be safe from pestilence and disease, they
    must also be made fair and equitable. As suggested in my earlier
    comment regarding user fees and the producer, the American farmer does
    not always fit into the classic model of American economics. The
    American consumer profits from the affordability and availability of a
    variety of foods that would not even be imaginable a generation ago.
    There is much at stake for the producer and consumer alike. Whether we
    ever stop to recognize it, every one of us fits into at least one of
    those two categories.
        There are some items with the budget proposal of the agencies
    before us with which I find strong disagreement. However, I believe our
    goals are the same. I look forward to the testimony today and to engage
    in a productive dialogue in which all views can be aired in order for
    us to proceed with the task before us.
                                     ______

                      Prepared Statement of Senator Burns
        Thank you, Mr. Chairman. I appreciate you calling this hearing this
    morning. As we look at the budget for the Department of Agriculture I
    see this as one of the more important hearings on the calendar. Both
    the Food Safety Inspection Service and the Agencies within Marketing
    and Regulatory Programs represented here today have a great deal to do
    with the way the people in the state of Montana go about their daily
    business.
        As with most of the agencies which we have seen come before this
    committee, I am again concerned with the way that these agencies
    budgeting for the coming fiscal year. We once again see additional fees
    tacked onto services provided by these agencies in the form of user
    fees. Fees which this committee, has in the past, and appears will
    again this year look unfavorably upon.
        As I look upon this budget for this year, I am concerned with the
    way the funds have once more been directed by the Department of
    Agriculture. I see funding cuts in areas where we have restored funds
    in past years. I also see programs continually proposed which this
    committee and Congress have told the Department that they are not
    inclined to agree with the Administration.
        Last year, Assistant Secretary Dunn came before this committee with
    a proposal to move to a cooperative arrangement in states with large
    predator problems to pay an additional share of the costs associated
    with predator control. States like Montana where a large portion of the
    predator problem is placed on the state by actions of the Federal
    government. Unfortunately we see this proposal brought before the
    Committee once again.
        In the area of Wildlife Services, we continue to see large cuts
    made in the budget. Yet in many of our rural states we see the
    population of predators on the rise. I have heard time and again, that
    the people who receive the services of the agencies involved in this
    program should pay additional funds to take care of the problem of
    predator control. A problem which has been placed on them by this
    government.
        I have a number of producers of both sheep and cattle who have told
    me of the losses they experience to both coyotes and wolves in Montana.
    Yet under your plan they would be forced to expend additional dollars
    to protect their private property from animals forced on them by this
    government. I have also been informed that the Wildlife Services Agency
    in Montana will effectively be out of money for predator control before
    the end of the current fiscal year. Well wolves and coyotes don't
    understand high finance of this particular nature, and they will
    continue to feed on the livestock in the field.
        Mr. Dunn, simple math will tell you that as wolf populations
    increase, damage to livestock will also increase. Wolves killed 70 head
    of livestock (both sheep and cattle) in Montana, Idaho and Wyoming in
    1996. By 1997, livestock kills increased to 140. Doesn't seem like a
    lot, unless of course you own one or two of those animals. Wildlife
    Services has $200,000 available in the fiscal year 1998 for wolf
    management, and I understand, anticipates a shortfall of about $70,000.
    In fiscal year 1999, $535,000 will be needed to address the escalating
    cost of livestock losses, a shortfall of over $200,000 from current
    program levels. With math like that it is not difficult to understand
    why the people on the ground don't trust the management of agencies
    within not only the Department of Agriculture but also the Department
    of the Interior.
        This past year, the Animal Plant Health Inspection Service (APHIS),
    developed certain protocols to provide for additional trade in
    livestock with our neighbors to the north in Canada. However, they set
    forth their protocols before our neighbors did so and now we are faced
    with a program that shows little potential for future development. This
    does not assist our producers in meeting the needs that they have on
    the ground, or that were explained to them in the development of this
    trade process.
        I have to tell you also Mr. Secretary, that I am more than a little
    concerned about what is happening with the funds that this Committee
    provided for the construction and operation of a bison quarantine
    facility in Montana last year. I have heard little or nothing about
    what has been done with the state to facilitate the construction and
    operation of the pens in Montana. I will be interested in hearing what
    has been going on and what APHIS plans for this facility.
        On the ground in states like Montana, our producers are looking for
    some means of finding what the market is like on fatten cattle.
    Producers have come to you for a number of years providing options for
    you to choose, yet today we have no more of an idea of what is
    happening in the market than we did several years ago. Proposals have
    been put forward, and this past month the National Cattlemen's Beef
    Association supported a resolution on providing transparency in the
    cattle market. I will be interested in hearing what is being done to
    address these concerns.
        On the issue of Food Safety. Well I guess we had better start
    spending our funds in that area of concern. It appears that this
    Administration is driving this country on a course where we will be
    required to purchase our food and fiber from foreign countries. I just
    don't know if the rest of the world takes as much care and concern in
    the commodities that they produce, as the American farmer and rancher
    does in producing the same commodities here in the United States.
        As a result I joined with several Senators in introducing a bill
    that would require that all meat be labeled as to the Country of
    Origin. After much debate within the livestock industry and with other
    industries associated with meat sales we have developed another
    proposal which we will unveil soon. However, throughout this entire
    process I have heard nothing from the Department on what their position
    on this would be.
        Overall, Mr. Chairman, I am supportive of the work and the mission
    of the Agencies before the Committee today. I am a vocal supporter of
    the work that APHIS provides. I will commit myself to working with both
    you and the ranking member of this Committee to find a way to provide
    the funding necessary for these agencies.
        Thank you, Mr. Chairman.

                         Statement of Catherine Woteki

        Dr. Woteki. Thank you, Mr. Chairman. I appreciate your
    introducing my statement and Mr. Billy's statement into the
    record. What I would propose to do is to just very briefly
    summarize some key information relevant to some of the points
    that you have just made.
        Mr. Billy is sitting to my immediate left and to his left
    is Mr. Dennis Kaplan from our Office of Budget and Policy
    Analysis.

                        Fiscal Year 1999 Budget Request

        The budget that we have proposed for fiscal year 1999 is a
    program level of $709 million, which reflects a net increase of
    $34 million over our 1998 current estimate.
        We are proposing in fiscal year 1999 to conduct our meat
    and poultry and egg inspection activities using our current
    level of staffing.
        The programmatic increases that are contained in our
    request would continue the implementation of our new regulatory
    approach based on hazard analysis and critical control points.
    It also contains funds that would be used for a variety of
    different purposes under the President's interagency food
    safety initiative.
        Collectively these increases would be used to continue
    implementation of HACCP, to extend HACCP training to the egg
    processing inspectors, to help to acquire some additional tools
    that would improve inspectors' ability to evaluate the product
    they are inspecting and also to facilitate the redeployment of
    inspectors to strengthen our compliance efforts.

                             Food Safety Initiative

        Overall the President's budget includes a $101 million
    request for an interagency food safety initiative. Of this sum,
    $11 million would come to the Food Safety and Inspection
    Service. The initiative identifies a number of very high
    priority food safety activities that provide a very integrated
    approach to reducing foodborne illnesses. In addition, these
    funds would help FSIS to facilitate the transformation of State
    programs to hazard analysis and critical control point systems
    by fiscal year 2000.
        Funds also requested under the President's food safety
    initiative would focus on expanding consumer education, helping
    to develop voluntary measures to reduce the risk of pathogenic
    contamination that could occur on the farm or on the ranch.

                               User Fee Proposal

        In the near future, the administration will be transmitting
    to you, to the Congress, the legislation necessary to support
    our fiscal year 1999 budget proposal to recover the full cost
    of the Federal meat, poultry, and egg products inspection
    through user fees. We do believe that the user fee proposal is
    important to ensure that we have sufficient resources to
    provide for the mandatory inspection services needed to meet
    the increasing demand from industry. The proposal will have an
    overall effect on prices, to the extent that we have been able
    to estimate, that will amount to less than 1 cent per pound of
    meat, poultry, and egg products. We also believe that
    implementation of a user fee should be designed and must be
    designed to be fair and equitable to promote accountability and
    efficiency and also to minimize the impact on the competitive
    balance among the affected industries.
        Approximately $150 million of appropriated funds are
    requested to convert the Federal program to user fees and also
    to continue our obligations to States to help them in
    maintaining their State inspection programs.
        We thank you for the opportunity to appear before you and I
    would also like in closing to thank you and the committee for
    your favorable actions this year on our budget request.

                              Prepared Statements

        Senator Cochran. Thank you, Dr. Woteki. Mr. Billy and Mr.
    Kaplan, we appreciate your presence as well. We will insert the
    complete statements of Dr. Woteki and Mr. Billy in the hearing
    record.
        [The statements follow:]
                   Prepared Statement of Catherine E. Woteki
        Mr. Chairman and Members of the Subcommittee, I am pleased to
    appear before you today to discuss the President's fiscal year 1999
    budget for the Food Safety and Inspection Service. With me are Deputy
    Under Secretary for Food Safety Caren Wilcox, FSIS Administrator Thomas
    Billy, USDA Budget Director Stephen Dewhurst, and representatives from
    the FSIS budget office. Before I begin, I would like to thank you for
    looking favorably on our fiscal year 1998 budget request. This funding
    has helped us make progress in fulfilling our Federal responsibilities
    of maintaining a safe food supply while we make improvements in the
    inspection program.
                         broader food safety challenges
        I would like to start by commenting briefly on our broad food
    safety agenda. As Congress pointed out in report language that
    accompanied the Department of Agriculture Reorganization Act of 1994,
    one of USDA's basic missions is to ensure the safety and quality of the
    Nation's food supply. The increasing importance of food safety issues
    to the future of agriculture led Congress to create this separate
    Subcabinet office to lead the effort to reform our food safety
    programs. It is my goal that the Under Secretary's office focus on
    long-term planning and policy development, on our legislative program
    required to ensure food safety, on oversight of the Food Safety and
    Inspection Service, and on providing general assistance and advice
    regarding food safety issues, as requested by the Secretary.
        My office also has broader responsibilities related to our critical
    mission, and the inspection of meat, poultry and egg products. One
    example of our involvement in food safety activities that provide
    support to our inspection activities is our leadership in the
    international Codex Alimentarius Commission. Coordinating the United
    States' position on international food safety issues has required that
    my office develop expertise across agency and commodity lines. Although
    we also must take into account trade issues and the international
    community's interest in those trade issues, these issues are secondary
    to Codex's public health orientation and mission.
        Secretary Glickman has also asked me to assume a leadership and
    coordination role consistent with our basic mission in such food safety
    areas as the President's Food Safety Initiative, which, among other
    things, includes the President's directive to develop and carry out a
    plan to ensure the safety of domestic and imported fruits and
    vegetables. We are working closely on these efforts with the Department
    of Health and Human Services, the Environmental Protection Agency, and
    other USDA agencies.
                             farm to table strategy
        Our central responsibility of safeguarding the nation's meat,
    poultry, and egg supply provides us with a broad perspective on the
    problem of ensuring food safety. We recognize that not all
    contamination of meat and poultry and egg products occurs in the
    slaughter and processing plants we regulate. It can occur during animal
    production, during storage and transportation, and in distribution. It
    can occur in the grocery store and in restaurants. And, of course, it
    can occur in the home. This is the basis for our farm to table food
    safety strategy.
        As you know, the President's 1998 and 1999 Food Safety Initiative
    embraces the farm to table philosophy of addressing food safety
    problems. Increased funding for research on microbial pathogen
    detection and prevention and agricultural production practices and for
    education and training of food handlers at home and in the commercial
    sector--as well as for surveillance, risk assessment, inspection, and
    strategic planning--is essential to making further improvements in food
    safety.
        For example, while many consumers have a good foundation of food
    safety knowledge, there are some persistent misconceptions as well as
    confusion about specific food handling practices. Because we believe
    education is key to changing risky behaviors, the Federal government
    has used funds provided in fiscal year 1998 to launch the ``Fight BAC''
    campaign to reduce the incidence of foodborne illness by educating
    Americans about safe food handling practices. ``BAC,'' which is short
    for bacteria, is a green, slimy-looking character, and the result of a
    private-public partnership consisting of industry, consumer groups, and
    government. The ``BAC'' character puts a face on foodborne bacteria,
    which we believe will help Americans remember that they have the power
    to control bacteria in their home kitchens. Because ``BAC'' is a
    cartoon character, children are naturally attentive to him. We hope
    that ``BAC'' will be a carrier of food safety messages to consumers at
    a young age.
                                    research
        Because of our experience with meat, poultry and egg products, we
    are positioned, I believe, to make recommendations on food safety
    research priorities and to develop effective consumer and industry
    education programs. Because FSIS is not a research agency, we must
    reach out to research agencies within the Federal government and to the
    private sector to meet our research needs. For that reason, FSIS has
    developed a Food Safety Research Agenda as one means of communicating
    with those outside of FSIS about our recommended priorities in food
    safety research.
                          inspection responsibilities
        I would like to talk now about our critical inspection
    responsibilities. I want to emphasize my commitment to fulfilling our
    basic mission--ensuring the safety of the nation's meat, poultry, and
    egg supply. Protection of the public health is our mandate, and that is
    what guides all that we do.
        Of course, our primary vehicle for meeting our responsibilities is
    our inplant inspection and oversight of the products we regulate. While
    no country in the world can boast of an absolutely safe food supply,
    I--along with many others--believe the United States has the world's
    safest food, including meat, poultry, and egg products.
                       importance of haccp implementation
        I am pleased to say that we have begun the first phase of our new
    meat and poultry inspection system. There are some 300 plants that were
    required to implement HACCP as of January 26 of this year. These plants
    account for about 75 percent of the meat and poultry slaughtered in the
    United States. I am also pleased to report that HACCP implementation in
    these plants is going well. However, HACCP implementation is an ongoing
    process that will need fine tuning in the weeks and months ahead. This
    is to be expected with such a complex change. FSIS has already
    requested some changes from a few plants, and all of these companies
    have responded positively and have adjusted their HACCP plans to
    prevent future problems before they occur. I can assure you that the
    Agency is committed to working out any problems as they arise and to a
    common sense approach to problem solving.
        Over the next two years, we will continue to work with all plants
    to make HACCP as effective as possible. We recognize that
    implementation of HACCP by smaller plants presents its own set of
    unique preparation problems. However, the Agency is ready. For example,
    approximately 380 small plants have participated in our HACCP small
    plant demonstration workshops. We also have available, technical
    guidance and materials consisting of software, videos, and written
    materials designed to assist the small plant owner or operator with
    developing their own HACCP plans. We are committed to improving food
    safety through HACCP. That commitment and follow-through will continue.
                              other items of note
    Government Performance and Results Act
        The strategic plan we have developed is consistent with the
    Government Performance and Results Act, which calls on all Federal
    agencies and departments to coordinate their activities to be more
    effective, efficient and to avoid duplication. To this end, FSIS has
    communicated with agencies, both within and external to USDA, about
    common issues and interests in food safety. Our goal, as stated in our
    ``Strategic Plan 1997-2002,'' is to enhance public health by minimizing
    foodborne illness from meat, poultry, and egg products. Our goal is a
    25 percent reduction in the number of foodborne illnesses associated
    with meat, poultry, and egg products by the year 2000. This goal will
    be achieved by accomplishing all the daily tasks necessary to satisfy
    objectives in pathogen reduction, implementing the President's Food
    Safety Initiative, implementing our farm to table food safety strategy,
    fostering Agency cultural change, and cooperating with international
    groups on food safety matters.
    Year 2000
        FSIS, as with others in both the public and private sectors, is
    faced with a major technical challenge known as the ``Year 2000
    Problem.'' This refers to the possibility some computer systems in
    government and business may malfunction or cease to function as the
    year changes from 1999 to 2000. FSIS began working in 1997 to ensure
    that its systems are prepared to support the inspection program
    successfully into the year 2000 and beyond. For example, FSIS has
    designated eight of its automated information systems as mission
    critical. FSIS is making these systems ``Year 2000 Compliant'' using
    existing resources. A project plan is in place to carry out four major
    phases--assessment, renovation, validation and implementation--covering
    the period 1997 through 1999. We expect to finish all systems
    validation in 1998, and will complete implementation of systems by
    March 1999.
                               budget highlights
        For 1999, the budget proposes a program level of $709 million, a
    net increase of $34 million over the 1998 current estimate. In 1999,
    FSIS will continue the process of transforming the inspection process
    with current staffing levels. In fiscal year 1999, the budget includes
    programmatic increases to build on the investments begun with the
    implementation of the Pathogen Reduction and HACCP systems rule and the
    President's Interagency Food Safety Initiative. Approximately $2
    million is requested to improve the Federal inspection system by
    providing HACCP training to egg processing inspectors, acquiring tools
    that will improve an inspector's ability to evaluate product, and
    facilitating the redeployment of inspectors to strengthen compliance
    efforts.
        The President's 1999 budget includes an increase of $101 million
    for the Interagency Food Safety Initiative, which includes $11 million
    for FSIS. The initiative identifies a number of high priority food
    safety activities that provide an integrated approach to reducing
    foodborne illness. With the additional funds, FSIS will facilitate the
    transformation of State programs to Hazard Analysis and Critical
    Control Point systems by fiscal year 2000, work cooperatively with
    other Federal agencies to expand consumer education, and develop
    voluntary measures to reduce the risk of pathogenic contamination of
    animals on the farm. These new activities would build on the successes
    and fill the gaps identified in the President's 1998 Food Safety
    Initiative.
        In the near future, the Administration will be transmitting to
    Congress the legislation necessary to support the 1999 budget proposal
    to recover the full cost of providing Federal meat, poultry, and egg
    products inspection through user fees. Requiring the payment of user
    fees for Federal inspection services would ensure that sufficient
    resources are available to provide the mandatory inspection services
    needed to meet increasing industry demand. The overall impact on prices
    as a result of these fees has been estimated to be less than one cent
    per pound of meat, poultry, and egg products production. The
    implementation of the user fee authority would be designed to be fair
    and equitable, promote accountability and efficiency, and minimize the
    impact on the competitive balance among affected industries.
    Approximately $150 million in appropriated funds are requested to
    convert the Federal program to user fees and for maintaining State
    inspection programs.
                                   conclusion
        These are a few of the issues I wanted to bring to your attention
    today. I believe we are on the right path to an even safer food supply.
    We have a good framework in place for making significant food safety
    improvements. I look forward to working with you to build the best food
    safety system we can.
        Thank you again for the opportunity to appear here and discuss our
    goals to enhance food safety and the progress we have made. I will be
    happy to answer any questions you or other Members of the Subcommittee
    may have.
                                     ______

                     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 1999
    budget request for the Food Safety and Inspection Service, FSIS.
        Having worked to promote food safety for most of my career in
    public service, I recognize the importance of working toward an
    essential and clearly defined goal. Our goal in food safety is to
    achieve the greatest possible reduction in the risk of foodborne
    illness associated with the consumption of meat, poultry, and egg
    products, consistent with available science and technology. Toward that
    end, we are applying resources in a prudent manner to make fundamental
    changes in inspection and build on our partnerships with other Federal
    agencies, the States, industry, academia, our employee organizations,
    consumer groups, and other interested segments of the public.
        These are exciting times in food safety and it is because of your
    support that we are making real progress in improving food safety. Now,
    I would like to tell you how we are fulfilling our responsibilities and
    about our initiatives for better ensuring the safety of meat, poultry,
    and egg products.
                         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 6,000 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 fiscal year 1997, our domestic inspectors examined approximately
    72.9 billion pounds, dressed weight, of meat and poultry and 3.2
    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:
    oversight and reinspection. In order to ensure that exporting countries
    have government controls equivalent to those of the United States, FSIS
    conducts a rigorous review of such before they can become eligible to
    export product to the United States. Additionally, periodic in-country
    reviews, including on-site plant audits, are carried out to maintain
    such eligibility.
        Reinspection of meat and poultry products that enter the United
    States is based on statistical sampling and verifies that the country's
    inspection system is working. Approximately 70 import inspectors
    covering some 124 active import inspection locations carry out this
    reinspection. In 1997, FSIS passed 2.5 billion pounds of imported meat
    and poultry products for entry into the U.S.
        Another part of the FSIS food safety program involves our
    laboratories, which provide scientific and technical support to
    inspection personnel through laboratory testing for microbiological
    contamination, chemical and antibiotic residues, 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 1997,
    over 141,000 residue, chemical and microbiological analyses were
    performed on meat, poultry, and egg product samples by federally
    operated laboratories.
        FSIS also 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 1997, 26,142 compliance reviews were conducted. As a
    result of these reviews and other compliance activities, more than 44
    million pounds of meat, poultry, and egg products were detained for
    noncompliance with the respective laws. Fifty recalls were conducted
    involving almost 27.9 million pounds of product. In addition, 22
    convictions were obtained against firms and individuals for violations
    of the meat and poultry inspection laws.
                            changes underway in fsis
        In 1997, FSIS began implementing a comprehensive food safety
    strategy. This included implementation of the requirements for
    sanitation SOP's and microbial testing for generic E. coli at
    slaughter. In addition, we began implementation of a major agency
    reorganization which will be completed by fiscal year 1999. I'd like to
    discuss these key changes further and changes under our food safety
    strategy that continue in 1998 and are planned for 1999.
                          pathogen reduction and haccp
        On July 25, 1996, FSIS published the final rule on Pathogen
    Reduction and the Hazard Analysis and Critical Control Point system,
    known as HACCP. This rule addresses the limitations of the traditional
    organoleptic inspection system in dealing adequately with the problem
    of pathogenic microorganisms--harmful bacteria--on raw meat and poultry
    products, which contribute significantly to foodborne illness in the
    United States. HACCP's objective is to directly target and
    systematically reduce harmful bacteria on raw products, as well as
    other likely hazards, thereby reducing the risk of foodborne illness.
        As required by the HACCP rule, on January 27, 1997, all plants had
    to implement plant-specific Sanitation Standard Operating Procedures,
    SSOP's, to ensure that they are meeting their responsibility for proper
    sanitation of facilities, equipment, and operations. The written SSOP's
    must describe the specific measures plant management will put in place
    to prevent direct product contamination. Follow-up reviews indicate
    that SSOP's are effective in the vast majority of plants; however, in
    about 14 instances, we have had to move into an enforcement mode to
    stimulate companies to correct their sanitation systems.
        In addition, all slaughter plants began testing their products for
    generic E. coli as an indicator of process control effectiveness for
    preventing fecal contamination, the primary pathway for pathogenic
    bacteria. Both of these measures were in preparation for full HACCP
    implementation, which began January 26 of this year in federally
    inspected large plants.
        Overall, some 300 large plants have moved to improve the safety of
    meat and poultry products by implementing their HACCP plans, which are
    based on the seven principles established by the National Advisory
    Committee on Microbiological Criteria for Foods. These HACCP plans are
    designed to meet performance standards for Salmonella that went into
    effect at the same time as the HACCP requirements.
        From the very beginning of the process of developing the HACCP
    rule, we have held frequent public meetings to receive input from our
    constituencies and to provide assistance to plants required to
    implement the provisions of the HACCP rule. Consistent with our
    emphasis on communication and assistance, in December and January, we
    held HACCP implementation meetings around the country to brief the
    management of large plants on how the agency would conduct inspection
    subsequent to the January 26 deadline. We found these meetings, held in
    Washington, DC, Des Moines, Iowa, Denver, Colorado, and Memphis,
    Tennessee, to be very useful in aiding a smooth transition to the new
    regulations.
        HACCP implementation will continue to be phased in according to
    plant size. Large plants with 500 or more employees implemented their
    plans on January 26. Small plants with 10 to 499 employees must have a
    plan in place by January 25, 1999, and very small plants, with fewer
    than 10 employees or annual sales of less than $2.5 million must have a
    plan in place by January 25, 2000.
        HACCP remains a work in progress that will need fine-tuning in the
    weeks and months to come. This is to be expected with such a complex
    change, and I assure you that we are committed to working out any
    problems as they arise. In recognizing the special difficulties that
    all plants, especially small plants, will face, we have initiated an
    aggressive program to provide assistance to these plants. We are
    providing technical assistance and recently held a round of meetings
    targeted to the communication needs of small and very small plants.
    FSIS district managers are on call 24 hours a day, 7 days a week, to
    make rapid decisions and respond to emergencies. In addition, the
    Technical Services Center is operating a HACCP Hotline with four lines
    open between 6 a.m. and 6 p.m. Central Time, Monday through Friday, and
    an electronic message and paging service 24 hours a day, seven days a
    week. As a result of questions we have received regarding
    implementation, we have published a number of documents in the Federal
    Register clarifying certain aspects of the HACCP regulations, including
    offering an option for early HACCP implementation, to small and very
    small plants.
        By January 25, 2000, all provisions of the final rule will be
    implemented. The final rule sets an important framework for performing
    our food safety mission, but it is not the culmination of our strategy
    for change. We will continue pursuing our goal of reducing the risk of
    foodborne illness and additional opportunities to improve the way we
    carry out inspection activities, to promote both food safety and the
    efficient use of resources.
        Our nation's meat and poultry is far and away the safest and
    highest quality in the world. However, the HACCP final rule assures
    consistency between meat and poultry inspection across the country and
    will help us move toward a seamless national food safety program. There
    will be greater consistency in both Federal and State inspection, as
    well, based on a common, consistent regulatory framework.
                               inspection changes
        HACCP is permitting us to make improvements in the inspection
    process and will permit us to redeploy some of our current in-plant
    inspection work force to HACCP verification tasks, and to new tasks
    outside of traditional in-plant settings in furtherance of our farm-to-
    table strategy. Our budget request includes a proposal to increase
    support for these efforts, especially for travel to multiple
    destinations to perform monitoring and reviews.
        We are making progress on addressing food safety risks to products
    once they leave Federally inspected plants by working closely with
    other government agencies, professional groups, academia, and industry.
    At the transportation level, we are working with FDA to develop
    guidelines covering the safety of foods during distribution. We are
    placing particular emphasis on time and temperature control as a means
    of minimizing the growth of pathogenic microorganisms. At the retail
    level, we are working again with FDA and with State officials to ensure
    the adoption of science-based standards and to foster HACCP-type
    preventative approaches--largely through the Food Code process.
                    federal-state cooperation in food safety
        In FSIS, we have a long history of working with State-administered
    meat and poultry inspection programs, and we are now in the process of
    taking steps to strengthen, and hopefully expand these programs. We
    consider them an integral part of the national regulatory system for
    ensuring the safety, quality, and accuracy of labeling of the Nation's
    meat and poultry supply.
        Describing the State programs as part of the national system is an
    extremely important concept, because we cannot look at the Federal and
    State programs as separate entities. On the contrary, they must be
    considered as parts of a whole, and any initiatives we undertake must
    be carried out with that perspective in mind. That is why we have
    worked closely with the States throughout the rulemaking and
    implementation process as a means of ensuring that the provisions in
    the HACCP rule are appropriate for State, as well as Federal, plants.
    This intergovernmental cooperation is the basis for our budget request
    for special assistance with HACCP implementation in the State programs.
                        changes in the fsis organization
        To help reach our strategic goal of reducing the risk of foodborne
    illness, we began implementing a major reorganization of the agency in
    1996, which was needed to optimize the management structure and
    allocation of our resources in performing our regulatory
    responsibilities. Originally, we expected the reorganization to be
    fully implemented by fiscal year 1999, but we exceeded our own
    expectations and much of the reorganization was completed in 1997. The
    change in organizational structure was designed to make the best
    possible use of agency resources so that FSIS could meet the future
    food safety and consumer protection challenges. The reorganization is
    based on a top-to-bottom review of the Agency's regulatory roles,
    resource allocations, and organizational needs.
        We have flattened and streamlined management structures both at
    headquarters and in the field, recognizing that the Agency needs fewer
    non-frontline staff. As we continue streamlining the organization, we
    will continue to 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 have reduced the number of headquarters
    units reporting to the Administrator by nearly half, from thirteen to
    seven, eliminated one layer of management, and reduced the number of
    supervisory positions. In fiscal year 1997, we reduced the number of
    field management offices from 46 field offices to 18 district offices
    and four field support offices. The 18 new district offices have
    already demonstrated that they will make supervisory spans of control
    more manageable and better balance the workload. In addition,
    administrative services provided to field locations were consolidated
    with the opening of the Financial Processing Center in Des Moines,
    Iowa, and assumption of further personnel support in the existing
    Personnel Operations Branch in Minneapolis, Minnesota.
        A new Technical Services Center opened in Omaha, Nebraska, in June
    1997. Center employees provide technical expertise and guidance to
    inspection personnel on the interpretation, enforcement, and
    application of domestic and import regulations, policies, and systems.
    The Center is also available to industry and enables FSIS to provide
    much quicker and more consistent technical assistance in inspection
    across the country. An example of this assistance is the newly
    operating HACCP Hotline that I mentioned earlier.
                    emphasis on public health in performance
        Our strategic goal is to reduce to the greatest possible extent the
    risk of foodborne illness associated with eating meat, poultry, and egg
    products. In short, we want food to be safer so that fewer people will
    get sick. As you know, the Government Performance and Results Act of
    1993, known as GPRA, 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.
        Within our Strategic Plan and Annual Performance Plan, our goal is
    supported by six objectives, which incorporate strategies for enhancing
    the public health by minimizing foodborne illness. These objectives are
    to:
      --Reduce pathogens on raw products by continuing the implementation
            of the Pathogen Reduction/HACCP rule;
      --Collaborate with other public health agencies and stakeholders to
            implement the near term program objectives contained in the
            President's National Food Safety Initiative;
      --Develop a comprehensive strategy for promoting food safety from
            farm-to-table;
      --Continue the necessary cultural changes to support HACCP and HACCP
            related food safety initiatives by training the work force to
            carry out the re-defined regulatory procedures, and by ensuring
            industry and State programs understand their new roles and
            responsibilities;
      --Assure HACCP equivalent systems for imported products; and
      --Streamline and improve the effectiveness, efficiency, and diversity
            of administrative and human resources support functions.
        In order to obtain much needed baseline data on the incidence of
    foodborne illness in the U.S. that is attributable to consumption of
    meat, poultry, and egg products, FSIS began working with the Centers
    for Disease Control and Prevention, CDC, and the FDA in 1995, to
    monitor seven foodborne illness ``sentinel sites'' through the FoodNet
    system. The sites include Northern California, Oregon, the Minneapolis/
    St. Paul metropolitan area, the Atlanta metropolitan area, Connecticut,
    several counties in upstate New York, and counties around Baltimore,
    Maryland. The data from FoodNet will enable us 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. FoodNet
    information will assist in reviewing the impact of HACCP programs and
    will trigger changes, where appropriate, to prevent future outbreaks of
    foodborne illness. This information is critical to improving the
    overall performance of our food safety mission because it will
    demonstrate the effectiveness of present and new strategies and greatly
    assist efforts to reduce the risk of foodborne illness.
        As you know, we were directed by you in the fiscal year 1998
    Committee Report to report on the incidence of foodborne illness in
    cooperation with CDC. Data for 1997 will be finalized by the end of
    March, and we will be able to provide the report in April.
        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 take the
    necessary action to further reduce risks.
        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 were well equipped to
    fulfill our food safety responsibilities in the 1997 product recalls.
    We demonstrated that we are able to address immediate public health
    problems, as well as adjust our regulatory policies and procedures as
    necessary.
                  president's national food safety initiative
        The President's Food Safety Initiative is an integrated, multi-
    agency plan for improving the safety of the Nation's food supply.
    Building on the 1998 initiative, the FSIS budget proposal will support
    efforts to reduce the risk of foodborne illness from the farm to the
    table. Addressing the need for increased efforts to address food safety
    on the farm, the initiative supports development of voluntary measures
    that producers can utilize to reduce pathogenic contamination of
    animals before they reach the slaughterhouse. In addition, to move
    toward a seamless national food safety program, FSIS proposes to
    increase the share of Federal funding to assist State programs with
    HACCP implementation. Mindful of our responsibilities to consumers, we
    also propose an expansion of food safety education. These proposals
    will work in tandem with complementary proposals within USDA and in
    other Federal programs to reduce the risk of foodborne illness.
                               regulatory reform
        FSIS is making steady progress in reforming its existing
    regulations and is delivering on the commitment we made in December
    1995 when we described our regulatory reform strategy in an advanced
    notice of proposed rulemaking. FSIS has already ended the prior
    approval requirements for facility blueprints and equipment, and most
    partial quality control programs through a final regulation that was
    published in August 1997.
        The Agency continues working to convert command and control
    regulations into performance standards in an effort to achieve
    consistency with the HACCP final rule. We have published a proposal to
    change all of the detailed sanitation requirements into performance
    standards. We have also published a proposed regulation on one uniform
    set of rules of practice. We are in the final stages of clearing a
    final rule to establish a performance standard for certain cooked meat
    and poultry products that will be the model for a series of product
    food safety performance standards, which will eventually encompass all
    categories of products. Whenever possible, FSIS has replaced the
    separate meat and poultry provisions with a single regulatory
    requirement that takes differing characteristics of meat and poultry
    into account.
        To supplement these planned regulatory reform activities, we have
    developed guidance material to assist the industry in meeting HACCP
    requirements, as mentioned earlier. The materials include guidance on
    how to collect the required samples for generic E. coli testing of both
    livestock and poultry carcasses; how to develop HACCP plans; how to
    identify food safety hazards associated with processes at inspected
    establishments; and thirteen generic HACCP models. We have printed
    these materials in quantity and we distribute them without charge.
    Public meetings that I discussed as part of HACCP implementation have
    facilitated useful communications with various segments of the industry
    and have assisted implementation of regulatory reform. In addition,
    FSIS has completed implementing Directives for the HACCP final rule and
    revision of the automated system, which schedules inspection procedures
    to accommodate HACCP implementation in large establishments. Finally,
    the Agency has published the first of a series of policy notices
    designed to clarify its expectations about certain aspects of HACCP
    implementation, which address misunderstandings that the industry has
    communicated informally.
                                   egg safety
        I'd like to now address our strategy for egg products. As you well
    know, USDA has the responsibility to regulate the safety of egg
    products, while FDA has the responsibility to regulate the safety of
    shell eggs. This shared jurisdiction necessitates that USDA and FDA
    work closely together to develop a food safety strategy for these
    products, and that is exactly what we are doing.
        The HACCP final rule that is now being implemented does not address
    egg safety, but egg safety is certainly part of our agenda. FSIS and
    FDA firmly believe that a farm-to-table food safety strategy must
    include eggs, be science-based, and address the entire farm-to-table
    chain. FSIS' 1999 budget request proposes implementation of HACCP in
    the Egg Products Inspection program and calls for establishment of a
    microbiological baseline and training for the egg products inspection
    work force.
        Egg safety is of particular concern to us because of the prevalence
    of foodborne illnesses caused by the pathogen Salmonella enteriditis,
    or SE, through the consumption of eggs and egg products. Data from CDC
    indicate that SE is one of the most commonly reported causes of
    foodborne illness in the United States and has been increasing since
    1976. Contaminated eggs have been the most commonly identified food
    source for outbreaks of SE, therefore we must take a comprehensive
    approach to improve the safety of both shell eggs and egg products.
        USDA, FDA, CDC, and academia are continuing to conduct a
    quantitative risk assessment for SE in eggs and egg products to help
    ensure that any actions taken will address the human risks identified.
    The risk assessment will give us a more definitive understanding of the
    risks from shell eggs and egg products, and it will help us evaluate
    the alternative ways in which the risks might be reduced. It will also
    tell us what additional data are needed and help us to prioritize data
    collection efforts; and to focus our risk/benefit analysis.
        To address these broad and complex issues, we are continuing to
    work jointly with FDA to develop an advanced notice of proposed
    rulemaking, or ANPR, that meets our farm-to-table and science-based
    criteria. The ANPR will look at eggs during production, packing,
    processing, labeling, distribution, retail, and preparation. We are
    seeking a rational and comprehensive approach to addressing the safety
    of eggs and egg products. We are mindful of the requirement in the 1998
    Appropriations Act to promulgate a final rule requiring a 45 degrees
    Fahrenheit ambient air temperature for the transportation and storage
    of eggs. While we believe this ANPR is the appropriate way to proceed,
    we will promulgate the required final rule if we cannot publish a more
    comprehensive regulation within the required time.
                             information technology
        Through the Field Automation and Information Management project, or
    FAIM, which you have supported, we are able to reinforce both the
    Agency's field reorganization and HACCP implementation by equipping our
    inspection personnel with information technology. All large HACCP
    plants are now covered by FAIM as of January 1998, the effective date
    of the HACCP rule for these plants.
        With FAIM implementation and new automation capability, lab results
    are available for immediate overnight distribution. Our work force has
    direct access to necessary regulations and directives, and can
    communicate and keep in contact with other inspection personnel via e-
    mail. FAIM also enables inspectors to receive on-site training in such
    areas as HACCP, beef and poultry slaughter techniques, and import
    inspection.
        In October 1997, the Industry Advisory Council and Chief
    Information Officers Council jointly published a report titled ``Best
    IT Practices in the Federal Government.'' In that publication, FAIM was
    cited as one of the top twenty Information Technology Programs in the
    Federal Government.
                             international changes
        FSIS remains committed to working through the Codex Alimentarius
    Commission to continue to stress the role of science in international
    standard setting and to actively participate in the process. Over the
    past year, the FSIS Office of Codex has accomplished a great deal. A
    U.S. Codex site on the FSIS web site was established, a Codex Strategic
    Planning document was published as a notice in the Federal Register,
    and a public meeting on Codex strategic planning was held here in
    Washington, DC. Also, FSIS published a notice in the Federal Register
    informing the public of the sanitary and phyto-sanitary standard
    setting activities of the Commission, and a public meeting was held to
    take comment on the U.S. positions on issues to be considered by the
    Codex Alimentarius Commission and its Executive Committee.
        Significant achievements were made at the June 22, 1997 meeting of
    the Commission. At that meeting, the Commission adopted three vitally
    important food safety standards through documents forwarded from the
    Food Hygiene Committee. One document outlines the basic principles of
    good hygiene as applied throughout the food chain by governments, food
    producers, and consumers, alike. The second document provides guidance
    to countries on the application of HACCP. The third document provides a
    framework to address the occurrence of microbial organisms including
    important pathogens such as E. coli O157:H7 and Salmonella in food.
        The Commission endorsed the inclusion of the four science
    principles in the Codex Procedural Manual, approved the inclusion of
    principles of risk assessment, and began work on the elaboration of
    principles of risk management. The incorporation of these important
    human health factors and a scientific and systematic approach to their
    application in the Codex process will facilitate future Codex work.
        Major progress was achieved by adopting the Codex General Standard
    on Food Additives (GSFA). This standard has been a prime goal of the
    Commission, and one sought by the U.S. for some time. It is tailored
    after the U.S. approach.
        The Commission also adopted standards for 170 food additives, which
    can be used in any food, within the constraints of Good Manufacturing
    Practices. This list of additives comprises a substantial fraction of
    the food additives currently in use in international trade. These
    standards were urgently needed to remove one of the principal barriers
    to trade in value-added processed foods, which had been subject to
    differing national food additive standards.
        I am also pleased to report that I was selected to be a Vice-
    Chairman of the Codex Alimentarius Commission at the 22nd Session of
    the Commission. I will serve as Vice-Chairman through the 23rd Session
    of the Commission, scheduled to be held in Rome in June 1999.
                              1999 budget request
        We welcome the increased emphasis being placed on food safety
    throughout USDA and other Federal programs and support the initiatives
    included in the President's Food Safety Initiative.
        To continue making food safety improvements and to accomplish our
    goals, the 1999 budget proposes a program level of $709 million--an
    increase of $33.6 million over the amount provided for 1998. To
    continue transformation of the Federal inspection program, this
    proposal includes a net increase of $20.7 million, of which $18.4
    million will support the current Federal inspection work force through
    mandatory pay increases and non-salary costs increases and $2.3 million
    will support new initiatives. In addition, the request includes $11.3
    million for the President's Food Safety Initiative and $1.6 million in
    State program-related initiatives.
        In fiscal year 1999, FSIS will again continue the process of
    transforming the inspection process within the current staffing
    ceiling, a commitment we made in the 1997 budget. We are maintaining
    the same inspection staffing levels in 1999 that we have in 1998, and
    are equipping our work force to perform in-plant inspection under HACCP
    requirements while planning to utilize other redeployed personnel to
    assure the safety of inspected meat, poultry, and egg products in-
    distribution. Widening inspection coverage to both the in-plant setting
    and in-distribution as we implement HACCP is critical to implementing
    our farm-to-table food safety strategy.
        In fiscal year 1999, FSIS proposes to build on the changes and
    investments we have begun during the last few 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.
                            1999 budget initiatives
        I spoke earlier of the importance of the President's Food Safety
    Initiative and for fiscal year 1999, our request will strengthen our
    partnerships with consumers, producers, and the State programs to
    improve overall food safety. We are requesting $0.5 million for food
    safety education of consumers and those who prepare food, which will
    focus on food handling behaviors and improving the food safety
    awareness of children and youth. An increase of $3.0 million is
    requested to provide producers with the information they need to
    implement voluntary measures to reduce pathogen contamination of
    animals before slaughter. Of this amount, we will use $1.0 million to
    conduct risk assessments that will lead to the development of
    appropriate voluntary control strategies for application by producers.
    The remaining $2.0 million will be used for producer education. This
    education is necessary to ensure that producers understand the changes
    that are occurring in the industry due to the implementation of HACCP,
    and to inform them of the ways in which risk mitigation strategies can
    assist them in meeting these new challenges. We do not, nor are we
    seeking authority to, mandate on-farm practices. We have been working
    with producers to develop voluntary animal management practices to
    improve food safety and more can be done to assist them in their
    efforts to improve food safety from farm-to-table.
        The Initiative also includes a $7.8 million increase in special
    assistance to facilitate the adoption of HACCP by State Inspection
    Programs that is short-term enhanced funding for HACCP implementation.
    Successful implementation of HACCP by States is critical to ensuring
    that their requirements are ``equal to'' Federal requirements.
    Specifically, $5.8 million of the increase is needed to extend the FAIM
    project to the State inspection programs. This funding will ensure that
    State programs have the necessary automated infrastructure support in
    time to fully implement the provisions of the HACCP final rule. The
    FAIM project will save FSIS and the States developmental costs, and
    provide for consistency in food safety data and information nationwide.
    A $1.3 million increase in special assistance is needed for equipment
    to assist States in meeting HACCP requirements for extensive laboratory
    testing for pathogens. An additional $0.7 million is needed to develop
    and deliver HACCP training so that State inspection personnel will be
    able to perform in the same manner as their Federal counterparts. To
    assist the States on a short-term basis through the transition to
    HACCP, the budget includes new appropriations language that will
    increase the Federal share of funding for these initiatives from 50
    percent to 75 percent.
        Redeployment of inspection personnel to perform new inspection work
    within the plant and in-distribution enables FSIS to operate within
    existing staffing levels, but requires increased operating support to
    assure peak performance. We are proposing an increase of $2.3 million
    for upgraded HACCP inspection technology within the plant,
    implementation of HACCP in the Egg Products Inspection program, and
    specialized equipment and increased travel for in-distribution
    compliance activity.
        As I have stated, the State inspection programs perform a key role
    in ensuring a safe and wholesome, nationwide food supply. We are
    requesting a net increase of $1.6 million in support of State
    inspection programs. About half of the increase will provide the
    federal share of increased State inspection costs, and the balance will
    enable FSIS to perform intensified audits of all 25 State inspection
    programs in 1999, which is needed to assure that their requirements are
    ``equal to'' the Federal program. These comprehensive reviews will
    enable FSIS to assist and monitor efforts in managing the extensive
    changes required by both the industry and State inspection programs as
    a result of mandatory HACCP provisions.
                                   user fees
        The budget assumes enactment of legislation to recover a total of
    $573.4 million in new user fees to cover the full cost of the Federal
    inspection program. For 1999, we are requesting an appropriation of
    $149.6 million for the Grants to States program, special assistance for
    State programs, and leave liability and start-up costs for the new user
    fee program. 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.
        We are currently evaluating a user fee plan to assess inspection
    fees based on pounds of inspected product by industry segment,
    including slaughter, processing, egg products, and import inspection.
    The overall impact on consumer prices as a result of these fees would
    be less than one cent per pound of meat and poultry production.
        To accomplish a balanced Federal budget, cost burdens must be
    shifted from taxpayers to those who benefit directly from the provided
    services. The food industry profits in the marketplace from the level
    of consumer confidence provided by the Federal inspection programs.
    Additionally, the inspection programs provide a level playing field in
    maintaining standards of safety, wholesomeness and labeling among
    individual industry entities competing for market advantage.
                                   conclusion
        Mr. Chairman, this concludes my prepared statement. Thank you for
    the opportunity to testify and speak to the Subcommittee on how FSIS is
    meeting its responsibilities in working with Congress and other
    partners 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.
                                     ______

                             Biographical Sketches
                                catherine woteki
        Dr. Catherine Woteki is Under Secretary for Food Safety for the
    U.S. Department of Agriculture. In this position, she is USDA's top
    food safety official, overseeing implementation of the new science-
    based inspection system for meat and poultry.
        Prior to being sworn in to her present position on July 31, 1997,
    she served as Acting Under Secretary for Research, Education, and
    Economics. From 1994 to 1995, she was Deputy to the Associate Director
    of Science of the Office of Science and Technology Policy. From 1990 to
    1994, she was Director of the Food and Nutrition Board, Institute of
    Medicine, National Academy of Sciences.
        Dr. Woteki was born in Fort Leavenworth, Kansas. 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, Blacksburg, Virginia, and received a
    Ph.D. in human nutrition. She is a registered dietitian.
        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 has published 48 articles and numerous technical reports
    and books on food and nutrition policy and nutrition monitoring. During
    her tenure as Director of the Food and Nutrition Board, she directed
    studies that resulted in 20 publications by the Institute of Medicine.
    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 received the Elijah White Award from the National Center
    for Health Statistics, the Special Recognition Award from the U.S.
    Public Health Service, and the Staff Achievement Award from 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 also presented the 1997 Lenna Frances
    Cooper Memorial Lecture at the annual meeting and exhibition of the
    American Dietetic Association. She and her husband, Tom, reside in
    Washington, D.C.
                                     ______

                                caren a. wilcox
        Caren A. Wilcox is Deputy Under Secretary for Food Safety of the
    U.S. Department of Agriculture. Her position is part of the
    restructuring of USDA's 1994 reorganization plan. Her key
    responsibilities include working with the Under Secretary and the
    Administrator of FSIS on the implementation of the Hazard Analysis and
    Critical Control Points [HACCP] system, a science-based process control
    system to improve the safety of American meat and poultry. She also
    works on many of the President's initiatives as they impact food safety
    mission responsibilities. Wilcox oversees certain areas of
    responsibility for the Under Secretary including assignments in
    strategic and communications planning regarding the Office of the Under
    Secretary.
        Prior to her present appointment, which began November 18, 1997,
    she was with the U.S. Small Business Administration where she was
    regional advocate for the mid-Atlantic states and the District of
    Columbia. In this position, she worked to enhance the growth of small
    businesses in the region. She also served as executive vice president
    of the National Association of Women Business Owners [NAWBO].
        At USDA, Wilcox combines her experience in the small business
    community with almost 20 years in the food industry, having served as
    manager, then director of government relations for Hershey Foods
    Corporation. While with the corporation, she was involved in the
    establishment of voluntary HACCP programs in its plants, and sat on the
    corporate oversight committee which reviewed food safety and quality
    issues. She also planned, organized, and managed public policy
    development and legislative representation of the corporation at all
    levels of government.
        In 1993 and 1994 she aided the Clinton administration by working
    with the business community on such issues as the President's economic
    programs, health care, school-to-work, GATT, and the Summit of the
    Americas. She served as Deputy Director for Business in the Political
    Department in the Clinton/Gore Campaign in 1992 in Little Rock.
        Ms. Wilcox, a longtime resident of Pennsylvania, graduated from
    Wellesley College in Massachusetts and received her master of arts in
    international relations from the University of Pennsylvania in
    Philadelphia. She also served as assistant dean of the College of
    Liberal Arts for Women at the university. Early in her career, Ms.
    Wilcox was involved in international educational programs and worked at
    Institut IMEDE in Lausanne, Switzerland.
        Ms. Wilcox has received many awards for her outstanding leadership
    at senior levels of business, government, academia, and public affairs
    management. She presently resides in Washington, DC.

                           Statement of Michael Dunn

        Senator Cochran. Mr. Dunn, Mr. Secretary, you may proceed.
        Mr. Dunn. Thank you, Mr. Chairman. I appreciate the
    opportunity.
        With me here today is Mr. Baker, who is the Administrator
    of the Grain Inspection, Packers and Stockyards Administration;
    Dr. Figueroa, who is the Administrator of the Agricultural
    Marketing Service; and Mr. Medley, who is the Administrator of
    the Animal and Plant Health and Inspection Service. These three
    Administrators make up the marketing and regulatory programs.
        Beneficiaries of program services, as well as taxpayers,
    provide for the funds needed to operate marketing and
    regulatory program activities. In total, the appropriations and
    user fee resources are proposed to carry out $804 million of
    program level activities. Beneficiaries of these services pay
    over $397 million. Currently marketing and regulatory programs
    administer over 50 percent of the Department's user fee
    programs. These programs have been market tested and continue
    to meet the demand of the market's challenges.
        In fiscal year 1999, the budget request proposes to
    appropriate $11.8 million for the Grain Inspection, Packers and
    Stockyards Administration, $59.7 million for the Agricultural
    Marketing Service, and $423 million for the Animal and Plant
    Health Inspection Service.
        We will, as you pointed out, be submitting legislation for
    $31 million more in user fees. The budget assumes that these
    would be passed.

                    Grain Inspection, Packers and Stockyards

        The 1999 budget proposes an increase of $795,000 for
    monitoring and analyzing packer competition and industry
    structure, $750,000 to broaden the size and scope of poultry
    compliance investigation, and $225,000 to establish electronic
    filing procedures.
        In addition, the budget requests $3 million to reorganize
    the 11 packers and stockyards field offices in order to
    implement the Office of Inspector General's recommendations for
    improving packers and stockyards' investigative capabilities.

                       Marketing and Regulatory Programs

        Legislation required us to publish two pieces of proposed
    rules this year, one for national standards for organic
    production, and the other for milk marketing order reform. Both
    of these rules have made extensive use of the Internet. For the
    organic standards alone, we have received over 17,000 comments.
        We are requesting $10.5 million for three efforts to expand
    the Pesticide Data Program for the Agricultural Marketing
    Service.
        First, we request an additional $2.5 million to restore the
    funding to the level available in 1996.
        Second, we need $1.7 million to protect American
    agriculture from unnecessary losses in pesticide registration.
        Third, we are requesting $6.3 million to begin
    microbiological testing of fruits and vegetables as part of the
    President's food safety initiative.
        The budget includes an increase of $300,000 to expand
    International Market News reporting.
        The budget also includes a request of $500,000 for the
    National Organic Standards Program to be started up. These
    funds will be recouped through user fees and deposited in the
    Treasury.

                                     APHIS

        The 1999 budget request is an example of good government.
    They are proposing to do more with less. The 1999 APHIS request
    for salary and expense is $9.9 million below that of 1998. Even
    so, APHIS proposes to spend $13 million more on high-priority
    efforts such as the $4.6 million increase for the National
    Animal Health Monitoring System.

                              Prepared Statements

        Mr. Chairman, I appreciate the opportunity to come before
    the committee, and we will submit the written testimony of
    myself and the Administrators.
        Senator Cochran. Thank you very much.
        [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 1999 budget proposals.
        With me today are Terry Medley, Administrator of the Animal and
    Plant Health Inspection Service, Enrique Figueroa, 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.
                                strategic goals
        Our goals contribute to the Department's three strategic goals that
    support the rural economy, assure food safety and sensibly manage the
    natural resources. Specifically, the MRP goals include: enhancing
    consumer access to safe, affordable, and quality products and to assure
    producer access to competitive markets; and facilitating the global
    marketing of U.S. agricultural products.
                                funding sources
        The Marketing and Regulatory Program activities are funded by both
    the taxpayers and beneficiaries of program services. In total, the
    appropriations and user fee resources are proposed to carry-out $804
    million of program level activity.
        On the appropriation side, we are requesting $417.8 million for
    salaries and expenses and $5.2 million for buildings and facilities for
    the Animal and Plant Health Inspection Service; $58.5 million for
    Marketing Services and $1.2 million for the Federal-State Marketing
    Improvement Program for the Agricultural Marketing Service; and $11.8
    million for the Grain Inspection, Packers and Stockyards
    Administration. Legislation will be submitted to recover $31 million
    more in user fees and the budget assumes that this legislation will be
    enacted. The budget also assumes enactment of legislation authorizing
    new license fees to recover the cost of administering the Packers and
    Stockyards Act (P&S Act), additional fees for selected APHIS
    activities, and additional fees for developing grain standards and
    methods to improve techniques for grain inspection. I will use the
    remainder of my time to highlight the Department's budget requests for
    the Marketing and Regulatory Programs.
            grain inspection, packers and stockyards administration
        GIPSA's 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
    two goals in the strategic plan that will guide them through the
    upcoming years include: ensuring a fair, open, and competitive
    marketing environment for livestock, meat, and poultry; and promoting
    and protecting the integrity of the domestic and global marketing of
    U.S. grain for the benefit of American agriculture.
    Program Plan and Accomplishments
        During 1997, GIPSA's Packers and Stockyards Program had 1,335
    stockyards; 6,900 market agencies/dealers; and 2,125 packer buyers
    registered 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 210
    poultry firms subject to the P&S Act.
        In fiscal year 1997, 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 1,800 investigations, disclosing 515 violations
    of the Packers and Stockyards (P&S) Act. During fiscal year 1997, 46
    formal cases were resolved and 29 new court cases were filed to bring
    subject firms into compliance with the provisions of the P&S Act. These
    complaints alleged violations of the P&S Act, including failure to
    compete in the purchase of livestock, paying livestock sellers on the
    basis of false and inaccurate weights, failure to pay and failure to
    pay promptly for livestock, operating without bond coverage, and
    delayed weighing of live poultry.
        In February 1997, the USDA Office of the Inspector General (OIG)
    issued an evaluation report which concluded that the P&S program needed
    to reorganize its national and regional offices. They found that the 11
    regional offices did not provide enough staff to perform the full range
    of investigations, including complex anticompetitive practice
    investigations, and that P&S needed to incorporate economic,
    statistical, and legal expertise in its field offices. The National
    Commission on Small Farms came to the same conclusion. GIPSA has
    Departmental approval to restructure its P&S Programs that consolidates
    2 operating divisions and 6 branches into a single policy/litigation
    support office at headquarters. This office will focus on the core
    responsibilities under the P&S Act--competition, fair trade practices,
    and payment protection. The 11 field offices will be consolidated at 3
    regional locations. Another 35 resident agents will operate out of
    their homes or a few small suboffices. Resident agents will handle the
    most basic services and routine investigations in outlying areas.
        GIPSA's Federal grain inspection 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 (8) delegated States provide
    service 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 1997, this unique mix
    of Federal, State, and private inspection agencies provided 2.1 million
    inspections on over 225 million metric tons of grains and oilseeds;
    weighed over 97 million metric tons of grain; and issued over 87,000
    official weight certificates.
        For an average cost of 27 cents per metric ton of grain in fiscal
    year 1997, exporters received USDA export certificates from GIPSA.
    These certificates facilitate the marketing of over $20 billion worth
    of grains and oilseeds. Likewise, here at home, buyers and handlers
    requested over 1.9 million inspections that facilitated the trading of
    124 million metric tons of cereals and oilseeds destined for domestic
    use.
        In fiscal year 1997, GIPSA continued to work closely with the U.S.
    grain handling industry on Electronic Data Interchange (EDI), an
    industry-driven electronic commerce initiative that is designed to
    automate the exchange of financial transaction documents among
    businesses. GIPSA established the standardized electronic file format
    that will be used for the EDI system and by official inspection
    providers.
        GIPSA believes that America's producers are entitled to a market
    that treats them fairly and honestly. In fiscal year 1997, GIPSA
    completed a long-term investigation of charges against ConAgra, Inc.,
    one of the Nation's largest food companies. In March 1997, ConAgra paid
    an $8.3 million penalty after pleading guilty to Federal charges of
    adulteration, improper grading, and improper weighing of grain by the
    company's grain division, Peavey Grain. GIPSA continues to enforce its
    1995 enactment of a prohibition on adding water to grain, which remains
    an enduring legacy of GIPSA's commitment to ensuring the integrity of
    the American grain marketing system and to safeguarding the rights and
    well-being of America's producers.
                          gipsa's 1999 budget request
        To fund these important initiatives and to enable GIPSA to remain a
    valuable part of American agriculture, GIPSA's total program level
    request for fiscal year 1999 is $71.6 million, of which $11.8 million
    represents appropriations. The remaining $59.8 million represents
    continuing user fee authority for inspection and weighing services, and
    the implementation of new user fees for standardization and methods
    development activities in the grain program, and license fees to fund
    the Packers and Stockyards' (P&S) program.
        For fiscal year 1999, the President's budget proposes a total
    program level for grain inspection of $53.6 million, with $4.6 million
    appropriated for compliance activities. The fiscal year 1999 budget
    also assumes enactment of legislation to authorize the collection of
    $3.6 million in new user fees to cover the costs of grain
    standardization activities and $2.8 million for methods development
    activities.
        The budget proposes an increase 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; an increase of $795,000 for activities in the packer competition
    and industry structure areas; an increase of $750,000 for poultry
    compliance activities; and $3 million for the one-time costs of
    reorganizing P&S' headquarters and field structures.
        Finally, the fiscal year 1999 budget assumes enactment of
    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. The $225,000 cost to implement this
    provision would be recouped through license fees.
                         agricultural marketing service
        The strategic goals for AMS include: facilitating the strategic
    marketing of U.S. agricultural products in domestic and international
    markets, and ensuring fair and competitive agricultural marketing
    through marketing tools and regulations.
        AMS' activities include the dissemination of market information,
    development of grade standards that are used in the voluntary grading
    programs funded by user fees, protection of producers from unfair
    marketing practices, statistically reliable testing of commodities for
    pesticide residues, oversight of industry funded programs to promote
    agricultural products, and 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
        AMS published the proposed rule on Federal Milk Marketing Order
    reform in late January with a comment period that has been extended
    until April 30, 1998. To draft the proposed rule, we solicited comments
    from all sectors of the public and industry. AMS received nearly 3,700
    comments and participated in 250 meetings with over 22,000 people.
    During the comment period we are holding listening sessions to continue
    the national dialogue.
        AMS was successful in advancing U.S. interests in international
    commodity standards through active participation at the Economic
    Commission for Europe (ECE) and Codex. For example, ECE work was
    completed on pork cut specifications and begun on beef cut
    specifications that will result in standards that closely mirror
    existing U.S. standards being adopted throughout Europe. To facilitate
    international trade, AMS held several seminars for small business
    exporters to better acquaint them with import requirements in several
    key markets. In a cooperative effort between AMS and other government
    representatives from Canada and Mexico, the NAFTA Advisory Committee on
    Private Commercial Disputes Regarding Agricultural Goods developed a
    consensus recommendation to establish an industry-driven mechanism for
    the resolution of private commercial disputes involving fresh fruit and
    vegetable commerce between the 3 countries. AMS also worked with Mexico
    and Canada to conduct a series of seminars for fruit and vegetable
    shippers regarding import requirements for each country.
        On December 16, 1997, AMS published the proposed rule for the
    National Organic Standards Program. Public meetings have been scheduled
    for February and March to provide USDA an opportunity to present the
    public an overview of the rule, respond to questions, and obtain public
    comment. The final rule will facilitate the movement of organic
    products domestically and internationally by assuring consumers of the
    validity and integrity of the organic label for the quality of product
    they are looking for in the marketplace.
        AMS expanded the use of the Internet for program delivery to
    improve customer service. Daily market new reports will be made fully
    available through the Internet and we have placed the proposed rule for
    the Organic Standards Program on the Internet to facilitate public
    discussion and comment.
    AMS Funding
        For 1999, we are requesting a budget of $58.5 million for the
    Marketing Services Program and $1.2 million for the Federal-State
    Marketing Improvement Program. AMS will continue to improve ongoing
    program activities while achieving management efficiencies. For 1999,
    we are requesting program increases of $11.8 million and a $1 million
    decrease for Market Development and Assistance due to completion of
    marketing assistance to Alaska.
        An increase of $0.3 million is needed to expand international
    market news reporting. Agricultural exports are playing an increasingly
    important role in the U.S. agricultural economy. In 1998, agricultural
    exports are expected to increase by $1.2 billion to a total of $58.5
    billion. Market surveys conducted by AMS have indicated a stronger
    demand for export market information by the industry as they seek
    opportunities for increased international trade in the post-GATT and
    NAFTA economy. With the additional resources requested, AMS will be
    able to develop or obtain reports from major export markets and
    incorporate them into existing market news reporting. Improving AMS'
    ability to gather time-sensitive overseas market information will have
    a significant positive impact on the ability of U.S. products to take
    advantage of timely placement in the international marketplace.
        In support of the recommendations made by the Secretary's Advisory
    Committee on Agricultural Concentration, AMS' 1999 budget request
    includes an increase of $0.5 million to expand reporting of livestock
    and poultry markets to help ensure fair competition. AMS will improve
    market coverage and provide more detailed market information through:
    (1) increased reporting on terms of contract sales or captive supply
    transactions, (2) expanded reporting that includes value-based pricing
    indicators, (3) reporting share of slaughter by grade and yield, (4)
    reporting daily live cattle and hog crossings from Canada and Mexico,
    (5) increasing the reported volumes of forward sales of boxed beef, (6)
    expanding producer reported hog marketing information, and (7)
    reporting regional and national marketing of the direct feeder pig
    trade.
        With the publication of the final rule for the National Organic
    Standards Program expected in early fiscal year 1999, AMS will require
    an additional $0.5 million to ensure effective national implementation
    of the program. Additional personnel will be needed to review
    applications, develop and distribute manuals, and provide accreditation
    of certifiers. Once the program is established, growers and handlers
    will be assessed a certification fee and certification agents will be
    assessed fees for USDA accreditation to recover program costs. The user
    fees collected will be deposited into the Treasury rather than serving
    to offset the appropriation. As a result, we need additional
    appropriations authority in order to meet the anticipated expenses to
    implement the program.
        For 1999, the budget includes an increase of $10.5 million for the
    Pesticide Data Program (PDP). The requested increase includes $2.5
    million to maintain the sampling levels necessary for statistical
    reliability. For 1996 the PDP operated with a budget of $11.6 million.
    In 1997, the funding was shifted to the Environmental Protection Agency
    (EPA) and the program had an operating budget of $10.6 million, with
    spending at $8.8 million. The program was shifted back to AMS for 1998
    with a budget of $8 million, plus $1.8 million provided to AMS from
    carryover from EPA. With the additional funds requested for 1999, AMS
    will be able to maintain statistically reliable sampling, upgrade the
    program's laboratory capability to test a broader range of commodities
    and to conduct more specific analyses of greater use to EPA. At the
    current $8 million level of funding, the program would have to drop up
    to 4 States from the program or reduce sampling rates by 13 percent.
    These actions would destroy the statistical sampling infrastructure of
    the program.
        The budget request for PDP also includes an increase of $1.7
    million to establish a rapid response capability necessary to support
    risk assessment analysis for minor use pesticides. With the
    implementation of the Food Quality Protection Act, there is an
    increased demand for providing the EPA pesticide residue data for
    minor-use pesticides on a rapid basis. EPA will need the data to
    conduct dietary risk assessment reviews for over 9,000 tolerances over
    the next 10 years as required by the Food Quality Protection Act
    (FQPA). Without the data, EPA will be required to make conservative
    assumptions about pesticide levels that could result in overestimation
    of risk and loss of pesticide registrations. The increased funds will
    permit increased sampling of specific commodities at a faster rate.
        In support of the President's Food Safety Initiative, the AMS
    budget includes an increase of $6.3 million to establish a
    microbiological data program. Utilizing the existing programmatic
    infrastructure of the PDP program, AMS will establish a statistically
    reliable estimate of microbiological contamination on domestic and
    imported fruits and vegetables. This information will be used by other
    agencies to assess the risk of contamination and will assist in the
    development of appropriate intervention strategies for ensuring the
    safety of these commodities.
                   animal and plant health inspection service
        The APHIS Strategic Plan was developed to guide the agency into the
    next century and to help ensure that its programs and services remain
    relevant to our customers and American agriculture. The Agency has
    identified 5 strategic goals to achieve its expanded role. They
    include: safeguarding U.S. plant and animal resources from foreign
    pests and diseases; quickly detecting and responding to outbreaks of
    foreign agricultural pests and diseases; effectively managing domestic
    plant and animal pests and diseases and wildlife damage; ensuring the
    humane care and treatment of animals; and facilitating the development
    of safe and effective scientific pest and disease control methods.
        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 and facilitates their movement in the global marketplace.
    Global trade has changed the responsibilities of APHIS. A significant
    new commercial protection role has fallen to APHIS--to respond to other
    countries' animal and plant health import requirements and to negotiate
    science-based standards that ensure America's agricultural exports are
    protected from unjustified trade restrictions. The development of new
    ``rules'' of trade through World Trade Organization (WTO), GATT, and
    other agreements now must address sanitary and phytosanitary barriers
    based upon risk assessment procedures, regionalization and equivalence.
    APHIS is ready to meet the opportunity and challenge to develop new
    partnerships with States, industry, and the public through prevention,
    monitoring systems and response actions.
    Program Plan and Accomplishments
        One of the most visible jobs performed by APHIS is the Agricultural
    Quarantine Inspection (AQI) program which works to protect American
    agriculture and enhance trade. This is the Agency's first line of
    defense in protecting American agriculture from exotic pests and
    diseases and helps facilitate the entry of U.S. agricultural products
    into international markets. In 1997, APHIS inspected approximately 77
    million passengers from international arrivals. The predeparture and
    preclearance programs intercepted 65,000 pests. Without these measures
    to mitigate the spread of pests and diseases via imports of
    contaminated commodities, U.S. exporters would face a challenge of
    meeting another country's Sanitary and Phytosanitary measures (SPS)
    requirements would increase dramatically.
        Recently, APHIS' SPS was involved with the resolution of trade
    barrier issues worth nearly $7 billion in exports of U.S. agricultural
    commodities. This represents about 12 percent of the total $60 billion
    of U.S. agricultural exports in fiscal year 1996. Three issues: (1)
    wheat exports threatened by karnal bunt, (2) poultry meat to Russia,
    and (3) poultry meat to China--were worth a total of $6.6 billion, or
    about 95 percent of the total value of APHIS' SPS accomplishments. All
    three issues were related to legitimate concerns about plant or animal
    health for countries importing U.S. products.
        The Animal Health Monitoring and Surveillance program maintains the
    capability of consistent disease surveillance and detection, emergency
    disease preparedness and response, animal health monitoring, and
    epidemiological delivery. It enables APHIS to rapidly eliminate
    outbreaks of foreign animal diseases, to assess the risk of new and
    emerging domestic animal health issues, and to support APHIS' control
    and eradication programs. In 1997, APHIS conducted 316 investigations
    for suspected foreign animal diseases. APHIS' proactive animal health
    monitoring and disease surveillance program produced and interpreted
    scientifically valid information used by policy makers, producers, and
    consumers.
        On the plant side, APHIS took quick action to address pest and
    disease outbreaks. Medflies were detected in the Tampa, Florida area in
    late May, posing a serious threat to Florida's $6 billion agricultural
    market. In response to these captures, APHIS and the State of Florida
    were able to rapidly start a cooperative Medfly emergency program. The
    sterile fly release area covered more than 313 square miles. No wild
    Medflies have been detected in Florida since late August 1997; the
    emergency program is expected to be completed in fiscal year 1998.
        APHIS used its contingency funds to implement the citrus canker
    emergency project in the Palmetto, Florida area where an outbreak was
    detected in June 1997. If citrus canker spread to commercial groves and
    nurseries, it would be very disruptive to commercial production of
    grapefruit, which is Florida's leading fresh market produce.
        Recently, we have seen a surge of foreign animal diseases in Europe
    and elsewhere. Hog cholera has been diagnosed in Belgium, Germany,
    Spain and several other countries. As a result, we have implemented
    science based import restrictions. Hog cholera has also been confirmed
    in the Dominican Republic, following the outbreak of a highly virulent
    strain in neighboring Haiti a year earlier. APHIS is providing
    officials in the Dominican Republic with technical and laboratory
    assistance in diagnosing and managing the outbreak and has increased
    its agricultural quarantine inspection and monitoring efforts at ports
    of entry.
        Another foreign animal disease we are monitoring closely is bovine
    spongiform encephalopathy (BSE), better known as ``Mad Cow disease.''
    Since 1989, the Department has severely restricted the importation of
    cattle, other ruminants, and ruminant products from Great Britain and
    other countries where BSE exists. APHIS has also educated veterinary
    practitioners, laboratory diagnosticians, and producers on the clinical
    signs and pathology of the disease. In addition, the Agency conducted a
    comprehensive program for BSE surveillance, which involves laboratory
    examination of brain tissue from high-risk cattle. As of October 31,
    1997, we have examined more than 6,508 cattle brains from throughout
    this country and found no evidence of the disease.
        To make meat and poultry more plentiful and affordable, APHIS is
    continuing to make headway in several domestic animal health programs.
    Currently, the cooperative State-Federal bovine tuberculosis
    eradication program has only three infected cattle herds under
    quarantine, all in Texas' El Paso Milkshed area. In July 1997, APHIS
    detected and quarantined an infected beef herd on the Hawaiian Island
    of Molokai. This herd has been depopulated. Nationwide eradication is
    projected by the end of 1999.
        With California's recent advancement to brucellosis-free status, we
    have now eradicated the disease in 40 States as well as the U.S. Virgin
    Islands and Puerto Rico. Another 6 States are in the qualifying period
    for brucellosis-free status and have no known infection. Nationwide, as
    of February 12, only 11 cattle herds in Texas and 1 domestic bison herd
    in South Dakota are known to be infected. This compares to 39 herds
    under quarantine a year earlier. Eradication in cattle herds is still
    on track for the end of 1998.
        We are also making strides in reaching a long-term solution to the
    Yellowstone bison problem. In June, APHIS, the Forest Service, the
    National Park Service, and Montana officials announced agreement on a
    long-term approach for managing brucellosis in the Yellowstone bison
    population. This interim plan meets the primary goals of maintaining a
    wild, free-ranging population of bison and also addressing the risk of
    brucellosis for livestock interests in the area.
        Successes in the boll weevil eradication program utilizing the Farm
    Service Agency loans allow for a reduced appropriations request. This
    mostly grower-funded and managed program needs 100 percent
    participation and is mandated by State law following a positive grower
    referendum. The program funded at least 70 percent by non-federal
    cooperators, has been extremely successful in improving cotton yields
    and reducing production costs on over 4 million acres in the eradicated
    areas. The rate of return on funds invested in boll weevil eradication
    is estimated to be $12 for every $1 in program cost. 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 at least $30 per acre, and land value increases of $14 per
    acre. The goal of eradicating this pest is by 2003.
        This past year, the Animal Damage Control program underwent a name
    change to Wildlife Services (WS) which more accurately reflects its
    program operations. Cooperative efforts allow us to make the best use
    of our funds. In fiscal year 1997, the WS budget for field operations
    was almost $23 million. For that same period, the cooperative funds
    provided by States, industry and private individuals totaled
    approximately $24 million--reflecting a projected increase of about $1
    million from the previous year. The willingness of many States to
    provide more than a dollar-for-dollar match shows commitment and a
    large measure of customer satisfaction. We are working toward the goal
    of having, within the next 2-3 years, cooperators in States with large
    direct control efforts to pay for at least 50 percent of the program
    benefits they receive.
        APHIS recently shifted its strategy to conduct more in-depth Animal
    Welfare Act inspections, particularly of those licensees and
    registrants with historical compliance problems. This approach resulted
    in a slight decrease in the overall number of inspections, but a
    significant increase in the amount of time spent inspecting facilities.
    Similarly, we redirected our enforcement efforts away from a rigid,
    ``one size fits all'' philosophy to a flexible approach that evaluates
    cases on their individual merits.
        The Agency continued its efforts to trace back dogs and cats sold
    by class B dealers to research facilities. In fiscal year 1997, we were
    able to trace back about 95.5 percent of animals sold to research to
    their original source--up from approximately 40 percent in fiscal year
    1993. We believe all these and many other efforts are leading to one
    positive end: Improved welfare for all animals protected under the AWA.
        APHIS continued developing a strategic plan for the horse
    protection program that would provide for more effective use of
    resources and gain increased compliance with the Horse Protection Act.
    This plan has been developed jointly with horse industry organizations
    and APHIS veterinarians. This partnership will place increased
    regulatory authority and enforcement responsibilities on USDA--
    certified organizations.
        Future challenges to the environment cannot be ignored. As the
    world population increases, we must develop methods to ensure that our
    agricultural production keeps pace with growing food demands while
    remaining stewards of the earth, water, and air. APHIS is well
    positioned to see that many of the necessary solutions are coming by
    way of agricultural biotechnology.
        As part of its regulatory mission, APHIS oversees the field testing
    of genetically engineered plant varieties to ensure that they pose no
    significant impact on the environment or agriculture. Since the first
    field trial under our regulations in 1987, they have evaluated more
    than 3,600 field trials at more than 14,000 sites throughout the United
    States.
        APHIS also makes decisions about whether to deregulate new plant
    varieties, thus clearing the way for their commercialization. These new
    plant varieties may hold the key to meeting our biggest future
    challenges in agriculture--those of feeding a growing world population
    while sustaining our environmental resources. In 1997, a corn hybrid
    engineered for resistance to the European corn borer averaged 15 more
    bushels per acre than other corn hybrids, without the use of additional
    pesticides.
        With the benefits of increased international trade, come new
    scientific responsibilities and the essential need for trading partners
    to exchange information. In this regard, a great challenge for APHIS is
    the need to educate our trading partners about the safety and benefits
    of these new, genetically enhanced plant products. In addition to
    ensuring that genetically engineered plants pose no danger to
    agriculture or the environment, we need to help governments and
    consumers across the world understand that they are safe. Increased
    understanding of the benefits of these products, as well as the extent
    to which they are tested, is critical to their acceptance and success
    in the international marketplace.
        On August 4, 1997, the Denver Wildlife Research Center in Lakewood,
    Colorado officially closed and the National Wildlife Research Center
    (NWRC) in Fort Collins, Colorado opened. As of that date, all NWRC
    headquarters' personnel began working out of a combination of permanent
    and GSA leased facilities in Fort Collins. Work on the new headquarters
    office/laboratory building on 43 acres on the foothills research campus
    of Colorado State University was initiated shortly thereafter.
    Occupancy of the 82,000 square foot building is expected to begin in
    late 1998, at which time all personnel will be located at one site
    after about four years in transition.
        The Integrated Systems Acquisition Project (ISAP) is an APHIS
    strategic initiative to replace aging, obsolete, and non-integrated
    Information Technology platforms. The ISAP initiative will result in an
    integrated hardware and software platform across the entire Agency to
    provide information and data sharing at all levels of the organization.
    The Agency will fully redeploy in-house and contractor resources to
    comply with Year 2000 requirements.
                           aphis' 1999 budget request
        The budget request proposes $417.8 million for salaries and
    expenses. The fiscal year 1999 budget proposes a redirection of $12
    million from APHIS' appropriations for the cotton growers share of boll
    weevil eradication to a USDA loan program. The redirection from boll
    weevil eradication results without a reduction in program operations by
    relying on the foundations to borrow cost sharing funds from CCC. The
    program successes in brucellosis allow an $8 million redirection to
    higher priority activities which help the Agency comply with
    international trade agreements. The budget assumes increased cost
    sharing from beneficiaries of Wildlife Services activities. Also, this
    budget supports activities to significantly increase agricultural
    exports. 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 and
    Disease Exclusion activities such as Agricultural Quarantine Inspection
    at the borders. APHIS will likely inspect upwards of 85 million
    passengers potentially carrying banned agricultural products into the
    United States.
        The budget also assumes enactment of legislation 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 $5.2 million is proposed for general
    maintenance and to support continued modernization of APHIS facilities
    in 1999 and to complement the Agricultural Research Service's request
    to continue modernization of the Plum Island Animal Disease Center.
        This concludes my statement. I am looking forward to working with
    the Committee on the 1999 budget for the Marketing and Regulatory
    Programs. We believe the proposed funding amounts and sources of
    funding will provide the level of service desired by our customers--the
    farmers and ranchers, the agricultural marketing industry, consumers,
    as well as the taxpayers who desire a balanced budget. We are happy to
    answer any questions.
                                     ______

                     Prepared Statement of Terry L. Medley
        Mr. Chairman and members of the Committee, I am pleased to report
    on our accomplishments and the challenges facing APHIS as we work to
    help ensure a wholesome, affordable food supply while stimulating
    global economies, safeguarding agricultural resources, and protecting
    ecological systems.
                                  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 and to
    ensure abundant agricultural products and services for U.S. customers.
                                   our focus
        Over the past 25 years, APHIS has played a key operational role in
    USDA's efforts to protect America's animal and plant resources from
    agricultural pests and diseases. The continued profitability and
    viability of U.S. agriculture, however, now also depends on the ability
    of U.S. producers to be competitive in a world market. In recent years,
    APHIS expanded beyond just regulating the imports of agricultural
    products in the U.S. to reduce the risk of exotic pests and diseases.
    Aggressively promoting U.S. exports will continue to be a dominant USDA
    focus for stimulating domestic farm employment and income. A
    significant new commercial protection role has fallen to APHIS--to
    respond to other countries' animal and plant health import requirements
    and to negotiate science-based standards that ensure America's
    agricultural exports are protected from unjustified trade restrictions.
    APHIS' protection role has also expanded over the years to include
    important functions related to the welfare of animals and to
    interactions with America's wildlife.
        The Agency has identified five strategic goals to help us achieve
    our expanded role. I would like to address each of those goals and our
    accomplishments toward fulfilling them.
                                     goal 1
    Safeguard U.S. plant and animal resources against introductions of
            foreign pests and diseases while meeting international trade
            obligations
        Exports climbed to $59.8 billion in 1996; the U.S. share of global
    agricultural trade has also increased. Today we are the world's leading
    exporter of agricultural products, commanding a 23 percent share of
    world agricultural trade--up from 17 percent a decade ago. Our
    agricultural trade surplus totaled $27 billion in 1996--the largest in
    history--making the agricultural sector the largest positive
    contributor to the U.S. balance of trade.
        Consider for a moment APHIS' work to protect American agriculture
    and enhance trade. The Agricultural Quarantine Inspection (AQI) program
    is the Agency's first line of defense in protecting American
    agriculture from exotic pests and diseases and helps facilitate the
    entry of U.S. agricultural products into international markets. In
    1997, APHIS inspected approximately 77 million passengers from
    international arrivals, and the predeparture and preclearance programs
    and intercepted 65,000 pests. For 1999, total inspections are expected
    to reach 85 million--48 million funded through user fees and the
    remainder through appropriated funds. These efforts protect domestic
    producers and industries. But without these measures in place to
    mitigate the spread of pests and diseases via imports of contaminated
    commodities, the challenge U.S. exporters would face in terms of
    meeting another country's Sanitary and Phytosanitary measures (SPS)
    requirements would increase dramatically. APHIS personnel have made and
    continue to make major contributions in resolving issues related to the
    World Trade Organization (WTO) Agreement on the Application of SPS
    Measures.
    Export Issues
        Recently, APHIS' SPS accomplishments included assisting in the
    resolution of trade barrier issues worth nearly $7 billion in exports
    of U.S. agricultural commodities. This represents about 12 percent of
    the total $60 billion of U.S. agricultural exports in fiscal year 1996.
        The $7 billion of unjustified trade restrictions on U.S. exports
    involved a wide variety of issues with a total of 16 countries. The
    value of export markets enhanced by these efforts ranged from a low of
    $400,000 for an individual issue (export access for goats to Taiwan;
    swine to Vietnam) to a high of $4.9 billion (worldwide wheat export
    markets retained after a threatened cutoff due to Karnal bunt in the
    United States). The median value of the SPS issues was $5 million.
        Recently, APHIS' efforts to retain markets threatened by SPS
    concerned nearly $6 billion of exports. The retention of U.S. wheat
    export markets threatened by the discovery of Karnal bunt in some areas
    of the United States was the largest contributing issue ($4.9 billion).
    Another large market retained in fiscal year 1996 was the $700 million
    Russian poultry meat market which was threatened by Russian concerns
    about sanitary controls of the U.S. poultry industry. A third major SPS
    accomplishment, expansion of poultry meat exports to China, was worth
    an estimated $1 billion.
        These three issues--(1) wheat exports threatened by Karnal bunt,
    (2) poultry meat to Russia, and (3) poultry meat to China--were worth a
    total of $6.6 billion, or about 95 percent of the total value of APHIS'
    SPS accomplishments. All three issues were related to legitimate
    concerns about plant or animal health for countries importing U.S.
    products. The issues were resolved in the United States' favor because
    APHIS scientists were able to demonstrate that the commodities involved
    posed negligible risks to the importing countries.
    Import Issues
        In fiscal year 1996, consistent with its obligations under the SPS
    Agreement, APHIS enabled the importation of several previously
    prohibited commodities into the United States. Examples are citrus from
    South Africa and fruit trees from France. Through the use of risk
    assessments, APHIS determined that these commodities, worth almost $16
    million in increased exports for the countries involved, did not pose a
    threat to U.S. animal and plant health. These import issues are
    considered APHIS SPS accomplishments, because prohibiting the
    importation of these commodities might have been considered an
    unjustified SPS trade barrier. By actively heading off potential
    challenges, APHIS was able to show its commitment to the SPS Agreement
    while still maintaining adequate safeguards for U.S. agriculture. In
    agriculture, the U.S. is likely to be the clear winner when SPS
    standards are science-based and fair.
        One of the most significant concepts introduced under the SPS
    agreements is regionalization--the idea that, for trade purposes, we
    can recognize pest and disease free zones or areas of low pest or
    disease incidences. Under these agreements, countries are committed to
    adapting their import requirements to the health conditions of the
    specific zone or area from which a plant or animal commodity
    originates. The concept of regionalization recognizes that health
    conditions vary tremendously across a country as a result of
    ecological, environmental, and quarantine differences. The burden of
    demonstrating a free or low prevalence area is on the exporting
    country.
        Under NAFTA and GATT, we are working to ensure opportunities for
    trade occur. As with any commodity, once the opportunity to trade is
    negotiated, a lot of work has to be done to make sure the pest and
    disease requirements are met and maintained. A crucial part of fair and
    free trade is establishing a process for resolving commercial trade
    disputes. Under NAFTA, a trilateral advisory committee of Mexico, the
    United States, and Canada are working to develop such a process. In
    addition, we have and will continue to use the trade dispute settlement
    process under the World Trade Organization to challenge countries who
    are not living up to their commitments under the free trade agreements.
        For its part, Mexico recently permitted the importation of U.S.
    sweet cherries from Washington, Oregon, and California in accordance
    with an approach designed to prevent the introduction of pests of
    concern. Just last September, Mexico officials recognized Arizona's
    citrus production areas as free of Mediterranean and Mexican fruit
    flies, removing any phytosanitary barriers to the export of those
    fruits. We also continue to discuss the possibility of permitting
    Florida citrus exports to Mexico. With every such decision rooted
    firmly in scientific information, we move much closer to fully
    actualizing the principles and agreements to which we have committed.
                                     goal 2
    Quickly detect and respond to introductions of foreign agricultural
            pests and diseases or other emerging agricultural health
            threats, to minimize production losses and export market
            disruptions
        APHIS' domestic programs which monitor, survey, impose Federal
    quarantines, and conduct eradication programs, is the force that
    permits U.S. agricultural commodities to be as widely accepted
    throughout the world as they are today. Without the maintenance of a
    strong domestic program, APHIS' ability to certify to the SPS
    requirements of other countries would be marginal.
        Our Animal Health Monitoring and Surveillance program maintains the
    capability of consistent disease surveillance and detection, emergency
    disease preparedness and response, animal health monitoring, and
    epidemiological delivery. It enables APHIS to rapidly eliminate
    outbreaks of foreign animal diseases, to assess the risk of new and
    emerging domestic animal health issues, and to support APHIS' control
    and eradication programs. In 1997, APHIS conducted 316 investigations
    for suspected foreign animal diseases. APHIS' proactive animal health
    monitoring and disease surveillance program produced and interpreted
    scientifically valid information used by policy makers, producers, and
    consumers. This program delivered objective information addressing
    animal health as it pertains to U.S. trade, agricultural productivity,
    public health, and on-farm quality assurance. Through effective
    partnerships with animal commodity producer groups--and with State
    governments, university researchers and other Federal Agencies--the
    program met producers' and the U.S. Public's information demands in a
    cost-effective, collaborative manner minimizing duplication of effort.
        On the plant side, APHIS took quick action to address pest and
    disease outbreaks. Medflies were detected in the Tampa, Florida, area
    in late May, posing a serious threat to Florida's $6 billion
    agricultural market. In response to these detections, APHIS and the
    State of Florida were able to rapidly start a cooperative Medfly
    emergency program. The sterile fly release area covered more than 313
    square miles. No wild Medflies have been detected in Florida since late
    August 1997; the emergency program is expected to be completed in
    fiscal year 1998.
        APHIS funded efforts for the citrus canker emergency project in the
    Palmetto, Florida, area where an outbreak was detected in June 1997. To
    effectively prevent the spread of citrus canker in Palmetto, APHIS and
    the State of Florida established a quarantine zone of 34 square miles
    and in Miami, the quarantine zone was more than 361 square miles. If
    citrus canker spread to commercial groves and nurseries, it would be
    very disruptive to commercial production of grapefruit, which is
    Florida's leading fresh market produce.
        Also in 1997, APHIS used contingency funds to battle an Asian
    longhorned beetle (ALB) emergency control project in New York State.
    The program consists of tree removal, detection and delimiting surveys,
    and education efforts. During fiscal year 1997, the program achieved
    drastic reductions of ALB populations in areas that had been heavily
    infested. If ALB spreads, it would threaten trees nationwide and pose
    problems for the sugar maple industry in upstate New York and its
    surrounding areas.
        In addition to these eradication programs, APHIS closely monitored
    two other animal disease situations. The first is the outbreak of
    vesicular stomatitis in the Western States. In response to this disease
    situation, Canada and the European Union have prohibited the
    importation of horses, ruminants, and swine from these States. APHIS
    continues to work with the affected States to closely monitor the
    situation and help producers meet trade requirements.
        The second disease situation is a low pathogenic strain of H7N2
    avian influenza that has been detected in 14 commercial poultry flocks
    near Lancaster County, Pennsylvania, last year. At the State's request,
    we have authorized the production and storage of an H7N2 vaccine for
    possible emergency use. APHIS will utilize the avian influenza vaccine
    as a tool only in the unlikely event of an outbreak of the highly
    pathogenic form of the disease.
        Our commitment to preventing the entry of foreign agricultural
    diseases and pests remains as strong as ever. We recognize that our
    initiatives to prevent the entry of agricultural diseases and pests
    have taken on increasing importance in this era of growing
    international trade and travel. Now more than ever, export
    opportunities hinge on a country's ability to prevent the entry of
    agricultural diseases, to document scientifically the health of its
    agricultural industry, and to respond quickly and decisively to disease
    and pest emergencies in the event prevention strategies are breached.
        To improve its emergency management strategy even further, APHIS
    has streamlined its Regional Emergency Animal Disease Eradication
    Organization to improve Departmental responsiveness to animal disease
    emergencies. Now, two highly prepared and trained regional teams can be
    dispatched immediately at the first indication of foreign livestock or
    poultry disease, such as in 1996 when exotic Newcastle disease was
    detected at a pet bird facility in Missouri and vesicular stomatitis
    was diagnosed in horses and cattle in Arizona, New Mexico, Colorado,
    and Utah.
        Recently, we have seen a resurgence of foreign animal diseases in
    Europe and elsewhere. Hog cholera has been diagnosed in Belgium,
    Bulgaria, Croatia, the Czech Republic, Germany, Italy, the Netherlands,
    and Spain. As a result, we have implemented appropriate import
    restrictions. Hog cholera has also been confirmed in the Dominican
    Republic, following the outbreak of a highly virulent strain in
    neighboring Haiti a year earlier. APHIS is providing officials in the
    Dominican Republic with technical and laboratory assistance in
    diagnosing and managing the outbreak and has increased its agricultural
    quarantine inspection and monitoring efforts at ports of entry.
        Another foreign animal disease we are monitoring closely is bovine
    spongiform encephalopathy (BSE). Since 1989, we have severely
    restricted the importation of cattle, other ruminants, and ruminant
    products from Great Britain and other countries where BSE exists. We
    have also educated veterinary practitioners, laboratory diagnosticians,
    and producers on the clinical signs and pathology of the disease. In
    addition, we conduct a comprehensive program for BSE surveillance,
    which involves laboratory examination of brain tissue from high-risk
    cattle. As of October 31, 1997, we have examined more than 6,508 cattle
    brains from throughout this country and found no evidence of the
    disease.
                                     goal 3
    Effectively manage plant and animal pests and diseases and wildlife
            damage which pose risks to agriculture, natural resources, or
            public health
        U.S. livestock and poultry producers provide households throughout
    the Nation--and the world--with high quality, affordable products.
    Because of their efforts, Americans are eating more meat and poultry
    than ever before. Estimates indicate that the average American adult
    eats more than 160 pounds of meat and poultry a year. Per person,
    that's 1.5 pounds more meat and poultry consumed per year than 10 years
    ago.
        To make meat and poultry more plentiful and affordable, APHIS is
    continuing to make headway in several domestic animal health programs.
    Currently, the cooperative State-Federal bovine tuberculosis
    eradication program has only three infected cattle herds under
    quarantine, all in Texas' El Paso Milkshed area. In July 1997, APHIS
    detected and quarantined an infected beef herd on the Hawaiian Island
    of Molokai. This herd has been depopulated. We are still aiming for
    nationwide eradication by the end of 2000.
        In regard to pseudorabies, with the addition of Tennessee in August
    and the U.S. Virgin Islands this month, 26 States and two U.S.
    Territories--including Puerto Rico--are currently free of the disease.
    Since 1992, the number in infected herds has dropped from approximately
    8,000 to nearly 2,000. Nationwide eradication of this disease is also
    set for the end of 2000.
        With California's recent advancement to brucellosis-free status, we
    have now eradicated the disease in 40 States as well as the U.S. Virgin
    Islands and Puerto Rico. Another six States are in the qualifying
    period for brucellosis-free status and have no known infection. The
    number of herds under quarantine has declined from 959 herds in fiscal
    year 1991 to 11 cattle herds as of February 12, 1998. The number of
    newly infected herds has also declined, from 400 in fiscal year 1991 to
    64 in fiscal year 1997.
        We are also making strides in reaching a long-term solution to the
    Yellowstone bison problem. In June, APHIS, the Forest Service, the
    National Park Service, and Montana officials announced agreement on a
    long-term approach to manage brucellosis and the Yellowstone bison
    population. This plan meets the primary goals of maintaining a wild,
    free-ranging population of bison and also addressing the risk of
    brucellosis for livestock interests in the area.
        While livestock and poultry producers face many challenges in their
    efforts to meet the rising demand for their products at home and
    abroad, they can be reassured that they do not face these challenges
    alone. APHIS is working hard to protect the health of U.S. livestock
    and poultry and to facilitate agricultural trade based on fair,
    science-based standards.
        The cooperative boll weevil program uses judicious application of
    pesticides based on the extensive and timely use of pheromone traps to
    reach the goal of eradicating the pest by 2003. This mostly grower-
    funded and managed program needs 100 percent participation and is
    mandated by State law following a positive grower referendum. The
    program, funded at least 70 percent by non-federal cooperators, has
    been extremely successful in improving cotton yields and reducing
    production costs on over 4 million acres in the eradicated areas. The
    rate of return on funds invested in boll weevil eradication is
    estimated to be $12 for every $1 in program cost. 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 at least $30 per acre, and land value increases of $14 per
    acre.
        Clearly, success in APHIS' active control programs such as
    brucellosis and boll weevil will require less funding as the pests and
    diseases are eradicated. This will allow APHIS to strategically focus
    on prevention by increased monitoring and surveillance, using the
    latest diagnostic techniques.
        This past year, we changed the name of the Animal Damage Control
    Program to Wildlife Services (WS) to more accurately reflect what we
    do. Besides protecting agricultural resources, WS continued its efforts
    to protect public health and safety, property and threatened and
    endangered species. WS also continued its interagency agreement with
    the National Agricultural Statistics Service (NASS) to determine the
    magnitude and extent of wildlife damage to various agricultural
    resources. In January 1997, NASS surveyed approximately 1,500 catfish
    producers. Sixty-eight percent of the respondents indicated they had
    spent some effort to avoid wildlife caused losses to their catfish
    crops. The overall cost of preventing losses and damage were projected
    to have cost catfish producers about $17 million during 1996.
        In 1998, the WS program is partnering with the Federal Aviation
    Administration (FAA) and the Department of Defense (DOD) on the
    National Performance Review's Reinvention Impact Center Initiative to
    increase airline safety and reduce economic losses to aircraft.
    Partnering with FAA and DOD will allow for greater levering of
    resources to provide a safer environment for the flying public and
    military personnel both domestically and internationally. Approximately
    10,000 civilian aircraft and 3,000 military aircraft collide with
    wildlife in the United States each year. These strikes have resulted in
    the loss of human life and economic damage to aircraft of approximately
    $300 million annually.
        During fiscal year 1997 and fiscal year 1998, WS personnel assisted
    Texas Department of Health officials distribute over 5 million oral
    rabies vaccine baits to stop the canine strain of rabies in coyotes and
    foxes in south and central portions of Texas. To date, the vaccines
    have been successful in stopping the spread of this disease. WS
    personnel also assisted with either oral rabies vaccine bait
    distributions, monitoring, or surveillance activities in Vermont, Ohio,
    and New York to stop the spread of the Mid-Atlantic strain of rabies in
    the raccoon population in those States.
        The wolf management programs in Idaho, Montana, Wyoming, and
    Minnesota continues to accelerate as the number of wolves increase and
    disperse into previously wolf-free areas. The rapidly expanding wolf
    population and resulting requests for assistance, continues to present
    a challenge for WS. In March 1998, the Fish and Wildlife Service (FWS)
    plans to reintroduce Mexican wolves into Arizona. With funding from the
    FWS, WS has placed a wolf management specialist in that State. Two
    other Wolf Management Specialists are presently located in Minnesota
    and Montana where they work closely with officials from the FWS,
    National Park Service, and livestock producers.
        It is gratifying to see the support for WS from Congress and the
    States where we provide service. Cooperative efforts allow us to make
    the best use of our funds. In fiscal year 1997, WS' budget for field
    operations was almost $23 million. For that same period, the
    cooperative funds provided by States, industry and private individuals
    totaled approximately $24 million--reflecting a projected increase of
    about $1 million from the previous year. Their overall nationwide
    dollar-for-dollar match commitment is the ultimate measure of customer
    satisfaction.
                                     goal 4
    Ensure the humane care and treatment of animals covered under the
            Animal Welfare Act and the Horse Protection Act
        After 30 years of focusing almost entirely on conducting as many
    inspections as possible, we shifted our strategy to conducting more in-
    depth inspections, particularly of those licensees and registrants who
    historically had compliance problems. This approach resulted in a
    slight decrease in the overall number of inspections, but a significant
    increase in the amount of time spent inspecting facilities. We used
    this time to take a closer look at licensees' and registrants' animals,
    facilities, and records. Similarly, we redirected our enforcement
    efforts away from a rigid, ``one size fits all'' philosophy to a
    flexible approach that evaluates cases on their individual merits. This
    approach enables us to work with individuals who recognize their errant
    ways and want to improve the welfare of their animals. At the same
    time, it allows us to impose stringent sanctions on licensees and
    registrants who continue to show little or no effort to provide better
    care or housing for their animals. The success of this approach is
    becoming evident in two ways. First, there is an increasing number of
    facilities found in full compliance upon inspection; currently about 56
    percent. Additionally, we have taken prompt and severe action when the
    violations were egregious or normal efforts to achieve compliance
    failed. During the year, 43 Animal Welfare Act licenses were suspended
    or revoked, or unlicensed operators disqualified from having a license.
    A record sanction of $175,000 was also assessed from a dog dealer whose
    license was permanently revoked. During 1997, we were able to reduce a
    backlog of AWA cases that developed over the past several years by
    about 25 percent.
        Under our umbrella strategic direction initiative, we also began
    preparing our Animal Care (AC) program for the 21st Century. This
    change initiative involves employees from all levels of the program and
    is aimed at making AC a recognized leader in the field of animal
    welfare.
        In fiscal year 1997, we advanced the initiative in many ways, such
    as equipping all AC field personnel with laptop computers on which they
    now generate inspection reports and developing a formal risk-based
    inspection system that will eventually enable us to direct our limited
    inspection resources where they are needed most.
        Complementing this initiative were numerous special projects. These
    projects included our increased emphasis on public outreach, which
    resulted in a quarterly report to the program's stakeholders. They also
    included AC's efforts to partner with another APHIS unit in inspecting
    animal handlers at airports.
        Perhaps most impressively, however, were our ongoing efforts to
    trace back dogs and cats sold by class B dealers to research
    facilities. In fiscal year 1997, we were able to trace back an
    impressive 95.5 percent of animals sold to research to their original
    source--up from approximately 40 percent in fiscal year 1993. We
    believe all these and many other efforts are leading to one positive
    end: improved welfare for all animals protected under the AWA.
        APHIS continued developing a strategic plan for the horse
    protection program that would provide for more effective use of
    resources and gain increased compliance with the HPA. This plan has
    been developed jointly with horse industry organizations and APHIS
    veterinarians. This partnership will place increased regulatory
    authority and enforcement responsibilities on USDA-certified
    organizations.
                                     goal 5
    Facilitate the development of safe and effective veterinary biologics,
            biotechnology-derived products, and other scientific methods
            for the benefit of agricultural producers and consumers and to
            protect the health of American agriculture
        Of course, the future also holds other challenges and hard
    realities that cannot be ignored. For example, as the world population
    increases, we must develop methods to ensure that our agricultural
    production keeps pace with growing food demands. Moreover, as we do so,
    we must remain sensitive to the toll we take upon the environment. We
    cannot afford to sacrifice our natural resources. Fortunately, these
    challenges are already prompting new ways of thinking, leading to the
    development of new solutions. APHIS is well positioned to see that many
    of these solutions are coming by way of agricultural biotechnology.
        As part of our regulatory mission, APHIS oversees the field testing
    of genetically engineered plant varieties to ensure that they pose no
    significant impact on the environment or agriculture. Since the first
    field trial under our regulations in 1987, we have evaluated more than
    3,600 field trials at more than 14,000 sites throughout the United
    States.
        Overall, derivatives of 48 different plant species have been field
    tested to date, including species as diverse as sugar cane, poplar
    trees, turfgrass, rice, and sunflowers. Derivatives of most major U.S.
    crops--corn, soybeans, potatoes, tomatoes, cotton, and tobacco--have
    each had a large number of trials.
        APHIS also makes decisions about whether to deregulate new plant
    varieties, thus clearing the way for their commercialization. In 1992,
    Calgene's delayed-ripening tomato, the Flavr Savr, became the first
    genetically modified crop approved for deregulation. Since then, we
    have deregulated nearly 30 more products--including varieties of virus-
    resistant squash and papayas; insect-resistant cotton, corn, and
    potatoes; herbicide-tolerant corn and soybeans; high-laureate canola;
    and delayed-softening tomatoes. The wave of new products shows no sign
    of slowing. These new plant varieties may hold the key to meeting our
    biggest future challenges in agriculture--those of feeding a growing
    world population while sustaining our environmental resources. For
    example, herbicide tolerant plants like the Roundup Ready soybeans
    enable farmers to reduce herbicide applications drastically. Insect-
    resistant crops like Bt cotton and corn can result in increased yields
    and substantial deceases in pesticide use. For example, in 1997, a corn
    hybrid engineered for resistance to the European corn borer averaged 15
    more bushels per acre than other corn hybrids, without the use of
    additional pesticides.
        In addition to these developments, plants like the papaya and the
    potato are being genetically engineered for resistance to viral
    diseases. We estimate that viral disease and damage cause about 20
    percent of all vegetable crop loss. Scientists are also working on
    crops with additional nutritional or medicinal properties, as well as
    plants that can tolerate a variety of adverse environmental conditions,
    such as soil salinity and drought.
        With the benefits of increased international trade, come new
    scientific responsibilities and the essential need for trading partners
    to exchange information. In this regard, a great challenge for APHIS is
    the need to educate our trading partners about the safety and benefits
    of these new, genetically enhanced plant products. In addition to
    ensuring that genetically engineered plants pose no danger to
    agriculture or the environment, we need to help governments and
    consumers across the world understand that they are safe. Increased
    understanding of the benefits of these products, as well as the extent
    to which they are tested, is critical to their acceptance and success
    in the international marketplace. If we can meet this challenge, the
    rewards for the environment and people around the world will be
    considerable.
        On August 4, 1997, the Denver Wildlife Research Center in Lakewood,
    Colorado officially closed and the National Wildlife Research Center
    (NWRC) in Fort Collins, Colorado opened. As of that date, all NWRC
    headquarters' personnel began working out of a combination of permanent
    and GSA leased facilities in Fort Collins. Work on the new headquarters
    office/laboratory building on 43 acres on the foothills research campus
    of Colorado State University was initiated shortly thereafter.
    Occupancy of the 82,000 square foot building, which is being
    constructed by GSA, is expected to begin in late 1998, at which time
    all personnel will finally be located at one site after about four
    years in transition.
        During 1997, WS methods development established new or continued
    work on existing cooperative agreements which enhance the Center's
    research program. One example is the agreement with the DOD to continue
    research into the development of chemical control methods for brown
    tree snake control on Guam. The NWRC has 20 identified research
    projects that seek to address the research needs of its stakeholders.
    These projects are between 3-5 years in duration and are developed
    around nationwide research needs assessments conducted in 1989 and
    1996. Two examples of projects regarding coyote studies include a study
    to determine the effectiveness of using llamas as livestock guarding
    animals, and a project to evaluate the effectiveness of chemical
    reproductive control on coyotes. Another ongoing research project is
    the management and analysis of the FAA's National Database on bird and
    other wildlife strikes with aircraft, which can be a serious economic
    and safety problem for civilian aircraft in the United States. Pilots
    and others report strikes to the FAA. Biologists now have over 17,000
    strike reports from 1989 through 1997 edited and accurately entered
    into a National Wildlife Strike Database. This database already is
    proving to be invaluable in providing biologists, aeronautical
    engineers, and airport managers with specific information on strike
    histories.
        The Integrated Systems Acquisition Project (ISAP) is an APHIS
    strategic initiative to replace aging, obsolete, and non-integrated
    Information Technology platforms. The ISAP initiative will result in an
    integrated hardware and software platform across the entire Agency to
    provide information and data sharing at all levels of the organization.
    The Agency will fully redeploy in-house and contractor resources to
    comply with year 2000 (Y2K) requirements. Of the 145 applications in
    APHIS, 21 have been identified as mission critical and are scheduled
    for Y2K remediation. All 21 mission critical applications will be made
    Y2K compliant by September 1998 with implementation no later than March
    1999.
                        fiscal year 1999 budget request
        The 1999 Budget proposes an appropriation level of $417.8 million
    for Salaries and Expenses, a $9.9 million decrease below the 1998
    current estimate. A critical part of this request is pay and retirement
    costs of almost $8.6 million. This funding is crucial to maintaining
    our existing infrastructure to carry out all Agency programs.
        The Agricultural Quarantine Inspection (AQI) program is the
    Nation's frontline defense against the introduction of dangerous
    agricultural pests and diseases from other countries. The 1996 FAIR Act
    set up the funding mechanism for the AQI--User Fees program which
    inspects international passengers, aircraft, ships, railcars, and
    trucks. Essentially, there are three funding parts--Congressional
    appropriation; the reserve amount at the end of 1996; and collections
    over $100 million. An appropriation of less than $100 million means
    either that more funding must come from the reserve available at the
    end of 1996 which is rapidly becoming depleted, or that fees to the
    public will have to be increased unnecessarily to offset funds that
    have already been collected, but cannot be used until 2003. With the
    $100 million appropriation, we can address increased traffic of Asian
    and European agricultural products into the United States. This has
    created the need for increased inspections to reduce the risk of
    introducing exotic agricultural pests into the U.S. APHIS will likely
    make over 85 million inspections to intercept banned agricultural
    products from entering the United States.
        Animal Health Monitoring and Surveillance is the corner stone of
    our animal health infrastructure and is key to preserving and enhancing
    America's animal health. Without this program, we could not quickly
    detect and respond to introductions of foreign agricultural disease
    that may cause production losses and export market disruptions. The
    budget requests a $4.6 million increase from fiscal year 1998. We
    intend to expand the National Animal Health Monitoring System to
    routinely identify diseases and death loss trends in sentinel feedlot
    and dairy cattle and swine. The Agency would enhance its emergency
    preparedness and response capabilities by upgrading its Foreign Animal
    Diseases Reporting and Networking System and developing and training on
    biological terrorism and other emerging disease issues. Finally, we
    would also work cooperatively with State and Federal wildlife agencies
    to investigate, study, and evaluate disease conditions in wildlife.
        The budget proposes an increase of $259 thousand for pest detection
    activities, which would be contributed toward cooperative research
    agreements to improve responses to plant pest and disease outbreaks and
    infestations, such as Karnal Bunt. Beyond the increase in fiscal year
    1999, APHIS also plans to devote $1 million to develop a strong fruit
    fly trapping and detection program to prevent the recurrence of fruit
    flies in Florida, which the state is expected to match. By detecting
    intrusions quickly, we will be able to control them within available
    funds and avoid the need for large, expensive emergency programs. These
    measures would reassure our international trading partners of APHIS'
    commitment to fruit fly control and deter them from prohibiting the
    entry of U.S. citrus and other agricultural products. At the same time,
    this would enable APHIS to cooperate with Florida on a similar basis as
    will California, providing an equal safeguarding level of this
    country's two largest citrus exporting states.
        The budget provides a program increase of $0.7 million to
    strengthen fruit fly exclusion and detection activities. The agency
    will carry out Environmental Protection Agency recommendations to
    minimize the use of pesticides by strengthening domestic fruit fly
    detection and control by increasing detection surveys in expanding
    urban areas where introduction is most likely. The increased funding
    will assure U.S. trading partners of our commitment to fruit fly
    control and ease entry of U.S. produce into foreign countries. The
    budget also requests a program increase of $0.6 million for
    international programs. APHIS would open new offices in Southeast Asia
    and Brazil to direct APHIS Sanitary/Phytosanitary (SPS) activities. The
    Agency has taken on greater responsibility for resolving SPS conflicts
    since the signing of the World Trade Organization agreement. Further,
    funds would be used to resolve SPS standards requirements for U.S.
    agricultural trade. Such funding would help meet the Secretary's goal
    to double agricultural exports over the next several years.
        The 1999 request for screwworm proposes a $1.4 million program
    reduction. Active eradication efforts will focus on Costa Rica and
    Panama where the total land mass is less than in Nicaragua and
    eradication costs can be reduced. The Agency will begin sterile fly
    releases into Panama, the last country before the barrier is
    established in the Isthmus of Panama. The program expects to begin
    planning for the new Panama facility in fiscal year 1999 with an
    architectural and engineering study.
        The budget proposes an $8.5 million program reduction in
    brucellosis eradication expenditures. APHIS has 9 States in the final
    stages of eradication and anticipates that all 50 States will be in
    Class ``Free'' Status by the end of 1999. The budget proposes a program
    reduction for boll weevil of $12.2 million below the 1998 current
    level. The Agency is gradually transferring full operational
    responsibility for program activities where the boll weevil no longer
    exists to grower organizations. APHIS would continue to oversee and
    provide technical support to boll weevil detection and control
    activities in eradicated and non-infested areas. Growers can pay a
    greater share of program costs due to loans made available from USDA's
    Farm Service Agency. Therefore, funding above the Administration's
    request for both the brucellosis and boll weevil programs is not needed
    in fiscal year 1999 and can be used for other priority needs.
        The 1999 budget proposes a program reduction of $3.4 million (for a
    net reduction of $2.5 million) for Wildlife Services (WS) which
    represents a total increase of $2.3 million, or 10 percent above the
    Administration's proposal for fiscal year 1998, as a result of several
    changes that we have made. Subject to the overall funding level, the
    proposal still calls for a reasonable (minimum 50 percent) match for
    all States, to reduce the significant disparity among States. The
    proposal allows States from two to three years to reach that goal. In
    addition, the basic infrastructure of each State will be funded by the
    Federal government, regardless of that States's contribution. Finally,
    funds have been set aside for needs that may cross State boundaries,
    and therefore may not be the responsibility of any single State. These
    changes address concerns that were raised with last year's proposal.
    However, behind the proposals in both years is the Administration's
    belief that cooperators in States that receive benefits should pay a
    reasonable portion of the government's costs of providing these
    benefits, and that the current significant disparity among States
    forces States and taxpayers to make up the difference.
        For buildings and facilities, we proposed $2 million for general
    maintenance. The Agency has not received general maintenance funding
    for the past two years making additional funding necessary to maintain
    existing facilities. APHIS controls and operates a broad range of
    facilities throughout the United States and overseas in support of our
    mission. These facilities include veterinary laboratories, animal
    quarantine and holding facilities, quarantine greenhouses, sterile
    insect rearing and production facilities, plant and soil analysis
    laboratories, and biological control laboratories and have a value of
    approximately $186 million. Many of these facilities are over 20 years
    old. As the controlling Agency, APHIS is responsible for maintaining
    these facilities in a good state of repair and complying with national,
    State, and local building codes, the Life Safety Code, the National
    Fire Code, Occupational Safety and Health Administration regulations,
    and the Environmental Protection Agency regulations. The budget also
    proposes $3.2 million to support continued modernization of Plum Island
    Animal Disease Center.
        The proposed budget assumes passage of legislation to collect fees
    for animal welfare inspection, veterinary biologics, biotechnology,
    pink bollworm, and Swine Health Protection Act inspection activities.
    In total, the fees would make up $9.9 million.
                                 final thoughts
        Much has been said about the primary mission of APHIS--whether it
    is to protect American agriculture from foreign diseases and pests, or
    to facilitate the export of American food and fiber products by helping
    our farmers and producers meet the animal and plant health standards of
    importing countries. Without question, APHIS' role as a domestic
    regulatory agency is still key. However, because of our role in
    developing and enforcing import requirements, as well as in providing
    key services to facilitate exports, APHIS must also focus its resources
    on issues relating to international trade. In fact, the two roles are
    inseparable.
        To succeed in the 21st century--and by that I mean to feed our
    populations, sustain our environment, and encourage economic growth
    through healthy agricultural trade--we will need to be effective in
    both roles by using all of the tools within our reach. We will need to
    explore and use the technologies available to better our crops and our
    production. In addition, we will need to build trust in trade with
    science-based decisions. In this global trade environment, where our
    actions and livelihoods are increasingly interdependent, it is crucial
    that we strive to make those decisions that will help ensure our mutual
    benefit.
        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 Enrique E. Figueroa
        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 1999 budget proposals.
        Although I am new to the Agricultural Marketing Service, or AMS, I
    am familiar with the economic and trading challenges faced by U.S.
    agriculture in domestic and international markets. Before coming to
    AMS, I was an associate professor at Cornell University's Department of
    Agricultural, Resource and Managerial Economics. At Cornell, my work
    was focused on horticultural product marketing issues. While at
    Cornell, I also served as a member of Secretary Glickman's NAFTA
    Advisory Committee on Private Commercial Disputes Regarding
    Agricultural Goods. Several years ago, I worked as a staff assistant
    for the House Committee on Agriculture, and spent four years with the
    California Conservation Corps. Since coming to AMS in November, I have
    been able to put my agricultural background to use for this agency and
    the customers we serve.
                          mission, goals, and programs
        I would like to take a few moments at the outset to review the
    agency's mission and strategic goals before I present our budget
    proposals.
        Our mission in 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 producers, traders, and
    consumers of U.S. food and fiber products. AMS' two major strategic
    goals are: (1) to facilitate the strategic marketing of U.S.
    agricultural products in domestic and international markets, and (2) to
    ensure fair and competitive agricultural marketing through marketing
    tools and regulations.
        Our first goal aims to enhance the efficiency of agricultural
    marketing, which will allow producers to maximize returns while
    reducing overall marketing costs, resulting in better values to
    consumers. AMS programs related to this goal include Market News,
    Quality Standards, Organic Certification, Pesticide Data, Wholesale
    Market Development, Transportation Services, Commodity Purchase
    Services, Grading and Certification, and Commodity Research and
    Promotion programs. Our Market News program provides timely, accurate,
    and unbiased market buying, selling, and pricing information on
    numerous agricultural commodities. Commodity standards provide a common
    language of quality for buyers and sellers in the U.S. and abroad. AMS
    user-funded grading and certification services provide an impartial
    evaluation of product quality so that purchasers can buy commodities
    without having to personally inspect them. 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 and integrity of the label.
    The program will accredit agents who will certify organic products to
    facilitate trading between the states and abroad. Our Pesticide Data
    Program develops and communicates comprehensive, statistically-reliable
    information on pesticide residues in food for use in Government dietary
    risk assessments and policy decisions. Since 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. AMS purchases selected
    meats, fish, poultry, fruits and vegetables to remove excess supplies
    from markets while providing a dependable supply of agricultural
    commodities for the National School Lunch and other domestic feeding
    programs. Research and promotion programs are used by agricultural
    producers to broaden and enhance national and international markets for
    various commodities. These AMS programs are directly related to USDA's
    strategic goal to open, expand, and maintain global market
    opportunities for agricultural producers.
        The aim of AMS' second goal is to ensure fair and competitive
    trading in agricultural markets for the benefit of producers and
    consumers of agricultural commodities. AMS programs that accomplish
    this important goal include Shell Egg Surveillance, Federal Seed,
    Pesticide Recordkeeping, Marketing Agreements and Orders, Plant Variety
    Protection, and the Perishable Agricultural Commodities Act, or PACA
    program. The Shell Egg Surveillance program promotes fair competition
    in the sale of consumer grade shell eggs by monitoring the proper
    disposition of certain undergrade and restricted eggs through regular
    inspections of shell egg handling operations. Marketing orders and
    agreements also help serve this goal by facilitating orderly marketing,
    and assuring equitable returns to producers and a dependable,
    reasonably-priced supply of products to consumers. The PACA program
    protects producers, shippers and distributors from loss due to unfair
    and fraudulent practices in the marketing of perishable agricultural
    commodities. These activities also help serve USDA's first strategic
    goal, and some serve USDA's second goal--to ensure a safe, affordable,
    nutritious, and accessible food supply.
                                funding sources
        The wide range of activities provided by AMS are funded from a
    variety of sources. AMS is uniquely entrepreneurial among governmental
    organizations. For the vast majority of our programs, our ability to
    ``stay in business'' depends on the earnings generated from customers
    who are under no obligation to buy our services, and who request those
    services only if they believe the service adds a proven value to their
    products in the marketplace. Nearly 75 percent of AMS funding is
    revenues generated from services provided to satisfied customers. This
    entrepreneurial climate drives us to be customer service-oriented,
    cost-conscious, committed to performance that will satisfy our
    customers, and innovative in service delivery. Customers pay for our
    services in grading, inspection and certification, and industry-
    generated self-help programs like research and promotion reimburse us
    for our oversight assistance to ensure that the programs comply with
    legislative intent and provisions. AMS also administers activities to
    protect and promote a level playing field in trade. Licenses and fees
    fully finance these programs. Finally, some of our activities provide a
    public good for millions of beneficiaries--such as issuing daily market
    reports and procuring food for Federal feeding programs. These
    activities are appropriations funded.
                       current issues and accomplishments
        I would like to review a few current issues and accomplishments of
    the past year.
    Federal Milk Marketing Order Reform
        AMS has completed drafting the proposed rule on Federal Milk Order
    reform in accordance with the mandate of the 1996 Farm Bill. To reach
    that goal, we engaged academics, solicited public comments, and
    released proposals and other documents to spark national debate and
    lead to a reform package. In preparation for the proposed rule, AMS
    received nearly 3,700 comments and participated in 250 meetings with
    over 22,000 people. The proposed rule was published on January 20. The
    initial 60-day comment period was recently extended until April 30.
    During the comment period, we anticipate holding listening sessions to
    continue as broad a national dialogue as possible.
    Rail and Other Transportation Issues
        U.S. agriculture faces increased reliance on market forces and
    export markets at a time when the performance and integrity of the
    transportation infrastructure is becoming an issue. Rail car shortages,
    crumbling locks, and old roads can result in bottlenecks that impede
    the most efficient movement of agricultural commodities. With a
    responsibility to monitor and represent the interests of agricultural
    shippers, Assistant Secretary Dunn has announced that AMS will take the
    lead in conducting a broadly based study to examine the transportation
    needs of U.S. agriculture.
        In October and December, AMS represented agricultural interests
    when rail car congestion problems at the Union Pacific/Southern
    Pacific's Houston rail hub spread throughout the western states. USDA
    filed written comments, and testified at emergency meetings of the
    Surface Transportation Board, or STB, to recommend alternatives that
    would quickly improve service to grain shippers. The STB issued orders
    that addressed USDA's requests and recent data from the railroads
    indicate that progress is being made to alleviate the rail car
    shortages and improve performance for shippers.
    International Activities and Issues
        In the international arena, AMS continues to be successful in
    advancing U.S. interests in international commodity standards, through
    active participation at the Economic Commission for Europe, or ECE, as
    well as Codex. For example, last March, ECE work was completed on pork
    cut specifications and progressed on beef cut specifications that will
    be adopted throughout Europe and should closely mirror existing U.S.
    standards. AMS has increased price reporting data from foreign markets
    and made contacts for future international market reporting. We also
    held several seminars for small business exporters to better acquaint
    them with import requirements in key international markets. In
    cooperation with government representatives from Canada and Mexico and
    under AMS leadership, the NAFTA Advisory Committee on Private
    Commercial Disputes Regarding Agricultural Goods developed a consensus
    recommendation to establish an industry-driven mechanism for the
    resolution of private commercial disputes involving fresh fruit and
    vegetable commerce between the three countries. AMS also worked closely
    with the Canadian and Mexican governments to conduct a series of
    seminars for fruit and vegetable shippers regarding import requirements
    for each country.
    Voluntary HACCP for Fruits and Vegetables
        AMS has been piloting a voluntary HACCP program for fresh-cut
    fruits and vegetables. This Quality Through Verification, or QTV,
    program encompassed five fresh cut fruit and vegetable firms during its
    pilot phase. The program was reviewed by FDA, which has regulatory
    responsibility for the safety of produce, and received that agency's
    support as an important component of FDA's overall effort to enhance
    the safety of produce. This year, we expect to complete a memorandum of
    understanding with FDA outlining the respective responsibilities of
    each agency in the program's operation. Several dozen additional firms
    are awaiting acceptance into the program, and we expect to extend QTV
    service to many of those firms.
    Expanded Use of Internet
        Another improvement in service to our customers is our expanded use
    of the Internet to enhance program delivery. In 1998, all of our daily
    market news reports will be available through the Internet, and we are
    exploring additional opportunities to use the Internet to make proposed
    rules available for public comment. In addition, we will expand the
    amount and depth of information on such topics as commodity procurement
    actions through our web site, following up on the recent business
    process re-engineering we undertook for our Commodity Procurement
    program.
                        fiscal year 1999 budget requests
        Let me turn now to our budget requests for fiscal year 1999. We are
    requesting a net increase in Marketing Services funds of $11.9 million
    which would cover the following activities: $320,000 for international
    market reporting, $500,000 to expand market reporting to address the
    potential effects of market concentration, $505,000 to expedite
    nationwide development of the Organic Certification Program, $2.5
    million to maintain statistically reliable sampling and testing in
    cooperation with all ten participating states in the Pesticide Data
    Program, $1.7 million to initiate a rapid response capability in the
    Pesticide Data Program to meet requirements of the Food Quality
    Protection Act of 1996, $6.3 million for the Microbiology Data Program
    (part of the Administration's Food Safety Initiative), $770,000 for pay
    costs, and $329,000 for added retirement costs. Our budget request also
    reflects a decrease of $1 million that was provided in fiscal year 1998
    for salmon marketing. This request will assure our goals of
    facilitating the strategic marketing of U.S. agricultural products in
    domestic and international markets while ensuring fair and competitive
    markets for the benefit of producers and consumers. Let me explain
    these program requests in more detail.
    International Market News
        To effectively compete in foreign as well as domestic markets, U.S.
    agriculture must have ready access to consistent, accurate, timely, and
    reliable information on international prices. With an increasing share
    of agriculture's income dependent on market expansion and export
    growth, USDA's role is to protect and expand the position of American
    agricultural products in foreign markets. Tariff reductions, resulting
    from international agreements, and rising incomes in many countries
    have continued to drive demand for U.S. agricultural products and
    expand our export markets. But international marketing challenges
    continue, and we want to ensure that a lack of market information is
    not a barrier to market access and, therefore, an impediment to the
    continued growth of U.S. agricultural exports.
        AMS is currently collecting limited international market
    information, but more in-depth information from a wider array of
    markets is needed. In a recent AMS customer service survey, respondents
    requested market information from 23 countries in Europe, North and
    South America, and the Pacific Rim for all fresh fruits, vegetables,
    and tree nuts. Various poultry and egg industry associations--the
    National Broiler Council, National Turkey Federation, United Egg
    Producers, United States Egg Marketers, National Poultry and Food
    Distributors Association, and USA Poultry and Egg Export Council--have
    also requested additional international market information. Our poultry
    market news program receives between 50 and 60 inquiries per week from
    various sources requesting information on international markets.
    Comments from customer surveys also indicate a strong need for more
    information regarding international market conditions. Our dairy market
    news program has concentrated on covering the dairy product markets of
    the U.S.' major international trade competitors, but now there is a
    growing need for dairy product information in those areas that are
    potential markets for U.S. dairy products such as Mexico, South
    America, and the Pacific Rim countries. The U.S. Dairy Export Council,
    a private organization consisting of dairy product processors,
    exporters, producers, and suppliers, has specifically requested market
    news for the Pacific Rim.
        We firmly subscribe to the principle that market information makes
    markets more efficient and contributes to the competitiveness of U.S.
    agriculture. In order to facilitate the development of international
    market news within available resources, AMS reporters have been working
    to establish contacts with private companies and government sources in
    foreign markets to collect and exchange market information. Industry
    has been so keenly interested in foreign market information that demand
    exceeds AMS resources. Additional personnel and increased automation
    would allow us to develop or obtain additional reports from major
    export markets and incorporate them into AMS' market news reports to
    the benefit of U.S. trade. Improving the availability of information on
    overseas markets should have a significant positive impact on the
    continued ability of U.S. products to compete successfully in the
    international marketplace.
    Domestic Market Reporting to Address Agricultural Concentration
        In domestic markets as well, we must also ensure that the lack of
    information is not a barrier or impediment to marketing opportunities
    for our producers. Increasing concentration within the meat and poultry
    industries has raised concerns over potential non-competitive behavior.
    Although there are some positive effects of concentration on the
    marketplace, the concern for potential non-competitive behavior by
    large companies leads to distrust and suspicion by many growers and
    smaller segments of the industry. A lack of complete market information
    only worsens the situation, fueling mistrust and suspicions of unfair
    market practices. The Secretary's Advisory Committee on Agricultural
    Concentration recommended that price discovery and reporting be
    enhanced wherever possible to ensure fair competition. Although AMS has
    developed several new reports in response to the advisory committee
    recommendations, such as export reporting, our resources are not
    sufficient to meet our commitments to agriculture in this critical
    area. Producers need all the information they can get to successfully
    compete in today's markets. New and expanded market reports will
    provide broader coverage of market information and a more in-depth look
    at market activity. Although a lack of resources limits our ability to
    be fully responsive, we have taken some initial steps to address these
    information needs. However, to realize their full potential, these
    initiatives will require additional AMS reporters covering more markets
    and improved information technology.
    Organic Certification
        Sales of organic foods are estimated at more than $3.5 billion and
    growing at a rate of 22 percent a year. With this growth has come
    multiple definitions of what constitutes an organic product, resulting
    in confusion among buyers and consumers. The Organic Foods Production
    Act of 1990 required the Secretary to establish an organic
    certification program for producers and handlers of agricultural
    products that are produced using organic methods. With recommendations
    from the National Organic Standards Board, or NOSB, 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.
        In fiscal 1997, AMS focused on completing and clearing the proposed
    organic rule. The rule was published in the Federal Register on
    December 16, 1997. For the first time, AMS is providing one of the most
    open and accessible public rulemakings in Federal experience--a fully
    electronic public rulemaking via the Internet. Four public information
    meetings to discuss the proposed rule were scheduled for February and
    March in various locations across the country, and these meetings will
    provide an opportunity for USDA to present an overview of the proposed
    rule, respond to questions, and expand the public dialogue on this
    important program.
        There are now approximately 28 states with some type of organic
    legislation in place, ranging from labeling laws to full-scale
    certification programs. Of these, only 11 states have certification
    programs in operation. Some are planning to adopt the national program
    and possibly implement certification programs; some states have
    established requirements for organic producers, but leave certification
    to private organizations; and others with existing programs likely will
    revise their organic programs when the Federal program goes into
    effect.
        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, nomenclature and
    standards for organic production will facilitate international
    marketing of U.S. organic products. After the final rule is
    implemented, we will work to harmonize the eventual program standards
    with those of existing and developing international organic programs.
        AMS needs additional resources to expedite nationwide development
    of the program, ensure labeling integrity, and facilitate global trade
    of our country's organic products. Once the program is fully
    established, we will charge fees to certifying agents for USDA
    accreditation, as authorized by current legislation. Fees collected
    will be deposited into the U.S. Treasury.
    Pesticide Data Program
        Pesticide residue data are a critical component of the Food Quality
    Protection Act, or FQPA, of 1996. The Act requires the Secretary of
    Agriculture to ensure the improved collection of pesticide residue data
    and the increased sampling of foods most likely consumed by children.
    AMS' statistically reliable procedures are designed to make unbiased
    estimates of residues in products collected in the ten cooperating
    states that represent almost half of the U.S. population. The
    pesticides targeted for data collection are selected by the
    Environmental Protection Agency, or EPA, in consultation with AMS. The
    commodities chosen for testing are among those most prevalently
    consumed by the American public.
        The fiscal year 1998 Appropriations Act provided $8 million in
    funding to AMS for the Pesticide Data Program, or PDP--a lower funding
    level than was made available for the program in previous years; in
    fact, about 30 percent less than the fiscal year 1996 level. With the
    additional funding requested for PDP program operations, we will be
    able to maintain statistical reliability of the data and provide the
    level of sampling and testing that will meet the needs of the EPA and
    other government agencies in responding to public health concerns.
        In addition to the FQPA, our pesticide residue testing has served
    the Department in several other important areas. AMS residue testing
    results have been used to confront barriers to international trade of
    U.S. agricultural commodities and are useful in the establishment of
    international standards. USDA's Foreign Agricultural Service, or FAS,
    uses data from the program to convince foreign governments that our
    food is safe. Pesticide data also have been used in the development of
    international standards by international organizations such as the
    Codex Alimentarius Commission and the World Health Organization.
    Rapid Response Initiative
        Title III, Section 301(c) of the FQPA directs the Secretary to
    ensure improved sampling and collection of pesticide residue data. To
    further respond to the requirements of the FQPA, AMS proposes to
    initiate a rapid response capability for pesticide residue testing. In
    the next ten years, EPA is required to review more than 9,000
    tolerances to ensure compliance with the more stringent safety
    standards of the FQPA. Under FQPA, EPA needs to complete risk
    assessment evaluations for pesticides with common toxic mechanisms and
    using aggregate exposure models. Up to date pesticide residue data
    generated by the Pesticide Data Program will allow the EPA to conduct
    realistic dietary risk assessments. A rapid response capability will
    increase productivity, especially for a commodity where PDP has
    collected data for other commodities in the same class, and for acute
    pesticide toxicity studies requiring single serving size surveys. PDP
    would add these commodities at a special sampling rate that provides a
    rapid response while maintaining statistical reliability. Without up to
    date and accurate residue data, EPA will be forced to make more
    conservative assumptions about residue levels that could potentially
    overestimate risk.
    Microbiology Data Program
        As part of the President's Food Safety Initiative, AMS proposes to
    initiate the Microbiology Data Program. The program is designed to
    address increasing public concerns about microorganisms in the U.S.
    food supply by helping to determine the incidence, number, and type of
    important foodborne microorganisms in domestically-produced and
    imported products with statistical reliability. With the data
    collected, a national database can be established identifying the
    incidence of key microorganisms in fruits and vegetables. The data will
    be used to establish ``benchmarks'' that can be used to evaluate the
    effectiveness of procedures to reduce or eliminate harmful foodborne
    microorganisms. The program also will provide Federal public health
    agencies with statistically reliable microbiological data to assess the
    impact of various regulations and agricultural practices. The produce
    industry and regulatory health agencies will benefit from data that
    enables them to assess processing and handling techniques from the farm
    almost to the grocery store, and identify the most effective
    modifications to the food distribution system. As a result, both the
    quality and the wholesomeness of the food supply will be improved.
    Stakeholders--including state agencies, consumers, growers, processors,
    retail stores, food handlers, food transporters, medical institutions,
    academia, global traders, and international organizations setting
    international standards--will benefit from this valuable data that will
    be available for study and decision making.
        To minimize the cost of this initiative, AMS proposes to use the
    existing infrastructure of the Pesticide Data Program for
    statistically-reliable sampling, including the laboratory capacity of
    participating State and Federal laboratories, and the electronic data
    reporting capabilities already in place with PDP. The 10 states
    currently participating in the PDP--California, Colorado, Florida,
    Maryland, Michigan, New York, Ohio, Texas, Washington, and Wisconsin--
    will be asked to also participate in the microbiology program.
    Initially, fresh fruit and vegetables will be sampled; other products
    could be included later. Organisms initially under consideration are E.
    coli, Listeria monocytogenes, Salmonella, and Shigella. Fruit and
    vegetable samples will be obtained at food terminal markets and chain
    store distribution centers.
        The proposed microbiological program offers a unique and innovative
    approach to identifying foodborne pathogens and focusing on those
    hazards in the food distribution system that present the greatest
    risks. No similar program exists at either the State or Federal level.
    AMS will coordinate our activities with other agencies within USDA,
    including ARS, NASS, ERS, and FSIS, as well as the FDA, and the Centers
    for Disease Control and Prevention, or CDC. CDC's primary
    responsibility is surveillance and tracking of foodborne illness; FDA
    notifies CDC of findings related to regulatory and laboratory
    investigations; and State and local health departments report foodborne
    illness cases after their investigations. Outbreaks involving
    restaurants or institutions are more likely to be recognized than those
    involving foods prepared in the home. Fruits and vegetables can become
    contaminated with pathogenic and spoilage microorganisms while growing,
    or during harvesting, processing, and distribution. Two earlier CDC
    reviews of foodborne illness revealed that fruits and vegetables can
    act as a vehicle in transmitting foodborne illness. Questionable
    practices in food production and handling, mass preparation of prepared
    meals, the trend toward greater consumption of meals away from home,
    the emphasis on increasing fresh fruits and vegetables in the diet, and
    product distribution logistics can all raise the risks of foodborne
    illnesses. The proposed program will help to gain important insight on
    the presence of pathogens in our food supply.
                             budget request summary
        In total, our 1999 budget request includes $58.5 million in
    appropriated funding for our marketing services programs and $1.2
    million for Payments to States and Possessions. In addition, we are
    requesting $11 million for formulation and administration of marketing
    agreements and orders and $6.3 million for administration of commodity
    purchase services from Section 32 funds.
        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 1999 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 major segments of American
    agriculture. GIPSA's Packers and Stockyards Programs (P&S) ensure open
    and competitive markets for livestock, meat, and poultry. The Agency's
    Federal Grain Inspection Service (FGIS) provides the U.S. grain market
    with Federal quality standards and a uniform system for applying them.
        GIPSA has both service and regulatory roles. The Agency provides
    financial protection to livestock producers and ensures fair and
    competitive markets. It also provides impartial, accurate measurements
    of grain quality to create an environment that promotes fairness and
    efficiency in the U.S. grain marketing system.
        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 livestock, meat, and poultry, and grain and related
    products.
                                  organization
        GIPSA is comprised of approximately 800 personnel, including full-
    time, temporary, and intermittent employees. GIPSA personnel are
    situated in field locations across the country to serve our customers.
        Of GIPSA's Packers and Stockyards Program's 180 allotted staff
    years, approximately 28 percent are located at headquarters. Following
    the planned reorganization of this program, the total staff located at
    headquarters will be reduced to no more than 20 percent of total staff
    years. During fiscal year 1997, GIPSA concentrated P&S program
    resources on providing financial protection and promoting fair business
    practices and a competitive marketing environment for livestock, meat,
    and poultry. The Agency conducted over 1,800 investigations, disclosing
    515 violations of the Packers and Stockyards (P&S) Act. Most violations
    are corrected on a voluntary basis with several resulting in livestock
    and poultry producers receiving additional funds for the sale of their
    product. During fiscal year 1997, 46 formal cases were resolved and 29
    new cases were filed to bring subject firms into compliance with the
    provisions of the P&S Act. These complaints alleged violations of the
    P&S Act, including failure to compete in the purchase of livestock,
    paying livestock sellers on the basis of false and inaccurate weights,
    failure to pay and failure to pay promptly for livestock, operating
    without bond coverage, and delayed weighing of live poultry. GIPSA is
    appealing an adverse decision in the IBP, Inc., case which alleged that
    the packer had given undue or unreasonable preference to a select group
    of feedlots.
        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 service 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 1997, this unique mix of Federal,
    State, and private inspection agencies provided 2.1 million inspections
    on over 225 million metric tons of grains and oilseeds; weighed over 97
    million metric tons of grain; and issued over 87,000 official weight
    certificates.
        This, of course, is only a brief summary of our accomplishments.
    I'd like to now provide some more in-depth information about our
    programs and their activities.
                 gipsa's packers and stockyards programs (p&s)
        GIPSA Strategic Goal No. 1.--Ensure a fair, open and competitive
    marketing environment for livestock, meat, and poultry.
        GIPSA's P&S program provides financial protection and promotes 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 $105 billion. At the
    close of fiscal year 1997, there were 1,335 stockyards; 6,900 market
    agencies/dealers; and 2,125 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 210 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 1997 resulted in $1.9
    million being restored to custodial accounts established and maintained
    for the benefit of livestock sellers. Packer and poultry trust
    activities also returned $264,000 to livestock sellers and $10,000 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 1997, 186 insolvent
    dealers and market agencies corrected or reduced their insolvencies by
    $34.4 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.
        During fiscal year 1997, GIPSA issued an administrative complaint
    against two dealers alleging they failed to conduct their buying
    operations in competition with and independently of one another. The
    complaint alleged the dealers entered into arrangements for the purpose
    and with the effect of restricting competition and thereby controlling
    the prices for slaughter cows at auction markets. Another investigation
    is underway to determine if other livestock dealers and packers in the
    Northwest region of the United States have entered into similar types
    of arrangements to restrict competition.
        GIPSA is currently conducting a broad investigation of fed steer
    and heifer procurement in the Texas Panhandle. The investigation was
    initiated in the summer of 1996 and includes 16 months of procurement
    data, over 37,000 transactions, and over 6 million head of cattle.
    Transaction data from packers has been collected, processed, and
    documented. Preliminary descriptive and graphical analyses have been
    completed and portions have been reported to the industry. Purchase and
    slaughter patterns over the period of investigation have been examined
    to identify potential occurrences of aberrant or unusual procurement
    practices. While the analyses conducted thus far have not disclosed
    obvious violations of the P&S Act, econometric and statistical analyses
    of the data are still being documented to identify relationships
    between spot market prices and non-spot purchases, and to reveal
    relationships that may not be apparent in the descriptive and graphical
    analysis. Completion of the investigation will depend on the findings
    of the econometric analysis. Two university researchers are
    collaborating on the econometric and statistical analyses.
        An investigation of slaughter hog procurement in the central United
    States also is underway. The investigation includes analysis of
    contractual arrangements between packers and hog producers, and will
    analyze price relationships between various procurement arrangements.
    The data also are being analyzed to ensure that firms are actively
    competing and to gain a better understanding of each firm's procurement
    operations. The investigation involves procurement data from a dozen
    major hog slaughter plants in the western Corn Belt. These plants
    slaughtered approximately one-third of the Nation's slaughter hogs in
    1996. Descriptive and graphical analyses should be completed and
    available by late spring 1998. Econometric and statistical analyses are
    underway with the cooperation of personnel from USDA's Economic
    Research Service and National Agricultural Statistics Service. While
    these analyses will take several months, they should be completed by
    late this year.
        Other major investigations underway include an investigation of
    slaughter lamb procurement in the Western United States and two poultry
    investigations. The slaughter lamb procurement investigation is
    focussing on evaluating competition and the use of supply contracts.
    One of the poultry investigations currently being conducted focuses on
    alleged discriminatory treatment of contract growers by a major poultry
    firm. The investigation involves analyzing settlements of nearly 1,000
    growers over a 2-year period. The other poultry investigation is being
    conducted to determine whether contract settlements that base payment
    on grower cost comparisons contain unfair elements. Data collection for
    both of the poultry investigations has been completed and analysis of
    the data is currently underway.
        Also in fiscal year 1997, GIPSA published an Advanced Notice of
    Proposed Rulemaking in the Federal Register seeking comments on the
    need for additional rules to protect contract poultry growers regarding
    (1) grower payment based on performance compared with other growers for
    a specified time period (usually all growers whose birds are killed
    within a 1- or 2-week period); (2) the accuracy of feed weights and
    feed delivery and pickup procedures; and (3) procedures for weighing
    live birds picked up for slaughter and the accuracy of the weights. We
    are concerned that contract poultry growers are in an unequal
    bargaining position with the integrated poultry companies and is
    considering the need to issue substantive regulations to provide
    growers with assurance that their settlements will be equitable. A
    review committee analyzed over 3,400 comments received in response to
    the notice. Recommendations of the committee and an analysis of grower
    comparison settlements by major poultry companies currently are being
    reviewed to determine the need for further regulation to ensure fair
    grower settlements.
        In order to create a forum for public discussion, the Department of
    Agriculture published a petition requesting rulemaking to restrict
    certain procurement practices regarding forward contracting and packer
    feeding. The petition was submitted by the Western Organization of
    Resource Councils. USDA received over 1,700 comments on the Federal
    Register notice by the April 14, 1997, closing date. A USDA team with
    economic, legal, and industry expertise was established to review and
    analyze the comments received. USDA is continuing to move forward on
    this matter and a decision regarding the petition is anticipated in the
    near future.
        Finally, in fiscal year 1997, GIPSA took preliminary steps to
    restructure its P&S program. The headquarters and field office
    structures of the P&S program were put in place in 1963. Since that
    time, there have been minor adjustments to both the field and
    headquarters structures, but the basic framework has remained
    unchanged. The field structure, which currently includes 11 regional
    offices, was designed to provide area coverage. The headquarters
    structure divides the enforcement activities into two program division
    with six branches based on the major titles in the P&S Act--a Packer
    and Poultry Division, which covers the responsibilities under Title II
    of the Act, and a livestock Marketing Division, which covers the
    activities under Title III.
        Major structural changes and most of the concentration in the
    livestock and meat packing industries have taken place since the
    current P&S structure was established. As the industry structure has
    changed, the lines between Titles II and III enforcement activities
    have become increasingly blurred. In addition, livestock and poultry
    production and slaughter has become concentrated in relatively narrow
    geographic areas.
        In an Evaluation Report released in February 1997, the USDA Office
    of the Inspector General (OIG) concluded that the P&S program needed to
    reorganize its national and regional offices, because its 11 regional
    offices do not provide enough staff to perform the full range of
    investigations, including complex anticompetitive practice
    investigations, and that P&S needed to incorporate economic,
    statistical, and legal expertise in its field offices.
        GIPSA recognizes the need to restructure its P&S program to enhance
    its ability to address competitive issues. The Agency's restructuring
    plan is consistent with OIG's recommendations.
        At headquarters, two operating divisions and six branches will be
    consolidated into a single policy/litigation support office with three
    branches that focus on the core responsibilities under the P&S Act--
    competition, fair trade practices, and payment protection. The 11 field
    offices will be consolidated into 3 regional offices with approximately
    35 resident agents operating either out of their homes or 1 of 3
    suboffices. Resident agents will handle the most basic services and
    routine investigations in outlying areas.
        One-time costs associated with consolidating the field offices and
    relocating displaced employees are projected at $3 million. The
    appropriation needed to fund the reorganization is included in the
    Department's fiscal year 1999 budget request as a one-time increase.
    While the Administration continues to seek additional resources to
    address competitive issues in the livestock, meat, and poultry
    industries, the restructuring itself will be budget neutral except for
    the one-time cost.
        The restructuring of the P&S program is vital to meeting the
    Department's responsibility, and industry's concerns, relating to
    competitive behavior in the livestock, meat, and poultry industries.
    While the restructuring plan is budget neutral in the out years, it
    represents a unique opportunity to strengthen P&S' ability to
    investigate anticompetitive practices and provide greater flexibility
    and efficiency in Agency operations.
                    gipsa's federal grain inspection service
        GIPSA Strategic Goal No. 2.--Promote and protect the integrity of
    the domestic and global marketing of U.S. grain for the benefit of
    American agriculture.
        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 international
    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.
        For an average cost of 27 cents per metric ton of grain in fiscal
    year 1997, exporters received USDA export certificates from GIPSA on
    which they relied to facilitate the marketing of over $20 billion worth
    of cereals and oilseeds. Likewise, here at home, buyers and handlers
    requested over 1.9 million inspections that facilitated the trading of
    124 million metric tons of cereals and oilseeds destined for domestic
    use.
        While current services are effective and efficient, GIPSA
    recognizes that to remain relevant in today's marketplace, continuous
    service improvement is essential and ongoing.
        In fiscal year 1997, GIPSA continued to work closely with the U.S.
    grain handling industry on Electronic Data Interchange (EDI), an
    industry-driven electronic commerce initiative that is designed to
    automate the exchange of financial transaction documents among
    businesses. GIPSA established the standardized electronic file format
    that will be used for the EDI system and by official inspection
    providers.
        GIPSA also continues to assist major export elevators in their
    ongoing efforts to integrate automation into official weighing and
    grain handling operations. Five fully automated weighing systems have
    been approved; five systems are being installed or debugged; and one
    system is in the proposal preparation stage. GIPSA continues to respond
    to inquiries from other elevators regarding automation initiatives. In
    addition, GIPSA has established a team of experts to develop, in
    partnership with the grain industry, an automated grain inspection
    system that will improve the efficiency and productivity of U.S. grain
    handling facilities, thereby making them more competitive in today's
    global marketplace.
        Also in fiscal year 1997, GIPSA began implementing an enhanced
    quality assurance and quality control program to ensure the quality and
    accuracy of official inspection results nationwide. The program
    balances national and localized monitoring, and emphasizes proactive
    actions to prevent problems from occurring. The new program will
    greatly improve GIPSA's efforts to provide our customers with the
    accurate and timely information they need to market America's grain.
        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
    1997, another grain moisture meter model was certified as conforming to
    NTEP requirements, bringing to seven the number of NTEP-certified
    models. The calibration data collected by GIPSA during fiscal years
    1995, 1996, and part of 1997 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
    limited to technological applications to service delivery. In fiscal
    year 1997, to further GIPSA's commitment to providing market-oriented
    inspection and weighing services, the Agency initiated a nationwide
    program to encourage and facilitate GIPSA field-level outreach to the
    U.S. agricultural community. Agency representatives conducted group and
    private meetings with field managers, producers, handlers, and
    processors throughout the United States to educate our customers about
    the official system, demonstrate the Department's commitment to U.S.
    agriculture, and explore better ways to serve the industry. This effort
    has resulted in GIPSA's undertaking creative and innovative initiatives
    to meet our customers' needs.
        For example, a farmers' cooperative in Iowa recently approached
    GIPSA for an innovative inspection and weighing approach to help them
    take advantage of railroad incentives, avoid demurrage, and improve
    their overall efficiency. The cooperative needed to improve their
    ability to manage grain inventories and increase railcar loading
    efficiency; to get onsite grade results to maximize their blending
    capabilities and stay within contract limits; and a training process to
    improve the quality assurance/control skills of the cooperative's
    employees. To meet the cooperative needs, GIPSA had to take a new
    approach to providing official services. The solution was an innovative
    cooperative agreement among three official agencies to provide
    inspection service to the cooperative. Using three mobile inspection
    labs, official inbound truck and bin inspections are provided at ten
    rail loading sites. This arrangement has allowed the cooperative to
    handle greater volumes of grain more quickly and efficiently. Further,
    the sampling and grading seminars that are routinely conducted for
    cooperative employees by official inspectors has increased the use of
    uniform sampling and grading techniques, thereby providing the
    cooperative's managers with an accurate assessment of the quality of
    their grain inventory.
        As an integral part of America's grain handling infrastructure--a
    superior infrastructure of storage facilities, rail lines, and
    waterways that makes American agriculture preeminently successful in
    the global marketplace--GIPSA will continue to provide all members of
    the U.S. grain handling system with the innovative, high-quality
    official inspection services they need to efficiently and effectively
    meet the challenges of a changing marketing environment.
        Our commitment to reaching our customers does not end at our
    borders. Exporters, importers, and end users of U.S. grains and
    oilseeds, as well as other USDA agencies, USDA cooperator
    organizations, and other governments, frequently ask GIPSA personnel to
    travel overseas to represent USDA at grain marketing and grading
    seminars, meet with foreign governments and grain industry
    representatives to resolve grain quality and weight discrepancies, help
    other countries develop domestic grain and commodity standards and
    marketing infrastructures, assist importers with quality
    specifications, and train local inspectors in U.S. inspection methods
    and procedures. At home, GIPSA regularly holds seminars and meetings to
    educate our worldwide customers about the quality and value of U.S.
    grain exports. In fiscal year 1997, GIPSA representatives met in the
    United States with 81 teams from 38 countries to provide information,
    technical guidance, and educational seminars. These international
    outreach efforts help promote greater harmony between U.S. and
    international standards. This, in turn, facilitates the export of U.S.
    agricultural products by reducing the risk of new barriers in today's
    open and freer global marketplace.
        GIPSA believes that America's producers are entitled to a market
    that treats them fairly and honestly. In fiscal year 1997, GIPSA's
    commitment to this tenet was exemplified as a long-term GIPSA
    investigation came to fruition in a legal action against ConAgra, Inc.,
    one of the nation's largest food companies. In March 1997, ConAgra
    agreed to pay $8.3 million in penalties after pleading guilty to
    federal charges of adulteration, misgrading, and misweighing of grain
    by the company's grain division, Peavey Grain. The settlement
    culminated a 4-year investigation conducted by GIPSA, USDA's Office of
    the Inspector General, and the Farm Service Agency. Central to the case
    was the work of GIPSA investigators, who documented ConAgra's
    widespread practice of adding water to grain to increase its weight.
    GIPSA determined that the addition of water to grain could degrade
    American agriculture's reputation for quality and excellence, and
    defraud buyers of U.S. grain. The conclusion of the ConAgra case
    complimented GIPSA's 1995 enactment of a prohibition on adding water to
    grain, which remains an enduring legacy of GIPSA's commitment to
    ensuring the integrity of the American grain marketing system and to
    safeguarding the rights and well-being of America's producers.
        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 1998 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 1998, our
    commitment to improved efficiency and effectiveness will continue to
    serve American agriculture well, as U.S. agricultural exports are
    expected to total over $56 billion (``Outlook for U.S. Agricultural
    Exports,'' February 1998).
        GIPSA accomplished a great deal in fiscal year 1997 and much is
    planned for fiscal year 1998. Our efforts to continuously improve our
    programs and services were further guided by the Agency's Strategic
    Plan, developed under the provisions of the Government Performance and
    Results Act.
                                   year 2000
        A great deal of planning and action also is underway to ensure that
    all GIPSA systems are Year 2000 (Y2K) compliant. GIPSA's Y2K efforts
    are of the highest priority and are focussed on addressing three basic
    areas of compliance: information technology, vulnerable systems, and
    telecommunications.
        GIPSA recognizes that disruption of our automated systems--
    including database reporting systems--would be extremely disruptive to
    the U.S. agricultural markets we serve. For example, GIPSA maintains an
    Export Grain Information System (EGIS), a comprehensive database of
    inspection and weighing information for all export grain that receives
    official services. It contains data on the number of carriers, volume
    of grain, number of lots and volume of lots at various grade levels.
    The database represents 90 percent or more of the grain exported from
    the United States (the remaining portion is exported under official
    inspection waiver provisions and is not, therefore, included in the
    system). Overall, EGIS provides the critically important information on
    the amount of specific grains available for export from the United
    States at a given time.
        This data on grain availability influences trading prices. Each
    week, EGIS reports are released to the public at precisely 11:00 AM
    Eastern Standard Time on Monday mornings. This time was established in
    cooperation with the Chicago Board of Trade to allow traders on the
    floor of the exchange to make bids prior to the close of the Market on
    Monday afternoons. Weekly updated EGIS data also is provided to USDA's
    Economic Research Service, Foreign Agricultural Service, and
    Agricultural Marketing Service, as well as to external customers such
    as Bluewater Shipping, Cargill, Columbia Grain, Continental, Koch
    Agriculture, and Sparks Commodities who rely on the data to support
    their critical grain trading functions.
        GIPSA is committed to ensuring that all needed resources are
    available for this effort--our success is of utmost importance to
    agency operations and to ensuring that there is no service disruption
    to our customers in America's cereal, oilseed, livestock, poultry, and
    meat markets.
                                  civil rights
        In addition to improving our services and programs in fiscal year
    1997, GIPSA also accomplished a great deal in the area of civil rights.
    The Secretary of Agriculture's goal is that each employee and customer
    of the Department of Agriculture be treated fairly and equitably, and
    with dignity and respect. The Secretary appointed a Civil Rights Action
    Team (CRAT) to develop recommendations to address institutional and
    underlying problems and ways to implement actions to ensure
    accountability and follow up on civil rights issues. The team's report
    laid the groundwork for many initiatives undertaken to address civil
    rights in USDA.
        In keeping with the CRAT report and in support of the Secretary's
    goal, GIPSA took a number of actions in fiscal year 1997. We
    established the agency's first Office of Civil Rights; adopted, by
    policy, the Secretary's policy of zero tolerance for reprisal;
    established a civil rights performance standard for managers and
    supervisors; implemented mandatory civil rights training for all
    employees; resolved many Title VII employment discrimination complaint
    cases at the lowest level; broadened Title VI reviews to ensure that
    GIPSA maintains its record of zero complaints of discrimination in
    service delivery; provided continuous support, resources, and funding
    for programs at 1890 land grant and other minority institutions; and
    established an outreach liaison to insure that all employees and
    customers are treated with dignity and respect.
        These are only some of the steps taken by GIPSA to support civil
    rights improvement in USDA. Like the Secretary, GIPSA has and will
    continue to make Civil Rights a part of our everyday work and an
    abiding priority.
                        fiscal year 1999 budget request
        To fund these important initiatives and to enable GIPSA to remain a
    valuable part of American agriculture, GIPSA's budget request for
    fiscal year 1999 is $11.8 million for appropriations and a limitation
    of $42.6 million in our revolving fund. GIPSA also proposes to collect
    $21.5 million in new user and license fees in fiscal year 1999.
        For fiscal year 1999, the President's budget proposes an
    appropriation request for grain inspection of $4.6 million for
    compliance activities. The fiscal year 1999 budget also assumes
    legislation to authorize the collection of $3.6 million in new user
    fees to cover the costs of grain standardization activities and $2.8
    million for methods development activities.
        The budget also assumes legislation to authorize the collection of
    $15.1 million in new user fees to cover the cost of the P&S Program.
    There are proposed 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; $795,000
    for activities in the packer competition and industry structure areas;
    and $750,000 for poultry compliance activities; and $3,000,000 for the
    one-time costs of reorganizing P&S' headquarters and field structures.
        GIPSA's fiscal year 1999 budget request includes an increase of
    $4,200,000 in one-time start-up costs to convert to new user fees and
    license fee status, and to maintain an adequate reserve. It is
    anticipated that $3,000,000 would be used for P&S activities and
    $1,200,000 would be used for standardization and methods development
    activities. Therefore, to summarize, the fiscal year 1999 request of
    $11.8 million consists of ongoing expenses of $4.6 million for grain
    compliance activities, a one-time increase of $3.0 million for
    relocation expenses, and a one-time request of $4.2 million for up-
    front costs for the transition to user-fee financing.
        The increase of $225,000 will allow GIPSA's P&S Programs to
    implement the requirements of the Paperwork Reduction Act that call for
    developing simpler reporting requirements for businesses and to provide
    for electronic submission of reports. Sustained low prices for beef and
    pork at the farm level have resulted in increased concern about
    concentration in the meat packing industry. Packer use of captive
    supplies, formula pricing, and other procurement initiatives require
    P&S to collect extensive data from packers for extended periods of
    time. Providing for the electronic submission of this data would reduce
    the cost to packers, improve the timeliness and increase the volume of
    data collection, and create a better understanding of the data on a
    real-time basis.
        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 ability 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. Additional resources are critical to expanding the
    Agency's capability to monitor and investigate the competitive
    implications of structural changes and behavioral practices in the meat
    packing industry, and will enhance our capability to support legal
    actions that require complex economic and statistical analyses.
        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 of $795,000 for packer competition and
    industry structure 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 $750,000 increase for poultry compliance activities will allow
    GIPSA to better ensure that contract poultry growers are treated fairly
    when dealing with large, integrated poultry companies, and protect them
    from unfair and discriminatory practices, as recommended by the
    Advisory Committee on Agricultural Concentration. Specifically, 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. Additional funding 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.
        A one-time appropriation of $3,000,000 will allow GIPSA to take the
    steps needed to strengthen its overall ability to investigate
    anticompetitive practices, and to provide greater flexibility and
    efficiency in enforcing all of the trade practice and payment
    protection provisions of the Packers and Stockyards Act. Without
    restructuring the field operations to provide for fewer offices with
    larger staffs, it will not be possible to incorporate the level of
    expertise needed to address the increasingly complex competitive issues
    facing the livestock, meat, and poultry industries.
        A request is included to provide for 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 request is enacted, the cost of
    administering this provision would be recovered through license fees.
        Finally, concerning our proposal for new user fees, we realize that
    in the past, the Congress has not approved these requests. However,
    please consider this in terms of a service being provided that
    primarily benefits an industry or individual. Should taxpayers as a
    whole pay or should those who benefit? As with the current fees for
    inspection and weighing services, we believe that those who primarily
    benefit should pay.
                                   conclusion
        Mr. Chairman, this concludes my statement. I appreciate the
    opportunity to testify on behalf of the Grain Inspection, Packers and
    Stockyards Administration (GIPSA). I will be happy to answer any
    questions the Committee may have.
                                     ______

                              Biographical Sketch
                              enrique e. figueroa
        Dr. Enrique E. Figueroa comes to USDA from Cornell University where
    he was an associate professor in the Department of Agricultural,
    Resource and Managerial Economics since November 1992. His initial
    appointment began in November 1986 as an assistant professor.
    Throughout his stay at Cornell, Dr. Figueroa's work focused on
    horticultural product marketing issues. Prior to that he was a post-
    graduate research agricultural economist and a research assistant in
    the Department of Agricultural Economics at the University of
    California at Davis.
        His experience also includes work as a staff assistant to the House
    Committee on Agriculture for the U.S. Congress in 1982 and 1984. He
    spent four years with the California Conservation Corps from 1976 to
    1980. He has an M.S. and Ph.D. in agricultural economics from the
    University of California at Davis, along with a M.S. in horticulture.
    His B.S. degree in agricultural education is from California State
    University in Fresno.
        Dr. Figueroa has extensive experience in both research, extension,
    and teaching. He has worked on a number of projects in many parts of
    the world and has trained a number of graduate students.

                        Inspection Changes Due to HACCP

        Senator Cochran. With respect to the Food Safety and
    Inspection Service, I know that one of the centerpiece programs
    now is the HACCP Program, this Hazard Analysis and Critical
    Control Point Program. How about that? [Laughter.]
        It was designed to be based on science, to be more
    efficient to find things that the old way of inspecting carcass
    by carcass with the naked eye could not possibly detect, and to
    provide information to those who were processing the carcasses
    so that problems could be corrected and the food products be
    safer.
        My question is, What changes, if any, can you tell us have
    been made in these plants with the introduction of this new
    procedure? What has been discarded that used to be done? What
    is being done under the new program?
        Dr. Woteki. Well, there are very substantial changes that
    have resulted as HACCP has been implemented over this last year
    plus. Our implementation began last year with sanitation
    standard operating procedures, as well as the beginning of
    testing for generic E. coli. Under that first step in
    implementation, our plants have essentially taken the
    responsibilities for having and following sanitation plans
    themselves. Our inspectors' role changed too. Instead of
    mandating the sanitation, they are overseeing the companies and
    the implementation of their standard operating procedures for
    sanitation.
        Then in the 300 of the largest plants that began operations
    in January of this year under the HACCP rule, we have also seen
    companies taking additional responsibilities for the ultimate
    safety of the product that they are producing and meeting the
    performance standards that are required under the rule for
    Salmonella.
        In addition, our inspectors' role has changed very
    substantially. The number of tasks have been reduced and
    systematized, and the role that they play within the plant in
    overseeing the companies' implementation of their HACCP plans
    has been another very substantial change.
        It has been a cultural change as well as a change to meet
    the requirements of performance standards in this science-based
    inspection approach.
        Senator Cochran. If you could for the record--I know this
    may be too difficult to do in an oral response to my question--
    list the tasks that were performed by the inspectors under the
    old system that are no longer being performed. That would be
    nice to see.
        Dr. Woteki. Yes; we can very easily submit that for the
    record.
        [The information follows:]

        For the record, we are providing the Inspection System Guide
    contained in FSIS Directive 5400.1, which contains tasks that
    inspection program personnel are no longer required to perform in
    establishments that are subject to the HACCP system regulations. In
    addition, we are providing Inspection System Procedures contained in
    FSIS Directive 5400.5 that replace the Inspection System Guide.
                             FSIS Directive 5400.5
                          inspection system activities
    I. Purpose
        FSIS is modernizing its approach to inspection to rely less on
    after-the-fact detection of problems and more on verifying the
    effectiveness of establishment processes and process controls. The
    Agency established the basic regulatory framework for this approach
    when it issued the Pathogen Reduction-Hazard Analysis and Critical
    Control Point (HACCP) Systems final rule (July 1996), which amended the
    regulations to require official establishments to take preventive and
    corrective measures at each stage of the food production process where
    food safety hazards occur.
        A modernized approach to inspection requires changes in the
    performance-based inspection system (PBIS) and the activities FSIS has
    conducted under that system--in particular, the tasks in the Inspection
    System Guide (ISG). Therefore, for establishments that are subject to
    the HACCP system regulations, FSIS is replacing the ISG and portions of
    the PBIS directives with this directive and its attachments. Inspection
    program personnel are to follow the instructions in this directive in
    every establishment that is subject to the HACCP system regulations.
    II. [Reserved]
    III. Reason for Issuance
        FSIS is issuing this directive to provide procedures, forms, and
    instructions that are appropriate for use in a modernized inspection
    system.
        In an official establishment, inspection program personnel are to
    follow the instructions in this directive (along with its attachments)
    if the establishment is subject to the HACCP system regulations.

        Senator Cochran. One of the suspicions out there, I will
    have to tell you, is that nothing has changed. We have got more
    and new things to be done under HACCP, but the old ways have
    not been abandoned and the activities of the inspectors are
    pretty much the same as they have been, except with new
    requirements on the part of the plan operators. That is a
    suspicion.

                                  Brucellosis

        On the other side of the table, let me get a status report
    on the brucellosis program. From what I hear, it has been a
    tremendous success and you have every right to be proud of the
    accomplishments there. Are we at a point where brucellosis is
    no longer a problem?
        Mr. Dunn. At this time, Mr. Chairman, we have nine States
    yet to achieve brucellosis-free status. We intend to complete
    that operation by calendar year 1999.
        Senator Cochran. Well, I congratulate you on a very
    successful program, and the States have been actively involved
    in helping make that a success too. I know in my State of
    Mississippi, former Commissioner of Agriculture Jim Buck Ross
    used to send me a letter up here every year telling me that
    status and where we were and what was needed in order to
    continue to make progress.
        Mr. Dunn. Mr. Chairman, it has been a true partnership
    between the States, the Federal Government, but also the
    producers as well.

                        Sanitary/Phytosanitary Standards

        Senator Cochran. There are a lot of inspection points now
    because of importing more fruits and vegetables and other food
    stuffs. Particularly under NAFTA, the freedom to import and
    export has increased the requirements for inspections and sites
    of inspections have increased, as I understand it.
        With this added workload, how are you going to do all the
    things you have to do in this global economy and still assure
    the U.S. consumers that things that are being imported are
    safe, wholesome, and not contaminated?
        Mr. Dunn. Mr. Chairman, we have been working very
    diligently with our trading partners to ensure that we can
    establish sanitary and phytosanitary procedures that are based
    on science and fact. APHIS, through its international services,
    has been working in country with these individual countries to
    ensure that we have equivalencies and verification of those
    equivalency programs for protection. I will ask the
    Administrator, Mr. Medley, to elaborate.
        Mr. Medley. Mr. Chairman, our 1999 budget requests
    increases in two areas. One is in our animal health monitoring
    and surveillance program. The other is in the pest detection
    program. These program increases are directly related to your
    question about the need to enhance our domestic infrastructure
    and to enhance our surveillance systems to certify the health
    status of American agricultural products.
        We also conduct inspections at the first point of entry.
    Under our agricultural quarantine inspection program, we are
    increasing the number of detector dogs used to identify
    prohibited agricultural products. We are using more
    sophisticated x-ray technology in the identification process as
    well. We are also shifting to a more risk-based inspection
    approach. With the enhanced value of agricultural exports to
    our economy, these safeguard measures provide protection for
    our domestic agricultural producers from exotic pests and
    diseases.

                           Single Food Safety Agency

        Senator Cochran. The National Academy of Sciences, as I
    understand it, is coming out with a proposal that there be one
    agency in the Federal Government that would be the food safety
    agency. Now, the Food and Drug Administration has
    responsibilities under current law, and the Department of
    Agriculture has separate responsibilities under current law.
        Dr. Woteki, what is your reaction to this proposal and how
    is the administration planning to respond to that proposal?
        Dr. Woteki. Well, we are very interested in what the report
    is going to say. I think the committee is going to be holding
    its first meeting later this month and begin considering this
    question of how should the Federal Government be organized to
    improve the safety of the food that is made available to our
    public.
        You may recall that the administration did consider this
    question early on during the National Performance Review,
    during the first year of that activity. They essentially came
    to the conclusion that we were going to better coordinate our
    activities. The President's food safety initiative and the
    budget request that we have submitted is a good example of how
    we have been working together to make the various parts of the
    Department of Health and Human Services, the EPA, as well as
    the various agencies within USDA that have a role to play in
    improving food safety, work better together.

                                  Irradiation

        Senator Cochran. One of the new technologies that some are
    arguing ought to be used more in the food industries to help
    protect the consuming public is irradiation as a way to kill
    bacteria and other contaminants in food.
        What is the reaction of your office to this suggestion and
    what can be done by the administration to encourage more
    irradiation of foodstuffs, if this is a correct approach?
        Dr. Woteki. Well, as you are probably well aware, the Food
    and Drug Administration considered the question of whether
    irradiation should be approved for use in red meat and decided
    the safety question with respect to red meat in December.
        Senator Cochran. They decided that it was safe.
        Dr. Woteki. That it was safe, exactly.
        Our role now within the Food Safety and Inspection Service
    is to develop a proposed rule that we will put out for public
    comment later this summer about how that technology should be
    used and applied within meat slaughter and processing
    establishments and also how that product then should be
    labeled.

                           Redeployment of Inspectors

        Senator Cochran. Let me ask you this. With the advent of
    the new technologies for analyzing food as it is being
    processed for sale in our country, is it necessary that we have
    the inspectors doing a carcass-by-carcass inspection any
    longer? Is that a waste of money?
        Dr. Woteki. Well, we are definitely giving a lot of
    consideration to how, within a HACCP environment, our
    inspection resources should be used. We are working with
    industry to develop some pilot projects to consider how those
    inspection resources, the inspectors' time, can be better used
    to focus on food safety concerns and to free up their time so
    that it can be used and redeployed into other areas, again with
    the primary emphasis on improving the safety of the product.
        Senator Cochran. As I mentioned when we started, we
    apologize again for the short period of time we have for oral
    questions. I have a number of questions that I intend to submit
    to you and I hope you will be able to respond to those in a
    timely fashion on a wide range of subjects. I do not want to
    leave anybody out. I hope you do not feel bad that I may not
    have asked you something that you wanted me to ask during this
    abbreviated hearing.
        My good friend, the distinguished Senator from Arkansas, is
    here. As I pointed out, he was over in the full committee
    markup on the supplemental appropriation. I am going to have to
    leave for another commitment that I made, and I am going to do
    something to show you how we get along up here occasionally. I
    am going to turn the gavel over to a Democrat and let him ask
    whatever questions he wants to ask and then adjourn the
    hearing.
        I do want to say that we will continue our hearings on the
    budget request for the Department of Agriculture on March 24 in
    this room. We will have witnesses from the Department's Farm
    and Foreign Agriculture Service programs.
        I am going to yield the floor to my good friend and thank
    you again for your cooperation with our committee. Thanks very
    much. Senator Bumpers.

                              HACCP Implementation

        Senator Bumpers [presiding]. Thank you, Mr. Chairman. You
    could not have picked a worse time to turn the gavel over to
    me. I have been so busy with the supplemental appropriation, I
    really have not had a chance to prepare for this hearing, as I
    would like.
        But there is one thing that is still a little bit of a
    thorn in my throat.
        I wanted to ask you, Ms. Woteki, about the HACCP Program,
    first of all. How do you rate the effectiveness and success of
    that program?
        Dr. Woteki. We have been at the full implementation of
    HACCP in about 300 plants just since January of this year. Our
    overall assessment of that first stage of implementation is
    good. It has gone relatively well. There have been some
    problems that have arisen of the type that we expected would
    occur with changes as large in magnitude as this is, both for
    the plants as well as for our inspectors.
        When there have been problems that have arisen over this
    last month and a half, our analysis of the situation has been
    that plants have reacted very quickly and very positively. Our
    inspectors have at times required some additional clarification
    of their roles and responsibilities, which we have been swift
    in providing to them. So, I think for a change as big as this
    one has been, our assessment of implementation is it is going
    pretty well.

                               User Fee Proposal

        Senator Bumpers. How quickly could you start collecting
    these user fees that you are requesting?
        Dr. Woteki. Well, we have included in our request
    approximately $100 million that will enable us to start up that
    program in the first quarter.
        Senator Bumpers. In 1998?
        Dr. Woteki. In fiscal year 1999.
        Senator Bumpers. In 1999, $100 million?
        Dr. Woteki. Correct.
        Senator Bumpers. And how much, say, in the year 2000?
        Dr. Woteki. At that point the program would be in full
    implementation.
        Senator Bumpers. And would produce how much revenue?
        Dr. Woteki. We anticipate that it would produce the revenue
    that would fully cover the cost of Federal inspection
    activities.
        Senator Bumpers. And how much would that be if it were in,
    say, 1998 or 1999?
        Dr. Woteki. It will be approximately $570 million.
        Senator Bumpers. Do you think the meat and poultry
    processors would pass that cost on to their consumers?
        Dr. Woteki. The economists that we have consulted in the
    development of this proposal have told us, yes, they believe
    the costs will be passed on to the consumers and those costs
    will amount to less than a penny per pound of product.

                               Seafood Inspection

        Senator Bumpers. You also have jurisdiction over fish
    inspection, do you not?
        Dr. Woteki. No.
        Senator Bumpers. Who does?
        Dr. Woteki. The Food and Drug Administration and the
    Commerce Department.
        Senator Bumpers. Well, I am not going to burden you with
    the question I was going to ask, but do you know what
    percentage of the domestic fish is inspected? Does anybody on
    this panel have any idea?
        Dr. Woteki. Mr. Billy previously worked on this issue.
        Senator Bumpers. Mr. Billy.
        Mr. Billy. I formerly was the Director of the Office of
    Seafood for the Food and Drug Administration. I may be a little
    out of date in terms of my statistics.
        The basic regulation of seafood safety falls to the Food
    and Drug Administration, and they operate an inspection system
    that is of a surveillance type. So, they spot check plants and
    products at a frequency appropriate to the hazards that are
    associated with the various types of seafood products.
        In addition to the mandatory system that they have, the
    Commerce Department operates a voluntary program similar to the
    programs operated by the Agricultural Marketing Service for
    other commodities. As I recall, about 20 percent of the seafood
    produced in the United States is under that voluntary program.
    Under that system, there are inspectors present daily and it
    operates more closely aligned to the way you would think meat
    and poultry inspection is done, although tailored to seafood.

                         Fruit and Vegetable Inspection

        Senator Bumpers. The President is now proposing to inspect
    all fruits and vegetables coming into the country from abroad.
    Is that correct?
        Mr. Billy. As I understand it, under the food safety
    initiative, the proposal is to strengthen the inspection
    activity of both domestic and imported fresh fruits and
    vegetables.
        Senator Bumpers. Is that also Commerce's responsibility?
        Mr. Billy. It is primarily a Food and Drug Administration
    responsibility, but Assistant Secretary Dunn may want to
    comment in terms of the role that the Agricultural Marketing
    Service will play.
        Senator Bumpers. I would be glad to hear it, Secretary
    Dunn.
        Mr. Dunn. Mr. Chairman, what we have requested in our
    budget is $6.3 million to begin microbiological testing for
    fruits and vegetables as part of the President's food safety
    initiative. We are going to be able to minimize that cost by
    putting it in with our pesticide data program that we currently
    have where we work through 10 different States to do testing
    for pesticide data residue. That will allow us to begin to have
    some inkling of how much microbiological problems there are in
    fruits and vegetables that come in, and we will have that
    information that we will turn over then to the Food and Drug
    Administration for action.
        Senator Bumpers. I want you to know I am hot for that
    program, and I was amazed, when the President offered that,
    that that was not already in effect. Most of the people in the
    country, when they buy--and in the winter months, you know that
    virtually everything you are eating is imported, and I think
    most people assume that it has been inspected and that there
    are no pesticide or herbicide residues on any of fruits and
    vegetables that have been imported. I would like to see that go
    forward, of course, and implemented at the earliest possible
    time.
        Ms. Woteki, how many poultry and meat plants were closed
    down totally in 1997 under the HACCP Program? Do you know the
    answer to that?

                           Plant Closures Under HACCP

        Dr. Woteki. The numbers that I have with me are for 1997
    and year to date so far in 1998. It includes January, February,
    and March of this year.
        Senator Bumpers. Say that again. I am sorry.
        Dr. Woteki. The numbers that I have with me that I can
    report to you today include calendar year 1997 as well as 3
    months of calendar year 1998.
        Senator Bumpers. Fine.
        Dr. Woteki. We have withheld inspection in 28 plants for
    failure to implement their sanitation standard operating
    procedures.
        Senator Bumpers. Let me interrupt you for just a moment.
    How many plants are we talking about total? How many do you
    inspect, meat and poultry?
        Dr. Woteki. Over 6,000.
        Senator Bumpers. How many of those are poultry?
        Dr. Woteki. FSIS inspects 428 plants that produce only
    poultry products, and 3,464 plants that produce both meat and
    poultry products.
        Senator Bumpers. Go ahead.
        Dr. Woteki. There have been 50 actions to withhold
    inspection which include 28 plants from whom we have withheld
    inspection because of repetitive SSOP deficiencies, in 11
    plants because of basic E. coli failures, in 10 plants because
    of HACCP system failures--and in this case, there are about 300
    plants since January of this year that have come under HACCP-
    based inspection. Inspection has been withheld in one non-HACCP
    plant for zero tolerance failures.

                               Import Inspection

        Senator Bumpers. You also inspect imported meat and
    poultry, do you not?
        Dr. Woteki. Correct.
        Senator Bumpers. Do we import any poultry into this
    country?
        Dr. Woteki. A small amount.
        Senator Bumpers. Pardon?
        Dr. Woteki. A small amount.
        Senator Bumpers. What kind of inspection do you perform on
    imported poultry and meats? Mostly in meat I assume. A lot of
    it comes from South America, does it not? Argentina?
        Dr. Woteki. Yes; we do a twofold inspection. One is that we
    evaluate countries that are exporting to us to determine
    whether they have a system that is equivalent to our own
    inspection system, and then as product enters the country, we
    do a random inspection of all of that product that comes in.
        Senator Bumpers. Are you telling me that we would not let a
    carcass of beef into this country that came from Argentina that
    was not subjected to as rigid an inspection in Argentina as it
    would be as if it were produced here?
        Dr. Woteki. That is correct, sir.
        Senator Bumpers. Do you have any way of verifying that,
    validating that?
        Dr. Woteki. Yes; we do.
        Senator Bumpers. How do you do it?
        Dr. Woteki. Well, I would like Mr. Billy to give you the
    details on how we go about doing that.
        Mr. Billy. Only 37 countries are authorized to export to us
    out of all the countries that presumably could.
        As Dr. Woteki described, we do a thorough evaluation of a
    country's inspection system to ensure that it is equivalent to
    ours before we will even approve them to export. That includes
    not only reviewing all their laws and regulations, but going on
    site and making sure that what they have on paper actually is
    being done in the plants and that their pesticide monitoring
    program, et cetera are being followed.
        Then once we allow shipping to start, as Dr. Woteki
    described, we randomly pick shipments and inspect them based on
    past performance and the risks associated with the product in
    question. This is done by our inspectors at what are called
    inspection houses, and we keep records of the performance of
    plants and countries.
        Then also as an additional step, we send auditors over to
    these countries. Our policy is to do that once a year. We
    review their program and we audit some percentage of the plants
    to make sure that they are continuing to follow the same
    procedures that we had reviewed previously. If they do not, we
    will delist the plants, have the country delist plants, or we
    will delist the country. We have done that on many occasions.
        It is a very strict system.
        Senator Bumpers. Mr. Billy, how about canned meats?
        Mr. Billy. Same thing, same procedure.
        Senator Bumpers. You inspect the plants where the meat is
    canned?
        Mr. Billy. Yes, sir. Yes; we do.
        Senator Bumpers. Do you have authority on that or is that
    an FDA----
        Mr. Billy. No; we have specific authority in the Meat Act
    and the Poultry Products Act.

                              Hudson Foods Recall

        Senator Bumpers. Dr. Woteki, let me ask you this. Hudson
    Foods bought beef from 15 different beef plants where the
    cattle were processed and the beef cut and maybe even ground. I
    am not sure. I think it was ground in the Hudson plant. But,
    for example, they took the carcass, cut all the meat off of it,
    transported it, 15 different packing plants, every one of them
    USDA inspected, FSIS inspected.
        Now, when the so-called outbreak in the Hudson plant in
    Iowa occurred--or in Nebraska, rather. Was it Nebraska? It was,
    was it not?
        Dr. Woteki. The plant was located in Nebraska. The outbreak
    was in Colorado.
        Senator Bumpers. Yes.
        But in any event, the last I heard FSIS had reduced the
    possibilities of where that beef came from. It did not
    originate in the Hudson plant. It originated in another plant
    that was FSIS inspected and transported there.
        Now, Hudson bore the brunt of the entire thing, and he was
    innocent as a newly ordained nun.
        So, my question to you is, have you ever identified which
    of the two plants that it had been narrowed to shipped the beef
    to the Hudson plant?
        And if I have misstated any thing of fact, do not hesitate
    to question it.
        Dr. Woteki. No, sir; we have not identified the source of
    the original contamination.

                                Reworked Product

        There is one clarification, though, that I think is
    worthwhile bringing about. I think Hudson did have a
    responsibility for maintaining practices that would prevent the
    further contamination of product they were processing within
    their plant, and they did have a practice they called return or
    rework where product--broken patties or other product--was put
    into the cooler overnight and brought back the next day and put
    into production. So, they had the possibility for
    recontaminating product every day they were producing.
        Senator Bumpers. Were you able to determine that that
    practice in that Hudson plant caused this outbreak?
        Dr. Woteki. We were not able to determine that that was the
    cause, but it does bring up the possibility of recontamination
    from----
        Senator Bumpers. I understand the practice might not be the
    ultimate practice even though this was a brand new facility,
    state-of-the-art, and I assume that FDA had known for a long
    time--the FSIS had known for a long time that this was a
    practice in that plant.
        Dr. Woteki. I know that this type of practice is common
    within the meat industry. I believe that based on the Hudson
    experience, many companies have reconsidered the use of this
    practice and discontinued it.
        Senator Bumpers. Have you issued an order to require no
    plant to use this practice?
        Dr. Woteki. No; we have not done that.
        Senator Bumpers. Why have you not?
        Dr. Woteki. We have held a public meeting on this issue and
    we are in the process of developing some guidance on this
    issue.
        Senator Bumpers. If this was a practice that you think
    could possibly have been a contributor to this problem, why
    have you not made every processing plant discontinue the
    practice?
        Dr. Woteki. I would like Mr. Billy to comment on the
    actions that we have undertaken to address this practice.

                     Guidelines Versus Command and Control

        Mr. Billy. We have held two meetings with the industry, all
    of the industry that has concerns about this particular area,
    the problem being the contamination of hamburger material with
    E. coli O15:H7. We have made it clear that these types of
    practices affect the risk of the organism, if it is, in fact,
    present in the raw material or if it somehow is introduced into
    the plant. This can contaminate more than the day's production.
        We have encouraged changes in the procedures that plants
    follow. We have drafted and will be sharing an announcement,
    just about to go out, guidelines that explain in very
    straightforward language how these different types of practices
    affect the exposure of the plants in terms of this organism
    being present in their product.
        Mr. Chairman, we are trying to move away from the
    traditional command and control approach. HACCP is about seeing
    plants take responsibility for how they produce their product,
    to use procedures that minimize the risk to the consumer. That
    is why we are working on guidelines. That is why we have had
    meetings, but we want the plants to take responsibility and
    have appropriate control measures in their HACCP programs. Many
    plants have already done so and we are going to encourage all
    plants that produce this type of product to do that.
        I am very concerned about falling back into the traditional
    approach of telling plants specifically you can do this, you
    cannot do that, at 11 o'clock you must make this step; the
    practices of the past.
        I believe the industry is committed. I believe they want to
    produce safe products. They have certainly shown to us with
    their HACCP programs that we have seen so far that they are
    taking good, positive steps to do that, and we are going to
    encourage more. I think that is the prudent strategy.
        We have included the public in this process. They are aware
    of what we are doing and how we are approaching it. I think
    there is a reasonable degree of comfort that this is a sound
    approach that will net us a safer product for the future.

                                Impact of Recall

        Senator Bumpers. I raise this issue because I am familiar
    with all of these people in my State. I watched Hudson Foods
    from the time I was elected Governor, maybe doing a few million
    dollars a year, go to $1.7 billion. I have always thought that
    the people who have the greatest incentive to put out a pure
    product are the companies themselves.
        In this particular case, I did not know quite what to think
    when this thing first burst on the scene, but as time went by
    and I found out that that contamination almost certainly
    originated in another USDA-inspected plant, not in a Hudson
    plant, and yet every press conference by the Department, every
    utterance by the Department placed the entire burden on Hudson
    Foods and made it so they had no choice but to either fold or
    to sell. And they sold for hundreds of millions of dollars less
    than that plant would have brought 1 day before this happened.
        Until this very day, until this moment, you cannot--I am
    not being all that critical about the process. I am concerned
    about the public relations that occurred during that period of
    time. You cannot tell me with any degree of certainty that they
    were culpable in any way. You are telling me that the procedure
    they used was one that was used in virtually all these plants,
    and that while it might have lent itself to the possibility of
    Salmonella or E. coli breaking out, you cannot state at all
    that that is what caused this problem.
        Yet, here is a family who worked themselves to death over
    the past 25 years to build that business and all of a sudden,
    they are out of business at a cost of several hundred million
    dollars to them.

                                Reworked Product

        Mr. Billy. Mr. Chairman, we do have information that
    indicates product that was produced in late April or early May
    and associated with some of the illnesses in Colorado was
    subsequently put into use roughly 4 weeks later, and we can
    provide the specific information for the record. That
    introduction of the return material into that later production,
    in fact, may well have introduced the organism into that later
    day's production and caused the bulk of the outbreaks of
    illness in Colorado. So, to the extent we were able to glean
    information from the company records, we do have information to
    indicate that the plant took part in practices that appeared to
    have caused the organism to be spread from one day's production
    to another.
        I would be happy to provide you with that information for
    the record.
        Senator Bumpers. Well, the information now is of not much
    benefit. I mean, the damage has already been done.
        I have chastised myself in a way because I did not speak up
    in the beginning, but the reason I did not speak up is because
    I did not know. I thought maybe the contamination was going to
    be widespread. I thought that maybe Hudson was culpable in the
    whole thing. I had no way of knowing, and I was listening to
    these press conferences constantly about going from a few
    pounds of beef until we wound up with 25 million pounds and
    then the plant then shut down. It is a powerful thing.
        I consider Secretary Glickman one of the best friends I
    have ever had. I have known him for years, long before he was
    Secretary, and I think he is a man of immense integrity,
    immense talent, and I think he does, by and large, an excellent
    job in the Department of Agriculture. So, I am reluctant to--I
    am not chastising him because none of us really knew in the
    beginning, but I am just saying the end result was catastrophic
    so far as I am concerned for innocent people.
        This morning on the way to work--my chief of staff who
    lives in the neighborhood and I drive to work together. I was
    talking about a large gathering last night that I had spoken
    to, and I told her, I said, you know, when I started talking
    about how lucky we are to live in a nation where, when you eat
    food, you know it is pure, when you drink water, you know it is
    pure, and when you take a dose of medicine, you know it has
    been tested and tested and tested, when you are in an airplane,
    you feel relatively safe because you know you are on a radar
    that is handing you off from one to the next one, and on and on
    and on it goes.
        But I saw two or three people in the audience. I could tell
    they did not like to hear that, and we were talking about that.
    I have been in this business a long time. I can watch an
    audience and I can tell who appreciates what I am saying and
    who does not. I could tell there was some anti-Government
    sentiment in that audience.
        Sometimes anti-Government sentiment is irresponsible,
    reckless, and irrational, but I told her this morning, I said,
    but you have ever been on the receiving end of an autocratic
    bureaucrat enforcing a regulation that you are quite sure he is
    misinterpreting or using to abuse you, you do not ever get over
    that.
        And that is the reason for the antipathy toward the
    Internal Revenue Service. They brought most of this on
    themselves. Now, I am not for abolishing the Internal Revenue
    Code or the Internal Revenue Service. All I am saying is I
    understand the hostility people feel about it, and I certainly
    understand the Hudson family's attitude about the Federal
    Government, and I might say it is toward OSHA as much as it is
    FSIS.
        But our job here is to try to make Government responsive,
    try to make it function. You will not ever make people like
    Government. You are not ever going to have a wholesale respect
    for Government. All I am saying is our job is to constantly day
    by day do the best we can and improve it as much as we possibly
    can.
        Well, that is enough of that lecture.
        I have just one other question, maybe a couple.

                                  Boll Weevil

        Mr. Medley, I wanted to ask you about the boll weevil
    program because my State is going to get left on the starting
    blocks. We are just getting started on it and now you are
    cutting the budget by $12 million. Does that bring the boll
    weevil eradication program to a halt?
        Mr. Medley. Senator, the cut of $12 million in the boll
    weevil program budget request is the Department proposing to
    move out of those areas where we have been successful in
    eradication and also provide a way by which the producers can
    get the startup costs, which sometimes can be very high,
    through an FSA loan program.
        It is an attempt to refocus our resources. Because of the
    success of the program and because of the high return for
    producers that have invested in the eradication program, we can
    move from providing direct support to providing technical
    assistance.
        Senator Bumpers. Mr. Medley, let me interrupt you just a
    moment. You are phasing out the grant program in favor of a
    loan program. Is that correct?
        Mr. Medley. Well, the appropriated funds in favor of a loan
    program; yes, sir.
        Senator Bumpers. Well, so my question is this. How about
    States like mine for example? This program has been going now,
    what, 5 or 6 years, a little longer?
        Mr. Medley. Yes; a very successful eradication program.
        Senator Bumpers. But everybody else had enjoyed the fruits
    of the grant program and now that you get down to Arkansas, you
    are converting it to a loan program, if I understand it. And I
    do not consider that fair for my cotton farmers.
        Mr. Medley. Senator, in the beginning, the eradication
    program was funded through a 70-30 cost share with 30 percent
    of the funding coming from the Government through
    appropriations. Over the last several years, there are more new
    eradication programs starting with growers paying more of the
    eradication costs because of the economic benefits. For
    instance, producers contribute over 85 percent for new
    eradication programs in Texas. As we demonstrate that the
    program can be successful, we have requested reduced
    appropriations for the eradication program. It is different
    from when the program first started.
        Senator Bumpers. I am enjoying this so much but we have got
    a vote on here. So, I will submit a few questions.
        Jim, I am sorry I did not have anything for you this
    morning. [Laughter.]
        Mr. Baker. It does not bother me a bit, sir. [Laughter.]
        Senator Bumpers. I thought you were rather enjoying it.
        Mr. Baker. I was.

                              Submitted Questions

        Senator Bumpers. We have a vote on, and so I am going to
    have to do that. I will submit a few questions in writing and
    ask that you at your earliest convenience answer those
    questions.
        [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
        Question. The President's fiscal year 1999 budget proposes new
    language under the Food Safety Inspection Service's Salaries and
    Expenses account which would waive the requirement that ``Federal funds
    for any year shall not exceed 50 per centum of the estimated total cost
    of the cooperative program'', as required by the Federal Meat
    Inspection Act. What is the rationale for increasing federal support to
    the States for this program, especially when the Administration is
    requesting private funds to pay all costs for inspection of the private
    companies?
        Answer. This waiver is needed to assist the States and ensure
    timely implementation of all HACCP requirements in the State inspection
    programs. The States will need assistance in developing infrastructure
    support for HACCP-based inspection in the areas of automation,
    laboratory pathogen testing, and inspection workforce training. This
    assistance will provide State programs with the same capability as FSIS
    in these critical areas so that State requirements will be ``equal to''
    those at the Federal level, as required by the statutes.
        The budget request will extend the current FAIM project initiative
    to the States, which would eliminate the need for each State to design,
    develop and implement automated systems that will support communication
    with FSIS automated systems. FSIS has already tested and proven the
    value of this infrastructure and the cost to FSIS would be less than
    paying 50 percent of the full cost for twenty-five individual State
    automation programs. This proposal will assist in moving toward a
    seamless food safety program through support of a uniform nationwide
    inspection system.
        Question. How does the Administration propose to pay for this
    increase?
        Answer. The Administration proposes a net appropriation of nearly
    $150 million that includes $7.8 million for this initiative.
        Question. The President's budget proposes legislation to require
    user fees to recover the full costs of meat, poultry, and egg products
    inspection. How many inspectors are supported by the fiscal year 1998
    budget?
        Answer. The fiscal year 1998 budget supports a total of 7,628
    permanent full-time inspectors and the full-time equivalent of 570
    other than permanent full-time inspectors.
        Question. Does the fiscal year 1999 budget propose an increase or
    decrease in the amount of funding for inspectors?
        Answer. The fiscal year 1999 budget proposes increases totaling
    $19.8 million for mandatory pay, retirement, and non-salary costs, as
    well as assumption of the Florida State inspection program to support a
    constant level of inspection staffing. FSIS will continue the process
    of transforming the inspection process within the same overall staffing
    levels in 1999 that we have in 1998.
        Question. Would all inspectors be supported by the user fee
    collections proposed?
        Answer. Yes, the proposal would cover the full cost of inspection,
    including the salaries and benefits of all inspection personnel.
        Question. How much will the consumer have to pay under the
    Administration user fee proposal?
        Answer. We estimate the overall impact on costs as a result of
    these fees will be less than one cent per pound of meat, poultry, and
    egg products production.
        Question. Why is a $100 million appropriation required to implement
    the user fees?
        Answer. Under our user fee proposal, establishments will be billed
    on a monthly basis, with fees due by the end of the month following the
    billing period. Because no fees will be received in the first month of
    the fiscal year, start-up funding is requested to cover FSIS budget
    obligations that must be paid in the first month. In addition, a
    reserve is needed to maintain a stable Federal inspection program as
    the flow of user fee revenue may not match estimated costs. Of the
    total $100 million request, estimated costs include $48 million for
    fiscal year start-up, and $52 million for program reserves.
        Question. What start-up costs would this amount support? Please be
    specific.
        Answer. The obligations that must be paid before the receipt of
    user fees are primarily for the salaries and benefits of the FSIS
    workforce, which is estimated at 85 percent of the total cost of the
    Federal inspection program.
        Question. When does the Administration plan to send to the Congress
    the legislation authorizing user fees?
        Answer. The proposed user fee legislation is presently in clearance
    at the Office of Management and Budget (OMB) and will be submitted to
    Congress very soon.
        Question. Did the Administration submit its user fee proposal to
    the Congress last year?
        Answer. Yes, on June 26, 1997, Secretary Glickman transmitted to
    the President of the Senate, Albert Gore, and the Speaker of the House,
    Newt Gingrich, a draft bill, ``To authorize the Secretary of
    Agriculture to impose user fees for the inspection of livestock, meat,
    poultry, and products thereof, and egg products.''
        Question. Dr. Woteki, you mention in your statement that you have
    been tapped as the coordinator of the President's Food Safety
    Initiative. Among other duties, one directive is to develop and carry
    out a plan to ensure the safety of domestic and imported fruits and
    vegetables. How does the agency's fiscal year 1999 budget address the
    President's initiative to enhance the safety of imported and domestic
    fruits and vegetables?
        Answer. While FSIS does not inspect fruits and vegetables, $13
    million of the $46 million included in the USDA fiscal year 1999 budget
    for the President's Interagency Food Safety Initiative has been
    specifically targeted for the President's Directive on the safety of
    domestic and imported fruits and vegetables: $4.0 million for the
    Cooperative State Research, Education, and Extension Service (CSREES)
    for research and producer education; $2.7 million for the Agricultural
    Research Service (ARS) for research on the development of new food
    safety technologies aimed at reducing and controlling pathogens on
    fruits and vegetables; and $6.3 million for the Agricultural Marketing
    Service (AMS) to establish a microbiological data program on fresh
    fruits and vegetables.
                           florida inspection program
        Question. Florida terminated its funding for the Cooperative State
    Inspection Program on December 1, 1997. Why did the State of Florida
    terminate its funding for this program?
        Answer. Governor Lawton Chiles informed Secretary Glickman, in his
    letter of July 23, 1997, that the State budget adopted by the Florida
    legislature for the fiscal year 1997-98 reduced funding for the State
    meat and poultry inspection program sufficiently to necessitate
    termination of the State program in December 1997 when funds would be
    depleted. Details were not provided for the rationale used by the
    legislature to prioritize funds.
        Question. Does the law direct FSIS to fund these activities should
    a state choose not to participate in this program?
        Answer. FSIS is mandated by law to assume responsibility,
    previously held by a State, for administering meat and poultry
    inspection programs with respect to operation and transactions within a
    State. In accordance with section 301(c)(3) of the Federal Meat
    Inspection Act and section 5(c)(3) of the Poultry Products Inspection
    Act, States that have terminated their inspection programs are
    designated to receive Federal inspection with respect to operations and
    transactions within the State.
        Question. Does the FSIS anticipate any other of the participating
    25 states terminating its participation in this program? If so, which
    ones?
        Answer. FSIS has not received any notification that a State is
    planning to terminate its program.
        Question. Should the Committee propose to not provide this needed
    increase, what are the consequences?
        Answer. The requested increase in funding is needed to ensure full
    coverage of inspection assignments for which FSIS assumed
    responsibility when Florida terminated its program. Without this
    increase, FSIS will absorb the additional workload, making adjustments
    as needed in resource allocations based on inspection priorities.
                       president's food safety initiative
        Question. How much money in fiscal year 1998 did FSIS contribute to
    the ``Fight BAC!'' educational campaign?
        Answer. FSIS is contributing $75,000 in fiscal year 1998 towards
    the ``Fight BAC!'' campaign. This includes $30,000 for printing ``Fight
    BAC!'' brochures and $45,000 for distribution of the brochures through
    the Consumer Information Center in Pueblo, Colorado. Additionally, FSIS
    is planning a multi-year education initiative that is part of the
    President's Food Safety Initiative. The Agency proposes an increase of
    $500,000 in the fiscal year 1999 budget request to develop new
    educational products and support distribution of existing products.
        Question. What was FSIS' role in this campaign?
        Answer. FSIS played a leading role in creating the Partnership for
    Food Safety Education, which brings together representatives from
    industry, government, public health, and consumer organizations. The
    Partnership developed the ``Fight BAC!'' campaign. FSIS is completely
    involved in all aspects of the Partnership, including selection of the
    public relations firm that created the ``Fight BAC!'' campaign, and
    review of all educational materials, the public service announcement,
    and Web site design and content. FSIS also played a major role in
    coordinating the ``Fight BAC!'' press conference held at USDA. FSIS
    continues to play an important role in recommending new promotional
    opportunities for the ``Fight BAC!'' campaign and planning the next
    phase of the campaign, which is to develop materials for the classroom.
        Question. FSIS is planning a multi-year education initiative which
    is a part of the President's Food Safety Initiative. The agency
    proposes in the fiscal year 1999 budget request an increase of $500,000
    to develop new educational products and support distribution of
    existing products. Are these additional funds to continue the ``Fight
    BAC!'' educational food safety campaign?
        Answer. The four key safe food handling messages contained in the
    ``Fight BAC!'' campaign will continue to be the cornerstone of new
    materials developed by FSIS. The Agency proposes in the fiscal year
    1999 budget request an increase of $500,000 to develop new educational
    products and support distribution of existing products in order to help
    food handlers change unsafe behaviors.
        Within the President's Food Safety Initiative, there are many
    consumer education projects identified that require government funding.
    For example, FSIS is proposing to produce a safe food handling video
    for senior citizens at risk for developing foodborne illness. Reaching
    at risk audiences is one of the goals of the President's Initiative.
    FSIS is currently investigating how best to integrate food safety
    education into the school environment. Once that analysis is completed,
    plans will be developed and funded by the request.
        Question. Do other USDA agencies develop and distribute
    informational products regarding food safety? If yes, which ones and
    how does this educational material differ from FSIS'?
        Answer. There is no other agency within USDA that develops and
    distributes national food safety information materials to consumers.
    However, FSIS has worked very closely with the Cooperative State
    Research, Education, and Extension Service (CSREES) at the State level.
    FSIS believes that the programs complement each other. Most of the
    CSREES resource allocation is provided through grant funding to local
    extension offices in individual States or localities. Projects are
    developed on a smaller scale. FSIS conducts educational programs on a
    national level and provides local extension specialists with tools to
    expand the impact of the national programs at the grass-roots level.
    For example, FSIS, as a partner in the ``Fight BAC!'' campaign,
    contributed to the production of brochures, camera-ready art and action
    kits, which are supplied to extension specialists. FSIS is funding the
    brochure's distribution through the Consumer Information Center (CIC).
    Extension specialists can direct their constituents to that resource.
        Question. The President's fiscal year 1999 budget request proposes
    an increase of $3 million for risk assessment and producer education.
    Of this increase, $1 million will be used to collaborate with animal
    production experts in identifying cost effective pathogen reduction
    strategies to reduce foodborne illness. The other $2 million will be
    used to educate producers, marketers, and transporters of meat and
    poultry products and to fund up to 25 State agriculture initiatives.
    Would you please elaborate on how these risk assessment and educational
    initiatives will be used by producers to reduce pathogen contamination.
        Answer. Currently, there does not exist the scientific
    understanding of practical ways to reliably reduce the level of
    pathogens in animals prior to slaughter that would result in lower
    contamination levels on the carcasses. The $1 million will continue the
    focus of the fiscal year 1997 initiatives in risk factor analysis at
    the food animal production stages for lamb, beef, poultry, and pork.
    The data collected from the pathogen reduction strategy pilot
    demonstration projects will provide information for quantitative and
    qualitative evaluation of production practices that producers may opt
    to use which have potential to lower the chemical, physical, and
    microbiological hazards associated with food animals presented for
    slaughter and processing.
        The $2 million for educational efforts will foster State level
    initiatives among food animal producers, practicing veterinarians,
    animal and public health agencies, agricultural research and extension
    and other stakeholders to assist producers in developing practical,
    cost-effective methods of managing their flocks and herds in ways which
    enhance food safety. As HACCP implementation causes the marketplace to
    encourage adoption of HACCP-compatible production practices, food
    animal producers, including small producers, will be aware of the
    changing nature of the marketplace. They will have the ability to
    remain viable by using the option of adopting management practices that
    both meet the demands of the marketplace and result in production of
    animals, which are the basis of safe, high quality food.
        Question. Does the agency plan to mandate these practices for
    producers in the future?
        Answer. The Agency has no plans to seek statutory authority for
    animal production. FSIS supports the implementation of voluntary
    efforts to reduce chemical, physical and microbial hazards from the
    farm, through markets, transportation, feedlots and during pre-
    slaughter preparation of food animals. The Agency believes the Pathogen
    Reduction/HACCP systems rule will affect food animal suppliers when
    they sell to slaughter plants implementing these systems. Plants will
    need more information about the potential hazards in/on incoming
    animals, including birds, in order to address those hazards
    appropriately in their HACCP plan. This will drive market changes that
    will promote HACCP-compatible practices at the production level. These
    practices may include record keeping, following the FDA compliance
    guidelines for appropriate drug use, animal or premise identification,
    and other Quality Assurance Program and Good Production Practices
    standards.
        Question. The fiscal year 1999 budget provides funds to train
    federal and state inspectors as the Hazard Analysis and Critical
    Control Point (HACCP) system is implemented in all sectors of the food
    industry. What areas are being emphasized in these training sessions?
    To date and by fiscal year, how many Federal inspectors and how much
    funding has been used?
        Answer. The 1999 budget requests a $750,000 increase to develop and
    deliver HACCP training for State inspection personnel under the
    activity Special Assistance for State programs, which is a major part
    of the President's Food Safety Initiative. The proposed State training
    will be modeled on the Federal HACCP training already underway since
    fiscal year 1997. Federal HACCP training includes the following:
        1. In fiscal year 1997, the first phase of the implementation of
    the pathogen reduction and HACCP rule took place. It dealt with Pre-
    HACCP requirements primarily consisting of the sanitation standard
    operating procedures (SSOP's), effective in all plants on January 27,
    1997. Two separate training programs were delivered at the cost of $3.5
    million, as follows:
        a. 4,331 employees, including supervisors, completed a three-day
    training program that focused on how to (1) perform the inspection
    tasks for the regulatory oversight of the pre-HACCP requirements; and
    (2) understand and appreciate the changes being brought about by the
    new rule.
        b. 1,200 supervisors completed a two-day training program to equip
    them to lead the changes brought about by the pathogen reduction and
    HACCP rule.
        2. In fiscal year 1998, the second phase of the implementation of
    the pathogen reduction and HACCP rule occurred. It dealt with the
    implementation of the HACCP and Salmonella requirements in large
    plants, effective January 26, 1998. It cost approximately $2 million
    and included a training program for more than 2,000 field inspection
    and compliance personnel during a six-week period in December 1997 and
    January 1998. Preparatory to the implementation, some 112 facilitators
    completed a three-week Facilitator Training Program on the delivery of
    the HACCP Technical Training Program.
        Included in the HACCP Technical Training Program was a module on
    Business Relations that focused on the concepts and practices that
    inspection personnel need to know to establish and maintain an
    effective business relationship with plant owners, operators and
    employees. It is centered on the following five relationship
    principles:
        1. Maintain open, honest, and straightforward communications.
        2. Have mutual respect.
        3. Be issues-oriented, do not personalize.
        4. Maintain a work environment that is absent of the fear of
    retaliation and intimidation.
        5. Understand each other's roles and responsibilities.
        On January 30, 1998, FSIS announced that Federally inspected meat
    and poultry plants may, upon request, implement and receive inspection
    under the pathogen reduction and HACCP rule prior to the mandatory
    implementation dates. Plants are not permitted to begin operating under
    the rule until FSIS has trained the assigned inspector(s). Upon receipt
    of a request, the HACCP Training Facilitators will schedule and deliver
    the training to the affected inspectors.
        Question. When does the agency plan to complete all training for
    Federal and State inspectors, by fiscal year?
        Answer. The training of Federal inspection personnel assigned to
    plants implementing the HACCP and Salmonella requirements will occur in
    subsequent fiscal years, as follows:
        1. In fiscal year 1999, for employees assigned to small plants that
    are required to implement the HACCP rule on January 25, 1999; and
        2. In fiscal year 2000, for employees assigned to very small plants
    that are required to implement the HACCP rule on January 25, 2000.
        Training for State inspection program personnel will be developed
    during the first part of fiscal year 1999, with delivery of training to
    begin in late fiscal year 1999 and continue into fiscal year 2000 to
    complete mandatory HACCP implementation in all very small plants.
        Question. Has the agency used any funding in providing joint
    training to the industry? If yes, how much?
        Answer. No, the Agency has not used any funding to provide joint
    training to the industry. FSIS is providing information to the industry
    through briefings at many locations nationwide, and technical
    assistance for small and very small establishments. FSIS is making
    available to small and very small establishments various HACCP
    materials that should assist these establishments in conducting their
    hazard analyses and developing their HACCP plans. As stated in the
    HACCP final rule, each establishment is responsible for training its
    employees. FSIS training is limited to FSIS and State employees because
    of complex logistical and cost considerations.
        Question. Dr. Woteki, you mention in your statement implementing
    the farm-to-table food safety strategy. What is the agency's strategy?
        Answer. The consumer's risk of foodborne illness from meat or
    poultry is a composite of the microbial hazards introduced to the
    product throughout the farm to table continuum. The only way to provide
    the maximum reduction in risk to consumers, and to allocate the costs
    of ameliorating those risks fairly, is to promote, or where appropriate
    require, adoption of reasonable interventions at every step where a
    hazard is introduced.
        While FSIS continues to focus much of its resources on oversight of
    slaughter and processing operations, the Agency is addressing other
    risk factors that contribute to foodborne illness and make consumers
    sick. FSIS officials recognize that the measures contained in the
    Pathogen Reduction and HACCP rule 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 emphasis on hazards that arise during production,
    transportation, distribution and retail sale.
        Animal production food safety.--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 voluntary 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 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.
        In the animal production area, the Agency strategy is two-fold.
    First, FSIS will continue efforts begun in fiscal year 1997 to identify
    and field-test production practices that will result in lower risk
    animals being presented for slaughter and processing. These efforts
    will be aimed at defining cost-effective, practical management
    adjustments that tend to contribute to food safety in all areas of
    chemical, physical, and microbial risks. They will address practices in
    the production of beef, lamb, poultry and pork, and the process will
    involve collaboration with numerous specialists in management, disease
    control, data collection, and risk analysis both inside and outside of
    USDA.
        Second, we will promote and encourage the development at the State
    level of partnerships among producers, veterinarians, animal and public
    health agencies, marketers, transporters, and education and extension
    personnel. These partnerships will function to make producers aware of
    the food safety challenges in the production of food animals, and
    define locally feasible methods of addressing these challenges. Every
    effort will be made to encourage the blending of needed food safety
    practices into existing and developing industry quality assurance and
    total quality management programs. The food safety HACCP-compatible
    production practices will then be available to producers in form and
    language familiar to them, and as part of projects already supported by
    industry leaders.
        Transportation, storage and distribution.--Other important links in
    the food safety chain are transportation, storage and distribution. In
    these areas, FSIS, FDA, and State and local governments share authority
    for oversight of food products. FSIS and FDA are working together 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. When raw
    product leaves the inspected facility, unsanitary conveyances can
    contaminate product and inadequate temperature controls during
    transportation to market can promote rapid and progressive growth of
    any bacteria present. For this reason, we are working with FDA and the
    food industry to develop procedures and practices that will ensure only
    clean and sanitary vehicles are used and appropriate temperature
    controls are maintained throughout transportation and distribution to
    retail.
        Retail and food service.--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 the 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.
        CDC outbreak data indicate that where a food source has been
    identified, mishandling of food at retail or in a food service
    establishment is, more often than not, cited as a contributing factor.
    Usually, one of the following factors is cited: (1) improper holding
    temperatures, (2) inadequate cooking temperatures, (3) contaminated
    equipment, (4) unsafe food sources, or (5) poor health or hygiene of
    personnel. There are about one million such establishments, employing
    about 12 million people. Close to half the consumer food dollar is
    spent on food prepared by others outside the home. These people
    represent not only a potential source of additional microbiological
    contamination, but also the last point at which interventions--such as
    cooking--can reduce or eliminate microbial risks. Improvements in food
    handling at retail promise to achieve the greatest reductions in the
    prevalence of foodborne illnesses.
        FSIS intends to be aggressive in promoting higher food safety
    standards and more uniformity among State and local jurisdictions that
    have primary jurisdiction over these establishments and food at retail.
    We are joining with FDA on a number of projects to support State and
    local food regulatory officials. Most notably, the Food Code provides
    the best advice of the Federal agencies on State laws and procedures
    for oversight of the retail food industry. The Food Code is
    continuously updated in collaboration with State and local regulatory
    officials, industry representatives, academic experts, and consumers
    participating in the biannual Conference for Food Protection.
        In addition, FSIS is providing training for State and local
    officials on meat and poultry processing, increasingly important as
    more and more retail establishments are processing products that, if
    they were produced in inspected establishments, would be subject to
    mandatory HACCP.
        The Agency is also collaborating with FDA on other training
    initiatives that will promote more uniform and effective oversight by
    State and local food regulators. One initiative is train the trainer
    courses, together with training materials and ongoing support, to
    increase the ability of the States to reach those in subordinate
    jurisdictions that most need training. Another initiative involves
    adapting HACCP principles to the many various conditions confronted by
    establishments handling and preparing foods at retail.
        Consumer education.--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, poultry, and egg 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. FSIS is a key participant in the
    Public/Private Partnership consisting of industry, government and
    consumer groups that have developed a public education campaign,
    ``Fight BAC!'', which is focused on food handling and is a key part of
    our efforts to educate consumers. The campaign includes public service
    announcements, and highlights the need for increased safety in food
    preparation practices. The ``Fight BAC!'' campaign highlights four
    basic sanitation and food-handling strategies consumers should use in
    their homes through use of a graphic featuring these four steps to food
    safety. The steps are: (1) Clean: Wash hands and surfaces often, (2)
    Separate: Don't cross-contaminate, (3) Cook: Cook to proper
    temperatures, and (4) Chill: Refrigerate promptly. The graphic is
    designed for use in a variety of materials, including posters and
    refrigerator magnets. This campaign is the foundation for the multi-
    year food safety education initiative.
                  field automation and information management[
        Question. The fiscal year 1999 President's budget proposes an
    increase of $5.8 million for automation assistance to extend the Field
    Automation and Information Management (FAIM) project to the State
    inspection programs. How many States would be served by this proposed
    funding, and would the FAIM program be fully implemented in fiscal year
    1999?
        Answer. In January 1998, the National Association of State Meat and
    Food Inspection Directors polled each of the 25 States that maintain
    their own inspection programs. All twenty-five expressed their desire
    to participate in FAIM. Twelve of the States want FAIM to be
    implemented in fiscal year 1999; the remaining thirteen States have
    asked for fiscal year 2000 as an implementation date. The funding
    requested for fiscal year 1999 will be sufficient to implement FAIM in
    the twelve States requesting implementation in fiscal year 1999.
        Implementing FAIM in the States will eliminate the need for each
    State to design, develop and implement automated systems that will
    support communication with FSIS automated systems. FSIS has already
    tested and proven the value of this infrastructure and the cost to FSIS
    would be less than paying 50 percent of the full cost for twenty-five
    individual State automation programs. This proposal will assist in
    moving toward a seamless food safety program through support of a
    uniform nationwide inspection system.
        Question. Does the fiscal year 1999 budget request contain any
    funds earmarked for the FAIM program on the Federal level?
        Answer. FAIM--for FSIS inspectors--is predicated on a phased five-
    year implementation. The Agency budget request includes $8.525 million
    in fiscal year 1999 for the fourth year of nationwide implementation.
    Implementation is on schedule and will be completed in fiscal year
    2000.
        Question. Please provide funds made available for FAIM in each
    fiscal year since the program was initiated to fiscal year 1999 and
    indicate the amount obligated for the program in each of these years.
        Answer.
        [The information follows:]

    ------------------------------------------------------------------------
                   Fiscal year                    Funding        Obligated
    ------------------------------------------------------------------------
    1996....................................      $8,425,000      $7,230,000
    1997....................................       8,525,000       9,485,000
    1998....................................       8,525,000       8,760,000
    1999....................................       8,525,000       8,525,000
    ------------------------------------------------------------------------
    Notes:
    1. Nearly $1.2 million was carried over as no-year funding from fiscal
      year 1996 to fiscal year 1997.
    2. In fiscal year 1997, $1.0 of the $1.2 million carryover funds was
      expended.
    3. Projected fiscal year 1998 obligations include the remaining $0.2
      million carryover funds.
    4. Fiscal year 1999 funding and obligated data reflect the current
      budget proposal.

                             salaries and expenses
        Question. In fiscal year 1999 the budget proposal assumes a
    decrease in staff years for non-inplant personnel realizing a savings
    in salary and operating costs. What factors influence this reduction in
    staff years?
        Answer. The 1999 budget proposes reductions of $1.75 million and 25
    staff years in salary and benefits and operating costs. This includes
    $1.0 million and 10 staff years for field office streamlining as a
    result of continued implementation of the FAIM project. An additional
    savings of $750,000 for salaries and benefits associated with 15 staff
    years is projected to result from the elimination of the prior approval
    programs.
        Question. How long does the agency expect these factors to affect
    staff reductions?
        Answer. Implementation of the FAIM project is scheduled for
    completion by the end of fiscal year 2000 and the resulting field
    streamlining will also be completed in fiscal year 2000. Elimination of
    the prior approval programs will be completed by the beginning of
    fiscal year 2000.
                  hazard analysis and critical control points
        Question. On January 26, 1998, the Hazard Analysis and Critical
    Control Point system (HACCP) was implemented in 312 of the largest meat
    and poultry plants in the nation. Some leading scientists involved in
    developing the model HACCP program have charged that FSIS is ignoring
    scientific data and forcing plants to incorporate the old organoleptic
    processing methods into HACCP plans. The Committee had serious concerns
    at the time the HACCP rule was being written about layering the new
    system on top of the old.
        I am aware that complaints have been made that FSIS is in fact
    forcing plants to write regulations from the old system--such as time
    and temperature cooling requirements--into their HACCP plans. Mr.
    Billy, if this is true, how does this fulfill the commitment the
    department made to Congress to eliminate layering?
        Answer. FSIS does have regulatory requirements that need to be
    updated and the Agency has acknowledged that it needs to remove its
    command and control requirements and replace them with performance
    standards, which provide the regulated industry with more flexibility.
    The Agency is developing a consolidated set of regulations that bring
    meat and poultry requirements together in a single place. We are
    committed to writing our regulations in plain and simple language so
    that they can be understood by not only the regulated industry, but
    also by the public, which expects that the government will hold
    industry accountable for meeting regulatory requirements.
        However, we acknowledge it is taking us longer to meet our goals
    than originally intended. Until performance standards are implemented,
    there are a number of regulations containing command and control
    requirements that will continue to be enforced. One such regulation is
    the requirement that poultry be chilled to a specific temperature
    within a certain time frame, depending on the weight of the bird: 40
    degrees within eight hours for turkey (9 C.F.R. 381.91). This
    requirement was based on the best available scientific knowledge about
    the lag phase for bacterial growth. FSIS would be negligent in its food
    safety mission if it dropped this requirement before implementing a
    performance standard.
        Question. How does this enhance food safety?
        Answer. To protect the public health, FSIS is enforcing current
    regulatory requirements that are based on the best science available at
    the time the requirements were developed. Chilling reduces the growth
    of bacteria.
        Question. FSIS has eliminated pre-approval for equipment and
    blueprints. Does FSIS intend to remove any other outdated requirements
    that you could share with us today?
        Answer. FSIS made a commitment to change its command and control
    regulations into performance standards as rapidly as it could, given
    current requirements for regulatory change.
        We are providing the FSIS portion of USDA's Unified Agenda that
    will be published in the Federal Register in April 1998. The Agenda
    outlines the Agency's regulatory reform efforts, including Sanitation
    Requirements for Official Meat and Poultry Establishments, Rules of
    Practice, Performance Standards for Perishable, Ready-to-eat Products,
    and Elimination of Requirements for Partial Quality Control Programs.
        [Clerk's note.--The information referred to does not appear in the
    hearing record, but can be reviewed in the April 1998 Federal
    Register.]
        Question. Mr. Billy, in your statement you mention the proposed
    increase of $2.3 million for upgraded HACCP inspection technology for
    the implementation of HACCP in the Egg Products Inspection program, and
    equipment and increased travel for distribution compliance activities.
        Why hasn't the agency promulgated the final rule requiring a 45
    degrees Fahrenheit ambient air temperature for the transportation and
    storage of eggs as the Committee required in the fiscal year 1998
    Appropriations Act?
        Answer. We are moving as rapidly as possible to publish the
    regulation mandating a 45 degree ambient air temperature requirement
    and will comply with the 1998 Appropriations Act.
        Question. Please elaborate on the need for this proposed increase
    of $2.3 million.
        Answer. Under HACCP-based inspection, FSIS will redeploy inspection
    personnel within the plant and in distribution to implement the farm-
    to-table food safety strategy. While redeployment enables us to operate
    within existing staffing levels, increased operating support is needed
    to perform the new inspection tasks required to ensure the safety of
    meat, poultry, and egg products.
        An enhanced compliance presence is needed to conduct increased
    inspection activity in distribution channels beyond the in-plant
    setting in order to ensure food safety from the farm to the table. An
    increase of $0.5 million is needed to provide travel, equipment, and
    supplies associated with these activities. The farm-to-table strategy
    for inspection will entail a great deal of out-of-plant activity
    requiring travel to multiple destinations. Specialized equipment, such
    as cameras and portable telephones, and supplies for taking samples are
    required to support these efforts.
        Additionally, FSIS expects to complete amendments to the HACCP rule
    that will cover Egg Products Inspection in fiscal year 1999.
    Implementation of HACCP provisions will require training for all
    inspectors, relief personnel, and supervisory staff involved with Egg
    Products Inspection; and sampling of egg products from the plant
    environment for various microorganisms to establish baseline data. FSIS
    is requesting an additional $0.4 million to provide training for more
    than 120 inspection personnel and enable the agency to perform required
    baseline sampling. Prior year funding for HACCP training will not be
    available for this purpose as it is committed to meat and poultry
    inspection and will be needed for training in new slaughter inspection
    procedures.
        Upgraded inspection technology is needed to assist inspection
    personnel in the fully implemented HACCP-based inspection program. The
    requested increase of $1.4 million will pay for technology not
    currently available to inspectors as well as improvements in current
    technology. Some examples include stethoscopes for veterinary medical
    officers to make a more thorough and complete determination of the
    health status of incoming animals for slaughter. In addition, improved
    thermometers are needed to perform verification tasks required by
    HACCP. Neither stethoscopes nor thermometers are currently available to
    FSIS inspectors. These instruments will be used in the HACCP inspection
    models project this year and will be needed by the full inspection
    workforce in fiscal year 1999. They are also necessary in order for
    inspection results to be fully accepted as accurate. Additionally,
    software packages are being developed, which inspection personnel will
    use in determining the adequacy of critical limits and other technical
    information related to HACCP.
        Question. What do you think about organizing an independent,
    scientific organization to come in and see if HACCP implementation has
    strayed from science-based HACCP?
        Answer. FSIS appreciates the importance of an independent,
    scientific evaluation of HACCP implementation. The Agency's evaluation
    strategy for HACCP is two-fold: conduct formative evaluations to gain
    information at each phase to facilitate the overall implementation of
    HACCP; and obtain scientific evaluation expertise from beyond the
    Agency to conduct a summative evaluation that will assess the impact of
    the final rule on inspection, industry, consumers, and foodborne
    illness.
        The first formative evaluation effort, Results of the SSOP
    Implementation Follow-Up Study, has been completed. Six months after
    the initial implementation date of sanitation standard operating
    procedures (SSOP's), this study was conducted to determine the extent
    to which the new system was implemented and where additional effort was
    needed to assure that the new system would continue to work as
    intended.
        The second formative evaluation, Evaluation of Inspection
    Activities During Phase One of HACCP Implementation is just starting.
    This in-house evaluation of FSIS inspection activities during HACCP
    implementation in large plants is designed to identify areas that might
    need modification before small plants begin implementation in January
    1999. The plan is to design the study, collect the data, analyze it and
    write the final report by July 1998. This tight timeline will enable
    FSIS Field Operations to review the findings and as necessary modify
    aspects of its delivery of inspection in time for small plant
    implementation in January 1999. Evaluation efforts of this type are
    planned at each phase of HACCP implementation.
        Concurrent with these evaluation efforts, the Agency is already
    planning an evaluation of the HACCP final rule. This evaluation will
    require expertise from beyond the Agency. The study is expected to
    address whether or not HACCP process control systems: (1) control
    production safety hazards, (2) reduce foodborne illness, (3) make
    inspection more effective, (4) increase consumer confidence, and (5)
    provide an opportunity for increased productivity.
        Question. When do you suggest this should be carried out?
        Answer. Based on the tentative timeline, the evaluation reports
    will be due in fiscal year 2000, fiscal year 2001 and fiscal year 2002.
    This would allow adequate time to fully assess the implementation of
    HACCP in all meat and poultry plants.
        Question. Please provide the Committee with the multi-year HAACP
    plan for staffing levels in the plant (in-plant inspections and
    others).
        Answer. Under HACCP implementation, FSIS is currently designing
    pilot projects to determine the best ways of conducting inspection of
    establishments and areas of in-distribution. FSIS has the opportunity
    to focus its inspection staffing resources on food safety both in
    plants and in distribution to achieve its Strategic Goal of enhanced
    public health. These projects will help the Agency determine what are
    optimum staffing levels and configurations to ensure the safety of
    meat, poultry, and egg products along the food safety continuum.
                     government performance and results act
        Question. How are the agency's annual performance goals linked to
    the agency's mission, strategic goals, and program activities in its
    budget request?
        Answer. The mission of FSIS is to ensure that meat, poultry, and
    egg products moving in interstate commerce or exported to other
    countries are safe, wholesome, and accurately labeled. In 1996, FSIS
    issued the HACCP final rule, which serves as a blueprint for changes in
    meat, poultry, and egg products' inspection for the future.
        The FSIS Strategic Plan goes beyond HACCP to develop the Agency's
    strategy for achieving enhanced public health. The Plan contains one
    goal: to enhance the public health by minimizing foodborne illness from
    meat, poultry, and egg products, which is supported by six
    corresponding strategic objectives that are necessary to accomplish the
    goal.
        The Strategic Plan and the Annual Performance Plan are closely
    linked in that the annual performance goals are based on the strategic
    objectives. All of the program activities in the 1999 budget request
    support the Agency's strategic goal. The ``Means and Strategies''
    section under each performance goal identifies specific budget
    initiatives that will enable FSIS to achieve its annual performance
    goals.
        Question. Could you describe the process used to link your
    performance goals to your budget activities?
        Answer. The Agency recognized the importance early on of linking
    the performance goals and the budget activities through the Agency
    mission. The goals represent our mission objectives, while the budget
    activities represent our mission activities. On a preliminary basis,
    the Agency evaluated the relationship between the budget activities and
    the performance goals to determine whether or not changes were needed
    in budget activities, and found that the complementary linkage of
    performance goals and budget activities to the Agency mission indicated
    no immediate need for change.
        Question. What difficulties, if any, did you encounter, and what
    lessons did you learn?
        Answer. FSIS is undergoing a transformation in its inspection
    program from traditional organoleptic inspection to HACCP-based
    inspection. The performance goals are specific to achieving a reduction
    in foodborne illness through HACCP and other inspection changes, and
    primarily focus on new and anticipated food safety developments. The
    budget activities capture all costs for both the traditional inspection
    program and the new HACCP-based inspection system now being
    implemented. We learned that the linkage of performance goals and
    budget activities will evolve through many stages as transformation of
    the inspection program takes place, and we should not make further
    changes in our budget activities at this time.
        Question. Does the agency's Performance Plan link performance
    measures to its budget?
        Answer. FSIS used both its Strategic Plan and preliminary 1999
    budget information to design the Annual Performance Plan. The
    performance goals are specific to achieving a reduction in foodborne
    illness, and the measures in the Plan indicate progress in achieving
    these goals. The performance measures are linked to the budget
    activities that compose the budget as indicated by the description of
    the measure. For example, the first goal--to reduce pathogens on raw
    products by continuing implementation of the Pathogen Reduction/HACCP
    rule--includes as one performance measure, the percentage of large and
    medium meat and poultry slaughter and processing facilities in
    compliance with the HACCP rule. This measure is linked to Federal food
    inspection, the budget activity through which FSIS will obtain the data
    to measure the industry's compliance with the HACCP rule.
        Question. Does each account have performance measures?
        Answer. FSIS has one major appropriated salaries and expenses
    account, and the Agency designed performance measures for that account.
    Many of the performance measures do not apply to the Agency's Trust
    Fund account because voluntary inspection is not included under the
    HACCP final rule. FSIS has not designed separate performance measures
    for the Trust Fund account.
        Question. To what extent does your performance planning structure
    differ from the account and activity structure in your budget
    justification?
        Answer. The FSIS performance planning structure is built around
    specific steps that must be carried out to achieve the strategic goal
    of minimizing foodborne illness in meat, poultry, and egg products. The
    account and activity structure presented in the budget justification is
    organized along program activity lines that capture the range of
    infrastructure and support activities necessary to carry out a total
    inspection program.
        Question. Do you plan to propose any changes to your account
    structure for fiscal year 2000?
        Answer. At this point in time, it is too early to discuss with any
    certainty the likelihood of changes to the account structure. In the
    1998 budget, FSIS proposed a new, streamlined program activity
    structure that would reduce the number of activities from eight to
    five. The new structure of Federal Food Inspection, Import/Export
    Inspection, Laboratory Services, FAIM, and Grants to States replaced
    the old structure of Slaughter Inspection, Processing Inspection, Egg
    Products Inspection, Import/Export Inspection, Pathogen Reduction
    Program, FAIM, and Grants to States. FAIM and Grants to States were
    preserved because of unique funding arrangements: no year funding for
    FAIM and earmarked funding for States. In the 1999 budget, FSIS
    included an additional activity, Special Assistance for State Programs,
    to reflect proposed enhanced Federal funding of 75 percent, rather than
    the authorized 50 percent matching funds. The proposed program activity
    structure is broad and flexible enough to permit linkage with strategic
    and annual performance goals, especially as these are fine-tuned or
    change over time.
        Question. How were performance measures chosen?
        Answer. As part of the performance goals, the performance measures
    were chosen as indicators of progress toward achieving goals. The
    annual performance goals are written in measurable, performance-
    oriented terms so that annual program evaluations can more easily gauge
    progress for each performance goal. Maintaining a common set of
    objectives and performance goals provides a strong linkage between the
    long-range strategic plan objectives and the more output-oriented
    performance goals in the Annual Performance Plan.
        Question. How did the agency balance the cost of data collection
    and verification with the need for reliable and valid performance data?
        Answer. When designing its performance indicators, FSIS tried to
    rely on information that was readily available within the Agency.
    Therefore, the data collected for activities contained in the Strategic
    Plan will be consistent and comparable with other activity data
    collected over time, ensuring a stream of reliable and valid
    performance data for the Plan's goals and objectives. Data quality
    should continue to be high since the Agency will rely on the same data
    sources (inplant records, for example) from which it has published data
    in the past.
        With some exceptions, there should be little increased cost due to
    the collection of data to meet the GPRA requirements. What will be
    needed is a review of the methodology the Agency uses to collect and
    verify the data and a strengthening of record keeping technology. FSIS
    has also established a performance measure to track the number of
    automation processes improved to determine how well information
    technology is supporting strategic and program goals. Management is
    committed to institutionalizing an integrated IRM system throughout
    FSIS and this commitment to better data collection and evaluation will
    permit more accurate data available for performance measurement of
    activities detailed in the FSIS Strategic Plan and Annual Performance
    Plan.
        Question. Does your plan include performance measures for which
    reliable data are not likely to be available in time for your first
    performance report in March 2000?
        Answer. During the performance measure design process, FSIS created
    measures that would utilize information that is both available and
    reliable. The Agency does not anticipate performance-reporting
    difficulties in preparing the March 2000 report.
        Question. What are the key performance goals from your fiscal year
    1999 Annual Performance Plan that you recommend this subcommittee use
    to track program results?
        Answer. FSIS recommends that the subcommittee use performance goals
    one, two, three, and four to track FSIS program results. They are as
    follows:
      --Reduce pathogens on raw products by continuing the implementation
            of the Pathogen Reduction/HACCP rule.
      --Collaborate with other public health agencies and stakeholders to
            implement the near term program objectives contained in the
            President's National Food Safety Initiative.
      --Develop a comprehensive strategy for promoting food safety from
            farm-to-table.
      --Continue the necessary cultural change to support HACCP and related
            food safety initiatives by training the workforce to carry out
            the re-defined regulatory tasks and procedures and by ensuring
            industry and State programs understand their new roles and
            responsibilities.
        The Agency believes that HACCP, along with microbiological testing,
    will improve food safety and reduce foodborne illness. Agency
    management also believes that applying HACCP or HACCP-compatible
    procedures in both the Federal and State programs throughout the farm-
    to-table food safety continuum will reduce foodborne illness. The
    Agency's performance measures for fiscal year 1999 were specifically
    selected to track progress in achieving this goal.
        Question. In developing your Annual Performance Plan, what efforts
    did your agency undertake to ensure that the goals in the plan include
    a significant number of outcome measures?
        Answer. The FSIS strategic goal is to enhance the public health by
    minimizing foodborne illness from meat, poultry, and egg products. The
    Annual Performance Plan establishes performance goals and measures to
    achieve the strategic goal. The long-term outcome for both the
    Strategic Plan and the Annual Performance Plan that FSIS is working
    toward is a 25 percent reduction in foodborne illnesses associated with
    meat, poultry, and egg products, which will be a major benefit for the
    consumer. Reducing pathogen contamination of these products is the
    major focus of FSIS initiatives.
        Question. Do you believe your program managers understand the
    difference between goals that measure workload (output) and goals that
    measure effectiveness (outcome)?
        Answer. The Agency has conducted training for its managers over the
    last three years in preparation for meeting the requirements of GPRA.
    Substantial progress has been made. However, continued training is
    needed as GPRA concepts and requirements are integrated into ongoing
    program operations.
        Question. What are some examples of customer satisfaction measures
    that you intend to use? Please include examples of both internal and
    external customers.
        Answer. Customer satisfaction measures will be based, in part, on
    feedback from stakeholders, including our own employee groups,
    representatives from the regulated industry, consumer groups, academia,
    State and local governments, and foreign governments. Stakeholders have
    participated in the development of the HACCP regulation for achieving
    greater food safety through numerous meetings that FSIS has conducted
    over the past several years. In addition, we expect to solicit feedback
    from the general public through a planned food safety consumer survey
    in cooperation with the Department of Health and Human Services as
    partners in the President's Food Safety Initiative.
        Question. How were the measurable goals of your fiscal year 1999
    Annual Performance Plan used to develop your fiscal year 1999 budget?
        Answer. The measurable goals of the fiscal year 1999 Annual
    Performance Plan enabled the Agency to evaluate and prioritize program
    needs in determining where budget initiatives were needed to help
    achieve performance goals.
        Question. If a proposed budget number is changed, up or down, by
    this committee, will you be able to indicate to us the likely impact
    the change would have on the level of program performance and the
    achievement of various goals?
        Answer. FSIS would be able to indicate the likely impact on program
    performance goals if budget numbers are changed up or down by the
    committee. What would be more difficult is measuring the precise impact
    on the FSIS strategic goal of enhancing the public health by minimizing
    foodborne illness from meat, poultry, and egg products, and the
    corresponding outcome of this goal. The Agency will be able to indicate
    the impact in a more definitive way after implementing the annual
    reporting requirement and completing a full GPRA cycle.
        Question. Do you have the technological capability of measuring and
    reporting program performance throughout the year on a regular basis,
    so that the agency can be properly managed to achieve the desired
    results?
        Answer. FSIS is currently able to measure and report performance on
    a regular basis for its performance goals. However, in preparing for
    the future the Agency contracted with a consulting firm to help
    managers internally evaluate data collection and measurement. The
    Administrator has created the FSIS Process and Data Analysis Project in
    conjunction with the Leads Corporation to develop systematic evaluation
    of Agency data systems as an ongoing process. In fact, FSIS has
    identified evaluation as one of its six core business processes. Data
    evaluation will be systematized using the Integrated Computer Aided
    Manufacturing (ICAM) methodology and the ICAM definitional language
    modeling technique (IDEF). The Agency is committed to
    institutionalizing an integrated information resources management (IRM)
    system throughout FSIS and this commitment to better data collection
    and evaluation will produce more accurate data for performance
    measurement of activities in the FSIS Strategic Plan and Annual
    Performance Plan.
        Question. The Government Performance and Results Act requires that
    your agency's Annual Performance Plan establish performance goals to
    define the level of performance to be achieved by each program activity
    set forth in your budget. Many agencies have indicated that their
    present budget account structure makes it difficult to link dollars to
    results in a clear and meaningful way. Have you faced such difficulty?
        Answer. Many of the FSIS results are based on outcomes related to
    HACCP implementation, which will be completed in fiscal year 2000,
    while the budget account structure covers both traditional and HACCP
    inspection activity. Therefore, the linkage between performance results
    and budget activities is not complete.
        Question. Would the linkages be clearer if your budget account
    structure were modified?
        Answer. The activities included in the budget account structure are
    sufficiently broad to cover the use of all budgetary resources and are
    also specific enough to account for the Agency's use of particular
    resources, such as Grants-to-States and FAIM. At this time, FSIS does
    not think it is necessary to modify the budget account structure.
        Question. If so, how would you propose to modify it and why do you
    believe such modification would be more useful both to your agency and
    to this committee than the present structure?
        Answer. While FSIS does not think modification is necessary at this
    time, the feedback received as we continue to transform the inspection
    program and complete the entire GPRA cycle will be evaluated to revisit
    this question.
        Question. How would such modification strengthen accountability for
    program performance in the use of budgeted dollars?
        Answer. No modification is proposed at this time.
        Question. Does your fiscal year 1999 performance plan--briefly or
    by reference to your strategic plan--identify any external factors that
    could influence goal achievement?
        Answer. The achievement of Agency goals is largely dependent on the
    success of multiple partnerships FSIS has with both internal and
    external stakeholders. The 1999 Annual Performance Plan identifies a
    number of external factors that influence goal achievement, including
    but not limited to cooperation of other Federal agencies and State and
    local governments, industry compliance with regulatory requirements,
    and the food handling behavior of consumers.
        Question. If so, what steps have you identified to prepare,
    anticipate and plan for such influences?
        Answer. Recognizing the importance of partnerships, FSIS continues
    working proactively with our partners to identify needs, meet
    education/information and infrastructure needs, and invest budgetary
    resources to ensure we are moving toward goal achievement. In
    developing the HACCP regulation FSIS conducted extensive meetings with
    the industry to address their needs, and as a result, is providing
    technical assistance, especially to small businesses to assure
    successful implementation of regulatory requirements. The 1999 budget
    proposes an increase for food safety education for consumers, building
    on the Public/Private Partnership's ``Fight BAC!'' campaign to promote
    safer food handling by consumers. In addition, the 1999 proposed
    special assistance for State programs reflects the Agency's effort to
    ensure successful State implementation of HACCP requirements based on
    infrastructure needs identified in the State inspection programs.
        Question. What impact might external factors have on your resource
    estimates?
        Answer. External factors influence the allocation of existing
    resources and generate new resource requirements. In the 1998 budget,
    FSIS requested and Congress approved funding for two activities that
    were part of the President's Food Safety Initiative, and both
    activities are associated with external factors. FSIS learned from CDC
    that Campylobacter is the most common foodborne pathogen, so the Agency
    requested an increase of $0.5 million for CDC to provide baseline data
    on the incidence of foodborne illness resulting from this pathogen. In
    addition, FSIS requested $0.6 million to provide HACCP training to
    State and local food regulatory officers who have jurisdiction over the
    packaging and processing of food in restaurants and retail
    establishments.
        Question. Through the development of the Performance Plan, has the
    agency identified overlapping functions or program duplication? If so,
    does the Performance Plan identify the overlap or duplication?
        Answer. The Agency did not identify any function or program overlap
    or duplication internally or with other USDA agencies while developing
    its performance plan. The recently implemented FSIS reorganization is
    based on a thorough evaluation of functions and programs that resulted
    in streamlining to eliminate overlap and duplication. The FSIS public
    health mission is broad in scope, however, and the Agency has
    participated with other agencies on food safety issues, such as HHS and
    EPA with the President's National Food Safety Initiative. Although such
    interagency activities are limited, FSIS considers them beneficial
    because they provide different Federal agencies with similar food
    safety interests an opportunity to share information and experiences in
    food safety protection.
        Question. Future funding decisions will take into consideration
    actual performance compared to expected or target performance. Given
    that: To what extent are your performance measures sufficiently mature
    to allow for these kinds of uses?
        Answer. The Agency's performance measures are designed to measure
    performance in areas where performance has never been measured before.
    This is clearly a learning period for the Agency and adjustments will
    be made as lessons are learned.
        FSIS has established performance measures that it believes relate
    to each performance goal in question. That is, the measures used
    correlate directly to the targeted performance. However, the Agency
    believes that it needs more experience before it is able to confidently
    predict future budget requirements based on projected performance.
        Question. Are there any factors, such as inexperience in making
    estimates for certain activities or lack of data, that might affect the
    accuracy of resource estimates?
        Answer. The performance goals are specific to achieving a reduction
    in foodborne illness and do not capture full inspection program costs
    at this time. The resource estimates are accurate, based on what
    actually took place in the prior year, and current and budget year
    projections. Estimates reflect employment trends and projections, as
    well as the estimated cost of specific budget initiatives for which
    funding has been requested.
        Question. Based on your fiscal year 1999 performance plan, do you
    see any need for any substantive revisions in your strategic plan
    issued on September 30, 1997?
        Answer. No, the Agency does not foresee any need to make
    substantive revisions in its strategic plan submitted on September 30,
    1997.
                                     ______

                     Questions Submitted by Senator Bumpers
                                   user fees
        Question. You state that protection of public health is your
    mandate. What other federal program charged with protecting public
    health seeks to impose user fees in order to pay for its entire
    inspection costs?
        Answer. There is no other Federal program that imposes or seeks to
    impose user fees for its entire inspection costs; however, other
    countries that have meat inspection programs completely financed by
    user fees include Argentina, Australia, Canada, Denmark, Germany, Great
    Britain and New Zealand. All of these countries have inspection
    programs that FSIS has determined are equivalent to ours and all of
    these countries are exporting product to the U.S.
        Question. Other than to achieve savings, is there any public health
    and safety policy reason to impose user fees?
        Answer. Yes, user fees will provide the required funds to maintain
    a strong public health protection for meat, poultry, and egg products.
        Question. If you state that your mandate is to protect public
    health, then why do you further state that ``cost burdens must be
    shifted from taxpayers to those who benefit directly from the provided
    services?''
        Answer. Both the public and industry benefit from our inspection
    services. However, industry is the direct beneficiary of Federal
    inspection, which enables businesses to engage in commerce and earn
    profits. Industry also directly benefits from the consumer confidence
    in inspected meat, poultry, and egg products.
        Question. Are not the direct beneficiaries of your mission the
    consuming public?
        Answer. Industry receives the direct benefit of Federal inspection,
    which is permission to operate businesses and earn profits. The
    consuming public also benefits by receiving strong public health
    protection from Federal inspection.
        Question. Are not the taxpayers directly benefited from the
    protections you provide? If not, why mandate an inspection program at
    all?
        Answer. Taxpayers who purchase meat, poultry, and egg products
    benefit from the public health protections that Federal inspection
    provides.
        Question. Is it the Department's view that the FSIS inspection
    service benefits the industry more than the consumer?
        Answer. Both industry and the consumer benefit from Federal
    inspection, but they do so in different ways. The consumer benefits by
    eating meat, poultry, and egg products that are safe, wholesome, and
    accurately labeled. Industry benefits from Federal inspection
    financially because inspection enables establishments to operate and
    helps to assure the public confidence in the safety and wholesomeness
    of their products. Federal inspection also benefits industry by
    providing the level of inspection commensurate with production so as
    not to limit production.
        Question. If enacted, the user fee proposal would result in FSIS
    inspectors remaining under the direction of the agency, but their
    livelihood tied to the financial health of the companies. Since there
    would be no appropriated funds for the salaries of FSIS inspectors, the
    inspectors would have a direct interest in the well-being of the
    companies. How does USDA plan to counter the questions in consumer
    confidence that will result from this plan?
        Answer. FSIS has and will continue to work at all levels of the
    Agency and with employee groups to ensure that an inspector's
    livelihood remains tied to his or her competence in performing
    regulatory inspection duties rather than the financial health of an
    individual company. FSIS is recommending that user fees be based on
    volume of production rather than an hourly inspection rate to avoid
    providing an opportunity for any external pressure to modify the
    application of inspection standards or inspection intensity. While the
    total number of inspection personnel is related to the overall size and
    growth of the industry, FSIS will perform inspection, including HACCP
    verification tasks, in a manner that will assure consumers and industry
    that the inspection program operates in accordance with regulatory
    requirements. Consumer confidence will grow, maintaining strong markets
    for industry as establishments produce product under HACCP programs
    that are fully compliant with regulatory requirements. Further, by
    basing user fees on objective, verifiable data, the Agency will be able
    to assure an equitable distribution of inspection costs.
        To maintain consumer confidence in the inspection program, FSIS
    will provide public information about the impact of user fee
    legislation. A key element in the public information effort would be
    public meetings with key Department and Agency officials, similar to
    those conducted for the HACCP regulation, to solicit input on issues
    concerning the implementation of user fees.
        Question. What are the views of most consumer organizations to this
    proposal?
        Answer. We are aware that many groups--consumer and industry--have
    expressed concern about user fees. Rather than attempting to speak for
    them, you may wish to contact them directly to ensure their full views
    are adequately conveyed. However, as I stated earlier, we will continue
    to work with all of our stakeholders on this very important issue. I
    believe that all of these groups want inspection personnel to maintain
    high inspection and enforcement standards and requirements in order to
    maintain consumer confidence and provide strong markets for meat,
    poultry, and egg products.
                  hazard analysis and critical control points
        Question. One of the early concerns about moving to HACCP was that
    the old organoleptic system would be left in place creating a
    ``layered'' system containing features of both. We had been assured
    that as the new HACCP program became established, the old ``command and
    control'' methods would be removed. Now that HACCP is in place in the
    large plants, what parts of the old system have been eliminated?
        Answer. We are providing the Inspection System Guide contained in
    FSIS Directive 5400.1, which contains a number of tasks that inspection
    program personnel are no longer required to perform in establishments
    that are subject to the HACCP system regulations. In addition, we are
    providing Inspection System Procedures contained in FSIS Directive
    5400.5 that replace the Inspection System Guide.
        Question. What is the timetable for eliminating the remaining
    elements of the old system?
        Answer. FSIS made a commitment to change its command and control
    regulations into performance standards as rapidly as it could, given
    current requirements for regulatory change. We believe we have made
    significant progress to fulfill our commitment as evidenced by the FSIS
    portion of USDA's Unified Agenda that will be published in the Federal
    Register in April 1998. The Agenda provides a timetable for the
    Agency's regulatory reform efforts, including Sanitation Requirements
    for Official Meat and Poultry Establishments, Rules of Practice,
    Performance Standards for Perishable, Ready-to-eat Products, and
    Elimination of Requirements for Partial Quality Control Programs.
        [Clerk's note.--The information referred to does not appear in the
    hearing record, but can be reviewed in the April 1998 Federal
    Register.]
        Question. There have been complaints that confusion on the
    implementation of HACCP in certain plants could have been avoided if
    inspectors and other personnel had received HACCP training earlier. In
    fact, some FSIS inspector training was conducted just prior to the
    implementation date in January of this year. What were the reasons for
    the delay in HACCP training?
        Answer. You can be assured that the Agency is concerned about the
    way inspection personnel carry out their regulatory responsibilities.
    The HACCP Technical Training Program provides inspection personnel with
    the (1) required information and background on HACCP and its principles
    and (2) knowledge, understanding, and techniques to apply the
    inspection procedures established to determine a plant's compliance/
    noncompliance with Pathogen Reduction and HACCP requirements. The
    ``just-in-time'' approach allows the agency to:
        1. Link the training to the four-phase implementation schedule
    contained in the Pathogen Reduction and HACCP rule spanning a period of
    6 to 42 months;
        2. Make the best use of scarce human resources;
        3. Minimize the disruption of program services; and
        4. Have employees immediately apply their newfound knowledge and
    skills thus eliminating the need to establish and maintain costly re-
    training or refresher programs.
        Further, we have established multiple means for employees to become
    more familiar and comfortable with the new Pathogen Reduction and HACCP
    inspection procedures as follows:
        1. Computer Based Training programs;
        2. Issuance of a Reference Guide on the HACCP-based inspection;
        3. Around the clock availability of technical assistance from the
    Technical Service Center through the use of e-mail and a 800 number;
    and
        4. Day-to-day guidance, support and coaching by supervisors.
        Question. It is my understanding that some meat and poultry plants
    have been shutdown due to HACCP violations already. How many plants
    have been shutdown since the implementation of HACCP?
        Answer. We inspect over 6,000 plants and from the pre-HACCP
    implementation in January 1997 through mid-March of this year, there
    have been 50 actions to withhold inspection.
        Question. What were the causes for the shutdowns?
        Answer. Of those 50 actions, 28 plants had Federal inspection
    withheld because of repetitive SSOP deficiencies, 11 plants because of
    basic E. coli failures, 10 plants because of HACCP system failures, and
    one non-HACCP plant for zero tolerance failures.
        Question. Is there a formal administrative appeal process a company
    may use to avoid a shutdown or other adverse agency action regarding a
    HACCP violation? If not, why?
        Answer. If the Inspector-in-Charge (IIC) determines that there may
    be a HACCP system inadequacy because an establishment has multiple,
    recurring noncompliances, as specified in 9 CFR 417.6, and has failed
    to adequately implement immediate and further planned actions as
    documented on the Noncompliance Record (NR) (FSIS Form 5400-4), the IIC
    should discuss this developing trend at the weekly meetings held with
    establishment management. If the IIC subsequently determines that the
    trend of multiple, recurring noncompliances without successful
    interventions has led to a HACCP system inadequacy and that the marks
    of inspection should be withheld, he or she shall contact the District
    Office (DO) and provide all the relevant information for the DO to
    prepare a Notice of Intent to Suspend Inspection. The Notice shall:
        1. Inform the establishment that the nature and scope of the
    noncompliances indicate that the HACCP system is inadequate as
    specified in 417.6 of the regulations;
        2. State that, because of the trend, FSIS intends to withhold the
    marks of inspection and suspend inspection;
        3. Explain the reason for the determination;
        4. Reference each pertinent NR by number;
        5. Inform the establishment that it is being afforded the
    opportunity to demonstrate why a HACCP system inadequacy determination
    should not be made or that it has achieved regulatory compliance; and
        6. Provide the establishment three business days from the date of
    the letter to provide its response to the DO.
        Based on the establishment's response, FSIS will determine further
    actions.
        If at any time inspection personnel determine that adulterated
    product was shipped, FSIS will immediately enact enforcement actions.
        Prior to appealing, the establishment may request that the program
    employee or IIC reconsider his or her finding or decision. The program
    employee or IIC who made the finding or decision should evaluate and
    consider any factual information the establishment provides. Program
    employees should encourage establishment management officials who
    indicate that they may appeal a decision or finding to do so as soon as
    possible. Timely appeals will help ensure that the relevant information
    is provided to subsequent decision makers promptly and that facts and
    observations can be verified. Timely appeals also avoid the implication
    that the establishment does not contest the inspection finding or
    decision.
        FSIS regulations provide establishments with the opportunity to
    appeal, orally or in writing, an inspection finding or decision made by
    any program employee. Such appeals should be directed to the employee's
    immediate supervisor. The following outlines the chain-of-command for
    inspection decisions:
        1. Program employee, including the Inspector-in-Charge (IIC), who
    made the determination;
        2. Circuit Supervisor;
        3. District Manager;
        4. Assistant Deputy Administrator for District Inspection
    Operations; and
        5. Deputy Administrator for Office of Field Operations.
        [The information (9 C.F.R. 417.6) follows:]
                      Sec. 417.6 Inadequate HACCP Systems
        A HACCP system may be found to be inadequate if:
        (a) The HACCP plan in operation does not meet the requirements set
    forth in this part;
        (b) Establishment personnel are not performing tasks specified in
    the HACCP plan;
        (c) The establishment fails to take corrective actions, as required
    by Sec. 417.3 of this part;
        (d) HACCP records are not being maintained as required in
    Sec. 417.5 of this part; or
        (e) Adulterated product is produced or shipped.
                                 fsis and trade
        Question. The U.S. poultry industry has been fighting a ruling by
    the European Union that product sprayed with chlorine as an anti-
    microbial will not be allowed in any EU country. Is the use of chlorine
    as an anti-microbial not an FSIS approved method to assure product
    safety?
        Answer. Chlorine is permitted as an antimicrobial treatment in the
    U.S.
        Question. Is there any evidence that any EU nation is using
    chlorine or is importing product from countries other than the U.S.
    that use chlorine as an anti-microbial?
        Answer. It was reported that the United Kingdom was using chlorine
    as an antimicrobial in their poultry plants. The EU Commission
    indicated that they would take legal action to assure that the United
    Kingdom was in compliance with EU requirements.
        Question. Has FSIS been involved in discussions with the EU on this
    subject and if so, what have they accomplished?
        Answer. The use of chlorine was the most contentious issue
    concerning poultry during the negotiation of the U.S.-EU veterinary
    equivalency agreement. The end result of the talks was that the
    agreement calls for the EU to conduct a scientific review of the use of
    antimicrobial techniques regarding poultry meat.
        Question. FSIS conducts inspections of meat and poultry imported
    into this country at 124 locations. Are there other locations that
    imports may cross in which there are no inspectors?
        Answer. Imported product can enter the United States at other
    locations, but must move under Customs bond to one of the FSIS
    inspection locations for import inspection.
        Question. How can you be certain that product is not coming into
    the country at undetected locations?
        Answer. U.S. Customs controls all products that enter the United
    States. Customs refers the importer to the appropriate government
    agency responsible for the specific imported product. In addition, FSIS
    Field Operations personnel would detect uninspected meat or poultry
    products during their routine inspections both in Federal plants and in
    commerce.
        Question. What safeguards can be put in place?
        Answer. U.S. Customs control at the Nation's borders and the
    continued vigilance of FSIS inspection personnel provide the safeguards
    necessary to ensure that foreign product is not entering U.S.
    commercial distribution channels illegally.
                                     ______

                      Questions Submitted by Senator Kohl
        Question. Some leading scientists involved in developing the model
    HACCP program have charged that FSIS is ignoring scientific data and
    forcing plants to incorporate old organoleptic processing methods into
    HACCP plans. If this charge is true, this is very serious. If this is
    happening, then how is food safety being enhanced?
        Answer. To protect public health, FSIS is enforcing current
    regulatory requirements that are based on the best science available at
    the time the requirements were developed. The process of replacing
    command and control regulatory requirements with performance standards
    is not one that can be accomplished quickly; therefore, it has taken
    the Agency longer to meet its goals than it had originally intended.
    Until performance standards are implemented, there are a number of
    command and control requirements that will continue to be enforced in
    order to protect public health.
        Question. When do you think would be a good time to have an
    independent, scientific organization to come in and see if HACCP
    implementation has strayed from science-based HACCP?
        Answer. FSIS appreciates the importance of an independent,
    scientific evaluation of HACCP implementation. The Agency's evaluation
    strategy for HACCP is two-fold: conduct formative evaluations to gain
    information at each phase to facilitate the overall implementation of
    HACCP; and obtain scientific evaluation expertise from beyond the
    Agency to conduct a summative evaluation that will assess the impact of
    the final rule on inspection, industry, consumers, and foodborne
    illness.
        The first formative evaluation effort, Results of the SSOP
    Implementation Follow-Up Study, has been completed. Six months after
    the initial implementation date of sanitation standard operating
    procedures (SSOP's), this study was conducted to determine the extent
    to which the new system was implemented and where additional effort was
    needed to assure that the new system would continue to work as
    intended.
        The second formative evaluation, Evaluation of Inspection
    Activities During Phase One of HACCP Implementation is just starting.
    This in-house evaluation of FSIS inspection activities during HACCP
    implementation in large plants is designed to identify areas that might
    need modification before small plants begin implementation in January
    1999. The plan is to design the study, collect the data, analyze it and
    write the final report by July 1998. This tight timeline will enable
    FSIS Field Operations to review the findings and as necessary modify
    aspects of its delivery of inspection in time for small plant
    implementation in January 1999. Evaluation efforts of this type are
    planned at each phase of HACCP implementation.
        Concurrent with these evaluation efforts, the Agency is already
    planning an evaluation of the HACCP final rule. This evaluation will
    require expertise from beyond the Agency. The study is expected to
    address whether or not HACCP process control systems: (1) control
    production safety hazards, (2) reduce foodborne illness, (3) make
    inspection more effective, (4) increase consumer confidence, and (5)
    provide an opportunity for increased productivity.
        Based on the tentative timeline, the evaluation reports will be due
    in fiscal year 2000, fiscal year 2001, and fiscal year 2002. This would
    allow adequate time to fully assess the implementation of HACCP in all
    meat and poultry plants.
        Question. There have been complaints that inspectors in the field
    have had varying interpretations of what a HACCP plan should contain
    and how a HACCP plant should operate. Some feel this situation has
    bordered on disastrous and that it was caused by a lack of inspector
    training, yet we understand FSIS still believes ``Just-in-Time''
    training is the best approach to preparing inspectors for HACCP. How
    can you explain your rational?
        Answer. You can be assured that the Agency is concerned about the
    way inspection personnel carry out their regulatory responsibilities.
    The HACCP Technical Training Program provides inspection personnel with
    the (1) required information and background on HACCP and its principles
    and (2) knowledge, understanding, and techniques to apply the
    inspection procedures established to determine a plant's compliance/
    noncompliance with Pathogen Reduction and HACCP requirements. The
    ``just-in-time'' approach allows the agency to:
        1. Link the training to the four-phase implementation schedule
    contained in the Pathogen Reduction and HACCP rule spanning a period of
    6 to 42 months;
        2. Make the best use of scarce human resources;
        3. Minimize the disruption of program services; and
        4. Have employees immediately apply their newfound knowledge and
    skills thus eliminating the need to establish and maintain costly re-
    training or refresher programs.
        Further, we have established multiple means for employees to become
    more familiar and comfortable with the new Pathogen Reduction and HACCP
    inspection procedures as follows:
        1. Computer Based Training programs;
        2. Issuance of a Reference Guide on the HACCP-based inspection;
        3. Around the clock availability of technical assistance from the
    Technical Service Center through the use of e-mail and a 800 number;
    and
        4. Day-to-day guidance, support and coaching by supervisors.
        Question. This subcommittee had serious concerns at the time the
    HACCP rule was being written about layering the new system on top of
    the old. To this point, FSIS has eliminated preapproval for equipment
    and blue prints. Is this all FSIS intends to do toward removing
    outdated requirements, or do you have more activities planned?
        Answer. FSIS made a commitment to change its command and control
    regulations into performance standards as rapidly as it could, given
    current requirements for regulatory change.
        We are providing the FSIS portion of USDA's Unified Agenda that
    will be published in the Federal Register in April 1998. The Agenda
    outlines the Agency's regulatory reform efforts, including Sanitation
    Requirements for Official Meat and Poultry Establishments, Rules of
    Practice, Performance Standards for Perishable, ready-to-eat Products,
    and Elimination of Requirements for Partial Quality Control Programs.
        [Clerk's note.--The information referred to does not appear in the
    hearing record but can be reviewed in the April 1998 Federal Register]
        Question. There have been complaints that FSIS is in fact forcing
    plants to write regulations from the old system--such as time and
    temperature cooling requirements--into their HACCP plans. How does this
    fulfill the commitment the Department made to Congress to eliminate
    layering?
        Answer. FSIS does have regulatory requirements that need to be
    updated and the Agency has acknowledged that it needs to remove its
    command and control requirements and replace them with performance
    standards, which provide the regulated industry with more flexibility.
    The Agency is developing a consolidated set of regulations that bring
    meat and poultry requirements together in a single place. We are
    committed to writing our regulations in plain and simple language so
    that they can be understood by not only the regulated industry, but
    also by the public, which expects that the government will hold
    industry accountable for meeting regulatory requirements.
        However, we acknowledge it is taking us longer to meet our goals
    than originally intended. Until performance standards are implemented,
    there are a number of regulations containing command and control
    requirements that will continue to be enforced. One such regulation is
    the requirement that poultry be chilled to a specific temperature
    within a certain time frame, depending on the weight of the bird: 40
    degrees within eight hours for turkey (9 C.F.R. 381.91). This
    requirement was based on the best available scientific knowledge about
    the lag phase for bacterial growth. FSIS would be negligent in its food
    safety mission if it dropped this requirement before implementing a
    performance standard.
        Question. The subcommittee understands there have been a few plant
    shutdowns so far. When FSIS makes a serious finding against a plant,
    what opportunity does the plant have to demonstrate compliance or
    dispute the findings before the plant is shut down? Is there a formal
    dispute resolution process in place? If not, why not?
        Answer. If the Inspector-in-Charge (IIC) determines that there may
    be a HACCP system inadequacy because an establishment has multiple,
    recurring noncompliances, as specified in 9 C.F.R. 417.6, and has
    failed to adequately implement immediate and further planned actions as
    documented on the Noncompliance Record (NR) (FSIS Form 5400-4), the IIC
    should discuss this developing trend at the weekly meetings held with
    establishment management. If the IIC subsequently determines that the
    trend of multiple, recurring noncompliances without successful
    interventions has led to a HACCP system inadequacy and that the marks
    of inspection should be withheld, he or she shall contact the District
    Office (DO) and provide all the relevant information for the DO to
    prepare a Notice of Intent to Suspend Inspection. The Notice shall:
        1. Inform the establishment that the nature and scope of the
    noncompliances indicate that the HACCP system is inadequate as
    specified in 417.6 of the regulations;
        2. State that, because of the trend, FSIS intends to withhold the
    marks of inspection and suspend inspection;
        3. Explain the reason for the determination;
        4. Reference each pertinent NR by number;
        5. Inform the establishment that it is being afforded the
    opportunity to demonstrate why a HACCP system inadequacy determination
    should not be made or that it has achieved regulatory compliance; and
        6. Provide the establishment three business days from the date of
    the letter to provide its response to the DO.
        Based on the establishment's response, FSIS will determine further
    actions.
        If at any time inspection personnel determine that adulterated
    product was shipped, FSIS will immediately enact enforcement actions.
        Prior to appealing, the establishment may request that the program
    employee or IIC reconsider his or her finding or decision. The program
    employee or IIC who made the finding or decision should evaluate and
    consider any factual information the establishment provides. Program
    employees should encourage establishment management officials who
    indicate that they may appeal a decision or finding to do so as soon as
    possible. Timely appeals will help ensure that the relevant information
    is provided to subsequent decision makers promptly and that facts and
    observations can be verified. Timely appeals also avoid the implication
    that the establishment does not contest the inspection finding or
    decision.
        FSIS regulations provide establishments with the opportunity to
    appeal, orally or in writing, an inspection finding or decision made by
    any program employee. Such appeals should be directed to the employee's
    immediate supervisor. The following outlines the chain-of-command for
    inspection decisions:
        1. Program employee, including the Inspector-in-Charge (IIC), who
    made the determination;
        2. Circuit Supervisor;
        3. District Manager;
        4. Assistant Deputy Administrator for District Inspection
    Operations; and
        5. Deputy Administrator for Office of Field Operations.
        [The information (9 C.F.R. 417.6) follows:]
                      Sec. 417.6 Inadequate HACCP Systems
        A HACCP system may be found to be inadequate if:
        (a) The HACCP plan in operation does not meet the requirements set
    forth in this part;
        (b) Establishment personnel are not performing tasks specified in
    the HACCP plan;
        (c) The establishment fails to take corrective actions, as required
    by Sec. 417.3 of this part;
        (d) HACCP records are not being maintained as required in
    Sec. 417.5 of this part; or
        (e) Adulterated product is produced or shipped.
                                     ______

                         Agricultural Marketing Service
                     Questions Submitted by Senator Cochran
                             market news reporting
        Question. A $320,000 increase is requested for fiscal year 1999 to
    expand reporting in foreign markets to include South and Central
    America and the Pacific Rim countries. What international markets does
    AMS report on currently? How do you decide which markets to cover
    within available resources?
        Answer. AMS currently reports selected markets in Canada, Mexico,
    England, France, Japan, Germany, New Zealand, the Netherlands,
    Colombia, and Bulgaria. The markets covered are chosen on the basis of
    their significance or importance to United States interests either as
    suppliers, competitors, or markets of opportunity. Our reports only
    include limited data on the important markets in those countries. Our
    requested increase would allow us to expand coverage in these and other
    markets in response to U.S. requests for information.
                             pesticide data program
        Question. The fiscal year 1999 budget proposes to increase funding
    for the Pesticide Data Program from $13,616,000 to $23,730,000, an
    increase of $10,114,000. Of the increase requested, $2,480,000 is for
    continuation of the current Pesticide Data Program; $1,716,000 is to
    create a rapid response capability to support increased EPA demands for
    pesticide residue data to conduct dietary risk assessments; and
    $6,257,000 is to initiate a microbiological surveillance program on
    domestic and imported fruits and vegetables. Why is an 18.2 percent
    funding increase needed to maintain current Pesticide Data Program
    activities?
        Answer. The increase of $10,114,000 mentioned in your question is
    the increase request for the entire Market Protection and Promotion
    activity. The combined budget net increase for the Pesticide Data
    Program, or PDP, is $10.453 million. The increase of $2.48 million for
    current Pesticide Data Program activities is needed to maintain
    statistically reliable data for use by EPA and other government and
    private entities in their decision-making. If the requested funding is
    not provided, we would have to reduce sampling levels and eliminate
    certain types of testing.
        We would also be unable to update our technical capabilities. Since
    1991, a new generation of instrumentation has become available,
    especially in chromatography and mass spectrometry. Furthermore, the
    computer systems for the laboratory instrumentation purchased in the
    early 1990's are not year 2000 compliant. The program needs to invest
    in replacement instruments or upgrade present instrumentation to make
    them compatible with present advancements in technology and year 2000
    compliant.
        Question. The budget indicates that if the requested increase of
    $2.48 million is not provided for current Pesticide Data Program
    sampling and testing, sampling in Colorado, Maryland, and Wisconsin
    would be eliminated, and either one other major state would be dropped
    or funding to the remaining participating states would be reduced by 13
    percent. Why have you determined that Colorado, Maryland and Wisconsin
    would be dropped from the program instead of reducing funding across-
    the-board if the requested funding increase is not provided?
        Answer. Reducing funding to the states across the board is not an
    option since the sampling in Colorado, Maryland and Wisconsin is at a
    minimum level now and those states cannot maintain viable programs if
    reduced further. Even with the three states leaving the program, the
    remaining states will still have to absorb a 13 percent decrease in
    funding which will mean reduced staffing and withdrawal of services in
    those states. Alternatively, having one of the seven remaining states
    leave the program would have the least impact on program effectiveness
    while still retaining regional balance. Ohio or Michigan would be one
    of the likely candidates.
        Question. Which states are currently participating in the Pesticide
    Data Program? How many State employees in each of these states are
    currently being supported with federal funds through this program?
        Answer. The 10 States in the 1998 Program and number of employees
    expressed as staff years are: California--23, Colorado--2.5, Florida--
    12, Maryland--3, Michigan--12, New York--17, Ohio--7.5, Texas--15,
    Washington--12.5, and Wisconsin--1.5. The total number of State staff
    years is 106.
        Question. Which fruits and vegetables are currently being tested
    and sampled through the Pesticide Data Program in each of the
    participating states?
        Answer.
        [The information follows:]

                                                                              PDP COMMODITY SAMPLING AND TESTING LOCATIONS
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                              Fresh        Sweet                     Canned       Fresh
       State collecting samples (No. for F&V) (No.    Apple juice  Green beans   Whole milk     Orange    strawberries    potatoes   Fresh pears    spinach      tomatoes      Winter    Grape juice
                          milk)                           (AJ)         (GB)         (MK)      juice (OJ)      (ST)          (SW)         (PE)         (SP)         (TO)     squash (WS)      (GJ)
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    California (14) (milk, 14)......................          CA1      CA1 US1          CA1          CA1       CA1 US1          CA1  CA1 US2 WA1          CA1          CA1          CA1          CA1
    Colorado (2) (milk, 2)..........................          MI1      MI1 US1          CA1          WA1       WA1 US1          MI1  US1 WA1 US2          WA1          MI1          MI1          MI1
    Florida (7) (milk, 5)...........................          TX1      TX1 US1       FL2-WH          FL1       FL2 US1          TX1  TX1 US1 WA1          FL1          FL1          TX1          TX1
                                                                                                                                             US2
    Maryland (4) (milk, 5)..........................          CA1      CA1 US1          CA1          CA1       CA1 US1          CA1  CA1 WA1 US2          CA1          CA1          CA1          CA1
    Michigan (6) (milk, 6)..........................          MI1          MI1         FL2-          WA1           WA1          MI1  US1 WA1 US2          WA1          MI1          MI1          MI1
    New York (9) (milk, 10).........................          NY1      NY1 US1          NY1          NY1       NY1 US1          NY1  NY1 US1 WA1          NY1          NY1          NY1          NY1
                                                                                                                                             US2
    Ohio (6) (milk, 5)..............................          OH1      OH1 US1          NY1          OH1       NY1 US1          OH1  OH1 US1 WA1          OH1          OH1          OH1          OH1
                                                                                                                                             US2
    Texas (8) (milk, 6).............................          TX1      TX1 US1       FL2-WH          FL1       FL2 US1          TX1  TX1 US1 WA1          FL1          FL1          TX1          TX1
                                                                                                                                             US2
    Washington (4) (milk, 4)........................          MI1      MI1 US1       FL2-WH          WA1       WA1 US1          MI1  US1 WA1 US2          WA1          MI1          MI1          MI1
    Wisconsin (2) (milk, 8).........................          OH1      OH1 US1          NY1          OH1       NY1 US1          OH1  OH1 US1 WA1          OH1          OH1          OH1          OH1
                                                                                                                                             US2
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    LAB CODES: Gulfport (NMRAL)--US1; California, Sacramento--CA1; Colorado (Sampling Only); Florida, Tallahassee--FL1; Florida, Winter Haven--FL2; Maryland (Sampling Only); Michigan, East
      Lansing--MI1; Gastonia, NC--US2; New York, Albany--NY1; Ohio, Reynoldsburg--OH1; Texas, Brenham--TX1; Washington, Yakima--WA1; and Wisconsin (Sampling Only)

        Question. How much of the current Pesticide Data program currently
    supports equipment costs? Of the $2.48 million increase requested, how
    much is for equipment?
        Answer. The present PDP equipment budget is essentially zero. If
    states can realize savings through reduced indirect costs or economies
    in staffing, they can apply the funds toward equipment purchases. Such
    savings would be insufficient to maintain or implement new and more
    efficient technologies. Since PDP's inception in 1991 an entire new
    generation of instrumentation has become available, especially in the
    area of chromatography and mass spectrometry. Most computer systems for
    laboratory instrumentation are not Year 2000 compliant. However
    upgrades for certain instrumentation software are available to correct
    this situation. Of the $2.48 million requested, a minimum of $600,000
    is needed to invest in replacement instruments or upgrades for year
    2000 compliance.
        Question. Please describe the $1.7 million rapid response
    capability which you say you need to support increased EPA demands for
    pesticide residue data. What additional data does the EPA need and
    specifically what will this data be used for?
        Answer. The EPA is required to review over 9,000 tolerances over
    the next ten years to meet the requirements of the Food Quality
    Protection Act, or FQPA. EPA's initial plan is to reevaluate tolerances
    for pesticides with a common mechanism of action such as
    organophosphates and N-methylcarbamates. Also, when factoring in EPA's
    Dietary Risk Assessment System criteria, more pesticides will fall
    under the acute rather than chronic classification. The acute
    pesticides will require single serving size studies in order to meet
    the criteria of ``no health concern'' for infants and children.
        EPA needs data for most commodities for which a pesticide is
    registered in order to conduct effective dietary risk assessments under
    FQPA guidelines and assure compliance with the new stringent standards.
    The first part of PDP rapid response would conduct modified residue
    studies for these commodities, for example, 100 to 300 data points over
    a one to two year period rather than 600 samples or more over two or
    more years. These rapid response situations will require minimal method
    development investment and can be done with minimal method validation
    with no need to assess laboratory capability to test new pesticides.
    Some commodities which may be considered under this arrangement are
    lemons, selected berries, nectarines and so forth.
        The second part of this response is single serving size studies for
    specific acute exceeder pesticides or group of pesticides, based on a
    composite sample analysis exceeding predetermined target level. Crops
    considered for these studies would already have been studied previously
    in the testing program. PDP already has experience in designing these
    studies. One such study was for aldicarb/potatoes in 1997, using a
    multi-residue method, therefore, the data were also applied to
    carbofuran at a later date.
        Question. You are requesting a $6.2 million increase for the
    Pesticide Data Program to initiate a microbiological testing program.
    Please tell us why this new program is needed, whether any testing of
    this type is done currently and who is doing it, and how this program
    will work.
        Answer. Although the U.S. domestic food supply is unmatched in both
    quantity and quality, sporadic cases of microbiological and viral
    contamination and parasitic infestation accounted for 90 percent of the
    confirmed food borne disease outbreaks nationwide. Apparently,
    microorganisms once thought under control are adapting to their
    environments, developing resistance to conventional food processing
    operations, and are re-emerging with increased pathogenicity. The risk
    of contracting food borne illness may increase with questionable
    practices in food production, the mass preparation of meals, the trend
    to consume a greater proportion of meals away from home, the emphasis
    to increase fresh fruits and vegetables in the diet and product
    distribution logistics. This could be especially true where produce is
    imported from sources which may have less rigorous sanitation
    standards.
        The President mandated a Food Safety Initiative and a Produce and
    Imported Foods Safety Initiative. Under these initiatives, FDA and USDA
    share the responsibility for developing a research program aimed at
    reducing disease caused by food borne microbes and their natural
    products. The President also directed FDA and USDA to issue guidance on
    good agricultural practices and good manufacturing practices for fruits
    and vegetables. It is generally agreed that there are a number of
    missing pieces of information in the scientific basis for reducing or
    eliminating pathogens in the agricultural setting. One of those missing
    pieces is valid statistical information on the present day level of
    fecal contamination and pathogenic contamination of the nation's fresh
    fruit and vegetable supply. Without this information, it is very
    difficult to determine if recommended changes in the production and
    handling of these commodities are effective. This program is designed
    to provide this piece of the missing information. It is also hoped that
    once this statistical data is available to both government and the
    public, innovative minds in other disciplines will make use of it in
    research areas that have not yet been considered.
        Statistically valid testing of pathogenic and fecal contamination
    in produce available in this country is not being performed. The
    current work being done by the Centers for Disease Control and
    Prevention, or CDC, FDA, and the States supports regulatory mandates
    and outbreak episodes. CDC has the primary responsibility for
    surveillance and tracking of both communicable and food borne illness.
    FDA provides support to this effort by funding surveys and notifying
    CDC of findings related to regulatory and laboratory investigations.
    CDC also relies on reports from State and local health departments to
    estimate the number of food borne illness cases occurring across the
    country. These reports are based on outbreak information from one or
    more individuals experiencing a similar illness, depending on the
    source. Local and State health departments conduct an investigation to
    identify the source of contamination and the specific food, if
    possible, before notifying CDC. Reports are limited by the ability of
    State and local authorities to follow up leads and report
    investigations to CDC. For example, outbreaks involving restaurants or
    institutions are more likely to be recognized than those involving
    foods prepared in the home or processed foods. In addition, the
    information reported can also differ widely by State, with some States
    having no surveillance staff specifically assigned to monitor for the
    presence of key pathogens and spoilage organisms in food and water.
        The Microbiology Data Program, or MDP, would use the infrastructure
    of PDP. All the elements that make PDP scientifically-sound will be
    incorporated into MDP. The same States performing work for PDP will
    perform work for MDP. The same samplers that obtain samples for PDP
    will be trained to gather the samples for MDP. A rigorous laboratory
    quality control program will be initiated to ensure that the results
    from various laboratories are comparable. The number of samples taken
    at each site will be statistically determined by NASS and the
    electronic transfer of data from the laboratories to AMS will mirror
    the data transfer for PDP. The data will be analyzed for accuracy and
    published in an annual summary. Commodities will be chosen based on per
    capita consumption and seasonality, and the organisms for testing will
    be chosen by USDA officials with recommendations from the scientific
    community.
        It is expected that seven staff years will be required for this
    program. It is anticipated that the ARS, FDA, and CDC will provide
    expert scientific advice and will make use of the resulting data, but
    will not receive any funds from the program. Some funding for
    statistical work will go to NASS, but at least 75 percent of the funds
    will go to the States performing the sampling and analysis.
        Question. How will AMS work with the Agricultural Research Service,
    the Centers for Disease Control, the Food and Drug Administration, and
    participating States on the requested microbiological testing program
    initiative?
        Answer. AMS scientists will confer with scientists in the ARS, CDC,
    FDA, and academia to obtain the best scientific advice on technical
    aspects of the program through surveys and informal consultations with
    experts. The ARS, CDC, and FDA would also have access to any pathogenic
    organisms isolated in the Microbiological Data Program, or MDP, for use
    in ongoing research projects. ARS is interested in examining any
    isolates obtained to expand their collection of organisms and to be
    able to correlate antibiotic resistance to areas of the country and
    perhaps production practices. The FDA is interested in determining the
    genetic relationships of pathogens isolated from various commodities
    from various parts of the country. This information might reveal the
    pathways of dissemination of pathogens. In addition, FDA would be able
    to use the data generated to determine whether recommended production
    modifications are having a positive effect on the microbial level of
    fresh fruits and vegetables and to determine the risk to the food
    supply relative to the microbial load. Using genetic fingerprinting,
    the CDC hopes to use the information generated in the MDP to help trace
    the source of food infection outbreaks. The Economic Research Service
    of USDA is very interested in obtaining statistically valid information
    for use in its projections regarding the economic impact of food borne
    outbreaks. Any additional data developed by these agencies that is not
    confidential, would be transmitted back to the MDP program for
    inclusion in the published data.
        To implement MDP, AMS will initiate agreements with the States
    currently participating in PDP--California, Colorado, Florida,
    Maryland, Michigan, New York, Ohio, Texas, Washington, and Wisconsin.
    States will collect samples at terminal markets and distribution
    centers. Those States without adequate microbiology laboratory
    capability will serve as collection centers with the analyses performed
    in other state laboratories or in an AMS laboratory. Those States with
    appropriate laboratory capabilities will perform the required analyses
    and electronically transfer the resulting data to AMS. We estimate that
    the States will receive at least 75 percent of the available funds. All
    participating State and AMS laboratories will participate in a
    stringent quality assurance program which will include analysis of
    check samples and on-site laboratory reviews. Those States currently in
    PDP have informally expressed interest in participating in MDP.
        Question. Please prioritize the increases requested for the
    Pesticide Data Program.
        Answer. The priority is as follows: First, $2,480,000 for
    continuation of the current Pesticide Data Program. Second, $6,257,000
    to establish the Microbiology Data Program. Third, $1,716,000 to create
    a rapid response capability to support increased EPA demands for
    pesticide residue data to conduct dietary risk assessments.
                         section 32 commodity purchases
        Question. Please list the commodity purchases made under the
    emergency surplus removal program in each of fiscal years 1996 and 1997
    and in fiscal year 1998 to date, and the reason for each removal action
        [The information follows:]
        The emergency surplus removal program is a mechanism used to
    stabilize market conditions. Commodities that are determined to be in
    overabundant supply are acquired to accomplish the purpose of clause
    (2) of Section 32. The goal also is to encourage the domestic
    consumption of commodities by diverting them from normal channels of
    trade and commerce and donating them to schools, institutions, and
    other domestic feeding programs.

                            Emergency surplus removal

                                Fiscal year 1996

                                                                     Dollars
            Item                                                  (millions)
    Beef roast........................................................  $6.4
    Blueberries, frozen...............................................  10.1
    Date pieces.......................................................   1.9
    Dried figs........................................................   2.4
    Fig nuggets.......................................................   0.4
    Orange juice, canned..............................................  13.3
    Potatoes, fresh...................................................   1.5
    Prunes, dried.....................................................   6.4
    Prunes, puree.....................................................   1.6
    Salmon, canned....................................................  10.0
    Salmon nuggets....................................................   2.2
                            -----------------------------------------------------------------
                            ________________________________________________
          Total.......................................................  56.2

                                Fiscal year 1997

    Apricots, canned..................................................  $2.1
    Apricots, frozen..................................................   1.5
    Beef, boneless....................................................   6.4
    Beef roast........................................................   2.1
    Beef, ground......................................................  19.1
    Cheese............................................................   5.0
    Cherries, canned..................................................   3.0
    Cherries, frozen..................................................   2.8
    Date pieces.......................................................   1.6
    Fig nuggets.......................................................   1.3
    Figs, dried.......................................................   2.6
    Grapefruit Juice..................................................   2.3
    Orange juice......................................................   5.5
    Peaches, canned...................................................   2.9
    Peaches, frozen...................................................   0.7
    Pork rib patty....................................................   8.8
    Potato flakes.....................................................   1.5
    Potato granules...................................................   4.1
    Potato oven fries.................................................   1.1
    Potato rounds, frozen.............................................   3.3
    Potato slices, dehydrated.........................................   6.3
    Potato wedges, frozen.............................................   3.1
    Potato slices, canned.............................................   4.0
    Salmon, pouched...................................................   1.3
    Turkey............................................................   8.5
                            -----------------------------------------------------------------
                            ________________________________________________
          Total....................................................... 100.9

                        Fiscal year 1998 through 3/20/98

    Salmon............................................................  $7.1
    Turkey............................................................  26.4
    Navy beans........................................................   1.6
    Prunes, dried.....................................................   5.8
    Peaches, frozen...................................................   4.5
    Prune puree.......................................................   0.6
    Unused authorization..............................................  62.0
                            -----------------------------------------------------------------
                            ________________________________________________
          Total....................................................... 108.0
                       market development and assistance
        Question. Funding of $1 million was provided in fiscal year 1998
    for AMS to assist Alaska in marketing salmon. The fiscal year 1999
    budget indicates this assistance is complete. Please describe the
    marketing efforts supported with this funding.
        Answer. Of the $1 million provided for marketing assistance to
    Alaska, $50,000 was designated for the promotion of agricultural
    commodities by the Alaska Division of Markets, or ADM. The Alaska
    Fisheries Development Foundation, Inc., or AFDF, will receive $880,000
    for marketing Arctic-Yakor-Kuskokwin salmon. Based on a review of ADM's
    and AFDF's marketing plans, AMS has submitted grant agreements to both
    groups. Funds will be distributed as soon as AMS receives the signed
    agreements from ADM and AFDF.
        Question. What agricultural marketing problems and opportunities
    have been addressed through projects funded through the Federal-State
    Marketing Improvement Program?
        Answer. Federal-State Marketing Improvement Program, or FSMIP,
    funds are allocated competitively among State departments of
    agriculture or other appropriate State agencies, for a wide range of
    research and service projects aimed at improving the marketing,
    distribution, and utilization of agricultural products. Federal grants,
    which must be matched by non-federal funds or in-kind resources, have
    averaged about $50,000 each in recent years, resulting in approximately
    25 proposals funded per year. I will provide some examples of the
    marketing problems and opportunities addressed for the record.
        [The information follows:]
        The Global Marketing Support Service at the University of Arkansas
    is providing information and other assistance to small- or mid-sized
    producers of specialty food and wood products to further their efforts
    to enter and compete effectively in targeted international markets.
        FSMIP provided assistance to the Missouri Department of Agriculture
    in developing a prototype market reporting system which more accurately
    reflects prices paid by packers and processors for slaughter hogs by
    accounting for premiums and discounts associated with carcass leanness.
    After operating on a pilot basis in Missouri during the past year, this
    system now is being extended to other areas under the Federal-State
    Market News Service.
        Funds provided to the Illinois Department of Agriculture, in
    cooperation with the University of Illinois, have been used to identify
    market opportunities for specific varieties and grades of soybeans used
    in food products in South Korea and other Asian markets. A second
    project, with the same cooperators, is aimed at improving farmers' and
    country elevator managers' access to information about the value of
    soybeans based on differences in oil and protein content as measured by
    Near Infra-Red technology.
        Kansas University, in cooperation with the agricultural marketing
    division of the State Department of Commerce, is identifying consumer
    demand and transaction costs for locally-grown produce through
    alternative market channels or marketing organizations, including
    producer cooperatives.
                         organic certification program
        Question. An increase of $505,000 is requested for fiscal year 1999
    to continue implementation of the Organic Certification Program. What
    is the fiscal year 1998 level of funding for this program?
        Answer. A total of $490,000 was made available in the 1998
    appropriation for the Organic Certification Program. AMS estimates that
    an additional $362,000, for a total of $852,000 from its Marketing
    Services account, will be needed in fiscal year 1998. A reprogramming
    proposal is under review within the Department.
        Question. What is the current staffing (FTE) level for the Organic
    Certification Program? What staffing (FTE) level is proposed for the
    program for fiscal year 1999?
        Answer. The current staffing level for the National Organic Program
    is 10 staff years. AMS proposes 12 staff years for fiscal year 1999.
        Question. Once the Organic Certification Program is fully
    established, growers and handlers and certifying agents are to be
    assessed fees to recover program costs. The user fees collected will be
    deposited in the Treasury under current law. Please provide the
    statutory language that would need to be included in the appropriations
    Act to allow these fees to be credited to the Appropriations account to
    cover program costs.
        Answer. A technical amendment to the Organic Foods Production Act
    of 1990, or 7 U.S.C. 6506, was adopted by conferees as section 601 of
    the Agricultural Research, Extension, and Education Reform Act of 1997,
    S. 1150. S. 1150 is pending final action by the Congress. The language,
    which authorizes the retention and use of the fees, is added at the end
    of section 2107 of the Organic Foods Production Act of 1990.
        [The language follows:]
        ``(d) Availability of Fees.--
        ``(1) Account.--Fees collected under subsection (a) (10) (including
    late payment penalties and interest earned from investment of the fees)
    shall be credited to the account that incurs the cost of the services
    provided under this title.
        ``(2) Use.--The collected fees shall be available to the Secretary,
    without further appropriation or fiscal year limitation, to pay the
    expenses of the Secretary incurred in providing accreditation services
    under this title.''
        Question. When do you expect a final rule to be published?
        Answer. The current plan is to publish a final rule by the end of
    calendar year 1998.
        Question. When do you expect the program to be fully established
    and user fees to be charged?
        Answer. The proposed rule lays out an 18-month implementation
    schedule following publication of the final rule. During the first 6
    months, applicants seeking accreditation for certification status will
    pay an application fee and an administrative fee. Operations wishing to
    be certified organic will then have 12 months to be certified, and will
    pay fees into the program. Site visits to the certifying agents will
    take place during this 18-month period and will generate fees. After
    the 18-month period, AMS anticipates the program will be self-
    supporting.
                     government performance and results act
        Question. How are the agency's annual performance goals linked to
    the agency's mission, strategic goals, and program activities in its
    budget request?
        Answer. AMS' annual performance goals are directly linked to its
    mission and strategic goals. The agency's program activities are
    grouped according to the agency's two strategic goals; the performance
    goals are listed by program activity. I will provide a table that shows
    the linkage between each activity and goal.
        [The information follows:]

           SUMMARY OF AMS PERFORMANCE GOAL LINKAGES, FISCAL YEAR 1999
    ------------------------------------------------------------------------
                           Fund                           Goal 1     Goal 2
    ------------------------------------------------------------------------
    Marketing services:
        Market news, appropriation....................          X  .........
        Standardization, appropriation................          X  .........
        Shell egg surveillance, appropriation.........  .........          X
        Federal Seed Act Program, appropriation.......  .........          X
        Organic Certification Program, appropriation..          X  .........
        Pesticide Recordkeeping Program, appropriation  .........          X
        Pesticide Data Program, appropriation.........          X  .........
        Market development and assistance,                      X  .........
         appropriation................................
        Wholesale market development, appropriation...          X  .........
        Transportation services, appropriation........          X  .........
    Payments to States and possessions: Federal-State           X  .........
     Marketing Improvement Program, appropriation.....
    Section 32:
        Commodity purchase services, appropriation....          X  .........
        Marketing agreements and orders, appropriation  .........          X
    User funded:
        Grading and certification, user funded........          X  .........
        Plant Variety Protection Act Program, user      .........          X
         funded.......................................
        Commodity research and promotion acts, user             X  .........
         funded.......................................
        Perishable Agricultural Commodities Act         .........          X
         Program, user funded.........................
    ------------------------------------------------------------------------

        Question. Could you describe the process used to link your
    performance goals to your budget activities? What difficulties, if any,
    did you encounter, and what lessons did you learn?
        Answer. AMS developed a performance goal for each budget activity.
    Since we used the budget activities as the framework, we did not
    encounter any difficulties.
        Question. Does the agency's Performance Plan link performance
    measures to its budget? Does each account have performance measures?
        Answer. Yes, the agency's performance plan links performance
    measures to budget activities. AMS budget accounts include multiple
    activities; each AMS activity has a performance measure.
        Question. To what extent does your performance planning structure
    differ from the account and activity structure in your budget
    justification?
        Answer. AMS' performance planning structure does not differ from
    the budget structure. The activities in the annual performance plan are
    the same as the activities in the budget justification. The budget
    justification lists AMS activities by account, whereas the performance
    planning structure lists the activities by goal.
        Question. Do you plan to propose any changes to your account
    structure for fiscal year 2000?
        Answer. No, AMS does not plan to propose any changes in its account
    structure.
        Question. How were performance measures chosen?
        Answer. Performance measures were developed through a consensus of
    program personnel and agency managers. As part of its strategic plan
    development, AMS established committees of agency program personnel for
    each activity. These committees were responsible for developing
    performance measures for their activities based on the strategic plan.
    AMS also formed a Strategic Planning Action Team at the Associate
    Deputy Administrator level. This team monitors the performance goals in
    the annual plan, gathers actual performance data semiannually, and
    prepares a report to the Administrator.
        Question. How did the agency balance the cost of data collection
    and verification with the need for reliable and valid performance data?
        Answer. Since we were already collecting data on a budget activity
    basis, there was no significant increase in costs.
        Question. Does your plan include performance measures for which
    reliable data are not likely to be available in time for your first
    performance report in March 2000?
        Answer. At this point, we do not believe there will be a problem,
    but since the performance goals are new, we cannot be sure.
        Question. What are the key performance goals from your fiscal year
    1999 Annual Performance Plan that you recommend this subcommittee use
    to track program results.
        Answer. Since the AMS performance goals track the budget
    activities, we believe that the Subcommittee would be interested in all
    of them.
        Question. In developing your Annual Performance Plan, what efforts
    did your agency undertake to ensure that the goals in the plan include
    a significant number of outcome measures?
        Answer. We attempted, where possible, to provide outcome measures
    for each program area.
        Question. Do you believe your program managers understand the
    differences between goals that measure workload (output) and goals that
    measure effectiveness (outcome)?
        Answer. Yes, we believe AMS program managers understand the
    differences. The problem, in some instances, was that measuring outcome
    was not possible and we had to use surrogate measures instead.
        Question. What are some examples of customer satisfaction measures
    that you intend to use? Please include examples of both internal and
    external customers.
        Answer. Some examples of customer satisfaction measures for
    external customers include the performance goal for market news
    services that is based on timeliness and the measures for wholesale
    market development and transportation services that are based on
    customer satisfaction survey results. None of our measures are
    specifically oriented toward internal customers.
        Question. How were the measurable goals of your fiscal year 1999
    Annual Performance Plan used to develop your fiscal year 1999 budget?
        Answer. We developed the budget based on the agency's mission and
    strategic plan, then adjusted the performance goals as needed.
        Question. If a proposed budget number is changed, up or down, by
    this committee, will you be able to indicate to us the likely impact
    the change would have on the level of program performance and the
    achievement of various goals.
        Answer. Yes, we change the goal estimates based on the budget
    proposals. If the proposed budget number is changed, AMS program
    personnel can estimate the likely impact of the change on program
    performance. The performance goals and indicators reflect the requested
    budget levels.
        Question. Do you have the technological capability of measuring and
    reporting program performance throughout the year on a regular basis,
    so that the agency can be properly managed to achieve the desired
    results?
        Answer. AMS has systems in place to measure and report program
    performance on a semiannual basis for management use.
        Question. The Government Performance and Results Act requires that
    your agency's Annual Performance Plan establish performance goals to
    define the level of performance to be achieved by each program activity
    set forth in your budget.
        Many agencies have indicated that their present budget account
    structure makes it difficult to link dollars to results in a clear and
    meaningful way.
      --Have you faced such difficulty?
      --Would the linkages be clearer if your budget account structure were
            modified?
      --If so, how would you propose to modify it and why do you believe
            such modification would be more useful both to your agency and
            to this committee than the present structure?
      --How would such modification strengthen accountability for program
            performance in the use of budgeted dollars?
        Answer. We have not faced any difficulty in linking dollars and
    results since we are using an activity basis under both the annual
    performance plan and the budget structure. Therefore, there is no need
    to change the budget account structure for AMS to improve the linkages.
        Question. Does your fiscal year 1999 performance plan--briefly or
    by reference to your strategic plan--identify any external factors that
    could influence goal achievement?
      --If so, what steps have you identified to prepare, anticipate and
            plan for such influences?
      --What impact might external factors have on your resource estimates?
        Answer. We included a discussion of external factors in the
    strategic plan. The discussion of performance goals in the performance
    plan briefly mentions external factors that could influence goal
    achievement for some of the agency's activities. AMS programs try to
    anticipate and prepare for uncontrollable external factors such as
    weather, economics, production levels, and consumer preference by
    closely monitoring the agricultural industry and its environment.
        Question. Through the development of the Performance Plan, has the
    agency identified overlapping functions or program duplication? If so,
    does the Performance Plan identify the overlap or duplication?
        Answer. No, rather the plan process has helped us to understand the
    complementary nature of our activities with others within and outside
    the Department.
        Question. Future funding decisions will take into consideration
    actual performance compared to expected or target performance. Given
    that:
      --To what extent are your performance measures sufficiently mature to
            allow for these kinds of uses?
      --Are there any factors, such as inexperience in making estimates for
            certain activities or lack of data, that might affect the
            accuracy of resource estimates?
        Answer. We believe our performance measures are the best that are
    currently available to reflect the accomplishment of our mission. We
    have not experienced any difficulty, but we plan to periodically
    reassess our performance measures to assure that they effectively
    measure AMS performance.
        Question. Based on your fiscal year 1999 performance plan, do you
    see any need for any substantive revisions in your strategic plan
    issued on September 30, 1997?
        Answer. No, we do not see the need for any substantive revisions.
                                     ______

                     Questions Submitted by Senator Bumpers
                               organic standards
        Question. The Department finally published proposed rules to
    establish national organic standards after many years of requests by
    the organic farming community. However, the proposed rule appears to
    have raised concerns by many about various practices that may be
    included in the standards. You suggest the final rule may be published
    by early in fiscal year 1999. Given all the past problems in publishing
    a proposed rule and the problems that have surfaced since, do you think
    early fiscal year 1999 is a realistic target?
        Answer. Secretary Glickman has stated that the final rule will be
    in place by the end of the year. We are committed to meeting that
    deadline. We are proposing to reprogram $362,000 for Organic
    Certification in fiscal year 1998.\1\ With those additional funds and
    the funding increase requested for fiscal year 1999, we should have the
    resources and personnel we need to meet our goal.
    ---------------------------------------------------------------------------
        \1\ A reprogramming request is under review within the Department.
    ---------------------------------------------------------------------------
        Question. When the organic movement began, many thought of it as a
    passing fad. What do you see as the long-term outlook for this method
    of production and marketing?
        Answer. The size of the organic industry has risen dramatically in
    recent years. In 1996, total domestic retail sales of organically-grown
    food products reached $3.5 billion, up from $78 million in 1980. Sales
    of organically-grown food have grown at approximately 20 per cent per
    year since 1990. From 1992 to 1994, certified organic cropland
    production in the U.S. expanded from 473,000 acres to 667,000 acres,
    and is expected to reach 2 million acres by the year 2000.
        U.S. exports of organically-grown products totaled $203 million in
    1994, or about nine percent of the organic output. Export markets may
    become more substantial and offer price premiums for organic products,
    with increased world-wide consumption of organically produced food. The
    organic market share in the European Union, or EU, has been projected
    to reach 2.5 percent of total food consumption expenditures in 1998.
    Austria expects its organic market share to equal one third of all food
    sales by the year 2000. In 1994, France and Germany combined had total
    retail sales of organic foods equal to that of the United States in the
    same year, approximately $2 billion. Japan's retail sales for that year
    were estimated to be $688 million. Other EU countries report growth
    rates equal to or greater than the current growth rate in the United
    States, which is about 20 percent per year.
        Question. AMS recently completed a study on the Little Rock River
    Market. Can you provide an overview of the finding and recommendations
    of that study?
        Answer. In September 1996, AMS initiated a cooperative agreement
    with the city of Little Rock to conduct an operational management
    analysis of the River Market, a public market that had recently opened
    in downtown Little Rock. A goal of the study was to develop a strategy
    for River Market to position itself as a preferred fresh food shopping
    destination, providing quality products built on farmer and grocery
    trade. A preliminary report was presented to market management and the
    City outlining a series of recommendations for improving operating
    procedures and management practices at the market.
        Included among the recommendations were:
      --Institute a monthly advertising fee to conduct ongoing and long-
            term promotional and marketing campaigns.
      --Hire a committed, strong, focused, visionary manager and give that
            person the authority to make decisions and orchestrate the
            market's success.
      --Reduce the number of days the market is operating to coincide with
            consumer shopping preferences.
      --Enhance security, particularly at night, to ensure a safe
            environment for the market.
      --Enforce terms of lease agreements, particularly as they relate to
            Use Clause, Stall Design, and Rental Rates. Excesses and abuses
            should be curtailed.
      --Consider implementing a validation system that would provide free
            parking for shoppers.
        Question. When will the study be available?
        Answer. A final draft is currently being prepared which further
    describes market data, demographics, and structural features of the
    market. This draft is scheduled for completion by May, 1998.
                                     ______

                   Animal and Plant Health Inspection Service
                     Questions Submitted by Senator Cochran
                       agricultural quarantine inspection
        Question. The fiscal year 1999 President's budget request proposes
    an increase of $12,000,000 for the agricultural quarantine inspection
    (AQI) user fee program. Does APHIS expect to use any of its operating
    reserves in fiscal year 1998? If yes, how much and for what purposes?
        Answer. Yes, in fiscal year 1998 APHIS will need to access $12
    million from the AQI Reserve Account to fund the operating shortfall
    that exists between the $100 million Federal Agriculture Improvement
    and Reform (FAIR) Act of 1996 threshold and the $88 million in
    appropriated funds. The FAIR Act changed the way funding is made
    available for most AQI activities and provided a mechanism to meet
    increased demands for AQI services. The FAIR act was designed to
    transition the AQI User Fee program into a true demand-driven user fee
    program in fiscal year (FY) 2003 based on the assumption that the
    program would receive $100 million in annual appropriated funds through
    fiscal year 2002 and finance additional costs with user fee collections
    that exceed $100 million. However, if less than $100 million is
    appropriated, the shortfall must be funded from the AQI Reserve
    Account. In both fiscal year 1997 and 1998 the AQI User Fee program was
    appropriated less than $100 million, $98 million and $88 million,
    respectively. We began fiscal year 1998 with a reserve account balance
    of $17.8 million on a cash accounting basis. However, after using the
    reserve account to finance the fiscal year 1998 appropriations
    shortfall, only $5.8 million is projected to remain available in the
    AQI Reserve Account for fiscal year 1999. This is a critically low
    reserve balance for a large-scale program such as AQI. Continued annual
    appropriations of less than $100 million will gravely threaten the
    program's ability to perform its mission. The proposed fiscal year 1999
    $12 million program increase will help APHIS avoid further depleting
    the AQI Reserve Account to finance user fee inspection services.
                     pest and disease exclusion activities
        Question. A recent General Accounting Office (GAO) report advised
    APHIS to improve its point-of-entry inspection program. What actions
    are being taken by APHIS to address this report? How much money has
    been earmarked in the proposed fiscal year 1999 budget request to
    address these concerns?
        Answer. APHIS proposes to address these concerns by providing
    additional inspectors at new ports of entry; expanding facilities at
    the Mexican and Canadian borders, and Hawaii; and further expanding the
    detector dog program along the Mexican border. An increase of $2.6
    million is included in the fiscal year 1999 budget to fund these
    improvements.
        Question. To address the GAO report, APHIS has stated that it will
    hire additional staff for inspections in Hawaii, Canada, and Mexico.
    How many additional staff will be devoted to conduct predeparture
    inspections in Hawaii, and preclearance inspections in Canada and
    Mexico? How many staff does Hawaii need to be considered fully staffed
    for all AQI programs?
        Answer. The fiscal year 1999 increase of $2.6 million for AQI
    appropriated activities supports nineteen additional staff years for
    predeparture inspections in Hawaii; 3 additional staff years for
    preclearance inspections in Canada; and 18 additional staff years for
    preclearance inspections along the U.S./Mexican border. Two additional
    inspectors above the increase level would provide optimal AQI staffing
    in Hawaii.
        Question. With the increase in world trade and global
    competitiveness, many responsibilities have been created to comply with
    the new World Trade Organization (WTO) obligations. Which
    responsibilities fall under the responsibility of APHIS?
        Answer. APHIS personnel have made and continue to make major
    contributions in resolving issues related to the World Trade
    Organization (WTO) Agreement on the Application of Sanitary and
    Phytosanitary (SPS) Measures. Several USDA agencies, including FAS,
    ARS, FSIS and all three Marketing and Regulatory Programs mission area
    agencies (AMS, APHIS, and GIPSA), spend considerable time and resources
    in resolving the many animal and plant health issues that arise due to
    increasing world trade and global competitiveness. In fiscal year 1996,
    APHIS and USDA SPS accomplishments included the resolution of 38 trade
    barrier issues worth nearly $7 billion in exports of U.S. agricultural
    commodities, representing about 12 percent of the $60 billion in U.S.
    agricultural exports that year. In 1997, SPS accomplishments included
    the resolution of over 70 issues worth over $1 billion.
        APHIS provides critical technical input for protecting American
    agriculture while facilitating trade. APHIS must maintain monitoring
    and surveillance activities in countries that have a trade relationship
    with the United States while, at the same time, ensuring that domestic
    agricultural products have access to emerging markets.
        Question. How does the proposed fiscal year 1999 budget request
    address the financial obligations placed on the agency?
        Answer. The demands facing APHIS have shifted substantially as a
    result of agricultural trade liberalization achieved during the GATT
    Uruguay round. The workload associated with regulating imports and
    certifying exports is increasing. As traditional barriers such as
    tariffs and quotas are eliminated under the WTO and other trade
    agreements, the temptation has increased for countries to adopt health-
    related requirements as disguised trade barriers.
        This reality increases the need for APHIS to assertively execute
    its role as a leader in the SPS area. First, APHIS conducts risk
    analyses to monitor epidemiological pest and disease trends and conduct
    or participate in risk analysis for specific plant and animal
    commodities and pathways of introduction. Second, APHIS is continuing
    to assess and make regulatory decisions on an increasing number of
    import requests. These regulatory decisions must be in accordance with
    WTO rules which require greater documentation, scientific analysis, and
    transparency than in the past. Third, an increasing portion of our
    resources is being used to support U.S. agricultural exporters who
    encounter foreign technical trade barriers. Our scientific staffs play
    a critical role in the negotiation and resolution of these SPS issues.
    Fourth, APHIS spends an increasing amount of time and resources working
    with its foreign regulatory counterparts to develop international
    standards and address a variety of pest and disease issues which affect
    trade. Increasingly, APHIS must also gather technical information in
    foreign countries on surveillance and monitoring procedures and certify
    these systems. These international activities and relationships are
    becoming increasingly vital for promoting harmonized regulatory
    approaches which allow U.S. products to compete on a level playing
    field.
        This expanding function presents certain challenges for APHIS as it
    seeks to reassess priorities and existing processes for managing
    sanitary and phytosanitary issues. APHIS is realigning its work
    processes to fit these changing needs, but increasing demands place a
    strain on current resources and the ability to update the skills of the
    workforce. Accordingly, we have requested increases in several line
    items to help us address sanitary and phytosanitary issues.
    Specifically, we request increases of $4.6 million for our animal
    health monitoring and surveillance program and $374,000 for our pest
    detection program. These program increases would enhance our domestic
    infrastructure and surveillance systems to certify the health status of
    American agricultural products. To specifically address SPS issues, we
    request an additional $694,000 for international programs, $173,000 for
    import/export inspection, and $2.6 million for our agricultural
    quarantine inspection appropriated program.
        Question. Under the import/export program, does APHIS' workload
    address the President's Food Safety Initiative? If yes, where and how
    much does the fiscal year 1999 proposed budget request contain?
        Answer. Because APHIS is not directly involved in the President's
    Food Safety Initiative, the fiscal year 1999 workload projections for
    the import/export program do not address the initiative. However, APHIS
    has technical expertise in the area related to animal and plant health
    and is well-suited to advise the Food and Drug Administration and other
    participating agencies within the USDA as they address the Food Safety
    Initiative.
                                  karnal bunt
        Question. How much does the agency plan to spend on Karnal Bunt in
    fiscal years 1998 and 1999?
        Answer. In fiscal year 1998, we plan to spend approximately $4.3
    million on operating costs, which will fund surveys, testing,
    regulatory, and laboratory work. We expect the funding need for these
    activities to decrease by fiscal year 1999. However, we will not have
    an accurate cost estimate for fiscal year 1999 until at least July 1,
    1998. At that point, enough fields will have been harvested to give us
    some indication of the level of activities needed for fiscal year 1999.
    So far through our Karnal Bunt (KB) Emergency Program, we have been
    able to prevent the presence of KB in the United States from crippling
    the $5.9 billion wheat export market. Preserving this market is highly
    dependent on our successful continuation of the regulatory program and
    ongoing national survey to document that major wheat-producing areas of
    the U.S. are free of KB.
        Question. Has the private sector agreed to finance this program?
        Answer. There is no consensus among the private sector about
    financing this program. Although industry groups within the major
    wheat-producing areas of the country are generally supportive of the KB
    National Survey, grain handlers in some regions are resistant. By
    fiscal year 1999, there will be a decreasing need for extensive survey.
    This is because our intensive National Survey of 1996-97 has provided
    ample evidence that KB is not present at detectable levels in
    unregulated U.S. wheat production regions and is not a production or
    quality problem in our system.
        Currently, we know that at least some of the sample collection
    element could be transferred if industry is willing to accept such a
    transfer. We believe we could also effectively transfer parts of the
    sample analysis element to private laboratories under accreditation
    processes. Also, we are working with the private sector to determine
    how parts of the data analysis and data management elements of the
    National Survey could be transferred. As long as our trade partners
    regard KB as a phytosanitary issue, the private grain sector should be
    willing to accept such a transfer and should want to take whatever
    measures may be necessary to assure trade partners that U.S. wheat
    meets import requirements. However, private sector acceptance of this
    transfer will depend on our ability to ensure that the private sector
    system would yield an official sample to meet WT Organization
    requirements.
                          silverleaf whitefly program
        Question. In the fiscal year 1999 President's budget, APHIS
    proposes to incorporate all components of the silverleaf whitefly
    program into the Biocontrol line item at the fiscal year 1998 funding
    level. Why is the agency proposing this?
        Answer. Although we are proposing to incorporate the silverleaf
    whitefly (SLW) program into the Biocontrol line item, we plan to
    continue SLW activities in fiscal year 1999 at approximately the same
    level as in fiscal year 1997 and 1998. However, this transfer could
    provide greater flexibility in future years in allocating resources
    related to biological control methods for the SLW.
        Question. Does the agency know if the industry agrees with this
    transfer?
        Answer. The industry is concerned about this transfer. They believe
    that it may signal decreased funding for SLW activities in fiscal year
    1999, but this is not the case. We plan to spend the same amount for
    SLW activities from the biocontrol line item in fiscal year 1999 as in
    fiscal years 1997 and 1998.
                    boll weevil eradication program and loan
        Question. In your statement, Mr. Secretary, you indicated that a
    redirection of $12 million from the Animal and Plant Health Inspection
    Service (APHIS) appropriations to the boll weevil loan program has been
    proposed. However, the budget shows the loan program level would
    decline from $40 million in fiscal year 1997 to $30 million in fiscal
    year 1999. Why is this?
        Answer. The boll weevil program, stays in the same areas for a few
    years, then rapidly expands into new zones. We understand that program
    leaders in Texas are considering a loan request of as much as $78
    million. We also have indications of requests that will be made from
    other States. At the time the budget was developed, our assessment of
    the need for loans was $30 million. We have not had an opportunity to
    review the current thinking behind the requests and cannot determine at
    this time, whether there will be a need for funding of the magnitude
    indicated.
        Question. APHIS plans to discontinue all cost-sharing program
    activities where the boll weevil no longer exists in the fiscal year
    1999 budget. In which areas does the boll weevil no longer exist?
        Answer. The boll weevil no longer exists in Virginia, North
    Carolina, South Carolina, Georgia, Florida, California, Arizona, most
    of Alabama, middle Tennessee, and northwestern Mexico.
        Question. The boll weevil loan program was created to enhance the
    appropriated funds for the boll weevil eradication program. The fiscal
    year 1999 President's budget proposes to decrease the eradication
    program by $12.2 million. Last fiscal year, the President's budget
    proposed to decrease the program by $9.8 million.
        Why does the agency continue to propose reductions in this program
    even though it knows the loan program is not capable of covering the
    costs of the program? Please explain how USDA proposes to utilize the
    $4 million proposed for the Boll Weevil Program in fiscal year 1999?
    How much of the APHIS funds go directly to the field and how much are
    attributed to administrative overhead? Since the program is continuing
    to expand, please provide the Committee with an analysis of whether the
    program can succeed without significant funding for federal cost
    sharing and for the FSA loan program--particularly while cotton prices
    are low and acreage is in decline.
        Answer. Since boll weevil eradication has proven to be successful
    and profitable for cotton growers, program beneficiaries will assume a
    greater financial responsibility for program costs. Additionally,
    growers had expressed a desire to have primary control over the daily
    operations of their program.
        In an effort to mitigate the impact of reduced Federal grants to
    the boll weevil eradication foundations, the USDA provided a loan
    program with very favorable terms which supplements funds raised
    through grower assessments and eases cashflow problems. In fact, the
    FSA loan program makes more total funds available for boll weevil
    program expansion than have been available under the traditional
    appropriations and grants approach. Because of the tremendous benefits
    cotton growers can gain from boll weevil eradication, we believe that
    they will choose to take advantage of the loan program. It provides a
    reasonable alternative that is cost beneficial.
        The Agency proposes to use approximately $2 million to fund direct
    and indirect costs for the ten technical coordinators APHIS has placed
    throughout the active eradication area. The remaining $2 million would
    be allocated as cost-sharing funds among the active program areas.
        Approximately 86.1 percent of APHIS' funding is allocated to the
    field for program delivery costs while 13.9 percent is allocated for
    agency and program-level support costs.
        We believe the boll weevil eradication program can succeed with
    fewer federal cost-share funds and a flexible loan program. Cotton
    acreage has fluctuated significantly over the last two years, largely
    due to recent changes in farm legislation. These swings in acreage make
    it more difficult to provide the cash flow for the eradication program
    in each new area. High acreage during the expensive few years of
    eradication will result in high overall program costs. If acreage then
    declines in the post-eradication phase as loans are being repaid,
    grower assessments may not be sufficient to retire existing debt on
    schedule. Loans, therefore, must be flexible and the acreage accurately
    reported each year through FSA.
        Question. What is the status of the memorandum of understanding
    (MOU) between APHIS and FSA which would provide for collection and
    sharing of crop acreage data in Boll Weevil Eradication zones which
    would facilitate administration of the program and collection of
    producer assessments? Is this consistent with report language which
    accompanied the fiscal year 1997 appropriations bill?
        Answer. Both agencies agree that an MOU is not needed. Coordination
    of data is proceeding adequately to facilitate administration of the
    program and collection of producer assessments.
        Yes, I believe that the Department is administering the program
    consistent with the Committee recommendations contained in Senate
    Report on the 1997 Act. In particular, we have developed working
    relationships with the foundations that actually carry out the boll
    weevil eradication program. Efforts by both FSA staff responsible for
    the loan program and APHIS staff responsible for the USDA's eradication
    program are closely coordinated, and we are making every effort
    possible to ensure that loan terms and conditions meet the needs of
    borrowers.
        Question. Please provide the Committee with an explanation of how
    the Department is currently collecting crop acreage data. Is there
    concern about gaps and inaccuracies in crop acreage data figures under
    the Department's new collection procedures?
        Answer. In most areas involved in eradication, FSA offices are
    involved, to varying degree, in collecting acreage information from
    producers. This information is provided by growers in accordance with
    State boll weevil eradication laws. It is critical that grower
    Foundations involved in the eradication program receive accurate and
    timely acreage reports from FSA. This information is used to bill
    growers for the assessments they voted to pay when they joined the
    program. Some States are very aggressive in enforcing their laws, while
    others are not.
        Question. Does USDA have authority to allow producers to report
    their planted acreage? Does USDA have authority to share planted
    acreage data with private organizations who need such data?
        Answer. Yes, the statutory authority to collect information such as
    reports on planted acreage is contained in Section 374 of the
    Agricultural Adjustment Act of 1938. No, the Department does not have
    authority to share the data with private organizations. Planted acreage
    reports are subject to a Privacy Act system of records and are exempt
    from Freedom of Information Act requests for sharing with private
    organizations.
                               yellowstone bison
        In fiscal year 1998, the Committee appropriated $1 million to plan,
    design, and construct a quarantine facility in Montana to hold and test
    bison leaving the confines of the Yellowstone National Park.
        Question. What is the status of this project?
        Answer. Discussions with the State of Montana are currently taking
    place to determine the best location for this facility and the roles
    and responsibilities of both APHIS and the State. Although a location
    has not been determined, APHIS has consulted with an engineering firm
    to put together a preliminary generic plan for construction. Upon
    selection of a site, a specific design plan for the facility will be
    developed. Once the design phase is complete, construction will begin.
    Due to the mild winter thus far in Montana, the need for such a
    facility has not been critical. APHIS expects that the facility will be
    operational by the winter of 1999/2000.
        Question. How has the project contributed to the agency's strides
    in reaching a long-term solution?
        Answer. The facility, when completed, will be consistent with the
    long-term solution to manage brucellosis in the Yellowstone bison
    population announced in June 1997 by State and Federal officials. The
    long-term solution includes capturing animals and sending them to
    quarantine facilities; providing the disease free animals to Native
    American Indian tribes; hunting bison in certain situations; and
    vaccinating the bison when a vaccine is approved.
        Question. Has the agency spent any of the fiscal year 1998
    appropriation of $1 million?
        Answer. To date, APHIS has not spent any of the $1 million
    appropriated in fiscal year 1998 for this project.
        Question. What is the next phase of this project and how much money
    will be needed in fiscal year 1999? Is this amount included in your
    fiscal year 1999 request? If not, why?
        Answer. Upon completion of the construction phase, the operational
    phase of the facility will begin. Presently, discussions are taking
    place to identify the roles and responsibilities of APHIS and the State
    of Montana. Funds were not included in the fiscal year 1999 budget for
    this activity because at the time the budget was developed, funds had
    not yet been included in the fiscal year 1998 Appropriations Act to
    construct the facility. For this reason, APHIS did not anticipate a
    need for operating and maintenance funds in fiscal year 1999.
                                golden nematode
        Question. In 1997, APHIS, the National Plant Board, the potato
    growers' industry, and the Agricultural Research Service conducted an
    extensive review of the golden nematode program. Why has the plan not
    been implemented?
        Answer. After a panel representing these groups conducted the
    review, they made several recommendations concerning the golden
    nematode program. In fiscal year 1997, we established an implementation
    team to review this panel's report, to determine which of the
    recommendations could be implemented, to establish a timetable for
    implementation, and to address the operational details associated with
    implementation. This implementation team consists of representatives
    from APHIS, ARS, New York State, Cornell University, New York State
    potato grower groups, the National Potato Council, and the American
    Association of Nurserymen. The recommendations and the actions we have
    taken on each follow:
        (1) that the feasibility of eradication be tested in accordance
    with the parameters presented by the Panel, and that the USDA, the New
    York State Department of Agriculture (NYSDA), and Cornell University
    continue to conduct a joint golden nematode (GN) management program.
        Since total eradication is not possible, the team advocated that
    some type of GN program must continue to prevent the pest from becoming
    more widely distributed.
        (2) that the program should explore the possibility of developing
    other effective control methodologies.
        We developed a steam heat treatment for farm equipment that we hope
    can replace methyl bromide by 2000. Also, we developed the ``hatching
    factor,'' which uses a chemical that would cause GN to hatch
    prematurely. In addition, the team supported the idea that
    biotechnology may have some application in the long term to accelerate
    the development of new GN-resistant potato varieties.
        (3) that the USDA or the New York State Department of Agriculture
    (NYSDA) work with potato growers to obtain a special local needs or
    general registration for Basamid.
        The team advocated the registration of Basamid, although it would
    probably require a third-party registrant. The availability of Basamid
    would not significantly affect program operations.
        (4) that the national GN detection surveys now in progress be
    completed.
        The team favored the continuation of the golden nematode program
    and Federal quarantine. Also, it advocated the need for additional
    national surveys that would enable the program to identify and regulate
    infested properties in time to prevent further spread.
        (5) that the program continue to intensely manage the GN in New
    York State.
        The team will be appointing a subcommittee to determine to what
    extent Long Island should be regulated. Currently, only individual
    properties are regulated on Long Island. Also in New York State, we
    initiated and implemented GN-resistant potato variety crop rotation on
    exposed lands (those that are at risk of becoming infested) which will
    control GN populations and prevent further spread. This would reduce
    workload because we would not need to survey the lands that are in
    rotation as often or as intensely as other lands.
        (6) that the GN management program be restructured to reduce
    workload.
        The program could be restructured and workload reduced if New York
    State would be willing take a greater role in activities concerning the
    intrastate movement of farm equipment.
        (7) that the federal-domestic quarantine be revised and the NYSDA
    evaluate the New York State parallel quarantine.
        The team supported the idea that the Federal quarantine not be
    revised until it is determined what type of program funding would
    allow. Also, the team believes that the current quarantine is an
    effective mechanism for preventing GN spread.
        (8) that ARS and Cornell University continue research and
    development efforts, that funds now provided to these efforts from
    APHIS and NYSDA be redirected to the regulatory and management program,
    and that federal funding for regulatory and management activities
    continue.
        ARS and Cornell University will continue research and development
    efforts to develop GN-resistant potato varieties and a heat treatment
    technique for farm equipment since the availability of new resistant
    varieties is essential to the program's success. But most of the team
    favored ARS and/or Cornell University funding this work. In fiscal year
    1997, APHIS funded these activities at $50,000.
        Also, the team endorsed the idea that APHIS conduct a cost-benefit
    analysis of the GN program in an attempt to justify requests for
    additional funding.
        (9) that potato commissions be consulted in developing research to
    identify other detection and control methods.
        The National Potato Council and the American Association of
    Nurserymen were represented at the most recent implementation team
    meeting in February.
        Question. Have other areas of the country become infested by the
    golden nematode?
        Answer. No, there are no areas outside of New York State that are
    infested with GN.
        Question. Under the circumstances, why is the fiscal year 1999
    President's budget request proposing a decrease of $36,000?
        Answer. We can achieve savings through the closing of our golden
    nematode facility in West Hampton Beach, Long Island, without impacting
    program operations. The employee now working in that office would be
    re-located to another office, but would still conduct most of the
    activities she is currently conducting. These activities include
    maintaining compliance agreements with growers and treating used farm
    equipment. The savings would be realized primarily through utility and
    maintenance costs.
                          wildlife service operations
        Question. The agency has proposed changes to the Wildlife Services
    Operations program to reduce the disparities between the States
    cooperators who are receiving assistance from the Federal Government.
    Please provide the Committee with a list of all States participating in
    the program currently, the amounts the States contribute currently, and
    those States identified which would be affected by these proposed
    changes.
        Answer. The following table contains the amount of net Federal
    appropriated funds and cooperator contributed funds by State for fiscal
    year 1997. Federal funds used for Congressional Directives, human
    health and safety work, protection of endangered species, migratory
    bird work, and basic program infrastructure costs are excluded from the
    Federal amounts listed. The balance reflects the Federal amounts which
    are directly contributed toward cooperative agreement activities.
        [The information follows:]

    ------------------------------------------------------------------------
                                                    Fiscal year 1997--
                      State                  -------------------------------
                                               Appropriated     Cooperative
    ------------------------------------------------------------------------
    Alabama.................................  ..............        $142,116
    Alaska..................................  ..............         347,407
    Arizona.................................        $306,793         323,608
    Arkansas................................          18,890  ..............
    California..............................         338,453       2,513,179
    Colorado................................         534,997         236,519
    Connecticut.............................  ..............           1,392
    Delaware................................  ..............  ..............
    District of Columbia....................  ..............  ..............
    Florida.................................  ..............          88,710
    Georgia.................................  ..............         118,343
    Hawaii..................................  ..............         640,938
    Idaho...................................         672,186         488,089
    Illinois................................  ..............         280,275
    Indiana.................................  ..............          20,703
    Iowa....................................          16,325          15,475
    Kansas..................................          25,500          65,267
    Kentucky................................  ..............         227,000
    Louisiana...............................          61,725         288,119
    Maine...................................  ..............         135,157
    Maryland................................  ..............          50,340
    Massachusetts...........................  ..............          53,490
    Michigan................................  ..............          31,915
    Minnesota...............................  ..............             631
    Mississippi.............................         319,072         821,463
    Missouri................................  ..............         104,998
    Montana.................................         562,055         816,258
    Nebraska................................         223,001         285,754
    Nevada..................................         593,659         637,232
    New Hampshire...........................          11,969         162,818
    New Jersey..............................          29,630         318,240
    New Mexico..............................         839,896       1,001,291
    New York................................  ..............          48,494
    North Carolina..........................          61,623         691,320
    North Dakota............................         143,625         436,229
    Ohio....................................  ..............          88,736
    Oklahoma................................         551,429       1,099,536
    Oregon..................................         735,311         897,095
    Pennsylvania............................  ..............          13,993
    Rhode Island............................  ..............           2,075
    South Carolina..........................          28,312         311,024
    South Dakota............................         231,458       1,032,867
    Tennessee...............................          19,952         404,848
    Texas...................................       1,574,520       5,383,783
    Utah....................................         853,825       1,035,008
    Vermont.................................           9,594          36,105
    Virginia................................          30,700         258,917
    Washington/Guam.........................          95,031       2,929,073
    West Virginia...........................  ..............         209,938
    Wisconsin...............................         357,540       1,036,177
    Wyoming.................................         701,924         571,845
                                             -------------------------------
          Total.............................       9,948,995      26,703,790
    ------------------------------------------------------------------------

        The following chart shows disparity amounts by state, based on the
    same formula used in developing the fiscal year 1999 budget proposal,
    but is based on fiscal year 1997 rather than fiscal year 1996 data. The
    formula used for determining disparity amounts involves totaling both
    Federal and cooperative funding, and then determining the amount below
    50 percent of the total, which is then the disparity amount.
        [The information follows:]

    ----------------------------------------------------------------------------------------------------------------
                                                            Fiscal year 1997--
                          State                      --------------------------------  Total program     Disparity
                                                       Appropriation    Cooperator
    ----------------------------------------------------------------------------------------------------------------
    Arkansas........................................         $18,890  ..............         $18,890          $9,445
    Colorado........................................         534,997        $236,519         771,516         149,239
    Idaho...........................................         672,186         488,089       1,160,275          92,048
    Iowa............................................          16,325          15,475          31,800             425
    Wyoming.........................................         701,924         571,845       1,273,769          65,039
                                                     ---------------------------------------------------------------
          Total.....................................       1,944,322       1,311,928       3,256,250         316,196
    ----------------------------------------------------------------------------------------------------------------

        Mr. Medley, you mention in your testimony that a survey was done of
    catfish farmers and that ``68 percent of the respondents indicated they
    had spent some effort to avoid wildlife caused losses to their catfish
    crops.''
        Question. What does ``spent some effort'' mean?
        Answer. In January 1997, the National Agricultural Statistics
    Service conducted a survey of catfish farmers regarding wildlife-caused
    losses in 1996. The results of the survey indicated that 69 percent of
    aquacultural producers suffered some type of damage from wildlife.
    Wildlife cost catfish producers about $17 million in 1996. Preventative
    measures most frequently cited by producers included shooting, vehicle
    patrol, scare tactics, and roost dispersal.
        Question. What is the agency doing to avoid these losses?
        Answer. Assistance is provided nationwide, with intense efforts
    concentrated in Alabama, Florida, and Mississippi, where three wildlife
    biologists are stationed. Wildlife biologists conduct onsite
    evaluations to assess damage and identify the species of bird or mammal
    causing the damage, and make control equipment available to producers.
    If exclusionary and scaring techniques fail to reduce losses, producers
    may now take a limited number of birds by lethal means, as a result of
    a cormorant depredation order recently issued by the U.S. Fish and
    Wildlife Services (FWS). In addition, APHIS' field research station in
    Starkville, Mississippi, conducts research and field studies to improve
    current control methods, and to develop new ones.
        In addition, APHIS cooperates with the FWS in the development and
    implementation of a management plan to control damage caused by fish-
    eating birds to aquaculture resources in the mid-south. APHIS is also
    continuing to work with FWS to study the ecology, behavior, food
    habits, and migratory patterns of various fish-eating birds.
        Question. How does the fiscal year 1999 budget request address the
    agency's preventive actions?
        Answer. Funding to continue all current aquacultural assistance and
    research activities would continue at the current level, if cooperators
    increased contribution levels as proposed in the fiscal year 1999
    request.
        Question. Through the agency's actions in fiscal year 1997 and
    1998, oral vaccines for the canine strain of rabies have been
    successful in stopping the spread of disease in Texas. Does the fiscal
    year 1999 budget request propose any spending for continued actions in
    Texas? If yes, how much?
        Answer. The fiscal year 1999 request does not propose any funding
    for support of the Oral Rabies Vaccination Project in Texas. However,
    APHIS will support the Texas program with in-kind services totaling
    about $25,000.
        Question. Oral rabies vaccine bait distributions, monitoring and
    surveillance activities in Vermont, Ohio and New York have helped to
    stop the spread of the Mid-Atlantic strain of rabies in the raccoon
    population in those States. How much money is requested for the
    continuation of these activities in the fiscal year 1999 budget
    request?
        Answer. The fiscal year 1999 request includes approximately $30,000
    to provide continued support of a Rabies Hotline which is maintained in
    the APHIS Wildlife Services Vermont office. No funds are included for
    oral rabies vaccination program activities in New York, Ohio, or
    Vermont.
        Question. During 1997 APHIS was able to reduce a backlog of Animal
    Welfare Act cases to about 25 percent. What is the current estimate of
    the reduction of backlog in the fiscal year 1999 budget request, and
    how much money is proposed to be used for these activities?
        Answer. We believe this problem is close to being resolved. Where
    in the past there were several hundred cases open awaiting formal
    administrative prosecution, the number has now been reduced to fewer
    than 100, most of which are recent. The main factor in our success has
    been an emphasis on settling cases at the agency level through
    stipulations, where the party agrees to improve their operation and
    pays in most cases a nominal fine, rather than issuing a formal
    complaint which may necessitate a lengthy hearing and appeals process.
    In addition there has been an intensive effort by APHIS and the Office
    of the General Counsel to eliminate the backlog of cases and reduce the
    time it takes to formally adjudicate an Animal Welfare case.
        We did not include a request for additional funds in the fiscal
    year 1999 budget to reduce the current backlog of cases.
        Question. In the fiscal year 1998 Appropriations Act, the Committee
    provided funding to enforce the Commercial Transportation Equine for
    Slaughter Act. What actions has the agency taken to date, and has the
    entire amount provided in fiscal year 1998 been used for enforcement
    activities? How much does the fiscal year 1999 budget request contain
    for the continuation of these activities?
        Answer. APHIS is in the process of implementing a program which
    focuses on regulating and educating the trucking and slaughter
    industries and conducting research on issues related to the humane
    treatment of horses from shipment to slaughter. Presently, APHIS is
    gathering information to draft regulations to enforce the Act.
    Information is being gathered from the horse industry including the
    American Horse Protection Association, the Humane Society of the United
    States, and the American Horse Council (AHC). APHIS expects to begin
    developing the regulations in the third quarter of fiscal year 1998.
    For fiscal year 1998, APHIS is funding two research studies which focus
    on the stress and well-being of slaughter horses during transport and
    examine health problems such as dehydration. The budget request
    includes approximately $400,000 to continue these activities in fiscal
    year 1999.
                                panama facility
        Question. The fiscal year 1999 budget request proposes $1.4 million
    reduction for the screwworm program. Planning for the new Panama
    facility is to begin in fiscal year 1999 with an architectural and
    engineering study. How much money is ear marked in the proposed fiscal
    year 1999 budget for the planning of this facility?
        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 1998,
    APHIS had $5.4 million available from prior years in the screwworm
    program to plan and conduct an architectural and engineering study and
    another $.5 million available in Buildings and Facilities to update the
    master plan for the facility. These funds were accumulated gradually
    from program savings over the past 4 years. No money in the proposed
    fiscal year 1999 budget is ear marked for planning the Panama facility.
        Question. What is the projected total cost of this building, and
    when does the agency plan to finish it?
        Answer. We expect to begin operations at the new facility by 2002.
    Current projections estimate costs for the construction of the sterile
    screwworm facility to be up to $80 million for three modules plus
    another $8 million for an architectural and engineering study and
    environmental studies. APHIS has the authority to make a grant to the
    Commission which could then construct, lease, or make loan payments for
    the facility.
                               animal welfare act
        The Animal Welfare Act is administered by APHIS and regulates
    groups under the Act which include ``dealers'' in dogs and cats. The
    Animal Welfare Act specifically excludes ``retail pet stores'' from the
    definition of ``dealers'' and regulations have excluded persons from
    the definition of ``dealer'' who sells dogs and cats at retail. I
    understand that APHIS is now considering to expand the definition of
    ``dealer'' to include some persons who sell dogs and cats at retail,
    specifically persons who sell dogs and cats at retail in their own
    residence.
        Question. Is APHIS considering such a proposal, and if so, do you
    have any idea how many additional entities would be defined as
    ``dealers'' and subjected to regulation under the Animal Welfare Act as
    a result of this regulatory expansion?
        Answer. APHIS is considering a proposed rulemaking that would
    require licensing and inspecting of both wholesale and retail outlets
    of dogs--including dogs intended for hunting, security, and breeding
    purpose--while still excluding true retail pet stores. The licensing
    determination would be based on the number of adult breeding females on
    the premises. Currently premises with less than four are not required
    to be licensed. We will propose to modify the threshold of breeding
    females based on recommendations received during a comment period after
    publication in the Federal Register. By soliciting this input from
    interested parties such as animal protectionist organizations as well
    as current and potential licensees, we can better determine the
    appropriate number and expect better compliance with any new
    regulation.
        According to my information, the number of residential breeders who
    sell dogs and cats at retail could number as many as 300,000 to
    500,000. I have no idea how many additional persons may sell dogs and
    cats for breeding, hunting, or security purposes. I understand from
    APHIS' recent Animal Welfare Enforcement reports that the Animal Care
    unit currently has fewer than 8,000 licensees and registrants, and only
    inspects about 10,000 sites annually. That is an inspection rate of
    about 1.4 inspections per year. The proposal to expand regulations to
    retail sellers, if it is carried out, seems like it would greatly
    expand the number of entities regulated by APHIS' animal care unit.
        Question. Will the Animal Care unit require additional funds to
    carry out this expansion?
        Answer. The number of additional facilities to be regulated has not
    been determined. An Animal Care survey showed that possibly another
    10,000 facilities might need to be regulated whereas, other estimates
    from industry has been as high as 270,000. It is estimated that to
    inspect an additional 10,000 facilities, 58 more inspectors and an
    additional $4.8 to $5 million would allow APHIS to service these
    facilities as in the past. APHIS is considering raising the current
    threshold of breeding females to a level where the additional
    facilities picked up would be offset by not inspecting those facilities
    below the threshold. Until the final rule is published, we will not
    know the full impact of this proposed regulation. Also, using a newly
    developed Risk-based Inspection System, APHIS will reallocate resources
    to those facilities most needing inspection services. Those facilities
    having a good history of Animal Welfare Act compliance may only be
    inspected once every 3 years; those facilities with a history of
    noncompliance may be inspected 2 to 4 times per year. However, using
    risk-based inspection will free up an estimated 3 to 10 percent of
    Animal Care resources that can be used to cover these additional
    facilities.
        Question. Is APHIS considering a request for an increase in its
    appropriation to regulate residential breeders or persons who sell
    hunting, breeding or security dogs at retail?
        Answer. In fiscal year 1999, APHIS did not request funding to carry
    out these activities. The Agency will consider requesting additional
    funds for these activities at a later time.
        Question. Has APHIS made any estimates of the additional funds that
    would be required to carry out this expansion?
        Answer. It is estimated that it will cost approximately $4.8 to $5
    million to cover the expenses associated with inspecting an additional
    10,000 facilities.
                     government performance and results act
        Question. How are the agency's annual performance goals linked to
    the agency's mission, strategic goals, and program activities in its
    budget request?
        Answer. They are directly linked. The five general goals of the
    APHIS strategic plan correspond to the five functional components of
    the agency's budget structure (Pest and Disease Exclusion, Plant and
    Animal Health Monitoring, Pest and Disease Management, Animal Care, and
    Scientific and Technical Services). Similarly, the objectives listed
    under each goal correspond directly to funded line programs under each
    functional component. In the annual performance plan, APHIS has
    developed a set of annual performance targets for each goal of its
    strategic plan.
        Question. Could you describe the process used to link your
    performance goals to your budget activities? What difficulties, if any,
    did you encounter, and what lessons did you learn?
        Answer. Development of performance goals and supporting budgets in
    APHIS occurs through a formal process we call the Multiyear Program
    Planning and Budgeting process. Personnel involved in budget
    development receive formats requesting that they develop budgets and
    measures for performance goals. Each program has its own set of
    ongoing, or formative, evaluation activities in place to identify
    strengths and weaknesses, and these evaluations are used by the program
    managers to develop new performance goals and strategies that are tied
    to funding levels.
        For many of our pest and disease eradication goals and objectives,
    the annual performance targets describe a progression leading to the
    long-term eradication objectives of the strategic plan. For other, more
    difficult-to-measure goals, further efforts are underway to quantify
    performance baselines. Once the performance baselines have been
    established, it will be possible for us to set targets for the goals of
    the strategic plan and then link them more fully to the performance
    plans.
        Question. Does the agency's Performance Plan link performance
    measures to its budget? Does each account have performance measures?
        Answer. The annual performance plan identifies selected program
    performance measures to reflect progress toward achieving the general
    goal. Each general goal has selected annual performance measures, but
    not every objective in the general goal is represented in the
    performance plan.
        Question. To what extent does your performance planning structure
    differ from the account and activity structure in your budget
    justification?
        Answer. The annual performance plan identifies progress toward
    general goals. However, it does not contain specific measures for each
    objective under the general goals.
        Question. Do you plan to propose any changes to your account
    structure for fiscal year 2000?
        Answer. At present, there has been no decision to change our
    account structure for fiscal year 2000, although final agency decisions
    on the fiscal year 2000 proposal will not be completed until June of
    this year when budgets are due to the Department.
        Question. How were performance measures chosen?
        Answer. Performance measures were chosen as part of the Agency's
    cycle of long-and short-range planning, budgeting, and program
    evaluation. Each program has its own set of ongoing, or formative,
    evaluation activities in place to identify strengths and weaknesses,
    and these evaluations are used by the program managers to develop new
    performance goals and strategies. These evaluations include station
    reviews, port reviews, program reviews, customer and stakeholder needs
    assessments, and the results of public hearings, meetings, and symposia
    on current scientific issues. In addition, as part of its annual
    performance planning cycle, APHIS is developing performance monitoring
    systems which will be refined over the next several years, so that
    program managers can routinely evaluate program effectiveness.
        Question. How did the agency balance the cost of data collection
    and verification with the need for reliable and valid performance data?
        Answer. The need for reliable and valid performance data is
    considered a high priority within the agency's information technology
    needs. Cost may affect how quickly we can reach our goal of having
    reliable and valid performance data for all our programs, especially
    given the resources devoted to the Year 2000 problem, but we are
    committed to eventually reaching the goal.
        Question. Does your plan include performance measures for which
    reliable data are not likely to be available in time for your first
    performance report in March 2000?
        Answer. There will likely be some performance measures for which
    reliable data will not be available in time for our first performance
    report in March 2000.
        Question. What are the key performance goals from your fiscal year
    1999 Annual Performance Plan that you recommend this subcommittee use
    to track program results?
        Answer. We believe that none of the performance goals should be
    overlooked in tracking program results.
        Question. In developing your Annual Performance Plan, what efforts
    did your agency undertake to ensure that the goals in the plan include
    a significant number of outcome measures?
        Answer. Ever since the passage of the Government Performance and
    Results Act, APHIS planning, budget, and program staffs have been
    engaged in efforts to change the mind set within the agency toward
    outcomes versus outputs. Initially, this work was done in small groups
    focusing on selected pilot line items, then broadened to encompass all
    of the agency's funded activities.
        Question. Do you believe your program managers understand the
    difference between goals that measure workload (output) and goals that
    measure effectiveness (outcome)?
        Answer. We believe that most of our program managers do recognize
    the distinction, although there may still be a few who don't. We are
    making every effort to promote awareness, through a number of avenues
    including training sessions, redesigned data collection formats, and
    interaction between program, policy, and budget staffs.
        Question. What are some examples of customer satisfaction measures
    that you intend to use? Please include examples of both internal and
    external customers.
        Answer. In our Wildlife Services program, we will measure
    ``customer satisfaction with Wildlife Services livestock protection.''
    For Horse Protection, the following measure has been developed: ``level
    of customer satisfaction with the Horse Protection program expressed by
    a random sample of customers in a mail survey.'' For Veterinary
    Biologics, we will measure ``public confidence in the safety and
    efficacy of biological products.'' These are but a few of many customer
    satisfaction measures that have been developed.
        Question. How were the measurable goals of your fiscal year 1999
    Annual Performance Plan used to develop your fiscal year 1999 budget?
        Answer. The fiscal year 1999 budget was developed last Spring,
    before the fiscal year 1999 Annual Performance Plan was completed.
    However, each program in APHIS has its own set of ongoing, or
    formative, evaluation activities in place to identify strengths and
    weaknesses, and these evaluations are used by the program managers to
    develop new performance goals and strategies and prioritize activities
    in their budgets. In addition, as part of its annual performance
    planning cycle, APHIS is developing performance monitoring systems
    which will be refined over the next several years, so that program
    managers can routinely evaluate program effectiveness. We will continue
    to work in the coming years toward integrating these processes so that
    program goals can translate into resource needs.
        Question. If a proposed budget number is changed, up or down, by
    this committee, will you be able to indicate to us the likely impact
    the change would have on the level of program performance and the
    achievement of various goals?
        Answer. Yes, we would be able to estimate the likely impact.
        Question. Do you have the technological capability of measuring and
    reporting program performance throughout the year on a regular basis,
    so that the agency can be properly managed to achieve the desired
    results?
        Answer. We have made some progress in this area, but the work is
    not finished. Our field and headquarters personnel are working together
    to develop the necessary technological capabilities to meet reporting
    requirements.
        The Government Performance and Results Act requires that your
    agency's Annual Performance Plan establish performance goals to define
    the level of performance to be achieved by each program activity set
    forth in your budget. Many agencies have indicated that their present
    budget account structure makes it difficult to link dollars to results
    in a clear and meaningful way.
        Question. Have you faced such difficulty?
        Answer. We have not experienced any difficulty from the standpoint
    of having a compatible budget structure. The five general goals of the
    APHIS strategic plan correspond to the five functional components of
    our budget (Pest and Disease Exclusion, Plant and Animal Health
    Monitoring, Pest and Disease Management, Animal Care, and Scientific
    and Technical Services). Similarly, the objectives listed under each
    goal correspond directly to funded line programs under each functional
    component. In our annual performance plan, we developed a set of annual
    performance targets for each goal of the strategic plan. For many of
    our pest and disease eradication goals and objectives, the annual
    performance targets describe a progression leading to the long-term
    eradication objectives of the strategic plan. For other, more
    difficult-to-measure goals, further efforts are underway to quantify
    performance baselines. Once the performance baselines have been
    established, it will be possible for APHIS to set targets for the goals
    of the strategic plan and then link them more fully to the performance
    plans.
        Question. Would the linkages be clearer if your budget account
    structure were modified?
        Answer. We do not believe modifying the budget account structure
    would significantly improve our ability to measure program performance.
        Question. If so, how would you propose to modify it and why do you
    believe such modification would be more useful both to your agency and
    to this committee than the present structure? How would such
    modification strengthen accountability for program performance in the
    use of budgeted dollars?
        Answer. We do not see a need to modify the budget structure at this
    time.
        Question. Does your fiscal year 1999 performance plan-briefly or by
    reference to your strategic plan-identify any external factors that
    could influence goal achievement?
        Answer. The performance plan does not specifically mention or
    identify external factors that could influence goal achievement. Those
    factors are enumerated and discussed in the Agency's strategic plan.
        Question. If so, what steps have you identified to prepare,
    anticipate and plan for such influences?
        Answer. APHIS takes into account a wide range of external factors
    in developing its overall strategy for accomplishing its mission. As
    the risk of pest and disease entry increases due to emerging animal and
    plant health issues, increases in global trade and passenger movement,
    and improved transportation technologies, APHIS is increasingly
    challenged to update prevention strategies, monitoring systems, and
    response actions that ensure effective management of those risks and
    preserve our markets. We must also continue to update strategies and
    methods to ensure that solutions are practical and environmentally
    sound.
        Question. What impact might external factors have on your resource
    estimates?
        Answer. External factors may have a significant impact on our
    resource estimates, as emergency outbreaks of fruit flies, citrus
    canker, and Karnal bunt have shown in recent years. Our aim, however,
    is to find solutions and adjust priorities so that we can accomplish
    our mission within resource estimates.
        Question. Through the development of the Performance Plan, has the
    agency identified overlapping functions or program duplication?
        Answer. No, we have not.
        Question. If so, does the Performance Plan identify the overlap or
    duplication?
        Answer. We have not identified overlapping functions or program
    duplication.
        Future funding decisions will take into consideration actual
    performance compared to expected or target performance. Given that:
        Question. To what extent are your performance measures sufficiently
    mature to allow for these kinds of uses?
        Answer. For many of our programs we are still in the process of
    establishing baselines and shifting measures from outputs to outcomes.
    We are also working to identify those external factors which could
    impact on our ability to achieve our targets. However, in certain
    eradication programs such as brucellosis and screwworm, the performance
    measures are as mature as possible and may be suitable for such uses.
        Question. Are there any factors, such as inexperience in making
    estimates for certain activities or lack of data, that might affect the
    accuracy of resource estimates?
        Answer. Both factors exist to some degree and would affect the
    accuracy of resource estimates. Another factor which interferes with
    accurate resource estimates is the occurrence of unexpected outbreaks
    of emerging pests and diseases.
        Question. Based on your fiscal year 1999 performance plan, do you
    see any need for any substantive revisions in your strategic plan
    issued on September 30, 1997?
        Answer. No. We see the need for some small adjustments, but none
    that we would consider substantive.
                                  boll weevil
        Question. Is it accurate that USDA and Land-Grant University
    analyses have concluded that the boll weevil program has generated
    significant economic and environmental benefits in the Southeastern
    states?
        Answer. A report written by USDA and University of Georgia
    researchers entitled--Cotton Production and the Boll Weevil in Georgia:
    History, Cost of Control, and Benefits of Eradication--summarizes the
    tremendous economic and environmental benefits of boll weevil
    eradication in Georgia. According to the study, cotton production has
    increased dramatically each year since the program was completed in
    1990. Average yield has increased from 482 pounds per acre in the pre-
    eradication period (1971 to 1986) to 733 pounds per acre in the post
    eradication period (1991 to 1995). Acreage has increased from an
    average of 288,000 to 770,000, and average gross crop revenues have
    increased from $70 million to $400 million per year. In addition, net
    crop revenues (gross revenues less insect pest management costs and
    amount of damage) have increased from $187 to $451 per acre.
        The report also identifies environmental advantages to growers and
    residents of the State due to a significant decrease in insecticide use
    in Georgia cotton. The average number of insecticide treatments have
    decreased from 14.4 per acre in the pre-eradication period to 5.4 per
    acre in the post-eradication period. In most cases, the materials used
    are more specific, and the amount of active ingredient applied during
    each treatment has been reduced from pounds per acre to a few ounces
    per acre.
                                     ______

                      Questions Submitted by Senator Burns
                           bison quarantine facility
        Question. Mr. Secretary, last year this committee provided the
    Animal Plant Health Inspection Service (APHIS) with $1 million to
    construct a bison quarantine facility in the state of Montana outside
    the boundaries of Yellowstone National Park. Could you provide the
    Committee with an update on the current status of those funds?
        Answer. APHIS has not yet obligated the $1 million for the bison
    quarantine facility. Presently, APHIS is in discussion with the State
    of Montana to determine a location for the facility and to identify
    roles and responsibilities for both APHIS and the State. Although a
    location has not been determined, APHIS has consulted with an
    engineering firm in Utah to put together a preliminary generic plan for
    construction. Upon selection of a site, a specific design plan for the
    facility will be developed. Once the design phase is complete,
    construction will begin. Due to the mild winter thus far in Montana,
    the need for such a facility has not been critical. APHIS expects that
    the facility will be operational by the winter of 1999/2000.
        Question. Would you also provide the Committee a breakdown of the
    negotiations that have occurred between APHIS and the State of Montana
    on this particular facility?
        Answer. Negotiations with the State of Montana are underway. Since
    January 1998, contacts have been made with the newly hired State
    Veterinarian in Montana to meet and discuss the facility. Items for
    discussion include operations management, authority issues, and a site
    location.
        Question. Could you also provide us with a status report on the
    agency's involvement in the Environmental Impact Statement being
    designed to address the bison/brucellosis problems in Yellowstone
    National Park?
        Answer. The National Park Service (NPS) is the lead Agency for the
    Environmental Impact Statement (EIS). APHIS is a cooperator. In our
    role as cooperator, APHIS has participated in the preparation, review,
    and evaluation of the alternatives of the EIS. APHIS has also provided
    assistance with assessing the economic impacts of actions on ranchers
    in the area. As a cooperator, APHIS is committed to providing input
    concerning brucellosis pathogenesis, epidemiology, and disease
    management methods.
                                  brucellosis
        Question. What is the current count of herds in the United States
    currently infected with brucellosis?
        Answer. As of February 28, 1998, there were 12 cattle herds under
    quarantine in the United States for brucellosis. These 12 herds were
    located in Texas. In addition, one privately owned bison herd in South
    Dakota was under quarantine.
        Question. What is APHIS' assessment of the science and research
    currently available with respect to brucellosis in livestock, captive
    wildlife and free ranging wildlife?
        Answer. Several research projects are ongoing and others have been
    conducted that provide or will provide critical information towards
    resolving the brucellosis problem in the Greater Yellowstone Area.
    These projects address disease transmission, pathogenesis,
    epidemiology, and vaccine safety and efficacy. However, additional
    information is needed including vaccine delivery systems, the effect of
    the vaccine on non-target animals, and management methods. Many of
    these studies require a statistically significant number of animals to
    validate study results and facilities which can handle large numbers of
    animals.
        Question. What are the principal centers and facilities for
    research on disease transmission between captive and free ranging bison
    and wildlife?
        Answer. The principal centers known to APHIS for research on
    transmission between captive and free ranging bison and wildlife are
    (1) Yellowstone National Park, (2) the Agricultural Research Service's
    facility in Ames, Iowa, (3) Texas A&M University, and (4) the Idaho
    Wildlife Laboratory/Caine Veterinary Teaching Center, Caldwell Idaho.
    Other facilities work on various aspects of brucella research but they
    do not have facilities to house bison for transmission studies.
        Question. What does APHIS see as the principal scientific, health,
    and research issues involving captive and free ranging bison and
    wildlife?
        Answer. APHIS feels that current brucellosis control and
    eradication methods are adequate to eradicate the disease from the
    Greater Yellowstone Area (GYA). However, implementing these standard
    procedures could potentially have a significant negative impact on the
    number of bison in the Yellowstone National Park (YNP) herd. Therefore,
    additional information is needed to address management procedures that
    could be used in YNP to eliminate infection and limit the impact on the
    herd populations. Issues that APHIS considers principal to implementing
    a brucellosis control plan in the GYA include evaluating vaccine safety
    and efficacy in a significant number of bison and elk; developing a
    variety of vaccine delivery systems that can be used in a variety of
    situations in YNP and surrounding elk feedgrounds; and evaluating newer
    vaccines with more potential for efficacy. Additional information that
    would be very useful includes improving elk habitats to prevent
    commingling on elk feedgrounds; additional studies in transmission,
    epidemiology, and pathogenesis in bison and elk (especially in males);
    and latency in bison and elk calves.
        Question. The Northwest Pilot Project is not working. The Canadians
    set protocols so unfriendly toward feedlots in the country that at this
    point in time only three have signed onto the program. The United
    States/Montana protocols are not applicable because USDA-APHIS approved
    the Regionalization Docket. I have several questions here so, first
    what can APHIS do to get Ag Canada to address the issues of rewriting
    the Northwest Protocol, and to expedite the development of a Canadian
    Regionalization document?
        Answer. The Canadian Cattlemen's Association (CCA) has already
    approached the Canadian Food Inspection Agency (CFIA) about adjusting
    the protocol. Their concerns reflect the issues that Montana producers
    have raised. CFIA is willing to address these issues on a scientific
    basis and continues to work with CCA to do so. Therefore, at this time,
    the process has been started. We have urged the industries on both
    sides of the border to cooperate with this process.
        Question. The producers in Montana are not very happy about the
    current situation. Canada got all it was asking for and the United
    States, particularly those states in the northwest got almost nothing.
    Could you explain to me what happened here?
        Answer. This project was developed over several years at the urging
    of both the National Cattlemen's Beef Association (NCBA) and the
    Canadian Cattlemen's Association (CCA). Both groups were involved with
    drafting the specifics of the project. Canada, which has a notice and
    comment regulatory procedure similar to the U.S. Federal Register
    process, published the proposed changes, including the requirements
    that feedlots must meet, for public comment. Neither the NCBA nor the
    CCA submitted any negative comments on this proposal. The regulatory
    changes were finalized and published. These changes allowed Canada to
    accept untested feeder cattle from any state that met the provisions.
        The U.S. commitment to this project addressed brucellosis and
    tuberculosis testing requirements for cattle from Canada. APHIS has the
    authority to waive federal requirements when it is determined that a
    risk is not present to the domestic livestock population. Using this
    authority, we evaluated Canada's animal health status for these
    diseases and decided to waive the testing requirements. At the same
    time, we were in the rule-making process with our regionalization
    document, which proposed many changes to the United States' animal
    health import requirements. The agreement to waive the Canadian
    requirements was made with the understanding that any final changes as
    decided in the rulemaking process would supersede any waivers. Final
    changes from the regionalization regulations were made in fall 1997 and
    took effect in November 1997.
        Question. Why didn't we ask for some sort of reciprocal
    regionalization document?
        Answer. This pilot was an industry driven project. The industry
    wanted to ship untested feeder cattle into Canada. The Agency pursued
    this request with Canada. Canada is primarily concerned with bluetongue
    and anaplasmosis. Currently, there is not enough available data on the
    status of these diseases in Montana to support any type of a
    regionalization request. We are working with Montana to obtain this
    data.
                               wildlife services
        Question. Mr. Dunn, the Wildlife Services program is obviously
    important to a broad range of the American public. It is involved with
    livestock protection, reintroduction of the wolf, public health and
    keeping wildlife away from airports. In four of the past five years the
    Department's budget has proposed large decreases in the operational
    budget. Can you explain to the Committee why this is happening with a
    program that is so important to the public safety and to wildlife
    conservation?
        Answer. Recently proposed decreases, including the fiscal year 1999
    request, have been based upon a cost sharing proposal which constitutes
    an effort to reduce Federal Costs by encouraging increased cooperative
    contributions to the program. This approach maintains total cooperative
    funding and cooperative program efforts at the current level, provided
    cooperators meet 50 percent of total program costs. If, however,
    affected cooperators did not increase their contributions, the Federal
    amount would be reduced and program activity would be reduced
    accordingly.
        Question. Is this a decision by the Office of Management and Budget
    (OMB)?
        Answer. WS has maintained a policy for several years in which
    cooperators must provide a minimum of 50 percent of total funding in
    all new agreements. In addition, WS has made and continues to make
    every effort to increase cooperative funding in all agreements, old and
    new. This is evidenced by the dramatic increase in total cooperative
    contributions, increasing from $13,957,909 in fiscal year 1990, to
    $26,703,790 in fiscal year 1997.
        Question. If so, has the Secretary done anything to point out to
    OMB the importance of this program?
        Answer. We met with representatives of OMB to discuss the cost
    sharing proposal. We believe that OMB understands the importance of the
    program.
        This Committee, in response to the public need, has restored funds
    in each of the years when decreases have been proposed.
        Question. Can we expect that the Department's budget will continue
    to propose such cuts in the coming years that the Committee will have
    to restore?
        Answer. Constantly changing program demands and budgetary
    circumstances may dictate a future need to propose a reduction for the
    program, but APHIS currently has no specific plan to request further
    reductions for Wildlife Services.
        Question. On the east coast we hear a lot about the methods used to
    control wildlife and predators that are causing damage. With this type
    of criticism, why is the Department proposing to cut the budget for
    research on new methods of animal control?
        Answer. In fiscal year 1996, the National Wildlife Research Center
    (NWRC) conducted a survey of wildlife damage management experts to
    determine highest priority advanced research needs. The survey resulted
    in the identification of priority needs for which additional emphasis
    is required. The new NWRC was established to meet such advanced needs
    and had anticipated taking advantage of new facilities to implement
    these expanded/enhanced priority areas in fiscal year 1999. However,
    the animal research building support wing and the outdoor animal
    holding and testing pens must be constructed before identified priority
    research can be fully supported. This will impact APHIS' ability to
    develop, improve, and maintain Environmental Protection Agency and
    Federal Drug Administration approved chemicals, vaccines, and drugs
    used for wildlife damage management.
                       national wildlife research center
        Question. Mr. Dunn please describe for the Committee what your
    plans are for completing the new research facility in Fort Collins,
    Colorado.
        Answer. On August 4, 1997, the Denver Wildlife Research Center in
    Lakewood, Colorado, was officially closed, and the National Wildlife
    Research Center (NWRC) in Fort Collins, Colorado, was opened. As of
    that date, all NWRC headquarters personnel began working from the NWRC
    Animal Research Building and GSA leased facilities in Fort Collins.
    Construction of the 82,000 sq ft office/laboratory/headquarters
    building began in late 1997, and is expected to be ready for occupancy
    in late 1998. At that time all NWRC headquarters personnel again will
    be located at one site.
        The remaining unfunded components of the 43 acre Master Plan as
    approved in 1989, include the outdoor animal pens and several
    associated support buildings, including a warehouse, bulk chemical
    storage facility, and a garage/maintenance/shop building, collectively
    known as the Outdoor Pen Project. Another essential component in NWRC
    construction, and one which is crucial for research scientists in the
    development of alternative control methods is the Animal Research
    Building (ARB) support wing. In addition, the completion of the full
    complement of animal holding and testing rooms in the ARB, and
    associated design and bid documents for this and for a pump house,
    irrigation piping, landscaping/visual barriers, fencing, etc., remain
    to be constructed.
        Additionally, a one-time investment is required for equipment and
    technology for the NWRC to fully utilize the new research facilities.
    This will allow the Center to maintain its research capabilities in
    terms of modern technologies, such as analytical instrumentation,
    computing infrastructure, information transfer capability, etc.
        Question. When do you propose to have it completed?
        Answer. Until funding sources are identified and secured for the
    remaining $22.75 million in unfunded components of the NWRC Master
    Plan, a completion date for the Center cannot be projected.
        Question. Why have you not requested funds to complete the
    facility?
        Answer. Although APHIS understands the importance in completing the
    NWRC, because of budgetary constraints, funding for NWRC construction
    could not be included in the fiscal year 1999 request.
                               50/50 cost sharing
        Question. Mr. Dunn, I have noticed that you have once again
    proposed a 50/50 cost share arrangement for Wildlife Services, the same
    proposal rejected by Congress last year. Do you have more recent
    Federal/cooperative data available, and if so what is the disparity
    amount by State based on this data?
        Answer. The following chart shows disparity amounts by state, based
    on the same formula used in developing the fiscal year 1999 budget
    proposal, but is based on fiscal year 1997 rather than fiscal year 1996
    data. The formula used for determining disparity amounts involves
    totaling both Federal and cooperative funding, and then determining the
    amount below 50 percent of the total, which is then the disparity
    amount.
        [The information follows:]

    ----------------------------------------------------------------------------------------------------------------
                                                            Fiscal year 1997--
                          State                      --------------------------------  Total program     Disparity
                                                       Appropriation    Cooperator
    ----------------------------------------------------------------------------------------------------------------
    Arkansas........................................         $18,890  ..............         $18,890          $9,445
    Colorado........................................         534,997        $236,519         771,516         149,239
    Idaho...........................................         672,186         488,089       1,160,275          92,048
    Iowa............................................          16,325          15,475          31,800             425
    Wyoming.........................................         701,924         571,845       1,273,769          65,039
                                                     ---------------------------------------------------------------
          Total.....................................       1,944,322       1,311,928       3,256,250         316,196
    ----------------------------------------------------------------------------------------------------------------

        Question. Was this something that the Department came up with or
    did this possibly come from OMB?
        Answer. WS has maintained a policy for several years in which
    cooperators must provide a minimum of 50 percent of total funding in
    all new agreements. In addition, WS has and continues, to make every
    effort to increase cooperative funding in all agreements, old and new.
    This is evidenced by the dramatic increase in total cooperative
    contributions, increasing from $13,957,909 in fiscal year 1990, to
    $26,703,790 in fiscal year 1997.
        Question. Wildlife Services' operational program is funded from a
    single line item, and I understand that overall, the program has more
    cooperative than Federal funding (probably more than any other Federal
    agency). Why does the Administration insist on micro-managing Wildlife
    Services down to the state level when cooperative funding objectives
    are being met nationally?
        Answer. A state by State analysis and subsequent cost sharing
    proposal was initiated not only because of States in which cooperator
    contributions are minimal or nonexistent, but also because of the
    States in which cooperative contributions far exceed Federal funding.
    The cost sharing proposal is made in an effort to encourage cooperators
    to contribute a fair share of funding toward cooperative program
    activity in each State. This approach greatly enhances the value of
    Federal funds invested. By encouraging a minimum 50 percent cooperator
    contribution level, the Agency can accomplish a more equitable
    distribution of Federal funds, can accomplish the same level of program
    activity with less Federal funding, and can consider future needs and
    new cooperative agreement proposals on a more programmatic and equal
    basis.
        Question. You are seeking to eliminate cost sharing disparity in
    each state, and you are requesting a reduction in funding because of
    this, yet at the same time, I understand you are projecting funding
    shortfalls for activities such as wolf control. Efforts to increase
    cooperative funding and to reduce Federal costs are commendable, but
    shouldn't program shortfalls be addressed before requesting reduced
    funding?
        Answer. The purpose in the fiscal year 1999 proposal was to
    facilitate a more equitable distribution of Federal WS funds among
    States, and to encourage cooperators to increase contributions for
    activities such as wolf control.
        It is true that there is a projected shortfall of approximately
    $70,000 in fiscal year 1998 for wolf management efforts in Montana,
    Idaho, and Wyoming, and a projected shortfall of about $235,000 in
    fiscal year 1999. In Minnesota, wolf control work is currently
    conducted solely with APHIS funding of about $250,000 per year with a
    projected shortage in fiscal year 1998 of about $30,000, and a
    projected shortfall in fiscal year 1999, of $100,000. These figures
    exclude inevitable wolf damage control costs relating to reintroduction
    of the Mexican wolf in Arizona, which will result in an additional need
    of about $100,000 in fiscal year 1999. Although the Agency must seek
    alternative means for funding these shortages in the short term, APHIS
    hopes that current efforts to reduce Federal program costs where
    possible, may permit shifting some funds to wolf damage control
    efforts.
        Question. Mr. Dunn, the livestock industry in Montana and other
    western states objected to the reintroduction of wolves. With this 50/
    50 cost share proposal are you proposing that they now have to share in
    the cost of controlling the wolves which they did not agree with in the
    first place?
        Answer. The cost sharing proposal would only affect those States
    which do not currently contribute a minimum of 50 percent of total
    funding toward cooperative program activities. As Montana is one of
    those States in which cooperative contributions totaling $816,258, far
    exceed Federal contributions of $562,055, the State would not be
    affected by this proposal.
        Question. Are there any exceptions to the cost share arrangement as
    it is now proposed?
        Answer. The cost sharing proposal would be applied to all States
    equally, without exception. To do otherwise, would defeat one of the
    proposal's goals of eliminating inequities in the State by State
    distribution of Federal funds as much as possible.
                                  wolf control
        Question. I understand that Wildlife Services is responding to an
    increasing number of requests for wolf control assistance in the Rocky
    Mountains and in Minnesota. How much of this increase is due to Fish
    and Wildlife Service wolf reintroduction efforts?
        Answer. APHIS responded to 76 requests for assistance due to
    suspected wolf predation in Idaho, Montana, and Wyoming, in fiscal year
    1997. Approximately two thirds of these were due to reintroduced
    wolves. Minnesota has no wolf reintroduction, but is experiencing a
    great increase in the natural wolf population.
        Gray wolves began naturally moving back into northwestern Montana
    from Canada in the mid-1980s. 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 with the assistance of WS personnel. These animals were
    released into Yellowstone National Park and central Idaho and are
    increasing in number. Naturally occurring populations from Canada and
    the reintroduced animals in Idaho and Yellowstone National Park now
    total estimated 235 adult wolves with an additional 134 pups produced
    this year.
        In August 1974, the eastern gray wolf was classified as an
    endangered species. At the time, the Minnesota wolf population was
    estimated at 500 to 1,000 animals and occupied a range of approximately
    19,000 square miles. The Minnesota wolf population is increasing at an
    annual rate of 3 to 5 percent and expanding its range considerably. By
    1996, the population had reached an estimated 2,200 to 2,300 wolves
    which had expanded their range to more than 39,000 square miles. APHIS
    verified 195 incidents of wolf predation on domestic animals in
    Minnesota in fiscal year 1997 and captured 226 wolves.
        After the wolf was classified as endangered, livestock producers
    became dependent on the Federal Government for protection from wolf
    depredations on their livestock in Minnesota. In Idaho, Montana, and
    Wyoming, wolf recovery and reintroduction have caused restrictions on
    the use of traditional methods of control where wolves may exist. The
    endangered status in Minnesota and the restriction on control methods
    due to reintroduction in Idaho, Montana and Wyoming, in addition to
    increasing populations of natural and reintroduced animals, have all
    contributed to great increases in the number of requests for
    assistance.
        Question. How much funding is Fish and Wildlife Services currently
    providing to APHIS for this work?
        Answer. In fiscal year 1997, the FWS and APHIS each agreed to
    contribute $100,000 to provide assistance at current wolf population
    levels, in dealing with wolf predation on livestock in Idaho and
    Montana. In Minnesota, wolf control work is accomplished solely with
    APHIS funding.
        Question. What are these efforts costing APHIS in fiscal year 98
    and projected to cost in fiscal year 99, and can you provide the same
    level of response with an increasing volume of work?
        Answer. In addition to the total of $200,000 provided under
    cooperative agreement equally from APHIS and FWS, there is a projected
    shortfall of approximately $70,000 in fiscal year 1998 for wolf
    management efforts in Montana, Idaho, and Wyoming. APHIS is projecting
    costs in these States to total $435,000 in fiscal year 1999, creating a
    shortfall of about $235,000. Also, reintroduction of the Mexican wolf
    in Arizona, initiated in January of this year, will result in an
    additional need of about $100,000 in both fiscal year 1998 and fiscal
    year 1999. FWS has agreed to provide $100,000 to deal with initial wolf
    predation problems in Arizona in fiscal year 1998. In Minnesota, where
    wolf control work is conducted solely with APHIS funding of about
    $250,000 per year, a $30,000 shortage is expected in fiscal year 1998,
    and total costs in this State are expected to be $380,000 in fiscal
    year 1999. In addition, wolf expansion into Wisconsin is projected to
    cost approximately $10,000 in fiscal year 1999. APHIS will have to
    adjust response levels to match available funding.
                introduction of exotic plant and animal disease
        Question. A national news broadcast last week portrayed the risk of
    deadly disease originating in livestock all around the world, sometimes
    in a matter of days or hours. In some cases, such as the Hong Kong
    Chicken Flu, these diseases can be transmitted to humans.
        What steps has the agency taken to provide a proper defense against
    unintentional or intentional introduction of exotic plant and animal
    diseases into this country?
        Answer. APHIS delivers a number of programs that protect the health
    of U.S. plant and animal resources, such as preclearance inspection,
    permit regulations, port of entry inspection, quarantine treatment,
    detection survey, and pest and disease eradication. However, dramatic
    increases in international travel and trade, and containerization of
    cargo make total reliance on traditional inspection techniques and
    procedures impractical. Therefore, APHIS is developing a comprehensive
    safeguarding system to augment these activities and improve our pest
    and disease exclusion efforts.
        The cornerstone of the safeguarding model is traditional point-of-
    entry inspection, but the model expands the use of foreign source
    intervention, increased point-of-entry inspection, smuggling
    intervention, exotic plant pest detection, and management of exotic
    pest incursions. A strong scientific base is fundamental to all parts
    of the system. The safeguarding model is still under development.
                      boll weevil/brucellosis eradication
        Question. The boll weevil eradication program has been successfully
    completed in some states and producers there are enjoying lower
    production costs, higher land values, and other benefits. Other states,
    such as Arkansas, are just now beginning the eradication process
    (pursuant to a timetable earlier agreed upon by the cotton industry)
    but are being told the budget is being reduced by $12 million.
        Does the Agency feel it would not harm the entire program to stop
    the eradication effort before it is complete?
        While the FSA boll weevil loan program allows the program to
    accelerate, is the intention of the agency to now phase out the grant
    program in lieu of the loan program? If so, does that not give an
    unfair advantage to those regions of the country where eradication was
    complete before this shift in policy?
        Would it not be better for all producers, the environment, and your
    agency mission to proceed with the eradication program as quickly as
    scientifically appropriate?
        Answer. We believe that areas where the boll weevil no longer
    exists--Virginia, North Carolina, South Carolina, Georgia, Florida,
    California, Arizona, most of Alabama, middle Tennessee, and
    northwestern Mexico--as well as current active zones would suffer if
    the eradication program were to stop expanding and moving toward
    completion.
        Since boll weevil eradication has proven to be successful and
    profitable for cotton growers, program beneficiaries will assume a
    greater financial responsibility for program costs. Additionally,
    growers had expressed a desire to have primary control over the daily
    operations of their program.
        Earlier program areas assumed a greater degree of risk in joining
    the eradication effort since the efficacy of the technology was still
    unproven. Now that the boll weevil has been effectively eradicated from
    over 4 million acres, the technology is generally accepted and the
    risks to growers has been dramatically reduced. It is reasonable that
    the early ``pioneers'' of eradication received more significant
    assistance. In an effort to mitigate the impact of reduced Federal
    grants to the boll weevil eradication foundations, the USDA provides a
    loan program with very favorable terms to supplement funds raised
    through grower assessments and eases cash flow problems. In fact, the
    FSA loan program makes more total funds available for boll weevil
    program expansion than have been available under the traditional
    appropriations and grants approach. Because of the tremendous benefits
    cotton growers can gain from boll weevil eradication, we believe that
    they will choose to take advantage of the loan program. It provides a
    reasonable alternative that is cost beneficial.
        It would be very beneficial for the entire cotton industry and the
    environment if the eradication program moved quickly to completion
    since unnecessary delays usually result in higher program costs and
    additional program constraints.
                               imported fire ant
        Question. The imported fire ant continues to be a growing problem
    all across the South affecting property, health, and safety. The budget
    proposal again zeros out the appropriation for the fire ant stating, in
    part, that since there is no real control, there is little you can do.
    However, you also state that the fire ant program at the University of
    Arkansas at Monticello along with the University of Florida has been
    working on the introduction of a natural enemy of the fire ant that
    might be a successful control tool. Would you provide an update on the
    University of Arkansas at Monticello program?
        Answer. APHIS has a cooperative agreement with the University of
    Arkansas at Monticello to conduct research on imported fire ants. The
    three areas funded by this agreement are a self-supporting community
    abatement program, an economic impact assessment, and an Agricultural
    Research Service (ARS) biological control project.
        The abatement program uses several public information tools to help
    area residents better manage fire ants using existing control methods.
    The economic assessment has concluded that pesticides alone will not
    provide a long-term solution to the problem and that the focus for IFA
    control should turn to non-pesticide strategies, such as biological
    controls. In the biological control project, ARS has identified three
    organisms for potential impact on the imported fire ant (IFA). These
    organisms include a microsporidium disease (Thelohania), a species
    complex of phorid flies (Phoridae), and a social parasitic ant
    (Solenopsis dagarri). Currently, ARS scientists are studying several
    colonies of these agents at their quarantine facility in Gainesville,
    Florida. These studies, which will likely continue until 2001, are
    aimed at introducing these organisms into the U.S. from South America.
    Once they are introduced, APHIS would mass produce and distribute the
    biological control agents. We began field release of one Phoridae in
    fiscal year 1997 and will begin field release of the parasitic ant by
    the Fall of 1999. None of the identified organisms by themselves would
    be enough to eradicate IFA from the United States because the pest is
    so widespread. We hope, however, that some combination of these methods
    will eventually enable native ants to compete effectively with the IFA
    to reduce economic losses and public health risks associated with IFA.
        Question. What efforts are you making to ensure that the ant does
    not further spread by interstate movement of nursery plants or other
    hosts of the ant?
        Answer. We are working to prevent further spread of the imported
    fire ant (IFA) by enforcing the Federal quarantine and cooperating with
    infested States to regulate articles like nursery stock and soil moving
    equipment. Also, we will continue evaluating the efficacy of regulatory
    treatments for preventing further spread of the IFA and revise our
    regulations and procedures as necessary. Even if the IFA line item were
    eliminated, the States could maintain a strong regulatory program with
    the Federal quarantine guidelines and industry cooperation. In
    addition, States have, in many cases, proven themselves able to
    eradicate small isolated infestations outside the regulated area.
                      el nino and other weather phenomena
        Question. The El Nino and similar events are credited with erratic
    weather patterns this year. Notably, the Mid-Atlantic region has had a
    very mild winter that suggests there may have been little winter-kill
    of insect pests. The storms in the Dakotas last year were predicted to
    cause an increase in grasshopper problems. It appears shifting weather
    patterns all across the nation are likely to have some affect on insect
    and other life.
        Has APHIS made or is APHIS aware of any forecasts of unusual insect
    or pest problems this year resulting from erratic weather or other
    conditions?
        Answer. We expect higher than normal boll weevil numbers in all
    weevil-infested areas this spring due to the unusually mild winter
    experienced across much of the Cotton Belt. In addition, we expect to
    lose some ground in the leafy spurge program since the mild winter
    eliminated the insulating effect of snow causing an increase in the
    mortality of flea beetles. The Agency anticipates high grasshopper
    populations this summer if, as in the past, a drought follows the end
    of the El Nino weather pattern.
                    wildlife services and fish eating birds
        Question. For years, the growing aquaculture industry in the Mid
    South has been plagued by fish-eating birds, most notably, the Double
    Crested Cormorant. I understand agreements have recently been reached
    with the U.S. Fish and Wildlife Service which has issued a depredation
    order to reduce the economic losses to this industry?
        Answer. A double-crested cormorant depredation order was published
    in the Federal Register on March 4, 1998. This allows aquaculture
    producers to take action against cormorants without applying for
    individual permits from the U.S. Fish and Wildlife Service (FWS).
        Question. What effect will this order have on your program?
        Answer. With the publication of this order, APHIS has begun
    assisting producers in implementing the certification and reporting
    criteria required by the FWS in the depredation order. The depredation
    order requires APHIS to ``certify'' that an aquaculture facility has a
    cormorant depredation problem and has implemented nonlethal actions to
    reduce cormorant impacts before the producer can take depredating
    cormorants by lethal means. The order also requires producers to keep a
    record of numbers taken so that the FWS can asses the impact of these
    ``takes'' and evaluate the success of the depredation order. APHIS is
    currently developing policies to assist producers in implementing
    consistent certification and reporting procedures. With the elimination
    of the Federal permit requirement, the number of producers requesting
    technical assistance from APHIS for the control of cormorants is
    expected to increase.
        Question. Please provide an update on your activities to control
    fish-eating birds.
        Answer. Assistance is provided nationwide, with intense efforts
    concentrated in Alabama, Florida, and Mississippi, where three wildlife
    biologists are stationed. Wildlife biologists conduct onsite
    evaluations to assess damage and identify the species of bird or mammal
    causing the damage, and make control equipment available to producers.
    If exclusionary and scaring techniques fail to reduce losses, producers
    may now take a limited number of birds by lethal means, as a result of
    a cormorant depredation order recently issued by the U.S. Fish and
    Wildlife Services (FWS). In addition, APHIS' field research station in
    Starkville, Mississippi conducts research and field studies to improve
    current control methods, and to develop new ones.
                                     ______

            Grain Inspection, Packers and Stockyards Administration
                     Questions Submitted by Senator Cochran
                  packers and stockyards office restructuring
        Question. The fiscal year 1999 budget requests a one-time increase
    of $3 million to enable the Packers and Stockyards to reorganize its
    National and regional offices in response to an Office of Inspector
    General report recommending an office restructuring to improve the
    Agency's ability to monitor and investigate anticompetitive practices.
        Can this office restructuring be completed in fiscal year 1999?
    When do you plan to begin the consolidations of offices if the
    requested funding is provided?
        Answer. If funding is provided, GIPSA plans to complete its
    restructuring during fiscal year 1999. The Agency is currently moving
    forward with restructuring its headquarters operations by consolidating
    two operating divisions and six branches into one division and three
    branches. The requested funding will be used to consolidate Packers and
    Stockyards' 11 field offices into 3 regional offices located in Denver,
    Colorado; Des Moines, Iowa; and Atlanta, Georgia, to provide
    significantly larger staffs located in regions with concentrations of
    beef, pork, and poultry. In order to assure that basic services are
    maintained across the Nation, the reorganization plan also includes
    resident agents who will work out of their homes or one of three
    suboffices located in Sacramento, California; Fort Worth, Texas; and
    Lancaster, Pennsylvania. This restructuring is vital to meeting the
    Department's responsibility, and industry's concerns, relating to
    competitive behavior in the livestock, meat and poultry industries.
        Question. What savings will be realized as a result of this plan to
    consolidate and maintain fewer office?
        Answer. The purpose of the restructuring plan is to strengthen
    Packers and Stockyards' ability to investigate anticompetitive
    practices while providing greater flexibility and efficiency in the
    Agency's operations by creating larger staffs with a broader mix of
    investigative skills. Except for the one time cost, consolidating the
    offices is not expected to result in either an increase or decrease in
    cost. However, the budget request does include additional resources to
    address concerns about competition in livestock procurement and poultry
    contract growing arrangements.
        Question. Will this reorganization result in a staffing reduction
    as well?
        Answer. The reorganization will not result in a staff reduction,
    however, it will substantially increase GIPSA's capacity to assemble
    investigative teams possessing the appropriate mix of economic, legal,
    and industry expertise required to conduct complex investigations in a
    timely manner.
                             proposed new user fees
        Question. The fiscal year 1999 appropriations request assumes a net
    reduction of $17.3 million resulting from proposed new user fees:
    $2.819 million from new methods development fees, $3.598 million in new
    fees for standardization activities; and a net reduction of $10.859
    million in Packers and Stockyards license fees and a dealer trust.
    Please describe the proposed new user fees assumed in the President's
    fiscal year 1999 budget.
        Answer. The proposed new user fees are consistent with the overall
    effort to balance the budget and with the Administration's efforts to
    shift funding for programs which benefit identifiable groups.
        GIPSA develops, reviews, and maintains official U.S. grain
    standards that describe the grain characteristics in terms of physical,
    sanitary, and intrinsic value at the time of inspection. GIPSA also
    conducts applied research or tests that produce new or improved
    techniques for measuring grain quality. Because these standards and
    methods directly benefit and are used almost solely by the grain
    trading industry, and because they facilitate the orderly marketing of
    grain products, we believe that it is industry, rather than the general
    public, that should bear the costs.
        As for the Packers and Stockyards license fees, this proposal would
    impose a license fee on an estimated 23,000 subject firms to fund the
    cost of administering the Packers and Stockyards Act (Act). The
    principal purpose of the Act is to assure the integrity of the
    livestock, meat, and poultry markets for the benefit of producers. This
    includes fostering fair and open competition, guarding against
    deceptive and fraudulent practices and providing financial protection
    for livestock and live poultry sellers and contract poultry growers.
        The dealer trust proposal would amend the Act to create a dealer
    trust and 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. Dealer failures represent a
    significant amount of unrecovered losses in the livestock marketing
    chain. A dealer trust would minimize the losses suffered by producers
    because of dealers failing to pay.
        Question. Is new legislative authority required for all new user
    fees proposed assumed in the budget? Has the Administration submitted
    its legislative proposals for these fees to the Congress for
    consideration?
        Answer. Yes, new legislative authority is required for all of these
    proposed user fees. The GIPSA legislative proposals will be sent to
    Congress as part of a total USDA legislative proposal package in the
    near future.
        Question. Most of these user fee proposals have been proposed by
    the President in previous-year budgets but have not been acted upon by
    the Congress. Is there any indication that these fee proposals will
    have greater success in gaining the approval of the Congress and being
    enacted into law this year?
        Answer. No. We have had no prior indications of Congress' intent
    regarding the user fee proposals.
        Question. What impact will approval of the President's
    appropriations request for the agency have if the proposed user fees
    are not adopted?
        Answer. Approval of the President's appropriations request will
    significantly impact the Agency's standardization and methods
    development activities, as well as its Packers and Stockyards program.
                           agricultural concentration
        Question. The President's fiscal year 1999 budget requested
    increased resources to continue to implement the recommendations of the
    Secretary's Advisory Committee on Agricultural Concentration. The
    fiscal year 1999 budget requests an additional $505,000 for the
    Agricultural Marketing Service (AMS) to expand reporting of livestock
    and poultry markets. For the Grain Inspection, Packers and Stockyards
    Administration, an additional $795,000 and 15 staff years is requested
    for packer competition and industry structure investigations and
    analyses, and an additional $750,000 and 10 staff years is requested
    for poultry compliance investigations.
        Please address the need for the additional resources requested for
    fiscal year 1999 to address livestock and poultry competition and
    industry structure.
        Answer. The additional funds and personnel are needed for GIPSA to
    more aggressively pursue anticompetitive practices related to industry
    concentration. We have increased the breadth and depth of
    anticompetitive practice investigations during the past 3 years. Due to
    our limited staff resources, however, the added focus on
    anticompetitive practice investigations 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 five
    additional economists, three lawyers, and two computer programmers into
    investigative units that will conduct investigations involving
    anticompetitive practices. Such expertise will allow for more effective
    monitoring and enforcement of potential anticompetitive practices in
    the increasingly concentrated meat packing industry while also ensuring
    that fair and competitive practices continue to grow and develop as the
    industry progresses. The funds will be used in fiscal year 1999 to
    continue conducting major investigations of potential anticompetitive
    practices and detailed analyses in the slaughter steer and heifer,
    slaughter hog, slaughter cow, and slaughter lamb industries. Detailed
    evidence will be developed if, and where incidences of anticompetitive
    practices are disclosed. Additional personnel with economic,
    statistical, and legal expertise will be critical to completing the
    necessary analyses that are essential for a full and complete
    investigation.
        The additional $750,000 requested for poultry compliance is
    necessary for GIPSA to perform the in-depth compliance investigations
    necessary to ascertain if the firms are engaging in activities that may
    be unfair or unjustly discriminatory to the growers. These additional
    funds would permit GIPSA to be proactive in initiating and expanding
    the scope of our compliance investigations, and at the same time
    continue to timely investigate the large number of complaints being
    received from poultry growers. The funds will be used to place
    additional investigators in the field to conduct industry-wide
    investigations and address specific grower complaints on a more timely
    and thorough basis. This will enable us to examine the effect of
    practices that impact grower performance and pay on a broader scale.
        Question. What progress has been made to date in implementing the
    recommendations of the Secretary's Advisory Committee on Agricultural
    Concentration with the increased resources that have been provided for
    this purpose?
        Answer. USDA has taken several steps to implement the
    recommendations of the Secretary's Advisory Committee on Agricultural
    Concentration. USDA reviewed surveillance, investigation, and
    enforcement practices under the Packers and Stockyards Act and
    developed a restructuring plan to increase flexibility and efficiency
    in enforcing the trade practice and payment protection provisions of
    the Packers and Stockyards Act, and strengthened enforcement against
    anticompetitive practices.
        GIPSA is currently recruiting and integrating economists into
    investigative units that will conduct investigations involving
    anticompetitive practices. Major investigations of fed steer and heifer
    procurement in the Texas Panhandle, slaughter hog procurement in the
    central United States, and slaughter lamb procurement in the western
    United States are currently under way. The investigations will examine
    statistical relationships between livestock prices and various formula
    and other contract purchase arrangements.
        USDA has taken several actions to improve the market and price
    discovery information available to the livestock industry.
      --Producer pork reporting--USDA is expanding the Missouri pork
            producer price reporting pilot project. Officials from USDA
            have met with the National Pork Producers Council to explore
            expanding Missouri hog price reporting to three additional
            States--Illinois, Iowa and Wisconsin.
      --Expanded boxed beef reporting--Beginning September 1996, USDA
            extended its coverage of boxed beef sale commitments to cover
            the upcoming 15 business days, rather than the previous 10
            business days. Approximately 45 percent of volume traded is now
            reported, compared with 30-40 percent previously reported.
      --Value-based reporting--In October 1996, USDA initiated a weekly
            report of premiums and discounts being offered for cattle in
            the upcoming week by meat packers. All major packers are
            participating and feedlots can verify information through the
            report.
      --Livestock produced or traded under contract--Beginning with the
            December 1996, Hogs and Pigs Report. USDA is reporting the
            number of hogs produced under contract by large hog producing
            operations. Starting in October 1996, USDA also began issuing a
            weekly report indicating the number of cattle being produced
            under contract for delivery in future months. For those
            contracts calling for settlement relative to a futures market
            price, the basis difference from a futures market contract is
            also reported.
      --Regional beef quality and yield report--In February 1997, USDA
            initiated a report of beef grading results on a regional basis,
            for four regions of the country, that will provide better
            geographic detail than contained in the current national
            report.
        USDA will examine the relationship between prices reported to AMS
    and prices that GIPSA obtains during its investigations of competitive
    issues to evaluate whether USDA's publicly reported Market News prices
    accurately reflect packer procurement transactions.
                     government performance and results act
        Question. How are the agency's performance goals linked to the
    agency's mission, strategic goals, and program activities in its budget
    request?
        Answer. There is a direct correlation between the agency's mission,
    strategic goals, performance goals, and budget activities. Each of the
    agency's budget activities--the Packers and Stockyards program and the
    Grain Inspection program--is directly linked to a strategic goal and
    supporting performance measures. The Packers and Stockyards program is
    represented in Goal 1 of the Agency's strategic plan, and the Grain
    Inspection program is represented in Goal 2. Both goals support the
    Agency's mission and have supporting performance measures.
        Question. Could you describe the process used to link your
    performance goals to your budget activities? What difficulties, if any,
    did you encounter, and what lessons did you learn?
        Answer. We developed our strategic plan around our core business
    practices which parallel our existing budget activities. The end result
    is that there is a one-to-one correlation between budget activities and
    strategic goals and supporting performance goals.
        Question. Does the agency's Performance Plan link performance
    measures to its budget? Does each account have performance measures?
        Answer. Yes, each budget account is aligned with a strategic goal
    and supporting performance measures. Several performance measures are
    still under development as we strive to efficiently and effectively
    measure outcomes.
        Question. To what extent does your performance planning structure
    differ from the account and activity structure in your budget
    justification?
        Answer. There are no differences.
        Question. Do you plan to propose any changes to your account
    structure for fiscal year 2000?
        Answer. The Agency is evaluating the benefits of consolidating two
    budget activities, Standardization and Methods Development.
        Question. How were performance measures chosen?
        Answer. The Agency focused on measurements requested by our
    customers--cost efficiency, timeliness of service, and accuracy of
    results. To date, the Agency has developed measures of timeliness
    (e.g., percentage of violations corrected within one year of
    investigation's starting date) and cost efficiency (e.g., cost of the
    official grain inspection and weighing service per metric ton using
    constant 1992 dollars indexed on the Gross Domestic Product). The
    Agency will develop measurements of accuracy to coincide with the
    beginning of the fiscal year 2000 budgeting cycle.
        Question. How did the agency balance the cost of data collection
    and verification with the need for reliable and valid performance data?
        Answer. For some of the Agency's performance measures, such as cost
    per metric ton, the data was already available and resulted in no extra
    cost to the Agency. In other instances, the agency is still struggling
    with developing meaningful outcome measures and identifying the
    necessary data sources.
        Question. Does your plan include performance measures for which
    reliable data are not likely to be available in time for your first
    performance report in March 2000?
        Answer. No, at this time, the Agency does not anticipate having
    performance measures for which reliable data are not available in time
    for the first performance report.
        Question. What are the key performance goals from your fiscal year
    1999 Annual Performance Plan that you recommend this subcommittee use
    to track program results?
        Answer. Each of the Agency's five performance goals align with the
    Agency's five budget line items and, as a result, it would be difficult
    to assign greater importance to any one goal. As given in the fiscal
    year 1999 Annual Performance Plan, the Agency's five performance goals
    and affiliated budget line items are: (1) Monitor, investigate, and
    analyze the livestock, meat and poultry industries; identify and
    correct unfair, deceptive, or discriminatory trade practices; and
    provide financial protections to livestock and poultry producers, all
    with the intent of ensuring a fair, open, and competitive marketing
    environment for livestock, meat, and poultry (Packers and Stockyards);
    (2) Increase the efficiency of U.S. grain marketing by harnessing
    technology to streamline grain inspection and weighing processes and
    providing objective measures of grain quality, quantity, and end-use
    value (Methods Development); (3) Enhance the uniformity of grain
    quantity and quality measurements to promote a more standardized
    framework for trade in the U.S. grain marketing system
    (Standardization); (4) Provide all segments of American agriculture
    with cost-effective and responsive official inspection and weighing
    services (Inspection and Weighing); and (5) Protect the integrity of
    U.S. grain marketing by regulating grain weighing and handling
    practices, and regulating the providers of official grain inspection
    and weighing services (Compliance).
        Question. In developing your Annual Performance Plan, what efforts
    did your agency undertake to ensure that the goals in the plan include
    a significant number of outcome measures?
        Answer. The Agency worked with its customers and employees to
    determine program expectations and then developed measurements to best
    determine whether those expectations are met. GIPSA anticipates
    refining some of its current performance goals and measures prior to
    the fiscal year 2000 budgeting cycle.
        Question. Do you believe your program managers understand the
    difference between goals that measure workload (output) and goals that
    measure effectiveness (outcome)?
        Answer. Although managers understand the difference, the Agency, at
    large, is still having difficulty in identifying meaningful outcome
    measures. For example, standardization of grain quality and quantity
    measurement improves market efficiency. Likewise, the use of grades and
    standards improves market efficiency if the grades and standards
    communicate the quality characteristics relevant to the market. GIPSA
    directly controls the standardization of the official inspection system
    and influences the standardization of the commercial market. Measuring
    the use of grades and standards by the commercial market is
    impractical, since nearly all those buying or selling grain use the
    grades and standards to one degree or another. As a result, GIPSA is
    attempting to develop surrogate measures that track the efficiency of
    the official inspection system and the adequacy of grades and
    standards.
        Question. What are some examples of customer satisfaction measures
    that you intend to use? Please include examples of both internal and
    external customers?
        Answer. In late 1996, GIPSA conducted a mail-out survey of external
    customers of the official inspection and weighing system. Results from
    the survey have allowed the official system to quantitatively assess
    customer satisfaction in terms of the factors that have been identified
    by customers as being critical to the official system's success:
    timeliness, accuracy and consistency, cost-effectiveness,
    responsiveness, and professionalism. Results from the survey will also
    serve as benchmarks against which further progress will be measured.
    The Agency plans to conduct another customer survey in fiscal year
    1999.
        In 1994 and 1997, GIPSA also conducted surveys of employees of the
    grain program. The Agency's managers and employees have used, and will
    continue to use, the survey results to identify the Agency's strengths
    and weaknesses and to take actions to improve both.
        Question. How were the measurable goals of your fiscal year 1999
    Annual Performance Plan used to develop your fiscal year 1999 budget?
        Answer. We aligned the Agency's strategic goals and supporting
    performance goals and measures with the Agency's two budget accounts,
    the Packers and Stockyards program and the Grain Inspection program.
        Question. If a proposed budget number is changed, up or down, by
    this committee, will you be able to indicate to us the likely impact
    the change would have on the level of program performance and the
    achievement of various goals?
        Answer. While not directly apparent, it is possible that a shift in
    funding sources for the Grain Inspection program would affect the cost
    of the official grain inspection and weighing service per metric ton.
        Question. Do you have the technological capability of measuring and
    reporting program performance throughout the year on a regular basis,
    so that the agency can be properly managed to achieve the desired
    results?
        Answer. Yes. With the exception of one measure, GIPSA will rely on
    internal agency procedures to track performance. More specifically, the
    Agency will rely upon existing systems, such as the agency's quality
    assurance/quality control and information management collection
    systems, to measure and report on program performance. By the start of
    the fiscal year 2000 budgeting cycle, GIPSA will have the capability of
    regularly assessing program progress.
        Question. The Government Performance and Results Act requires that
    your agency's Annual Performance Plan establish performance goals to
    define the level of performance to be achieved by each program activity
    set forth in your budget.
        Many agencies have indicated that their present budget account
    structure makes it difficult to link dollars to results in a clear and
    meaningful way.
      --Have you faced such difficulty?
        Answer. Since GIPSA's program activities set forth in the budget
    and the Agency's strategic and performance goals are aligned, the
    Agency has not encountered such difficulty.
      --Would the linkages be clearer if your budget account structure were
            modified?
        Answer. No, the linkages are currently clear.
      --If so, how would you propose to modify it and why do you believe
            such modification would be more useful both to your agency and
            to this committee than the present structure?
        Answer. The Agency does not consider modification to be necessary
    at this time.
      --How would such modification strengthen accountability for program
            performance in the use of budgeted dollars?
        Answer. The Agency does not consider modification to be necessary
    at this time.
        Question. Does your fiscal year 1999 Performance Plan--briefly or
    by reference to your strategic plan--identify any external factors that
    could influence goal achievement?
        Answer. The Agency's strategic plan, rather than its performance
    plan, identifies key external factors that could influence goal
    achievement.
      --If so, what steps have you identified to prepare, anticipate and
            plan for such influences?
        Answer. GIPSA must effectively respond to the fluid and dynamic
    business environments in which the grain and livestock industries
    operate. Like many segments of American agriculture, these industries
    are experiencing rapid changes such as mergers, acquisitions, vertical
    integration, and increasingly automated operations. The changes are
    shaping how GIPSA operates. For example, GIPSA has developed a field
    office consolidation plan which will allow more resources to be located
    in regions where beef, pork, and poultry production and processing are
    concentrated. Furthermore, the field offices will be strengthened with
    additional expertise in economic, statistical, and legal issues to more
    effectively conduct investigations of alleged anticompetitive practices
    and financial and trade practice violations.
      --What impact might external factors have on your resource estimates?
        Answer. Changing external factors may require the Agency's Packers
    and Stockyards program to shift from one area of focus to another. In
    the grain arena, increases or decreases in U.S. grain exports may
    affect the cost per metric ton of the grain inspection and weighing
    service.
        Question. Through the development of the Performance Plan, has the
    agency identified overlapping functions or program duplication? If so,
    does the Performance Plan identify the overlap or duplication?
        Answer. GIPSA has not identified any overlapping functions or
    program duplication. GIPSA does, however, coordinate its program
    activities with a number of government entities. Within USDA, GIPSA
    works with the Animal and Plant Health Inspection Service and the
    Agricultural Marketing Service on marketing issues; the Foreign
    Agricultural Service on international trade issues and programs; the
    Agricultural Research Service and the Economic Research Service for
    research support; and the Office of the Inspector General on
    investigative matters. Further, GIPSA cooperates with various non-USDA
    entities, including the Food and Drug Administration on food safety
    issues; the Environmental Protection Agency on pesticide residue
    programs; and the Department of Justice and the Commodity Futures
    Trading Commission on investigative matters. GIPSA's strategic plan,
    rather than its performance plan, addresses the coordination of
    efforts.
        Question. Future funding decisions will take into consideration
    actual performance compared to expected or target performance. Given
    that:
      --To what extent are your performance measures sufficiently mature to
            allow for these kinds of uses?
        Answer. Given that the Agency's current performance goals and
    measures are relatively immature, the Agency is in the process of
    reviewing and refining its current goals and measures and developing
    some new measures in time for the beginning of the fiscal year 2000
    budgeting cycle.
      --Are there any factors, such as inexperience in making estimates for
            certain activities or lack of data, that might affect the
            accuracy of resource estimates?
        Answer. The Agency has not encountered any such factors at this
    time.
        Question. Based on your fiscal year 1999 performance plan, do you
    see any need for any substantive revisions in your strategic plan
    issues on September 30, 1997?
        Answer. GIPSA does not foresee any need for substantive revisions
    in the Agency's strategic plan at this time.
                                     ______

                      Questions Submitted by Senator Burns
                                price reporting
        Question. What does the Department plan in terms of price reporting
    action?
        Answer. The Department plans to implement or enhance the following:
        (a) Increased reporting on the terms of contract sales, or captive
    supply transactions. While AMS has been able to report captive supply
    volumes, reporting of contract terms and transactions has been more
    difficult. This information will assist the industry as they move
    toward a value based marketing system.
        (b) Expanded reporting that includes value-based pricing
    indicators. A matrix report for value based marketing has been
    requested by the cattle industry. The report will provide the economic
    indicators to help guide producers in supplying products to meet
    consumer demands.
        (c) Reporting share of slaughter by grade and yield. This report
    will provide industry with the consist and distribution of cattle that
    provides a barometer of available supplies that meet certain criteria
    for the trade.
        (d) Reporting daily live cattle and hog crossings from Canada and
    Mexico. These reports provide the industry with information on volume
    and prices of animals being exported and imported at U.S. borders.
    Knowledge of movements and price levels provide industry a more level
    trading platform to assess their marketing plans.
        (e) Increasing the reported volumes of forward sales of boxed beef.
    Increased volumes and broader coverage of prices provide market
    information that is important to the industry in negotiating forward
    sales of products and enhances competition.
        (f) reporting packer premiums and discounts for beef carcass value
    differences. Information on packer premiums and discounts will assist
    industry in improving their products to meet stated premiums and
    therefore move more efficiently to meet consumer demands.
        (g) Expanding producer reported hog marketing information. This
    will 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.
        (h) Reporting regional and national marketing of the direct feeder
    pig trade. There currently is no market report in place to assist
    producers in determining the fair market value of segregated early
    weaned and other weaned pigs. These reports will assist in this area.
        Question. What options does the Department have to implement some
    sort of mandatory price reporting system for fat cattle?
        Answer. Options include:
    Continue with voluntary reporting of market information.
        Pros:
        (1) Most economical for the government and industry.
        (2) Analysis and reporting volumes are sufficient to adequately
    establish trading levels and assist in the price discovery process.
        (3) Information collected and reported does not divulge proprietary
    information.
        (4) Places a minimum amount of burden on the industry.
        (5) Contacts who currently provide information play large or
    significant roles in the market. Collection from a large number of
    small participants may have little or no effect on the price discovery
    process.
        Cons:
        (1) As the industry becomes more concentrated it is more difficult
    to obtain voluntary information.
        (2) Some commodity products have very limited open market sales and
    if these sales are not obtained, the price discovery process hindered.
        (3) There is the appearance of hidden sales.
    Mandatory reporting of transactions only when asked by a reporter.
        Pros:
        (1) Would provide industry with a large amount of sales transaction
    marketing data.
        (2) Remove the appearance of hidden sales information.
        (3) Would limit the financial and personnel requirements that would
    be required under 100 percent reporting.
        Cons:
        (1) Promote the absence of available industry contacts to avoid
    reporting.
        (2) Place a large financial burden on the government.
        (3) Monitoring and enforcing mandatory reporting would require
    additional government financial and personnel resources.
        (4) Industry members may be unwilling to cooperate with private and
    industry information systems if reporting to the government is
    mandated.
        (5) Divulging information that could be used by a domestic or
    international competitor could be detrimental to the industry.
        Question. Is the voluntary price reporting system working?
        Answer. Yes, the system is working, however due diligence must be
    practiced. Market reporters develop reliable contacts to discuss market
    conditions and obtain information about sales or purchases. Voluntary
    participants are more likely to provide information of a confidential
    nature that affect market conditions to aid reporters in their market
    analysis. Voluntary collection of information is the most economical
    for the government and places a minimum amount of burden on the
    industry.
        Question. What is USDA doing to insure that there is a competitive
    environment in the live cattle market?
        Answer. GIPSA will restructure its Packers and Stockyards Programs
    (P&S) to strengthen enforcement against alleged anticompetitive
    practices and provide greater flexibility and efficiency in enforcing
    the trade practice and payment protection provisions of the P&S Act.
    GIPSA will restructure the headquarters offices of P&S, consolidate
    field offices, and add staff with economic, statistical and legal
    expertise to work on investigations of anticompetitive practices. P&S'
    Denver, Colorado, regional field office will handle all major
    competition and industry issues in the United States relating to cattle
    and sheep, as well as all trade practice and financial protection
    issues in its region. The Denver office will continue to conduct
    investigations of anticompetitive behavior in the cattle industry
    following reorganization.
        GIPSA is conducting a broad investigation of fed steer and heifer
    procurement in the Texas Panhandle. Preliminary descriptive and
    graphical analysis have been completed and portions reported to the
    industry. Purchase and slaughter patterns have been examined to
    identify potential occurrences of aberrant or unusual procurement
    practices. Assessment has begun of whether the Department's publicly
    reported Market News prices accurately reflect packer procurement
    transactions. Econometric and statistical analysis of the data is
    underway to identify relationships between spot market prices and
    nonspot purchases, and to reveal relationships that may not be
    otherwise apparent. Portions of the econometric analysis will be
    conducted under cooperative agreement with researchers at Iowa State
    University and the University of Nebraska. The completion date depends
    on the results of the econometric and statistical analysis.

                              Subcommittee Recess

        Senator Bumpers. We will stand in recess subject to the
    call of the chair. Thank you very much.
        [Whereupon, at 12:18 p.m., Tuesday, March 17, the
    subcommittee was recessed, to reconvene at 10:06 a.m., Tuesday,
    March 24.]

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 1999

                                  ----------

                            TUESDAY, MARCH 24, 1998

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 10:06 a.m., in room SD-138, Dirksen
    Senate Office Building, Hon. Thad Cochran (chairman) presiding.
        Present: Senators Cochran, Burns, Bumpers, Kohl, and Leahy.

                           DEPARTMENT OF AGRICULTURE

    STATEMENT OF AUGUST SCHUMACHER, JR., UNDER SECRETARY,
                FARM AND FOREIGN AGRICULTURAL SERVICES
    ACCOMPANIED BY DENNIS KAPLAN, DEPUTY DIRECTOR, OFFICE OF BUDGET AND
                PROGRAM ANALYSIS

                              Farm Service Agency

    STATEMENT OF KEITH KELLY, ADMINISTRATOR

                             General Sales Manager

    STATEMENT OF CHRISTOPHER E. GOLDTHWAIT, GENERAL SALES
                MANAGER

                          Foreign Agricultural Service

    STATEMENT OF LON HATAMIYA, ADMINISTRATOR

                             Risk Management Agency

    STATEMENT OF KENNETH D. ACKERMAN, ADMINISTRATOR

                                Opening Remarks

        Senator Cochran. The subcommittee will please come to
    order.
        Today our subcommittee continues its hearings reviewing the
    President's budget request for the next fiscal year for the
    Department of Agriculture and related agencies. This morning we
    are specifically considering the budget request for programs
    and activities of the Department's Farm and Foreign
    Agricultural Services agencies. Our witnesses this morning
    include a panel led by the Under Secretary for Farm and Foreign
    Agricultural Services, Mr. August Schumacher, Jr.
        Mr. Secretary, we appreciate your attendance and that of
    the others who are with you this morning. We invite you to
    introduce them and proceed with your statement and any other
    statements by the panel that you think would be helpful to the
    subcommittee. We have copies of the prepared testimony, which
    we will print in the record in full. We are interested in
    hearing what your proposal is for appropriations for these
    activities, and thank you for being here today.
        I am going to yield now for any comments or opening
    statements from other members of the subcommittee. Senator
    Bumpers.

                          STATEMENT OF SENATOR BUMPERS

        Senator Bumpers. Mr. Chairman, today's panel is going to be
    the last panel we will hear from regarding the President's
    budget. I would just like to make a few comments, and I will
    insert my formal opening statement for the record.
        During my tenure in the Senate, I have seen many changes in
    farm programs and the relationship of the Department to the
    farming community. I have seen agricultural production go from
    huge surpluses to shrinking supplies. I have seen farm prices
    soar and I have seen them collapse. I have seen crops prosper
    and I have seen untold natural disasters that have destroyed
    countless acres of farmland and farmers' livelihoods along with
    them.
        Two years ago, Congress enacted, without my support,
    legislation that dramatically changed the relationship of
    farmers and the Federal Government. Prices were good then,
    better than they are now. The phaseout of farm programs seemed
    a distant problem, especially when sweetened with additional
    cash from Uncle Sam.
        We are already beginning to hear the faint cries of hard
    times ahead. Legislation is being discussed to extend crop loan
    periods and other farm safety net mechanisms seen only as an
    amendment away. I do not hold out false promises. We fought the
    hard fight and my side lost.
        Still, in all my years of public service, one thing always
    rings true: The Government, Congress especially, will never
    forget its farmers. Not only has the Department changed its
    relationship with farmers, it has changed its relationship with
    itself. The USDA of 5 years ago is not the USDA of today. Names
    have changed, but changes have gone beyond the purely cosmetic.
        The Farm Service Agency now exists where two agencies were
    before, ASCS and the Farmers Home Administration. To further
    complicate matters, the new agency houses more than two former
    agency missions. It houses two separate classes of USDA
    employees. The old Farmers Home Administration offices were
    staffed with regular Federal Civil Service employees, while
    ASCS offices were staffed with employees hired under a
    different authority, tied to the county committee system, and
    were considered non-Federal employees. Still, they were and are
    USDA employees, all with the same commitment to farmers and the
    delivery of Federal farm programs.
        I make this distinction because the two classes of
    employees are not treated alike. Earlier this year, the Farm
    Service Agency conducted a RIF of 152 employees. Because of
    their status as non-Federal employees, the USDA employees from
    the old ASCS offices were the only ones to lose their jobs,
    regardless of years of service, experience, or other relevant
    factors. With all the attention to civil rights problems at the
    Department, this inherently unfair situation is one that should
    not be overlooked.

                               Prepared Statement

        Mr. Chairman, I will forgo the rest of my statement and ask
    a couple of questions on the point I just made later. I ask
    unanimous consent that my full statement be inserted in the
    record.
        Senator Cochran. Without objection, it is so ordered. Thank
    you, Senator.
        [The statement follows:]

                     Prepared Statement of Senator Bumpers

        Mr. Chairman: It is a pleasure to welcome Secretary
    Schumacher and the other USDA officials to this morning's
    hearing. Today's panel will be the last from USDA we will hear
    regarding the President's budget request for fiscal year 1999.
    It is somehow appropriate that this final USDA hearing will
    focus on those agencies which are most closely associated with
    farmers, in the traditional context, and with expanding export
    markets, which many believe will be the focus of U.S.
    agriculture's future.
        During my tenure in the United States Senate, I have seen
    many changes in farm programs and the relationship of USDA to
    the farming community. I have seen agricultural production go
    from huge surpluses to shrinking supplies. I have seen farm
    prices soar and collapse. I have seen crops prosper and I have
    seen untold natural disasters that have destroyed countless
    acres of farmland and farmers' livelihoods along with them.
        Two years ago, Congress enacted, without my support,
    legislation that dramatically changed the relationship of
    farmers and the Federal Government. Prices then were good,
    better than they are now, and the phaseout of farm programs
    seemed a distant problem, especially when sweetened with
    additional cash from Uncle Sam. We are already beginning to
    hear the faint cries of hard times ahead. Legislation is being
    discussed to extend crop loan periods, and other ``farm safety
    net'' mechanisms seem only an amendment away. I don't hold out
    false promise. We fought the hard fight and we lost. Still, in
    all my years of public service one thing I have learned: the
    Government, Congress especially, will never forget its farmers.
        Not only has USDA changed its relationship with farmers, it
    has changed its relationship with itself. The USDA of five
    years ago is not the USDA of today. Names have changed, but
    changes have gone beyond the purely cosmetic. The Farm Service
    Agency now exists where two agencies were before, the
    Agricultural Stabilization and Conservation Service (ASCS) and
    the Farmers Home Administration (FmHA). To further complicate
    matters, this new agency houses more than two former agency
    missions, it houses two separate classes of USDA employees. The
    old FmHA offices were staffed with regular federal civil
    service employees while ASCS offices were staffed with
    employees hired under a different authority tied to the county
    committee system and were considered non-federal employees.
    Still, they were, and are, USDA employees all with the same
    commitment to farmers and the delivery of federal farm
    programs.
        I highlight this distinction because the two classes of
    employees are not treated alike. Earlier this year, the Farm
    Service Agency conducted a RIF of 152 employees. Because of
    their status as ``non-federal'' employees the USDA employees
    from the old ASCS offices were the only ones to lose their
    jobs, regardless of years of service, experience, or other
    relevant factors. With all the attention to civil rights
    problems at the Department, this inherently unfair situation is
    one that should not be overlooked.
        Another major change at USDA has been the manner in which
    federal assistance is administered to help farmers recover from
    natural disasters. In place of the ad hoc programs of the past
    is a series of risk management programs designed to cover a
    wide variety of disaster scenarios. Some of these programs even
    cover losses in market price. Still, there is much to do to
    make these programs truly fair. The natural disasters that now
    have the attention of Congress speak to this point. Some
    producers, dairy for example, are not covered at all for losses
    in production. Maple producers are covered for production
    losses but in a way that doesn't precisely fit the facts of the
    recent ice storms in the Northeast. Clearly, it is hard to
    prepare for every contingency, but it should be our goal to
    treat producers as fairly and consistently as possible.
    Otherwise, we will be urged to head back down the path of ad
    hoc programs that can only escalate to a multitude of changing
    and contrary programs that we could not easily justify on
    either policy or budgetary grounds.
        Finally, let me mention the role of the American farmer in
    world markets. When Thomas Jefferson spoke of America as a
    nation of yeoman farmers, his vision of agricultural markets
    did not see beyond the demands of a growing and expanding
    domestic population. In the course of two hundred years,
    Jefferson's view has been dramatically altered.
        Today, financial crisis in Asia will affect thousands of
    metric tons of U.S. farm production that may find no way to
    market. Phytosanitary requirements in Europe may close down
    U.S. poultry plants and cost American jobs. Famine in Africa
    may compel the U.S. to ship food stores through the Public Law
    480 programs, thereby boosting grain prices to farmers in mid-
    America. More and more, the nations and regions of the world
    are tied together in ways not imagined even a few short years
    ago.
        I have spoken many times before about my concern for world
    food security and our ability to keep pace with an ever growing
    population. American farmers remain the best in the world and
    our natural resource base can keep them there if we manage it
    properly. We must keep our access to the markets and the people
    of the world wide open. Our farmers can produce, but they're
    never quite sure which markets will be open.
        This is the last year I will review the policies and
    priorities of USDA in an official capacity as a member of the
    subcommittee. I want to stress in this, my last hearing with
    USDA agencies, the importance of supporting the American
    farmer. He is more than the simple romantic notion contained in
    political speeches. The American farmer is an integral and very
    important part of our economy. He contributes to our balance of
    trade. He protects our natural resources which, unlike most of
    us who see them as recreation, are the basis of his livelihood.
        There is also something to that old romantic notion that is
    more than mere fiction. From the early days of America,
    philosophies tied to work ethic became the very fabric of this
    nation and that work ethic was largely based on that of the
    farmer. The America of today was not built from the foundation
    of a shopping mall or office complex. Neither the empires of
    finance nor the network of telecommunications serve as the
    model for who we are as Americans. If there is any single part
    of the American family that can remind us all of who we once
    were, it is the American farmer. The New York bond dealer, the
    Dallas oilman, and the California computer tycoon may never
    admit it publicly, but all our roots are on the farm.

                           STATEMENT OF SENATOR BURNS

        Senator Cochran. Senator Burns.
        Senator Burns. Thank you very much, Mr. Chairman.
        For the first time, I want to welcome Keith Kelly to the
    table this morning. Keith was raised up in the Red Lodge, MT,
    country and his father was an outstanding sheepman and they
    lost him a year ago. They are just fine people. I want to
    welcome Keith here. We have had a great working relationship
    for a long time.
        I want to sort of associate myself with the words of
    Senator Bumpers. I think we have changed the direction of the
    USDA. It seems like we are getting away from the support. Of
    course, Mr. Kaplan has heard this speech so many times that he
    is getting sick of it and wants to go out and throw up. But we
    are changing our emphasis from the grassroots producer.
        The more I explore this and we take a look--and we have a
    crisis on the farm. I do not care how you turn it. We have a
    crisis and it is an income crisis. A guy says there is nothing
    wrong on the farm except in the price, what we get at the gate.
        The more I am kicking this around, the more I think it is
    in the area of the transparency in the market. We just do not
    get reports from our processors and our purveyors as it
    compares to the prices we receive at the gate, and I think
    there has to be some way that we get some transparency in the
    market. And it is just not in our grains. It boils down to the
    problem with all of the commodities.
        Now we have packers that do not want to report what they
    gave for fat cattle going into their plants, and I think that
    is wrong because the free market--I will say right now that the
    auction markets right now are the only ones that are really
    engaged in price discovery. And I think we have to look at
    price discovery in order to gain transparency. That is our
    problem with the Canadian grain situation is transparency in
    the market. And I go back to the old Wheaties thing again, and
    I hate to keep beating on that, but if there is transparency in
    the market, then it seems as though good things happen and
    money does get filtered back down to the farm.
        But we do not know what a crisis is until this next year as
    far as on the farm because we have got farmers that will not--
    we cannot produce our commodities for the same price,
    especially in the grains, as we produced in 1948, 50 years ago,
    and now that same combine is costing $180,000, that same
    tractor is costing over $100,000. And we are still paying
    taxes, and we pay the highest taxes. The Government does not
    choose to pay taxes on their land that they own in our counties
    to the rate of the private taxpayer.
        So, we are in a bind, folks, and I am very much concerned.
    But I think it boils down to transparency in the market.

                               Prepared Statement

        I will put the rest of my statement in the record. I got
    another commitment, Mr. Chairman, and I must leave, but that
    still concerns me.
        Thank you very much.
        Senator Cochran. Thank you, Senator. Your statement will be
    printed in the record.
        [The statement follows:]

                      Prepared Statement of Senator Burns

        Thank you, Mr. Chairman.
        I appreciate you calling this hearing this morning. As we
    look at the budget for the Department of Agriculture I see this
    as one of the more important hearings on the calendar. I
    believe that both of these agencies have a great impact on the
    farmer on the ground in Montana as well as the rest of the
    nation.
        I would like to welcome Mr. Keith Kelly to this hearing.
    Mr. Kelly and I go back a ways in Montana agriculture. While I
    was broadcasting agriculture radio shows, Keith was the
    Director of Agriculture for the state of Montana. Keith is a
    good Montana native and we are pleased to see him in his
    position today.
        As with most of the agencies which we have seen come before
    this committee, I am again concerned with the way that these
    agencies are budgeting for the coming fiscal year. I have to
    admit that I am again concerned with the lack of work that I
    feel is being done for the producer on the ground. This group
    has as much to do with lack of concern as any we have had
    testify before us.
        As I look upon this budget for this year, I am concerned
    with the way the funds have once more been directed by the
    Department of Agriculture. I see funding cuts in areas where we
    have restored funds in past years. I also see programs
    continually proposed which this committee and Congress have
    told the Department that they are not inclined to agree with
    the Administration.
        I will continue to stress the need I see for a sound and
    committed agriculture trade policy which will assist our
    producers in the world market. About a month ago I attended a
    farm forum in Cut Bank, Montana, where I was able to spend time
    with the people on the ground who are trying to make a living
    today, but who face terrible odds in doing so. Partially
    because of what they, and I, see as a faulty trade policy. When
    my farmers in Montana cannot sell their bushels of wheat for
    the equivalent price of a one pound box of Wheaties. Yet they
    continue to see hundreds of thousands of bushels of wheat
    crossing the border from Canada. Well, Mr. Chairman, it does
    not take a genius to understand how and why these men and women
    feel the way they do.
        The man and woman in the field are very concerned about
    what they see happening on the world market. The rest of the
    world seems to be trading with each other and we sit by and
    watch them move their grain, while our Department of
    Agriculture does nothing. My producers are asking that this
    Department do something, other than sitting on their hands.
        My producers in Montana, and those I have talked with
    across the country are very puzzled by what they are seeing in
    Washington today. They see reactive and not proactive trade
    arrangements being made. They feel as though, like I do, that
    this Administration and this Department do not care about them.
    Instead of actively moving in the market we hear that the
    Secretary is waiting until the rest of the world depletes their
    supplies of grain. Well I wonder how many farmers out there
    will still be there when something finally occurs.
        Last week before the House, Secretary Glickman told the
    Agriculture Committee that he felt that using the Export
    Enhancement Program (EEP) would drive wheat prices lower. The
    countries we compete with would in turn lower their prices. He
    followed up by stating that sooner or later our competitors
    will run out of grain anyway and we will have the market to
    ourselves. Well I have some very serious concerns about those
    statements, and I will have questions to follow up with those
    remarks.
        The one thing I have to say here is that the Secretary
    finally gave us some sense of a reason for not using the EEP
    funding. The real problem here lies in the way that all the
    funds for export marketing in the Department of Agriculture are
    being used. This is the basic root of why the producer in the
    field is losing sleep over and confidence in this Department.
        We see other programs like the Foreign Market Development
    funds not being totally expended, resulting in carryover which
    the Department claims is a success. Instead where we have a
    program that they are using, they are not using it to its
    fullest degree. Programs where the dollars are cost shared by
    the producer are being carried over for use in the coming
    years.
        Now I understand that the Department and the Foreign Ag
    Service is not excited about the fact that I got an amendment
    in the last farm program bill to create a line item for this
    account. And it has been stated that this line item ties their
    hands, but I like the people in the field, have little
    confidence in what would have been done if there was not a line
    item for this account. I believe I have heard it stated that
    they would have put more money in there, well I find that
    difficult to believe considering the amounts that they have
    placed in the budget in the past couple of years.
        I could go on and on about the lack of confidence that the
    general agriculture producer has in this Administration when it
    comes to trade policy, but well unfortunately I don't see where
    it will do a lot of good. This Administration and Department
    have their minds set on not doing enough to assist the
    producers in the field. I will have some follow up questions to
    bring before the Committee to see if I can get some answers on
    later.
        Last year we had some problems with the way that the
    signups for lands to be placed into the Conservation Reserve
    Program were being completed. The people on the land were left
    in a state of confusion and unfortunately now, in a state of
    distrust in the Department of Agriculture. The confusion in the
    way the program was being administered has hurt both the
    program and the producer.
        The results of this confusion led to some of the best
    producing land in the state of Montana being placed in CRP.
    Excluding those marginal lands which the program was originally
    designed to protect. It was my understanding that the
    Conservation Reserve Program was a plan developed to take
    marginal, environmentally sensitive lands out of production and
    allow them to be reseeded in grasses. This then would serve to
    protect those lands, the environment and enhance wildlife
    opportunities in areas of a sensitive nature.
        Instead in Montana what has occurred, by the development of
    the indexes used to judge the fields, was the exact opposite of
    what the program was intended to do. We have large sections of
    good solid producing land coming out of production, and those
    areas with highly sensitive land will continue to see the
    plowshare breaking the soil. This just does not make sense to
    me or to the people trying to protect the lands on which they
    plant.
        Furthermore, during the signup periods, people were
    provided with certain sets of rules and standards by which
    their land was judged for suitability for inclusion in the
    program. Only to find out afterwards, that during the process
    the rules and standards had changed. So ultimately they found
    that the standards for which they were planning were no longer
    the same standards by which they could plant their cover seed
    for this land.
        In a large operation it might be possible to overcome this
    type of realignment of seed purchase for cover forage, but on
    many of the smaller operations who count on this land for
    stable income, well it completely wipes out their cash reserve
    for the coming planting season. Making nearly impossible to
    either continue their enrollment in the program or plan for
    planting costs for the upcoming year.
        These people are having a difficult enough time this year,
    with grain prices at horribly low levels. Brought on, in part
    at least, by the unwillingness of this Administration and the
    Secretary to use all the marketing tools at their disposal to
    make gains on the world market stage. American agriculture is
    always one of the first issues taken off the table at trade
    negotiations, in favor of the hi tech industry for which the
    United States is famous. Forsaking our ability to continue to
    produce our own supply of safe, reliable and cost effective
    food and fiber.
        Mr. Chairman, I am concerned about the future of
    Agriculture in these United States. It seems we are headed down
    the wrong path. Life in Washington, DC, is so easy compared to
    the nightmares that the producer faces daily in the fields of
    our states. I pledge my time and energy to working with you to
    find ways we can assist the producer. I know you and the
    ranking member have a great deal of work before you, but I will
    be there to help in anyway I can to make sure that the producer
    on the ground in either Montana, Mississippi or Arkansas has a
    chance to make something of their futures, despite all the
    efforts of the Department of Agriculture.

                           STATEMENT OF SENATOR LEAHY

        Senator Cochran. Senator Leahy.
        Senator Leahy. Mr. Chairman, I will put mine also in the
    record.
        I am glad to see, of course, Gus Schumacher here. I have
    worked with him for so long. And Ken Ackerman who was a valued
    member of the Senate Agricultural Committee staff. He not only
    advised me on that, but perhaps as importantly has given me
    great advice on scuba diving. [Laughter.]
        He is one of the best there is in that area.
        I just want to thank you, Mr. Chairman, and Senator Bumpers
    for your help in approving the amendment for the emergency
    supplemental for maple farmers. I understand from Mr.
    Schumacher, he is looking carefully how to help there, and I
    will have questions that I will submit for the record on that
    area.

                               Prepared Statement

        Senator Cochran. Thank you very much, Senator. We will
    insert your prepared statement in the hearing record.
        [The statement follows:]

                      Prepared Statement of Senator Leahy

        Good morning Under Secretary Schumacher. I would like to
    take a moment to mention a problem that I raised once before
    with Secretary Glickman, but which I think is important to
    discuss again today. Earlier this year a devastating ice storm
    paralyzed communities from Northern New York to the tip of
    Maine.
        Just a few days after the storm, I visited the hardest hit
    areas of Vermont. The storm's damage was the worst I have ever
    seen. The damage to Vermont's maple groves was especially
    severe. The cost of downed taps and tubing in Vermont alone
    totaled over $4 million. In some cases, sugarmakers will have
    to wait for several years to allow regrowth before tapping can
    resume. And yet none of those costs were covered through the
    disaster assistance programs.
        Last week the Appropriations Committee corrected that
    problem by including $4.48 million in the emergency
    supplemental to assist farmers to replace taps and tubing in
    maple groves throughout the Northeast which were affected by
    the storm. I appreciate the help Senator Cochran and Senator
    Bumpers gave in approving that amendment. However, getting this
    money out to those farmers will require an emergency
    designation by the President. I hope you will support that
    request and that the Farm Service Agency will help farmers in
    Vermont and throughout the Northeast make use of this funding
    to bring their maple groves back into production.
        One other area also needs to be mentioned. I was hopeful
    that you, Mr. Under Secretary, could work out some new
    arrangements with Canada that would permit us to export milk to
    Canada. This is potentially a huge dairy market for Vermont--
    yet tariffs can be as high as 300 percent. I would like to see
    something done about this problem as soon as possible.
        On a similar front, I am very concerned about other
    countries using sanitary standards as an excuse to keep out
    American products. And third, I am very concerned about the
    quality and safety of our imports.

                      Statement of August Schumacher, Jr.

        Senator Cochran. Mr. Secretary, please proceed.
        Mr. Schumacher. Thank you, Mr. Chairman, and thank you, Mr.
    Burns, Mr. Bumpers, and Mr. Leahy.
        I have a very fine panel this morning. Ken Ackerman is with
    us. Keith Kelly not only worked in Montana, but he and I worked
    together as commissioners, and we enjoyed each other working
    different ends of the country. Lon Hatamiya is our new FAS
    Administrator, but not new to USDA. He has done a fine job at
    AMS, and is doing a great job right off the get-go on Asia in
    FAS. Chris Goldthwait and Dennis Kaplan are here as well. Chris
    is working closely on Asia with Lon. Dennis has been here
    almost every meeting.
        I would like to submit my formal statement for the record,
    Mr. Chairman, and then have a very brief opening comment, if
    that would be permissible.
        Senator Cochran. That certainly will be. Your statement
    will be printed in the record.
        Mr. Schumacher. Mr. Chairman, our mission--and I always
    consider this the most important area of USDA--is to secure
    long-term vitality, global competitiveness, and profitability
    for the American family farmer and rancher. As American
    agriculture continues to adjust to the new Federal policies
    that the committee has outlined, these expose producers more
    directly to risks and market fluctuations, as has been noted.
    The goal of the President and the Secretary remains to improve
    farm income and to provide an adequate safety net for American
    family farmers and ranchers. The President's budget we feel
    will permit us to accomplish this goal.
        Today I am going to talk a fair bit about this in my
    opening statement and then, of course, take questions on the
    crucial safety net for our farmers and ranchers.
        This safety net has several critical elements, including
    assistance in managing risks inherent in agricultural
    production, assistance in obtaining credit necessary for
    agricultural production, assistance to producers and ranchers
    in times of crisis, emergency, and some of the new weather
    patterns we are seeing, and assistance in marketing our
    agricultural products in the strong global marketplace. We feel
    this budget supports and strengthens this safety net.
        Today's hearing is very timely, Mr. Chairman, because it is
    being held while Congress is considering support for critical
    elements of the safety net in the context of the President's
    supplemental appropriations request for fiscal year 1998, and
    the research bill, as well as the present budget debate that is
    currently ongoing.
        We certainly appreciate the support the Senate has shown in
    supporting additional funding to provide emergency assistance
    to farmers and ranchers who recently sustained losses due to
    natural disasters, which is well documented, and to finance
    farm ownership and operating loans targeted to small,
    beginning, and socially disadvantaged farmers through
    supplemental appropriations.
        Absent enactment of the supplemental budget, funds
    available for direct loan programs during 1998 will be used up
    by this spring. They will end, and farm ownership guaranteed
    loans will be exhausted by the end of June.
        We also appreciate the healthy debate that is taking place
    in the context of the research bill and other bills regarding
    permanent funding for the vitally important crop insurance
    program.
        We appreciate the opportunity to work with you and your
    committee to provide permanent funding for these critically
    important programs without jeopardizing funding for other
    priorities outlined in the President's budget.
        Mr. Chairman, Secretary Glickman is concerned the safety
    net does need to be strengthened in three respects: credit,
    insurance, and the international side. I will be brief on all
    three.
        Mr. Chairman, the Secretary believes that several aspects
    of our credit programs need to be strengthened. In order to be
    successful and profitable in farming, America's farmers and
    ranchers need access to adequate, affordable credit. For that
    reason, the budget provides almost $3 billion in funding for
    farm loan and loan guarantee programs for farm families who
    would be unable to obtain credit otherwise, and is consistent
    with recommendations of the Department's Civil Rights Action
    Team and the National Commission on Small Farms.
        Carolyn Cooksie, who is here today, oversees lending for
    110,000 farmers on direct loans and an additional 50,000, I
    believe, on guaranteed. So, roughly 160,000 farmers are working
    with Carolyn on credit, a very important issue.
        We have submitted legislation that would amend the ``one
    strike and you are out'' clause that prohibits family farmers
    and ranchers, 73,000 since 1989, who have ever had a wipe-down,
    for whatever reason, from ever coming to USDA for another loan.
    We believe this is too harsh, too restrictive, and we hope
    Congress will support this legislation.
        Further, the Secretary has placed high priority on
    providing credit to small, socially disadvantaged, and
    beginning farmers and ranchers. The budget proposal we have
    submitted reflects this commitment.
        We also believe more funds are needed for the direct loan
    programs. We have 7,400 direct operating loan applications on
    hand. Nearly 4,000 of these will go unfunded unless we provide
    some additional funds. This is similar to what happened last
    year. Loans are made on a first-come-first-served basis, and
    when funds are gone, they are gone.
        As I said earlier, we appreciate your support in the
    Senate--strong support--for these programs through the
    supplemental appropriations bill that is underway, and we look
    forward to working with you and your colleagues in the House to
    put this funding in place.
        We are reviewing several other aspects of our credit
    programs. We will be proposing regulatory streamlining changes
    to make these programs more user friendly, both for the
    borrowers and also for the banks that provide the important
    guarantee. We are moving very hard on low documentation and we
    will continue to brief you and your committee on those
    improvements.
        Let me just touch briefly on crop insurance, and then I
    will end with the international side.
        This is under great discussion as we speak, in fact,
    yesterday, today, and tomorrow. I was with Mr. Stenholm in
    Texas yesterday, and he has been in close touch with the
    Congress on these very important issues.
        We believe that America's family farmers and ranchers
    deserve to know that crop insurance, the backbone of the farm
    safety net, is on a sound financial footing. Crop insurance
    provided $24 billion in protection to more than 600,000
    producers last year.
        Ken Ackerman's group expects that next year 63 percent--63
    percent--of our total insurable acres will be covered by our
    crop insurance risk management program. Twenty-two percent of
    this acreage is expected to be covered at the CAT level, which
    is 50 percent of the approved yield covered at 55 percent of
    the expected market price, with the Federal Government paying
    100 percent of that premium. Forty-one percent of the insurable
    acres is expected to be covered at higher levels, the buy-up,
    up to 75 percent of the approved yield level, covered at 100
    percent of the expected market price, and for this buy-up, of
    course, producers pay a premium.
        Since passage of crop insurance reform in 1994, total
    expenditures have averaged about $1.2 billion. In 1999, these
    expenditures are expected to rise, depending on the
    appropriation, to $1.8 billion. The budget proposal provides
    for full funding of this amount, and proposes to shift all
    delivery expenses from discretionary to mandatory. This shift
    would consolidate all spending for the program other than
    salary related and operating costs into a single account, a
    mandatory account, and eliminate the possibility of the program
    being restricted by a limited appropriation of discretionary
    funds.
        We look forward to working with your committee, Mr.
    Chairman, to provide offsets without diminishing funding for
    the program to the extent that it would be put at risk or for
    other priorities in the President's budget.
        Our crop insurance program has changed dramatically over
    these past 5 years and is, we feel, much improved.
    Participation is more than double the levels of the early
    1990's. Farmers have more choices of insurance, and our
    delivery system has been solid. At the same time, we also
    recognize that expectations for crop insurance and the
    complementary risk management tools, as we are looking at a
    number of issues like dairy options and others, will have grown
    dramatically as well. And it is very important that in addition
    we move beyond crop insurance and look at related risk
    management tools that Ken Ackerman and his team are ably
    developing, in accordance with the farm bill.
        As other programs have receded under the farm bill, farmers
    more and more depend on crop insurance and related risk
    management tools as the principal safety net, along with Lon
    Hatamiya's group on the international side.
        As a result, while maintaining the program's basic
    financial soundness, we must continue to expand Federal crop
    insurance to cover as many producers as practical, correct
    program flaws when we find them, and respond to customer needs
    with a growing menu of services and tools. It is a great
    challenge, Mr. Chairman. We will need to work closely with you
    as we work to make the necessary improvements.
        Let me then conclude on the international side. I have been
    before you in the past as Lon's predecessor. I continue to
    spend a fair bit of my time on the international side because
    export markets are so critical--so critical--to America's
    family farmers.
        The budget provides a number of tools which we believe are
    needed to help expand U.S. agricultural exports. The key is to
    ensure that markets are open and ranchers and farmers have the
    opportunity to compete and ensure that we remain a reliable
    supplier of safe, affordable, high-quality food and farm
    products to our customers.
        Again, our budget will allow us to continue our market
    reporting. Senator Burns has mentioned the very important need
    for transparency in market reporting and intelligence gathering
    activities overseas. Our budget will also continue our trade
    policy negotiating work going into the next round. We have been
    very active, Mr. Chairman, in trying to make sure that as we
    get information internationally, we get it out promptly to all
    segments of American agriculture, particularly using the radio,
    so that farmers have equal access to this information that
    comes in from overseas so they can make prompt decisions on
    their crop sales and planning ideas.
        Access to this information is one of the keys to success in
    this marketplace. The budget provides full funding for the MAP
    program, the Market Access Program, the Dairy Export Incentive
    Program, and the GSM Export Credit Guarantee Programs, as well
    as some innovative multiyear funding for the Export Enhancement
    Program.
        It also includes $3 million for the very successful Cochran
    Fellowship Program, unchanged from 1998 levels.
        We believe we need to use all these tools to respond to
    changes in market condition. We have been very aggressive this
    year, Mr. Chairman, in using the GSM program in Asia. Chris and
    Lon have been to Asia twice and they can respond to any
    questions. We feel, because of liquidity problems there, this
    is the right tool for the right job. We have been criticized
    for this by certain countries.
        There continues to be a need, however, for liquidity in
    Asia as they continue to work through a very difficult
    situation. There is a tremendous demand for our products--
    meats, cotton, soybean meal, hides and skins, and corn and
    soybeans.
        But the Asian currency situation and the banking crisis
    have made it difficult, particularly in December, January, and
    February, to finance transactions through Lon's and Chris'
    program, the GSM, which provides commercial guarantees on
    letters of credit at commercial rates to allow this trade to
    take place and to help resolve some of the ongoing liquidity
    problems in certain key countries. GSM is the right tool for
    managing this crisis.
        The facts speak for themselves. Since Secretary Glickman
    announced the program in Korea, we have registered nearly $700
    million in sales under the program. This includes $87 million
    in beef, $13 million in pork, $125 million in cotton, and $100
    million in hides and skins. And certainly it is having an
    impact on the bottom line.
        One of the mistakes made when Chris, Lon, and I were
    negotiating this is that we did not include hides and skins in
    the original negotiation with Korea. Once we realized the
    importance of hides and skins, the Secretary, Lon, and I worked
    to get the Korean Government another $100 million, to bump it
    up to $1.1 billion.
        This had an immediate effect. The price of hides a
    hundredweight fell in January to $57 because Korea takes
    something like 35 percent of all the hides produced in the
    United States, and as soon as that was announced, the price
    went up $10 to $67, and that put between $5 and $10 back into
    the hands of America's 900,000 producers of cows and calves.
    Again, a very useful tool and we were able to operate it very
    quickly.
        Certainly also with cotton, the GSM has had an important
    role to play throughout Asia as it has been used to stabilize
    contracts and keep those markets open for American cotton
    exporters.
        Mr. Chairman, in closing, we are using all of these tools
    that Congress has made available--credit, crop insurance,
    emergency assistance, and export expansion measures--as
    strategically targeted as possible, to accomplish our mission
    to keep family farming and ranching profitable in this country.
        We do not have all the tools we would like to have, and we
    have put forward a series of proposals within the framework of
    a balanced budget to strengthen the farm safety net.
        I look forward to working with you and other members of the
    committee as Congress considers our proposals for the upcoming
    year.
        That concludes my remarks, Mr. Chairman. I would be very
    pleased to take your questions.

                              Prepared Statements

        Senator Cochran. Thank you very much, Mr. Secretary. We
    will insert your prepared statement in the hearing record along
    with the statements of Mr. Kelly, Mr. Hatamiya, and Mr.
    Ackerman.
        [The statements follow:]
                  Prepared Statement of August Schumacher, Jr.
        Mr. Chairman and Members of the Committee, I am pleased to appear
    before you this morning to discuss the fiscal year 1999 budget and
    program proposals for the Farm and Foreign Agricultural Services (FFAS)
    mission area of the Department of Agriculture (USDA). With me today are
    the Administrators of the three agencies within our mission area:
    Kenneth D. Ackerman, Administrator of the Risk Management Agency; Keith
    Kelly, Administrator of the Farm Service Agency; and Lon S. Hatamiya,
    Administrator of the Foreign Agricultural Service. I am also pleased to
    be accompanied by Christopher Goldthwait, the Department's General
    Sales Manager, and Dennis Kaplan from the Department's Office of Budget
    and Program Analysis.
        Statements by the Administrators, providing details on their
    agencies' budget and program proposals for 1999, have been submitted to
    the Committee. My statement will summarize the proposals, after which
    we will be pleased to respond to your questions.
        Mr. Chairman, the mission of FFAS is to secure the long-term
    vitality and global competitiveness of American agriculture. As
    American agriculture continues to adjust to new Federal policies that
    expose producers more directly to risks and market fluctuations, the
    goal of President Clinton and Secretary Glickman remains to improve
    farm income and provide an adequate safety net for American family
    farmers and ranchers. The President's budget proposals allow us to
    accomplish this goal.
        While we have moved away from the traditional supply management and
    price support farm programs, USDA still provides a crucial safety net
    for American producers. This safety net has several critical elements,
    including assistance in managing risks inherent in agricultural
    production, assistance in obtaining credit necessary for agricultural
    production, assistance for producers in times of emergency, and
    assistance in marketing American agricultural products in the global
    marketplace. The budget supports and strengthens this safety net.
        Further, Secretary Glickman has placed a very high priority on
    providing credit to small, socially disadvantaged, and beginning
    farmers and ranchers. The President's budget proposals reflect that
    commitment.
                              farm service agency
        The Farm Service Agency (FSA) is the agency that family farmers and
    ranchers interact with most frequently. Producers come to FSA to
    participate in farm programs, for farm ownership, operational, and
    commodity loans, for disaster assistance, and to participate in the
    Conservation Reserve Program. The FSA network is a tremendous resource.
    We can all be proud of the dedicated FSA staff who serve America's
    family farmers and ranchers.
        The consolidation of staffs and county offices, establishment of a
    common computing environment, and the convergence of administrative
    services at all levels of the county-based agencies continue to be the
    focus of USDA streamlining efforts. As part of the Department's
    continuing reorganization, we are implementing a field office
    streamlining plan which co-locates the county-based agencies in one-
    stop USDA Service Centers. At this point, the county offices have been
    consolidated into about 2,700 Service Centers. An additional
    streamlining initiative will consolidate administrative support
    functions for the county-based agencies.
        We are also developing a common computing environment for these
    agencies to optimize the use of data and equipment and improve the flow
    of information across the agencies. Also, the Department has entered
    into a contract with an independent consultant who is examining what
    further steps, if any, can be taken to improve the efficiency of our
    farm and rural program delivery system. That study is scheduled to be
    completed by the end of this fiscal year. Collectively, these efforts
    represent a substantial retooling of our service delivery system and a
    vital investment in rural America that is important to family farmers
    and ranchers.
        Our budget proposals provide $976 million for salaries and expenses
    for FSA in 1999 for the administration of its programs. This is
    comprised of appropriated funding of $953 million, a proposal for the
    collection of user fees for the sale of information to the public of
    $10 million, and estimated carryover funds of $13 million. The total
    includes $21 million for increased pay costs and $30 million in
    increased funding for the common computing environment. The 1999
    request represents a $13 million increase over our current estimate for
    1998; however, the funding requested will support about 1,100 fewer
    staff years than in 1998.
    Commodity Credit Corporation
        Before I turn to the programs administered by FSA, I would like to
    address the budget request for the Commodity Credit Corporation (CCC),
    a government entity for which FSA provides operating personnel.
    Domestic farm commodity price and income support programs are
    administered by FSA and financed through CCC. CCC is also the source of
    funding for a number of the conservation programs administered by USDA,
    and it funds a portion of the export programs administered by the
    Foreign Agricultural Service. Funds are borrowed by the Corporation
    from the Treasury to finance CCC programs. Changes over the last decade
    in commodity, disaster, and conservation programs have substantially
    modified the level, mix, and variability of CCC outlays. Since the mid-
    1980s, commodity program spending has declined dramatically, spending
    for ad hoc crop disaster programs has been virtually eliminated, and
    spending for conservation programs has increased and become a major
    portion of CCC's outlays. A great deal of volatility associated with
    CCC outlays has been removed due to provisions of the 1996 Farm Bill.
        The 1999 budget reflects a need for $8.4 billion to reimburse CCC
    for its actual fiscal year 1997 realized losses, an increase of $7.7
    billion from the 1998 reimbursement of $784 million. In prior years,
    the request for appropriations to reimburse 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 the 1998 budget, the
    request for appropriations to reimburse CCC for net realized losses
    covered the actual amount of the unreimbursed losses incurred 2 years
    earlier. The appropriation request for 1999 would fully reimburse CCC
    for the balance of actual 1997 net realized losses of $8.4 billion.
    Appropriations to reimburse CCC for actual net realized losses to be
    incurred in 1998, currently estimated to total $8.5 billion, will be
    requested in the President's budget for fiscal year 2000.
    Commodity Price and Income Support Programs
        Commodity price and income support program outlays account for
    about two-thirds of total CCC outlays in 1999. The President's budget
    includes $5.94 billion in funding for commodity price and income
    support programs in 1999, down from the current estimate of $6.25
    billion in 1998.
        The commodity price and income support programs administered by FSA
    were changed dramatically by provisions of the 1996 Farm Bill. The 1996
    Farm Bill replaced deficiency payments with fixed production
    flexibility contract payments that are no longer tied to market price.
    Nonrecourse loan programs for contract commodities and oilseeds have
    been retained. These programs continue to provide producers with some
    protection against sharp declines in market prices, but the changes in
    the support programs have diminished the traditional role of the farm
    programs as a buffer against fluctuations in production and commodity
    prices.
        The 1996 Farm Bill also modified price support provisions for
    dairy, sugar, and peanuts. Dairy price supports are being phased out,
    and Secretary Glickman recently announced major reforms of milk
    marketing orders. The peanut program was made a no-net-cost program,
    the minimum national peanut poundage quota was eliminated, and the
    quota rate level was reduced. With respect to sugar, sugar loan rates
    were effectively reduced with the imposition of loan forfeiture fees,
    marketing assessments were increased, and marketing allotments were
    suspended.
        The Administration continues to place a high priority on helping
    farmers to manage risk. These changes underscore the importance of crop
    insurance programs that help farmers manage production risk. For the
    crop insurance program administered by the Risk Management Agency,
    legislation will be proposed with the 1999 budget to provide mandatory
    funding for administrative expense reimbursements to reinsured
    companies previously funded through the discretionary account. Offsets
    required for the proposal are included in the budget. For producers of
    crops for which crop insurance is unavailable, the Noninsured Crop
    Disaster Assistance Program, administered by FSA and funded through
    CCC, provides coverage against catastrophic losses where area-wide crop
    losses exceed 35 percent of normal yields.
    Conservation
        Conservation program outlays account for almost one-fourth of the
    CCC expenditures in 1999. The 1996 Act authorized CCC funding for the
    Conservation Reserve Program (CRP) administered by FSA and several new
    conservation programs administered by the Natural Resources
    Conservation Service (NRCS). In 1998, outlays for CRP will total an
    estimated $1.9 billion, including $63 million in NRCS and Forest
    Service technical assistance costs paid for with appropriated funds and
    $1.8 billion from CCC for rental costs and for sharing the cost of
    establishing permanent cover on replacement acres. For 1999, outlays
    for CRP will total approximately $1.72 billion, including $24 million
    in appropriated funds for technical assistance and $1.7 billion from
    CCC.
        CRP provides landowners annual payments and half the cost of
    establishing a conserving cover in exchange for retiring
    environmentally sensitive land from production for 10 to 15 years. The
    1996 Act authorized the program through 2002 and set maximum enrollment
    in the program at 36.4 million acres. Current enrollment totaled about
    28 million acres at the end of calendar year 1997. After a successful
    16th CRP regular signup, the budget assumes acreage enrollments under
    the CRP of about 32 million acres in 1998, 34 million acres in 1999,
    with an eventual enrollment of 36.4 million acres by 2001.
        A number of other conservation programs administered by USDA, such
    as the Wetlands Reserve Program, the Environmental Quality Incentives
    Program (EQIP), the Conservation Farm Option Pilot Program, and the
    Wildlife Habitat Incentive Program are also funded by CCC. These
    programs are administered primarily by NRCS, and funding for these
    programs will be discussed in detail when NRCS appears before the
    Committee.
    Farm Loans
        In order to be successful in farming, America's family farmers and
    ranchers need access to adequate credit. For that reason, the budget
    provides almost $3 billion in funding for farm loan and loan guarantee
    programs for farm families who would be unable to obtain credit
    otherwise and is consistent with recommendations of the Department's
    Civil Rights Action Team and the National Commission on Small Farms. It
    includes $85 million for direct farm ownership loans and $425 million
    for guarantees for farm ownership loans, compared to 1998 levels of $46
    million and $400 million, respectively. The funding requested would
    allow USDA to help 3,458 beginning and small farmers to either acquire
    their own farm or to save an existing one, with about 1,000 of those
    served receiving direct loans.
        The budget also includes $2.4 billion in direct and guaranteed farm
    operating loans, nearly the same funding level as 1998. This funding
    level will allow FSA to serve an estimated 28,000 beginning and small
    farmers, about 12,000 of whom will receive direct loans. The budget
    also provides $25 million in emergency loans for qualifying losses
    which occur in areas covered by a Presidential or Secretarial disaster
    declaration. In addition, the budget provides $1 million for Indian
    tribe land acquisition loans, $25 million for credit sales of property
    acquired by FSA, and $30 million for the boll weevil eradication
    program.
        Credit is one element of the farm safety net which needs
    strengthening. For this reason, the Administration has proposed
    emergency legislation to modify the 1996 Act prohibition on loans to
    borrowers who received debt forgiveness. The ``one strike and you're
    out'' provision in current law is more restrictive than U.S. bankruptcy
    laws which allow individuals to reestablish credit. Our proposal would
    correct this inequity by providing borrowers a second chance.
    Other FSA Programs
        The budget proposes to double funding for State mediation grants
    from $2 million in 1998 to $4 million in 1999. Mediation gives family
    farmers, including many low income and socially disadvantaged farmers,
    the opportunity to remain on the farm by resolving credit and other
    issues through alternative dispute resolution. The increased funding
    will support mediation programs in the 21 States currently certified in
    1998, as well as any additional States that become certified by 1999,
    and will allow States to expand programs to include mediation of other
    agricultural issues in addition to credit disputes.
        FSA also administers the Emergency Conservation Program (ECP).
    Under this program, USDA shares the cost of rehabilitating farmland
    damaged by natural disasters. Supplemental appropriations provided a
    total of $95 million for the ECP in 1997. As of March 12, 1998,
    approximately $9.7 million of that total remains unallocated. No funds
    have been appropriated to date for the program in 1998, although a
    request for supplemental funding is now pending before Congress. The
    budget proposes no funding for the program in 1999.
    Requested 1998 Supplemental Funding
        The President recently submitted several supplemental funding
    requests to Congress to provide emergency assistance to farmers and
    ranchers who recently sustained losses caused by natural disasters, and
    to finance farm ownership and operating loans targeted to beginning and
    socially disadvantaged family farmers.
        For those whose lands were damaged by ice storms in the
    Northeastern United States, rains and mudslides in California,
    tornadoes in Florida, and other recent natural disasters, we are
    requesting a contingency of $20 million for the Emergency Conservation
    Program. The Administration is also asking for $4 million for losses
    sustained by dairy and livestock producers. Emergency funding is also
    requested to provide $25 million in additional emergency loans ($6
    million in budget authority) and a contingency of $62 million in
    emergency loans ($15 million in budget authority).
        In addition, we are requesting approval to redirect $6.7 million in
    budget authority from guaranteed farm operating loans to finance $39
    million in direct farm ownership loans, $25 million in farm ownership
    guaranteed loans, and $10 million in farm operating direct loans.
    Absent enactment of the supplemental, funds available for direct loan
    programs during 1998 will be used up by this Spring, and farm ownership
    guaranteed loans will be exhausted by the end of June. These programs
    are targeted to beginning and socially disadvantaged family farmers and
    were recommended for increased funding in the Civil Rights Action Team
    Report to the Secretary.
                             risk management agency
        The virtual elimination of ad hoc crop disaster aid and subsequent
    passage of the 1996 Farm Bill expanded the role of the Risk Management
    Agency (RMA), giving it primary responsibility for providing an
    agricultural safety net. It is doing so in several ways. RMA
    administers the Federal crop insurance program on behalf of the Federal
    Crop Insurance Corporation (FCIC), offering farmers protection against
    income losses due to production failures and in some cases, market
    price declines. It is aggressively providing risk management education
    to make farmers aware of risk management strategies and actions to
    cover those risks. And, it is pursuing innovative tools, such as the
    Dairy Options Pilot Program, to give farmers more risk management
    alternatives.
        From 1987 to 1994, disaster assistance payments averaged roughly
    $1.2 billion a year, while annual crop insurance outlays averaged
    roughly $800 million over the same period. Combined, the total Federal
    expenditure was roughly $2 billion annually. Since the Federal Crop
    Insurance Reform Act of 1994 (1994 Act), total expenditures for the
    crop insurance program have averaged $1.2 billion annually. For 1999,
    expenditures will total about $1.8 billion; the budget provides for
    full funding of this amount.
        In 1997, crop insurance provided $24.3 billion in protection to
    more than 600,000 producers, holding slightly more than 1.3 million
    policies on 181.4 million acres. For 1998 and 1999, we expect to
    maintain approximately the same level of participation and that
    producers will select higher levels of coverage. Further, Crop Revenue
    Coverage (CRC) is now available on almost 90 percent of the corn,
    wheat, cotton, soybean, and grain sorghum acres in the United States.
    CRC helps protect producers from losses in yield, price, or
    combinations of both factors.
        By 1999, RMA expects that roughly 63 percent of the country's
    insurable acres will be covered by the crop insurance program. Twenty-
    two percent of insurable acreage is expected to be covered at the
    catastrophic coverage level (50 percent of the approved yield covered
    at 55 percent of the expected market price) with the Federal government
    subsidizing 100 percent of the premium, and 41 percent of the insurable
    acreage is expected to be covered at higher levels of coverage (up to
    75 percent of the approved yield covered at 100 percent of the expected
    market price) for which producers pay a premium, a portion of which is
    also subsidized by the Federal government.
        With our private sector partners, including farmer organizations,
    crop insurance agents, trade associations, and educational
    institutions, we are continuing to work with agricultural leaders
    nationwide to increase producers' awareness of risk management
    strategies and impress upon them the importance of taking active steps
    to protect their investments from fluctuating prices and weather-
    related disasters. Our budget proposals include $5 million to carry out
    these educational initiatives.
        We are also exploring new programs that will allow us to offer
    coverages that better meet the needs of family-sized farm operations.
    We intend to launch a Dairy Options Pilot Program this year, and our
    budget proposal includes $10 million for this program in both 1998 and
    1999.
        The budget includes a proposal to shift all reimbursements for
    delivery expenses incurred by reinsured companies from discretionary to
    mandatory spending. This shift would consolidate all spending for the
    program other than salary-related and operating costs into a single
    account and eliminate the possibility of the program being restricted
    by a limited appropriation of discretionary funds.
        The proposal results in an increase of $185 million in outlays from
    the mandatory account in 1999, associated with $205 million in budget
    authority for reimbursement of delivery expenses. This will require
    corresponding mandatory offsets. Of the $1.1 billion in offsets needed
    through 2002, USDA will propose that about half come from the crop
    insurance program, with producers and insurance providers sharing the
    reductions. Beginning in 2000, savings within the crop insurance
    program are achieved by: limiting payment eligibility under the
    catastrophic risk protection (CAT) insurance program to $100,000 per
    person; reducing administrative subsidies for insurance providers from
    27 percent to 25 percent of premiums for buy-up coverage; reducing
    premium subsidies for higher levels of coverage; and reducing the
    statutory loss ratio target from 1.075 to 1.060 beginning in 2000.
        For 1999, necessary offsets have been identified, including savings
    from the Cotton Step 2 Payments and from the Export Enhancement
    Program.
                          foreign agricultural service
        One of USDA's primary goals is to expand economic and trade
    opportunities for agricultural producers and other rural residents. The
    opening and expansion of foreign agricultural markets has never been
    more important. Recent changes in Federal farm policy, including those
    adopted in the 1996 Farm Bill, have made it clear that new and growing
    markets are critical to future income growth for our farmers and
    ranchers.
        We have made some notable progress in achieving our export
    expansion goal in recent years. U.S. agricultural exports reached $57.3
    billion in fiscal year 1997, the second highest level on record. Last
    year also marked the third consecutive year that exports topped $54
    billion. The agricultural trade surplus ended the year at $21.5
    billion. Four of 1997's top 10 markets for U.S. agricultural exports
    rose to new highs. Records were set to both U.S. neighbors, Canada and
    Mexico. Together, our NAFTA partners accounted for $11.7 billion in
    U.S. exports this past year, 20 percent of our total agricultural
    exports worldwide and greater than our sales to Japan. Records were
    also set to Hong Kong and Russia. However, we also experienced declines
    in other top markets with value declines to three key Asian markets--
    Japan, Taiwan, South Korea--ranging from 10 to 12 percent.
        The Foreign Agricultural Service (FAS) plays a critical role in our
    efforts to achieve the Department's goal of expanding overseas markets.
    Working with the Office of the United States Trade Representative, FAS
    is involved in agricultural trade policy, monitoring and enforcing
    trade agreements, and working to reduce trade barriers and increase
    market access for U.S. agricultural products. Through its network of 81
    Counselor/Attache offices and Agricultural Trade Offices, FAS provides
    market intelligence information to U.S. producers and exporters,
    enabling them to compete for market opportunities abroad. FAS
    administers a variety of foreign food assistance, market development
    and export promotion programs which are designed to bolster U.S.
    competitiveness in international markets and build long-term trading
    relationships with other countries. FAS also carries out exporter
    outreach and assistance programs which are designed to increase
    domestic awareness of export opportunities, help companies become
    export ready, and link export-ready and new-to-export companies to
    foreign buyers overseas. And, FAS coordinates international activities
    throughout USDA, bringing to bear all of the resources of the
    Department to address issues as they arise.
        The budget provides a total program level of $190 million for FAS
    for 1999. This includes $146 million of appropriated funding, an
    increase of $6 million over the 1998 enacted level.
        The budget proposal includes $4 million for overseas administrative
    services provided by the Department of State in support of the
    International Cooperative Administrative Support Services (ICASS)
    program, and includes $2 million to establish a buying power
    maintenance fund to assist FAS in managing unanticipated changes in the
    costs of its overseas operations which can result from exchange rate
    losses or gains. This proposal responds to a request of the Conference
    Committee on the 1998 Agriculture Appropriations Bill.
        The budget also includes an increase of $500,000 for FAS to re-
    engineer its program performance measurement and evaluation tools,
    which are a critical element in meeting requirements of the Government
    Performance and Results Act.
        The budget proposes to shift funding for FAS information technology
    infrastructure and related expenses to the FAS appropriated account. At
    present, these costs are funded through a reimbursable agreement with
    CCC. FAS will meet these costs, which are estimated to be $12 million
    in 1999, through staff-year and associated cost reductions and through
    increased cost-share contributions to the Foreign Market Development
    Program.
    Export Credit Guarantee Programs
        Under the export credit guarantee programs, CCC provides payment
    guarantees for the commercial financing of U.S. agricultural exports.
    These programs facilitate exports to buyers in countries where credit
    is necessary to maintain or increase U.S. sales, but where financing
    may not be available without CCC guarantees.
        The budget proposes a new approach to presenting the estimates for
    export credit guarantee programs. Program levels, budget authority and
    outlays will reflect the level of sales expected to be registered
    rather than the authorized level. This provides more realistic
    estimates of the costs of the guarantee programs and improves the
    accuracy of CCC budget estimates. This change will not restrict program
    use; the authorized levels remain available for use as determined by
    program demand and changing market conditions.
        Following this new approach, the budget projects an aggregate
    program level of $5.0 billion for export credit guarantees in 1998 and
    $4.6 billion in 1999. These program levels are significantly higher
    than in recent years, reflecting large increases in programming in
    Southeast Asia and South Korea this year that are expected to continue
    into 1999. The 1999 program level includes $4.3 billion for GSM-102
    short-term export guarantees and $100 million for GSM-103 intermediate-
    term guarantees. Additionally, the budget includes $150 million for
    supplier credit guarantees and $50 million for facilities financing
    guarantees.
    Export Subsidies
        The budget proposes a flexible, multi-year program level
    authorization for the Export Enhancement Program (EEP), which is one of
    two export subsidy programs administered by FAS. The proposal provides
    total funding level of just under $1.2 billion for EEP during the 1999
    to 2003 period and provides administrative discretion to the Department
    to determine the level of funding for individual years. The proposal
    will generate approximately $1.4 billion in savings during this period,
    which will help offset increased funding included in the budget for
    crop insurance and other mandatory spending proposals. There has been
    limited activity under EEP during the past two years due to world
    supply and demand conditions. However, the program remains in place and
    USDA is prepared to resume awarding EEP bonuses should market
    conditions warrant. Annual program levels will continue to be subject
    to the export subsidy reduction commitments established in conjunction
    with the Uruguay Round Agreement on Agriculture.
        FAS also administers the Dairy Export Incentive Program (DEIP),
    which helps exporters of U.S. dairy products become price competitive
    and thereby make sales in targeted overseas markets where competitor
    countries are making subsidized sales. For DEIP, the budget assumes a
    somewhat lower level of program activity in 1999 due primarily to a
    projected tighter domestic market situation. However, the actual level
    of DEIP programming will be determined by market conditions in 1999,
    subject only to the Uruguay Round Agreement subsidy reduction
    commitments. Thus, the actual level of DEIP programming could exceed
    what is assumed in the budget should supply and demand conditions not
    be as tight as currently projected.
    Public Law 480
        Public Law 480 programs are the primary means by which the United
    States provides foreign food assistance. FAS administers Title I of
    Public Law 480, which provides for sales of U.S. agricultural
    commodities to developing countries and private entities through
    concessional financing. Titles II and III of Public Law 480 are
    administered by the Agency for International Development. Under Title
    II, the United States provides humanitarian food assistance to needy
    people in foreign countries in response to malnutrition, famine, and
    other extraordinary relief requirements. Title III provides food
    assistance on a grant basis to least developed countries to support
    programs of economic development.
        The budget provides a total program level for Public Law 480 food
    assistance of $979 million. This is expected to provide approximately
    2.8 million metric tons of commodity assistance, approximately 700,000
    metric tons less than the current estimate for 1998. The budget reduces
    funding for Title I from $245 million in 1998 to $112 million in 1999.
        Funding for Titles II and III remains the same for 1998 and 1999 at
    $837 million and $30 million, respectively.
        In addition, the budget assumes that approximately $109 million of
    CCC funds will be used to support the Food for Progress program. Under
    Food for Progress, U.S. agricultural commodities are provided to
    developing countries and emerging democracies which have made
    commitments to introduce and expand free enterprise in their
    agricultural economies. Commodities are provided on either long-term
    credit or grant terms to foreign governments, private voluntary
    agencies, nonprofit agricultural organizations, cooperatives, or
    intergovernmental organizations.
    Market Access Program
        The President's budget fully funds the Market Access Program (MAP)
    at $90 million. FAS administers MAP to support the development,
    maintenance, and expansion of commercial export markets for U.S.
    agricultural commodities and products. Under the program, CCC funds are
    used to provide cost-share assistance to participating organizations
    including nonprofit agricultural trade organizations, State regional
    trade groups, and private companies, for carrying out foreign market
    development activities in designated countries. Only small businesses
    are permitted to receive direct assistance under MAP.
                              year 2000 compliance
        Finally, I would like to provide an update on Year 2000 compliance
    efforts. FAS, FSA, and RMA are on target for meeting required
    conversions and retrofitting computer hardware, software, and other
    systems to ensure Year 2000 compliance.
        FSA is the lead agency providing information technology support for
    the agencies within our mission area. In August 1996, FSA established a
    target of September 30, 1998, for completion of conversion, well ahead
    of OMB's recently announced target of March 1999. FSA has reported and
    tracked the status of all Year 2000 efforts since October 1996. All FSA
    systems that have not been canceled or replaced are regarded as mission
    critical systems. As of January 28, 1998, FSA has completed 42 percent
    of its Information Technology (software application) systems. For all
    Year 2000 projects, both application and non-application projects, FSA
    has completed over 27 percent. Within the next 3 to 6 months, the
    percentage of completion will increase significantly as ongoing field
    office projects are completed.
        FAS has also established September 30, 1998, as the target date for
    completion of all conversion projects. From the beginning, FAS took the
    approach that Year 2000 compliance would be incorporated into the
    overall re-engineering efforts for the FAS applications systems. The
    process to re-engineer all of FAS's mission critical applications into
    a client/server environment began in 1994. FAS identified 14
    applications as being mission-critical. Eight of those 14 applications
    are Year 2000 compliant; the remaining 6 systems will be compliant by
    September of this year.
        RMA is also making steady progress to meet Year 2000 compliance.
    The Agency has identified 48 mission-critical application systems which
    must be Year 2000 compliant. Of these, 19 are compliant, 10 will be
    replaced, one is being repaired, and 18 will be retired. All of RMA's
    transaction data is compliant now. Historical data is still being
    migrated into Year 2000 compliant systems. Most of the work will be
    done by September 1998, and RMA is on track to have all systems Year
    2000 compliant by the March 1999 deadline.
        The planned early completion date for FSA and FAS will allow those
    agencies to use the remaining time for actual production processing
    with the systems to ensure compliance and will provide time to
    eliminate any errors.
        In closing, I would like to add that I believe the Department of
    Agriculture has an important role to play in helping American farmers
    and ranchers succeed. The FFAS mission area plays a crucial role in the
    Department's efforts to improve farm income and provide an adequate
    safety net for America's family farmers and ranchers. Our programs
    don't operate in a vacuum, but in partnership with State and local
    governments, commodity organizations, private insurance companies,
    colleges and universities, and most importantly, with individual
    producers. These are our customers, and these are the people we are all
    here to serve. Although many challenges are ahead of us, FSA, FAS, and
    RMA are committed to the prospect of using all the tools available to
    us to serve our customers in a farmer-friendly way. With the continued
    support of this Committee, we will continue to do so.
        This concludes my statement, Mr. Chairman. We will be pleased to
    answer any questions you and other Members of the Committee may have.
                                     ______

                       Prepared Statement of Keith Kelly
        Mr. Chairman and Members of the Subcommittee, this is my first
    opportunity to offer a statement to this Subcommittee, and I am pleased
    to present the fiscal year 1999 budget for the Farm Service Agency
    (FSA). While our budget estimates conform with Government Performance
    and Results Act (GPRA) requirements regarding strategic and annual
    performance plans, I will discuss in a traditional format the budget
    estimates for the programs that serve as our tools for meeting GPRA
    goals--price and income support and related programs of the Commodity
    Credit Corporation, conservation programs funded by the Commodity
    Credit Corporation, the farm loan programs of the Agricultural Credit
    Insurance Fund, and a number of others. To conclude my statement, I
    will summarize our request for administrative support.
        Before presenting our budget requests, however, I would like to
    emphasize the importance of strategic planning. The formal plans that
    we have submitted so far are a first step in a comprehensive process of
    examining the role of this agency and its appropriate level of
    resources now and years into the future. Accordingly, I have
    established a Strategic Planning, Policy, and Operations Staff within
    FSA to spearhead the necessary analysis.
        I would also like to take a moment, before I discuss 1999, to
    mention some proposed changes to 1998 funding. The President has
    transmitted to Congress a number of supplemental requests as well as a
    rescission proposal. To respond to natural disaster conditions
    afflicting various parts of the nation, we are requesting $20 million
    for the Emergency Conservation Program; $4 million to indemnify
    producers for milk and livestock lost due to disaster; and $21 million
    in appropriated subsidy, of which $15 million would be available on a
    contingency basis, to provide up to $87 million in emergency disaster
    loans. We are also requesting approval to redirect $6.7 million from
    the current appropriation for guaranteed farm operating loans to
    provide increases in direct farm ownership and operating loans as well
    as guaranteed farm ownership loans, all of which are expected to be
    depleted in coming months. This redistribution would help increase
    opportunities for beginning and socially disadvantaged farmers.
    Finally, the Administration is proposing a rescission of $1.08 million
    from the FSA Salaries and Expenses account to help offset a
    supplemental funding request for the USDA civil rights initiative.
                          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 (CCC), 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 the Natural
    Resources Conservation Service (NRCS), and it funds a portion of the
    export programs administered by the Foreign Agricultural Service (FAS).
    Funds are borrowed by the Corporation from the Treasury to finance CCC
    programs. Commodity support operations, handled primarily through
    loans, 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.
    Program Outlays
        The current 1999 budget estimates largely reflect estimated supply
    and demand conditions for the 1998 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 programs 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 budget includes proposed legislation that would limit cotton
    user marketing certificates to no more than $140 million in 1999 for
    savings of about $110 million. The proposed spending level of $140
    million in 1999 is in line with the history of spending for this
    program. Since the marketing certificate program was first implemented
    in 1991, we have spent about $750 million on these payments--a little
    over $125 million per year, on average. To help meet critical water
    quality goals and to address the recommendations of the Civil Rights
    Action Team (CRAT), legislation is proposed to increase CCC funding for
    the Environmental Quality Incentives Program (EQIP) by $100 million in
    1999 and by a total of $350 million for the period 1999 to 2003. The
    Department also proposes legislation to provide a flexible, multi-year
    program level authorization for the Export Enhancement Program (EEP),
    providing total funding of just under $1.2 billion for the 1999 to 2003
    period, with a funding limitation of $320 million in 1999. This
    proposal provides the Department the discretion to determine the annual
    funding levels, where funding not used one year will remain available
    for use in subsequent years. This proposal would generate estimated
    savings of $230 million in 1999 and a total of $1.4 billion during 1999
    to 2003.
        Changes over the last decade in commodity, disaster, and
    conservation programs have substantially modified the level, mix, and
    variability of CCC outlays. Since the mid-1980's, commodity program
    spending has declined, and will continue to decline as annual fixed
    production flexibility contract payments are reduced. Spending for ad
    hoc disaster programs has been virtually eliminated, and CCC spending
    for conservation programs has increased from negligible amounts prior
    to the 1996 Farm Bill to over $2 billion in 1999, becoming a major
    portion of CCC's outlays. Including conservation programs and other
    programs for which CCC funding was authorized by the 1996 Farm Bill,
    CCC outlays are projected to total $8.6 billion in fiscal year 1998 and
    $8.4 billion in fiscal year 1999, and are expected to decline to about
    $7.0 billion by fiscal year 2003. This outlay trend is shown on the
    graph that follows.
    [GRAPHIC] [TIFF OMITTED] T01MA24.006

        Total net outlays for fiscal year 1999, including the impact of
    proposed legislative savings, are expected to decrease by $200 million
    to $8.4 billion.
    ADP Expenses and other Section 11 Activities
        Section 161 of the 1996 Farm Bill significantly limits the use of
    CCC funds for certain operating expenses. 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 $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 1997 was $36.1 million. The 1999 budget assumes
    that expenditures for computer and telecommunications equipment subject
    to the cap will total $107 million in fiscal year 1998 and $76 million
    in fiscal year 1999. Start-up funding for the Common Computing
    Environment (CCE) is included in both years, and will supplement other
    agencies' funds to begin USDA Service Center CCE implementation
    activities.
        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 $46.2 million,
    obligations in fiscal year 1996 were $51.2 million, and obligations in
    fiscal year 1997 were $39.3 million. The budget projects obligations
    under the cap for reimbursable agreements will total $44.9 million in
    fiscal year 1998 and $46.1 million in fiscal year 1999.
    Reimbursement for Realized Losses
        Mr. Chairman, the 1999 budget reflects a need for $8.439 billion to
    reimburse CCC for its fiscal year 1997 realized losses, an increase of
    $7.7 billion from the fiscal year 1998 reimbursement of $784 million.
    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. Last
    year, in response to OIG recommendations, the request for
    appropriations to reimburse CCC for net realized losses covered the
    actual amount of the unreimbursed losses incurred 2 years earlier. In
    this manner, realized losses are not requested for reimbursement until
    actually recorded on the books of CCC. The appropriation request for
    fiscal year 1999 would fully reimburse CCC the balance of actual fiscal
    year 1997 realized losses of $8.439 billion. Appropriations to
    reimburse CCC for actual net realized losses to be incurred in 1998,
    currently estimated to total $8.5 billion, will be requested in the
    fiscal year 2000 budget.
    Appropriation Language Change
        One CCC appropriation language change is proposed in the budget.
    Language pertaining to a minimum level of export credit guarantees is
    proposed for deletion. This language is not required in the
    appropriations act because the export credit authorizations are
    permanent authority. Moreover, the 1999 budget adopts a new approach
    for presenting more realistic annual program levels for the export
    credit guarantee programs. The estimates for the annual level of
    programming will reflect the actual level of sales expected to be
    registered under the export credit guarantee programs, to be determined
    by program demand, market conditions, and other relevant factors.
                        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 has been available for certain high priority
    practices involving small acreages, such as filter strips and
    shelterbelts. As of December 1997, over 500 thousand acres have been
    signed up under this provision. The 16th signup for CRP regular
    enrollment began on October 14, 1997, and ended on November 14, 1997,
    with 9.5 million acres offered for enrollment at FSA offices. The 1999
    budget assumes acreage enrolled under the 15th and 16th signups, in
    combination with the continuous signup, will bring CRP enrollment to
    about 32 million acres in fiscal year 1998, to 34 million acres in
    fiscal year 1999, and to an eventual enrollment of 36.4 million acres
    by fiscal year 2001.
        In 1998, CCC is making payments of approximately $1.603 billion for
    rental costs of acres that were enrolled for fiscal year 1997. About
    $195 million is being used for sharing the cost of permanent cover on
    acres enrolled during the 15th and 16th signups and under continuous
    signup provisions. Fiscal year 1998 CRP technical assistance costs of
    $63 million for NRCS and FS are funded by unobligated balances of CRP
    funds appropriated prior to enactment of the 1996 Farm Bill. For 1999,
    CCC program costs are expected to total approximately $1.694 billion,
    consisting of: $1.497 billion for rental payments on acres enrolled for
    fiscal year 1998, including those approved during the 15th, 16th, and
    continuous signups; and about $197 million for cost-sharing of
    permanent cover on enrolled acres. Fiscal year 1999 CRP technical
    assistance costs of $24 million for NRCS and FS are also 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 $123.7 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 $300 million for the EQIP in 1999,
    including the proposed legislation to increase the program by $100
    million in 1999 and by a total of $350 million for 1999 to 2003. 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 1999, $25 million
    is included for the CFO in the CCC budget. CCC funding of $20 million
    will be transferred to NRCS to be used in 1999 for the Wildlife Habitat
    Incentive Program, which shares the cost of developing habitat for
    upland wildlife, wetland wildlife, threatened and endangered species,
    fish, and other types of wildlife.
                               farm loan programs
        The programs of the Agricultural Credit Insurance Fund (ACIF)
    provide a variety of loans and loan guarantees to farm families who
    would be unable to obtain credit otherwise. The 1999 budget provides
    for a total program level of almost $3.0 billion in ACIF direct loans
    and guarantees, up approximately $83 million from the current estimate
    for 1998. The largest segment of FSA lending is carried out in
    partnership with private lenders through the guarantee programs, which
    are most cost-efficient for the taxpayer because of their low subsidy
    cost. This budget continues strong support for guaranteed loans, with a
    proposed program level of over $2.3 billion. Moreover, in accordance
    with the recommendations of the Secretary's Civil Rights Action Team
    (CRAT) report of February 1997, we are seeking additional funding for
    direct loans, which provide affordable, supervised credit, a portion of
    which is targeted to beginning farmers and members of socially
    disadvantaged groups.
        For direct farm ownership loans we are requesting a loan level of
    $85 million, at least 18 percent of which would be targeted to socially
    disadvantaged farmers. This program level, an increase of over $39
    million from fiscal year 1998, would enable FSA to extend credit to
    more than 1,000 small and beginning farmers to purchase or save a
    family farm, nearly double the number estimated for the current fiscal
    year. For direct farm operating loans we are requesting a modest
    increase for a program level of $500 million, up about $10 million from
    1998, to provide about 11,580 loans to family farmers. At least 12
    percent of this funding would be targeted to socially disadvantaged
    farmers. Both of these direct loan requests represent the levels
    recommended by the CRAT report.
        For guaranteed farm ownership loans in fiscal year 1999, we are
    requesting a loan level of $425 million, an increase of $25 million.
    For guaranteed farm operating loans we propose to hold the 1999 program
    level at the current level of $1.9 billion.
        Other Loan Programs.--The Budget requests a loan level of $25
    million for credit sales of acquired property, unchanged from 1998.
    This program assists qualified applicants to purchase property in FSA
    inventory.
        The Budget also proposes a program level of $25 million in
    emergency disaster loans in fiscal year 1999. In addition, our budget
    proposes to offer just over $1 million in Indian tribe land acquisition
    loans and $30 million for boll weevil eradication.
        We have noted the recommendations of the Secretary's National
    Commission on Small Farms and are studying ways to use them. Our farm
    loan programs are already essentially directed at small farms since
    only family-size farms meet our loan eligibility requirements. Our
    average farm operating loan is about $45,000. In response to a
    recommendation made by both the Commission and the CRAT, USDA is
    proposing legislation to amend the 1996 Farm Bill prohibition on loans
    to borrowers who have been granted debt forgiveness. This change is
    designed to provide a second chance to borrowers who might be denied
    credit as a result of losses that occurred long ago.
                          other appropriated programs
    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 agricultural issues. Operated primarily by State
    universities or departments of agriculture, the program provides
    neutral mediators to assist producers, primarily small farmers, in
    resolving disputes before they culminate in litigation or bankruptcy.
    Moreover, this program supports the Vice President's initiative to
    achieve savings through alternative means of dispute resolution since
    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.
        Participating States certify their programs with FSA annually.
    Currently, 21 States have programs that qualify for grants. At least
    one additional State is expected to be certified for fiscal year 1999,
    and additional States are in the process of developing programs. For
    fiscal year 1999 the Budget requests $4 million, an increase of $2
    million over fiscal year 1998, to meet the rising demand expected as a
    result of the program's broadened scope and to accommodate newly
    participating States. This level would allow us to provide grants which
    cover the full 70 percent of program costs authorized by law,
    eliminating the need to prorate available funds among States as we have
    done at the current appropriated level.
        A proposed rule for this program is in final stages of clearance
    within the Department and will soon be published for public comment.
    The regulations provide a uniform set of requirements for all States
    participating in the program and address the issue of confidentiality
    of records in mediation cases.
    Emergency Conservation Program
        The Emergency Conservation Program assists producers in
    rehabilitating farmland damaged by natural disasters 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.
        The President's Budget requests no ECP funding for fiscal year
    1999. No funding was provided in the fiscal year 1998 Appropriations
    Act, but carryover unallocated balances remain available from
    supplemental funding of $95 million in fiscal year 1997. As of March
    12, approximately $9.7 million is available for allocation. Allocations
    of about $14.3 million have been issued so far in fiscal year 1998 for
    some of the Northeast States hit by ice storms, several States damaged
    by floods, and a number of other States affected by other disasters.
    Additional requests are anticipated from the Northeast as well as
    flood-damaged regions of California, and others. We anticipate that all
    funds remaining from 1997 will be allocated before the end of the
    fiscal year. Accordingly, as I mentioned earlier, the Administration
    has transmitted a request for $20 million in supplemental funding that
    would be contingent upon usage of available funds and subject to a
    budget request from the President.
    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 1999 appropriation
    request of $450 thousand would cover a higher than normal but not
    catastrophic level of claims.
                             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. The Budget proposes to increase direct funding by
    $40.7 million, of which $17.8 million is included under the
    Agricultural Credit Insurance Fund program account in order to offset
    serious staff shortages in administering farm loan programs. These
    resources would help achieve reduced direct loan losses by providing
    enhanced supervised credit, and would also allow reduced processing
    time for direct and guaranteed loan requests. We also plan to lower
    delinquency rates by increasing our loan servicing capability. Our
    proposal for $952.7 million in direct funding reflects increases for
    the Common Computing Environment ($30 million) and pay costs ($20.8
    million), partly offset by salary savings from reductions in staffing
    financed by direct funds (-$11 million). Considerable county office
    staffing reductions occur because of a $37.8 million reduction in
    available carryover funds in 1999, and because of continuing workload
    impacts of the 1996 Farm Bill.
        The increase of $30 million for the Common Computing Environment
    (CCE) will be used, along with funding from the Natural Resources
    Conservation Service and Rural Development, to implement the CCE for
    USDA Service Centers. A CCE will provide a common technical
    architecture supporting both the program delivery and administrative
    support of participating agencies. Implementation is based on a
    thorough analysis and reengineering of business practices and involves
    pretesting, procurement, deployment, installation, and training
    associated with equipment and software such as standard network
    servers, desktop or laptop computers, standardized peripherals, and
    commercial off-the-shelf software. Achievement of a CCE will enhance
    customer service and optimize the opportunities for sharing of
    resources among the USDA Service Center partner agencies.
        In the meantime I am happy to report that FSA is making good
    progress in conversion and retrofitting of existing computer systems to
    ensure Year 2000 compliance. In August of 1996, we established a target
    of September 30, 1998, for completion of conversion, well ahead of the
    Office of Management and Budget's recently announced target of March
    1999. We have reported and tracked the status of all Year 2000 efforts
    since October 1996. All FSA systems that have not been cancelled or
    replaced are regarded as mission critical. As of January 28, 1998, we
    have completed 42 percent of our Information Technology (software
    application) systems. For all Year 2000 projects, both application and
    non-application projects, we have completed over 27 percent. Within the
    next 3 to 6 months, the percentage of completion will increase
    significantly as ongoing field office projects are finished. Our
    planned early completion target will allow us time for testing and
    correction of any problems.
    Staffing
        From fiscal year 1993 through the current fiscal year 1998, FSA
    will have reduced total staffing by 25.8 percent. These reductions
    reflect an overall 22.5 percent reduction in Federal staff years and a
    27.5 percent reduction in non-Federal county office staff years. The
    fiscal year 1999 Budget proposes a further reduction of 1,118 staff
    years for fiscal year 1999, of which 263 are Federal staff years and
    855 are non-Federal county office staff years.
        As you know, Mr. Chairman, we have proceeded with the closure of
    FSA county offices according to the 1994 plan. However, the staffing
    reductions we are proposing for fiscal year 1999 require a
    reexamination of our county office structure. Because there is a point
    at which an office can be too small to function effectively, it may
    become necessary to consolidate offices where staffing reductions take
    place. I will consider any closure decisions in light of cost
    effectiveness and quality of service to the producer, and I will keep
    the Committee apprised of any prospective closures.
        As you also are aware, the Secretary favors converting FSA non-
    Federal county committee employees, with their career tenure, to
    Federal civil service status. Conversion of these FSA non-Federal
    employees to Federal civil service status would eliminate the
    challenges FSA currently faces in operating two different personnel
    systems for employees in county offices. These challenges include the
    fact that non-Federal FSA employees cannot compete for FSA Federal
    vacancies on an equal footing with Federal employees, non-Federal
    employees who are RIFed are not entitled to assistance and priority
    placement under the Career Transition Assistance Program, and FSA is
    required by law to establish separate supervisory reporting lines for
    non-Federal and Federal employees located in the same county office.
    Legislative Proposal
        In closing, I would like to point out that the President's Budget
    includes a proposal to provide $10 million of FSA's 1999 funding
    through charging a fee for information requested by insurance
    companies, appraisers, consultants, attorneys, and others. This
    proposal is in keeping with the Administration's user fee initiative
    intended to shift costs from the general taxpayer to the parties that
    benefit directly from the information.
        Mr. Chairman, this concludes my statement. I will be happy to
    answer your questions and those of the other Subcommittee Members at
    any time.
                                     ______

                       Prepared Statement of Lon Hatamiya
        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
    1999.
        Although I have been administrator of FAS for a short time, I am
    familiar with the Agency and its accomplishments, both through my work
    as administrator of the Agricultural Marketing Service and through work
    on my family's farm in California. During my four years as AMS
    administrator, FAS and AMS worked together on a regular basis,
    particularly in our efforts to implement the North American Free Trade
    Agreement (NAFTA). As a farmer from the No. 1 exporting state, I can
    fully appreciate the role of FAS in assisting agricultural exporters
    and the increasing importance that exports will play in the future for
    American farmers.
              agricultural exports reach second highest level ever
        In fiscal year 1997, U.S. agricultural exports reached $57.3
    billion, the second highest level on record. Last year also marked the
    third consecutive year that exports topped $50 billion.
        Exports of intermediate products (such as soybean meal and planting
    seeds) set a record at $12.3 billion. Consumer-oriented products also
    reached a record level of $20.8 billion, with poultry and fresh fruit
    leading the way. Exports of bulk products were down 16 percent because
    reduced wheat, corn, and cotton sales offset record soybean and tobacco
    sales.
        Four of 1997's top 10 markets for U.S. agricultural exports rose to
    new highs. Records were set to both U.S. neighbors, Canada and Mexico.
    Together, our NAFTA partners accounted for $11.7 billion in U.S.
    exports this past year, 20 percent of our total agricultural exports
    worldwide and greater than our sales to Japan. Records were also set to
    Hong Kong and Russia. However, we also experienced declines in other
    top markets with value declines to three key Asian markets--Japan,
    Taiwan, South Korea--ranging from 10 to 12 percent.
        The Latin American market continues to grow in importance for U.S.
    agriculture. U.S. exports to Latin America reached $10 billion in 1997,
    exceeding the total for all of Western Europe.
        As usual, agriculture made a healthy contribution to the U.S.
    merchandise trade balance in fiscal 1997. The agricultural trade
    surplus (exports minus imports) ended the year at $21.5 billion. With
    this latest figure, agriculture has now registered trade surpluses in
    each of the last 37 years.
        More so than agricultural products, U.S. wood and fishery products
    faced a mixed trade picture in fiscal 1997. It was good news for wood
    product exports, which reached a record $7.5 billion--up 5 percent from
    the previous year. Edible fish and seafood products did not fare as
    well. Export value slipped 6 percent to $2.7 billion. Weak world salmon
    prices, a shortage of U.S. crab and crabmeat, increased competition,
    and sluggish demand all contributed to this drop.
        Combined U.S. exports of agricultural, wood, and fish products in
    1997 were $67.4 billion. This was down 3 percent from 1996's record-
    breaking $69.8 billion, but well above earlier levels. In fiscal 1990,
    agricultural, wood, and fish exports totaled only $49.4 billion.
        For fiscal 1998, our February estimate forecasts U.S. exports at
    $56 billion. With imports projected at $38.0 billion, the current
    estimates set the agricultural trade surplus at $18 billion this year.
    The decline in exports forecast for this year is due largely to the
    unsettled financial situation in Asia, strong competition from other
    exporting nations, and the strong dollar.
        Mr. Chairman, one of USDA's primary goals is to expand economic and
    trade opportunities for agricultural producers and other rural
    residents. The modest annual growth projected in domestic demand for
    U.S. agricultural products makes the export market one of the most
    viable sources of increases in U.S. farm income.
               fas mission, accomplishments and future challenges
        Before I present our budget request, I would like to briefly share
    my thoughts on our mission highlighted in our 5-year strategic plan,
    and briefly review the strategies we will use to successfully
    accomplish our goals. My staff at FAS has created a highly focused
    strategic plan to guide us in accomplishing our mission and turning
    future challenges into opportunities for U.S. agriculture. As stated in
    our strategic plan, FAS' mission is to serve U.S. agriculture's
    international interests by expanding export opportunities for U.S.
    agricultural, fish, and forest products and promoting world food
    security.
        FAS identified two goals and a number of strategies in its
    strategic and annual performance plans that I believe will help us help
    American agriculture tap into export opportunities. The first goal is
    to expand export opportunities. We will accomplish this goal by:
      --aggressively pursuing reductions in trade barriers and trade-
            distorting practices of key trading partners;
      --identifying constraints to U.S. exports and implementing strategies
            for overcoming them;
      --defending U.S. agricultural interests by promoting U.S. policy
            views before the international community;
      --strengthening the export knowledge and skills of producers,
            exporters, and new-to-export small agribusiness firms so they
            can compete more effectively in the international marketplace;
      --educating foreign buyers on the merits of U.S. products;
      --targeting market development and promotion activities to leverage
            the entrepreneurial spirit of America's small business owners
            in expanding agricultural exports;
      --assuring accurate and timely dissemination of market intelligence
            that serves a broad domestic customer base through the
            effective application of technologies such as the Internet;
      --effectively applying our GSM export credit guarantee programs in
            developing country markets where liquidity is a limiting factor
            to U.S. exports; and
      --using the Dairy Export Incentive Program (DEIP) up to GATT-
            allowable limits. Our second goal is to promote world food
            security, which we will accomplish by:
        --ensuring the U.S. research community has accurate and up-to-date
                information about areas of emerging trends in scientific
                research and technical activities that will benefit U.S.
                farmers through improving farming technologies;
        --supporting economic development efforts, especially in emerging
                markets and developing countries;
        --continuing to use the Public Law 480, Title I program, increasing
                its focus on the private sector; and
        --continuing the successful work under the Food for Progress
                program with private voluntary organizations.
        Through these aggressive strategies, we are helping our farmers and
    ranchers meet the competitive challenges both now and in the future.
    FAS conducts a wide range of programs and activities to successfully
    implement these strategies, as we work to achieve our mission and
    goals. Some accomplishments in 1997 include:
        Trade policy accomplishments.--In 1997, the United States won a
    major victory in the first case brought to the World Trade Organization
    (WTO) under the new Sanitary and Phytosanitary (SPS) Agreement. In
    August, the WTO upheld the claims of the United States and Canada that
    the European Union's (EU) import ban on meat from hormone-treated
    animals was inconsistent with the EU's commitments under the WTO SPS
    Agreement. The decision was affirmed just last month by the WTO's
    Appellate Body. This ban, initiated in 1989, stopped over $100 million
    in U.S. beef exports annually. We are ready to work with EU officials
    toward resuming normal trade as soon as possible.
        Other accomplishments included the first commercial shipment of
    U.S. tomatoes to Japan, the lifting of Egypt's ban on imported poultry,
    gaining market access for sweet cherries in Mexico, preserving the
    market for U.S. petfood exports to Switzerland, implementing a project
    to expedite shipments of live cattle from Montana and Washington to
    Canada, and working with Chile to re-open its market to U.S. wheat.
        Enforcing Trade Agreements.--FAS aggressively monitored foreign
    countries' compliance with Uruguay Round Agreement commitments during
    1997, the second year of the agreement's implementation. FAS efforts
    helped safeguard negotiated trade benefits, including working with
    Costa Rica to open its poultry tariff rate quotas, which had been
    delayed by domestic legal challenges. That action set a precedent for
    other countries to implement their agreement commitments. FAS efforts
    also resulted in the Philippines taking major steps to fully open its
    market for U.S. pork and poultry exports. FAS work contributed to the
    opening of formal dispute settlement proceedings by the U.S. government
    that will challenge the EU's cheese export subsidies and Canada's milk
    price pooling scheme--practices that may constrain U.S. dairy exports.
    We have used the NAFTA committee process to gain new access for sweet
    cherries and address restrictions that would have impeded exports for
    grain, livestock, fruit and milk to Mexico.
        Expanding and Improving Export Assistance Programs.--Export
    programs and services were refined and expanded to meet changing
    demands of the international marketplace and keep pace with the
    competition. In 1997, funding offered under the Foreign Market
    Development Program (FMD) for the first time was provided to export
    organizations through a competitive process. Under the 1997 Market
    Access Program (MAP), 84 percent of the brand promotion funds assisted
    small-sized companies and cooperatives. Funding has been cut
    significantly for large companies and will be eliminated entirely in
    the 1998 allocation process.
        In 1997, U.S. exporters reported the first sales under the Supplier
    Credit Guarantee Program. In addition, a new Facilities Credit
    Guarantee Program was launched. The program provides payment guarantees
    to help finance exports of U.S. goods and services for agricultural
    facilities in emerging markets.
        Through a variety of training experiences throughout the United
    States, the Cochran Fellowship Program provided 707 participants from
    45 countries exposure to U.S. economic policies, business practices and
    products. New programs were initiated in Kenya, Namibia and Brazil. In
    Ukraine, USDA, through the Commercial Agriculture Development Project,
    provided technical assistance and training to develop a system of
    grades and standards to facilitate domestic and international commerce.
        Reaching Out to New Exporters.--FAS continued its outreach efforts
    to educate American farmers and exporters about foreign sales
    opportunities. In 1997, efforts continued to target cooperatives and
    small, disadvantaged, and minority firms. New partnerships were formed
    with vocational agriculture teachers, 4-H and FFA representatives to
    inform more of the public, particularly young farmers, of the dynamics
    of agricultural exports and the need to get more producers and
    companies exporting. In addition, FAS has worked with the FFA and
    United Negro College Fund to organize an international intern program
    providing interested students an opportunity to gain international
    experience by working in select FAS overseas offices.
        Providing Scientific and Policy Leadership on Biotechnology.--In
    1997, FAS and other USDA agencies took a leadership role to ensure that
    farmers and consumers around the world have access to approved products
    resulting from biotechnology. FAS worked tirelessly in EU countries to
    convince policy makers of the need for food safety decisions to be
    based on sound science. Two biotech products were cleared for
    importation by most European countries. FAS worked with Egyptian
    officials to continue to keep the Egyptian market open to approved
    agricultural biotechnology products. USDA worked to assure Brazilian
    officials of the safety of approved biotechnology products, and
    Brazilian officials approved the importation of 1.5 million metric tons
    of soybeans, including those derived from biotechnology. The
    establishment of the U.S.-Indonesia Food and Agricultural Forum insured
    continued dialog among senior public and private sector officials of
    both countries on issues related to food safety, genetically engineered
    products and trade. This is envisioned as a model to engage the
    leadership of other countries in a continuing discussion of these
    important issues. The United States also is a key proponent of a
    biotech initiative under the Asian Pacific Economic Cooperation (APEC)
    forum. We are sponsoring educational workshops aimed at harmonizing
    regulatory approaches to biotech products among APEC members.
        Working to Ensure Food Security Around the World.--In 1997, USDA
    worked vigorously to continue the momentum created by the 1996 World
    Food Summit. At the Summit, 186 countries adopted a Plan of Action that
    endorses trade liberalization, free markets, private sector initiative,
    sustainable development, and self-reliance rather than self-
    sufficiency. USDA is coordinating U.S. follow-up by the government,
    which emphasizes strengthening the U.S. contribution to alleviating
    hunger and malnutrition at home and abroad. Central to that effort is
    the development of a U.S. Action Plan on Food Security to serve as a
    blueprint for future U.S. policies and programs. The plan is being
    developed in full collaboration with non-government organizations, the
    private sector and academia. Intended to be not just a government plan,
    but one for the country as a whole, its completion will hopefully also
    be an incentive for other countries to meet their commitments made at
    the Summit.
        Promoting Scientific Cooperation.--USDA scientific cooperation with
    foreign countries continues to pay off in practical ways for U.S.
    agriculture. USDA uses science to help solve critical problems such as
    trade barriers and phytosanitary issues, food safety, and exotic
    diseases and pests. Postharvest technology scientists have worked with
    Malaysian counterparts to develop quarantine treatments to hasten the
    elimination of trade barriers to commodities susceptible to fruit fly.
    A Chinese team visited the United States to exchange information on
    viral diseases of animals, laying the groundwork for the exportation of
    U.S. Shorthorn cattle and diagnostic equipment to China.
        Scientists are also promoting new industrial uses for U.S.
    agricultural products overseas. Initiatives include collaboration with
    Hungary on biodegradable plastics from corn starch, Argentina on
    hypoallergenic latex from guayule, and Mexico on pulp and paper
    products from crop wastes. Such projects help open new markets for U.S.
    products and diversify the U.S. export portfolio.
        An important component of global food security is food safety. USDA
    has ongoing efforts to transfer existing technologies and develop new
    technologies in food safety. An example of successful technology
    transfer is a project that allowed USDA to provide relevant information
    to the Bulgarian government concerning health risks of rice grown in a
    region contaminated with arsenic. Subsequent efforts have focused on
    developing new phytoremediation techniques using plants to detoxify
    contaminated soils.
    Challenges for 1998
        Mr. Chairman, we just need to look at the front page of nearly any
    newspaper in America to see the issues confronting American farmers and
    producers. From Asian currency problems to biotechnology to food safety
    concerns, American farmers face challenges that were unthinkable just a
    few years ago. Today's global trading environment means that the
    actions taken by governments and businesses far from U.S. shores can
    and do have an impact on U.S. farmers. The enactment of the landmark
    1996 farm bill makes the role of exports and, in turn, the role of FAS
    even more prominent in increasing the economic opportunities for
    America's farmers and ranchers. I would like to take a few moments to
    outline some of the issues we will be focusing on in the coming year.
        Impact of Asian Financial Problems.--USDA's latest export forecast
    shows plainly the impact the events in Asia are having on our exports
    to those markets. I just recently returned from Japan and Korea to
    learn first hand the problems and the issues that continue to face
    those countries and U.S. exporters. Earlier this year, I also visited
    several Asian nations and the information I gathered on my most recent
    trip will help us determine whether our initial efforts are meeting
    with success.
        We intend to use all the programs at our disposal to diminish the
    impact on U.S. agricultural exports. We have announced the availability
    of $1.1 billion in export credit guarantees to South Korea, and have
    increased the availability of export credit guarantees to the
    Philippines, Indonesia, Malaysia, Thailand, and Singapore to more than
    $1 billion. We have sent a technical team to the region and a follow-up
    team will visit this spring to ensure the smooth operation of these
    programs. We also will continue to constantly review the situations in
    these markets to ensure that U.S. exporters have all the necessary
    tools available to them.
        Competitive Pressures.--The outlook for U.S. agricultural exports
    is heavily influenced by competitive pressures that differ by commodity
    and can affect price and/or quantity of sales. One of the primary
    sources of this pressure is the rising value of the U.S. dollar,
    especially against the currencies of our major competitors. This has
    the effect of making U.S. exports more expensive to our customers,
    relative to those of our competitors. Unfortunately, the dollar has
    been rising against the currencies of all our competitors. Given the
    strength of the American economy, this situation is likely to continue
    for the foreseeable future, putting downward pressure on the U.S. share
    of world trade.
        There are commodity-specific competitive pressures that pose
    challenges to U.S. exports as well. Record production of soybeans in
    South America will continue to pressure prices in 1998 and these
    pressures will continue in future years. We expect South American
    production of grains and oilseeds to expand significantly in the years
    ahead, offering increased competition to U.S. suppliers in third
    country markets, and pressuring prices in the process. Likewise,
    Chinese corn and East European corn and feed wheat available for export
    have been putting downward pressure on U.S. corn prices so far this
    year. While the threat from Chinese corn appears to have abated as
    supplies have diminished, East European products will continue to
    pressure U.S. corn prices.
        In addition, we will continue to face stiff competition in markets
    around the globe. Our annual review of the export promotion activities
    of the 22 countries that account for our major competition found that
    just like the United States, many of our competitors have ambitious
    export goals. The EU and other countries assist their producers and
    small business to develop foreign markets through activities similar to
    our Market Access Program and Foreign Market Development Program.
    Market promotion by EU countries is estimated at $400 million in 1995/
    96, with about one-half of that amount provided by EU-member
    governments. The rest of the funds comes from producer-funded
    organizations 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 $7.2 billion budgeted by the EU in
    1997 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.
        Fast-track Authority.--We were obviously disappointed that the
    President's traditional trade negotiating authority was not renewed in
    1997. Like his predecessors since Gerald Ford, the President and his
    negotiators need this authority to gain further market access overseas,
    extract significant concessions from our trading partners, and play a
    leadership role in shaping new trade agreements. But it isn't over. The
    Administration is conferring with key members of Congress to secure
    this authority. Our preference would be for broad fast track authority,
    incorporating the specific goals for agriculture that were spelled out
    in the President's last bill.
        Next Round of Multilateral Trade Negotiations.--As important as the
    Uruguay Round was for initiating the process of liberalizing world
    trade in agricultural products, a lot of work remains to be done. WTO
    members agreed to begin negotiations on the next phase of agricultural
    trade liberalization at the end of 1999. These negotiations are the
    best chance U.S. agriculture has for further reducing tariffs, opening
    new markets, and addressing unfair trade practices on a global scale.
    Fast track authority was critical in concluding the Uruguay Round, and
    renewed authority is viewed as essential for U.S. negotiating
    credibility and success in future WTO negotiations. Several key issues
    stand out:
      --Substantial further reductions in tariffs are needed.
      --Tariff-rate quotas (TRQ's) should be substantially increased or
            effectively eliminated by cutting the out-of-quota duty.
      --Export subsidies should be further cut or eliminated.
      --Rigorous disciplines should be imposed on the activities of state
            trading enterprises.
      --Tighter disciplines are needed to prevent countries from
            circumventing their trade commitments through disguised
            subsidies and nontariff measures.
      --Rules on sanitary and phytosanitary measures should be tightened so
            countries cannot disguise protectionist intentions or pander to
            irrational concerns regarding public health.
        Refining Our Export Assistance Efforts.--Today's competitive
    environment for exporters coupled with budget realities means that the
    Federal government must continue its efforts to do more with less. At
    FAS we are using the Government Performance and Results Act (GPRA)
    strategic planning framework to rethink our export assistance efforts
    from top to bottom. We continue to emphasize customer service and
    search for ways we can improve program delivery. This year, we will
    begin moving toward a one-stop application process for both our MAP and
    FMD programs to better coordinate our export efforts across programs,
    as well as simplify and reduce the paperwork burden on potential
    program participants. This is one example of our efforts to implement
    GPRA principles to guide us in allocating our export promotion
    resources.
        In our credit guarantee programs, we will continue to expand our
    outreach activities to educate both potential exporters and importers
    about how the programs can benefit them. We will also continue to work
    to increase the number of U.S. firms participating in the export market
    through our efforts with state departments of agriculture and state
    legislators as well as groups such as FFA.
        World Food Security.--Improving world food security continues to be
    a top priority. This year, we will continue to work with the public and
    private sectors to develop a U.S. Action Plan on Food Security that
    will serve as a blueprint for future U.S. policies and programs. Our
    food aid programs are also under review as we evaluate the changes that
    were made as a result of the 1996 farm bill.
        Another area of emphasis is our effort to ensure that farmers and
    consumers around the world have access to approved products resulting
    from biotechnology. Properly used and regulated, biotechnology offers
    one of the most promising tools for meeting future demand for an
    abundant, affordable, nutritious, and safe global food supply. It holds
    the potential for reducing the use of crop chemicals and fossil fuels,
    adapting plant varieties that can be grown in harsh conditions,
    reducing losses to plant pests and diseases, increasing the shelf life
    and the nutritional content of foods.
        Equal Employment Opportunity.--I am firmly committed to ensuring
    that FAS supports the civil rights of all our employees. As you can
    see, the challenges facing us are many, and we can only begin to
    accomplish these goals by effectively working together. Under the
    direction of Secretary Glickman, we are committed to ensuring equal
    opportunity; respecting the civil rights of all employees, clients, and
    customers; and creating a work environment that is free of
    discrimination and harassment, while accommodating the needs of persons
    with disabilities. As an Asian American, I have experienced prejudice
    and stereotypical assumptions solely based on my heritage. As FAS
    administrator, I will carefully monitor the implementation of our
    agency's EEO commitment and will hold each employee at every level
    personally accountable for his or her conduct and performance, as a
    public servant, in equal opportunity and civil rights.
                               fas budget request
        Mr. Chairman, 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.
        The fiscal 1999 FAS budget proposes a funding level of $145.6
    million and 819 staff-years. This represents an increase of $5.6
    million above fiscal 1998 funding levels but a reduction of 62 staff-
    years from 1998 levels. The budget proposes several initiatives that I
    would like to briefly review with you.
        The 1999 budget proposes that the costs of operating the CCC
    Computer Facility, and other related FAS Information Resources
    Management (IRM) costs shall be funded through the FAS appropriation.
    The Facility serves as the Department's collection point for
    international production intelligence and crop estimates. Currently,
    these activities are funded through a reimbursable agreement with CCC.
    This change will shift funding for these activities from mandatory to
    the more appropriate category of discretionary spending. Additionally,
    with this shift, 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 funding support for the CCC Computer Facility and other IRM
    costs is estimated at $12.0 million in fiscal 1999. The budget proposes
    to finance this activity primarily by reducing employment, associated
    administrative cost reductions, and a reduction in the FAS contribution
    to the Foreign Market Development (FMD) Cooperator Program from $27.5
    million to $22.0 million. It is anticipated that increased cost-share
    contributions by participants in the FMD Program will offset reduced
    FAS contribution levels.
        Year 2000 Efforts.--I am pleased to report that all computer
    hardware and application software systems will be Year 2000 compliant
    by the end of calendar 1998. Of the 14 FAS mission-critical systems,
    eight are already compliant, and the remaining systems will be re-
    engineered or modified during calendar 1998. Independent Verification
    and Validation (IV&V) of FAS systems will be performed during the
    latter part of calendar 1998.
        The budget proposes $2.0 million to establish an overseas buying
    power maintenance account to assist FAS in managing unanticipated
    changes in the costs of overseas operations associated with exchange
    rate losses. This proposal responds to fiscal year 1998 conference
    report language that directs the Department to develop a plan for
    establishing an account to manage overseas currency fluctuations. Under
    this proposal, funds appropriated for this purpose in 1999 will be
    transferred to a revolving fund where they will remain until expended.
    Funds could be withdrawn from the account after exchange rate losses
    are verified. Exchange rate gains that may accrue will be deposited
    into the account.
        The budget provides an increase of $2.0 million for pay costs and
    higher agency contribution levels for employees under the Civil Service
    Retirement System and includes $4 million for overseas administrative
    services provided by the Department of State in support of the
    International Cooperative Administrative Support Services (ICASS)
    program. In 1998, $4.4 million has been transferred from the Department
    of State for this purpose.
        The budget includes an increase of $500,000 to develop a more
    effective FAS Government Performance and Results Act (GPRA) performance
    measurement and evaluation system and to re-engineer market
    intelligence gathering processes. FAS will enlist the help of private
    sector experts to develop a cross-agency performance tracking and
    evaluation system to determine success rates in attaining goals and
    objectives outlined in the FAS Strategic Plan. FAS also will evaluate
    and re-engineer its crop and market intelligence gathering activities,
    interagency partnering, and evaluation and dissemination processes to
    make them more efficient in terms of resource utilization and more
    responsive to internal and external customer needs.
        For fiscal 1999, the budget includes $3.0 million for the Cochran
    Fellowship Program, unchanged from 1998 levels.
    Export Programs
        Mr. Chairman, the export promotion, food assistance and foreign
    market development programs administered by FAS are key to expanding
    global market opportunities for U.S. agricultural producers. Our
    program proposals provide the tools to meet these new sales
    opportunities, tempered by the need to reduce Federal spending.
        Export Credit Guarantee Programs.--The budget proposes a new
    approach to presenting the estimates for the CCC export credit
    guarantee programs. Program levels, budget authority and outlays will
    reflect the level of sales expected to be registered rather than the
    authorized levels. This provides more realistic estimates of the costs
    of the guarantee programs and improves the accuracy of CCC budget
    estimates. This change will not restrict program use; the authorized
    levels remain available for use as determined by program demand and
    changing market conditions.
        Following this new approach, the budget projects an aggregate
    program level of $5.0 billion for export credit guarantees in fiscal
    1998 and $4.6 billion for 1999. These program levels are significantly
    higher than in recent years, reflecting large increases in programming
    in Southeast Asia and South Korea during 1998 that are expected to
    continue into 1999.
        The 1999 program level includes $4.3 billion for the GSM-102
    program and $100 million for the GSM-103 program. Additionally, the
    budget includes $150 million for supplier credit guarantees and $50
    million for facilities financing guarantees.
        Public Law 480.--The 1999 budget provides a total program level of
    $979 million for Public Law 480 foreign food assistance, a reduction of
    $133 million from 1998 levels. At this program level, 2.8 million
    metric tons of commodity assistance will be provided, 700,000 metric
    tons below the current estimate for 1998. The reduction in Public Law
    480 funding proposed for 1999 will occur in the Title I program;
    funding for Titles II and III will remain unchanged from 1998 enacted
    levels. This will ensure the availability of adequate resources to meet
    the most serious food assistance needs.
        Market Access Program.--For the Market Access Program, the 1999
    budget proposes to continue the program level at $90.0 million, the
    maximum annual program level authorized in the 1996 Farm Bill.
        Export Enhancement Program.--For the Export Enhancement Program
    (EEP), the budget proposes a program level of up to $320 million for
    fiscal 1999. While world market conditions have limited the use of EEP
    over the past two years, we believe it is extremely important that we
    maintain a strong position in order to protect U.S. agricultural trade
    interests. Additionally, the budget proposed a flexible multi-year
    program level for EEP of $1.2 billion for the fiscal years 1999 through
    2003. This proposal will provide the Department with the administrative
    discretion to determine the annual funding level for EEP, subject to
    the $320 million limitation in 1999. Amounts not used in one year will
    remain available for use in subsequent years, subject to the export
    subsidy reduction commitments made in conjunction with the Uruguay
    Round Agreement on Agriculture. It is anticipated that this proposal
    will generate some $1.4 billion in savings over the five-year period
    that will be used to finance crop insurance sales commissions,
    increased EQIP funds, and other increases requested for mandatory
    programs in the budget.
        Dairy Export Incentive Program.--For the Dairy Export Incentive
    Program (DEIP), the budget includes a program level of $82.3 million,
    somewhat below the current level due to projected tighter domestic
    market situation. As is the case with EEP, actual 1999 program levels
    for DEIP will be determined by market conditions subject to the export
    subsidy reduction commitments made in the Uruguay Round Agreement on
    Agriculture.
        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 1999 budget for the Risk Management Agency
    (RMA). It is my privilege to appear before you as Administrator of RMA,
    and I would like to express my personal gratitude to the members of
    this Subcommittee who have shown a continuing interest and commitment
    to RMA programs.
        The virtual elimination of ad hoc disaster aid and subsequent
    passage of the 1996 Farm Bill positioned the RMA to be the primary
    provider of the agricultural safety net. In order to assure that
    American agriculture remains solid, solvent, and globally competitive
    into the 21st century, RMA has committed itself to transforming the
    crop insurance program into a broad-based safety net for producers.
    That is our vision. We have worked to assure a broad-based safety net
    consisting of many public and private alternatives, all of which are
    intended to improve the economic stability of agriculture. Today, I
    want to discuss with you an important budget issue which must be
    addressed in order to continue our work establishing, maintaining, and
    delivering this safety net for producers. However, before I do that, I
    would like to emphasize our mandate which has taken RMA into many new
    areas beyond traditional crop insurance, including the development of
    innovative products based on proposals from the private sector spanning
    the breadth of the farm risk management community. I would also like to
    highlight some of RMA's key accomplishments for 1997.
                             program participation
        Participation in the crop insurance program remains at a
    significantly high level despite elimination of the requirement that
    producers obtain crop insurance to participate in other major
    Department of Agriculture (USDA) programs. In 1997, crop insurance
    provided $24.3 billion in protection to more than 600,000 policyholders
    holding slightly more than 1.3 million policies on 181.4 million acres.
    We expect to have about the same level of participation in 1998 and
    1999. In 1997, RMA expanded coverage on 29 insured crops to 343
    additional counties in 26 States. In 1998, coverage will be expanded on
    25 crops to 144 additional counties in 16 States. Further, Crop Revenue
    Coverage (CRC) is now available on almost 90 percent of the corn,
    wheat, cotton, soybean, and grain sorghum acres in the U.S. CRC helps
    protect producers from losses in yield, price, or combinations of both
    factors.
                            preparing for the future
        We are continuing to work with agricultural leaders nationwide to
    increase producers' awareness of risk management strategies and impress
    upon them the importance of taking active steps to protect their
    investments from fluctuating prices and weather disasters. Private
    sector participation is key to the success of this initiative. Without
    the active efforts of our private sector partners, our ability to help
    growers manage risk would be lessened. Our Risk Management Education
    effort is backed by a $5 million apportionment of the Federal Crop
    Insurance Corporation Fund, on which we will draw in the coming months
    to carry out educational initiatives and competitively award education
    proposals submitted by our private sector partners, including farmer
    organizations, trade associations, and educational institutions. In its
    role as facilitator of the education effort, RMA will work to ensure
    that all producers are fully aware of not only the production risks but
    also the economic risks facing them in today's environment and of what
    tools are available to them to manage these risks. This initiative
    directly supports our strategic goal to strengthen the safety net for
    agricultural producers through sound risk management programs and
    education, as well as our objective to increase the agricultural
    community's awareness and effective utilization of risk management
    alternatives.
        As part of our continuing efforts to develop programs for a range
    of agricultural commodities, we announced a new program for dairy
    farmers on January 6, 1998. The Dairy Options Pilot Program will
    provide minimum pricing guarantees for dairy farmers through a cost-
    sharing agreement with USDA. This program offers eligible producers a
    financial safety net by allowing them to purchase options on the price
    of their milk. Under this program, when milk prices fall, producers
    will be able to offset losses based on projected future earnings, in
    effect insuring the price of their milk. The pilot program, scheduled
    to begin this spring, is limited to six counties in six States that RMA
    will select on the basis of concentration of production and other
    factors. Funding for this program will be provided by the Commodity
    Credit Corporation.
        In addition, we, along with our private sector partners, are
    exploring other opportunities to develop additional risk management
    tools, including insurance for many new crops and some exciting new
    products.
        RMA recognizes changes and new challenges in its mandate and
    organizational environment and is currently underway with a Business
    Process Reengineering project which began in November, 1997. The
    project will produce a blueprint for reengineering the risk management
    tools and compliance investigations lifecycles. Throughout this
    process, RMA will be responding to such factors as tightening budget
    and staff resources, as well as growing program demands from Congress,
    the Department, and key customers and partners. This process will help
    us achieve the goal and objectives I mentioned earlier, as well as our
    objective to improve program integrity and protect taxpayers funds.
                         strengthening the partnership
        After spirited negotiations, RMA and the insurance companies agreed
    on terms for a new Standard Reinsurance Agreement for the 1998 crop
    year. The new agreement reduced annual administrative costs by $30
    million and average annual underwriting profits by an estimated 20
    percent. Timely completion of this agreement ensured that producers
    will continue to receive the high level of service they have come to
    expect, and that taxpayers will receive good value for their investment
    in American agriculture.
                           preserving the safety net
        From 1987 to 1994, disaster assistance payments averaged roughly
    $1.2 billion a year, while annual crop insurance outlays averaged
    roughly $800 million over the same period. Combined, the total Federal
    expenditure was roughly $2 billion annually. Since the Federal Crop
    Insurance Reform Act of 1994 (1994 Act), total expenditures for the
    crop insurance program have averaged $1.2 billion annually. Compared to
    historical expenditures, the reform has saved between $700 and $800
    million annually, net of Noninsured Assistance Program (NAP) payments,
    while providing most farmers affordable risk protection. While much of
    these savings are due to favorable weather, crop insurance reform has
    produced budgetary savings that have greatly exceeded expectations. For
    1999, the crop insurance program is expected to cost $1.785 billion,
    which is still below the historic cost of disaster assistance payments.
        To follow-up on my earlier remarks, I would now like to address the
    budget issue facing RMA for fiscal year 1999. The 1994 reform
    legislation did not fully fund the enhanced crop insurance program.
    Rather, about half of the amount needed to fund the administrative and
    operating (A&O) subsidy to participating private insurance providers--
    about $188 million in fiscal year 1998--became subject to an annual
    appropriation of discretionary spending beginning in 1998.
        We are prepared to resolve this dilemma and place the crop
    insurance program on a firm financial foundation. USDA has drafted
    legislation to shift the payment for A&O subsidy from discretionary to
    mandatory spending, a process that requires corresponding mandatory
    offsets. In fiscal year 1999, USDA will provide the offsets for this
    funding shift from sources outside the crop insurance program. Of the
    $1.1 billion in offsets needed through fiscal year 2003, USDA will
    propose that about half come from the crop insurance program, with
    producers and insurance providers sharing the reductions. The balance
    will come from other USDA sources.
        USDA is prepared to spend the time and energy necessary to craft a
    solution which is fair and flexible for those with an interest in the
    crop insurance program. By solving this funding dilemma, we will
    benefit producers by assuring year-in, year-out stability to the crop
    insurance delivery system and predictability for the program.
    Accordingly, we have proposed the following strategy in developing a
    package to accomplish the needed offsets beginning in fiscal year 2000:
      --Limit payment eligibility under the catastrophic risk protection
            (CAT) insurance program to $100,000 per person.--The savings
            attributed to this action will be $50 million in crop year
            2000, increasing to $56 million in 2003 under the baseline
            projections. In crop year 1997, about 9,500 producers had
            insurance coverage under CAT that exceeded $100,000 for all
            insured crops. While maintaining the essential ``safety net''
            for producers, the proposed limitation responds to criticisms
            of a ``free'' CAT program providing potentially millions of
            dollars of coverage to certain large operators.
      --Reduce administrative subsidies for insurance providers from 27
            percent to 25 percent of premiums for the standard plans of
            insurance.--This action, combined with the reduced premium due
            to the limitation on CAT coverage, reduces costs by an
            estimated $35-40 million per year.
      --Reduce premium subsidies for higher levels of coverage.--The
            smallest program cuts were made in this area in order to
            continue protecting farmers and encourage producers to take
            advantage of higher crop insurance coverage levels. Currently,
            the premium risk subsidy for each producer is calculated as if
            the per-person premium had been purchased at a 50 percent
            coverage of yield and 75 percent of the price election (50/75).
            A reduction to 50/72.5 will cause only a slight increase in
            producers' out-of-pocket costs to pay premiums, approximately
            10 cents per acre.
      --Reduce the statutory loss ratio target from 1.075 to 1.060
            beginning in fiscal year 2000.--The savings attributed to this
            action are about $30 million total during fiscal year 2000-
            2003. To achieve this savings, premium rates would be
            increased, thus increasing out-of-pocket costs for producers.
        The proposed changes will have the following effect on
    participants. In annual dollar terms, large CAT-insured producers take
    the largest share of the reductions ($58 million or a reduction of 15.7
    percent from $370 million), followed by providers ($37 million or 6
    percent from $612 million), and then by producers who elect additional
    coverage ($33 million or 4.3 percent from $772 million).
        The time is right for moving forward with this legislative
    proposal. If we fail to act, there will be a $205 million shortfall in
    company payments as no discretionary funds have been requested to pay
    for these expenses. This would result in severe disruption to the
    Federal crop insurance delivery system and an unacceptable erosion of
    program effectiveness.
        In proposing this legislation, our goal is to ensure that cuts are
    fair and that they are achieved with minimal disruption for both
    program participants and insurance providers. We look forward to
    working with you and your colleagues in the coming months on this
    proposal, which will protect the interests of agricultural producers
    and ensure the stability of the crop insurance program.
                                   year 2000
        RMA is making steady progress to prepare for the technological
    challenges associated with the Year 2000. We have identified 48 mission
    critical software application systems for Year 2000 compliance. Of
    these, 19 are compliant, 10 will be replaced, one is being repaired,
    and 18 will be retired. We are projecting that the total cost of
    bringing RMA into compliance will be $1.69 million.
                     administrative and operating expenses
        Discretionary account expenses are estimated to increase by $2.0
    million from the fiscal year (FY) 1998 level of $64 million. This
    increase includes: $1,064,000 for pay costs, of which $266,000 is for
    annualization of the fiscal year 1998 pay raise and $798,000 for the
    anticipated fiscal year 1999 pay raise; $277,000 to fund increased CSRS
    contributions; and $659,000 for costs associated with the completion of
    Year 2000 conversion requirements in order to comply with Departmental
    mandates, Civil Rights activities, and administrative costs in support
    of the Risk Management Education initiative. These costs all directly
    support the goal and objectives of the Agency.
        Mr. Chairman, this concludes my testimony. I appreciate the
    opportunity to address this Subcommittee on behalf of the Risk
    Management Agency, and I will be glad to answer any questions that you
    or other members of the Subcommittee may have.
                                     ______

                             Biographical Sketches
                             august schumacher, jr.
        August Schumacher is the Under Secretary for Farm and Foreign
    Agricultural Services in the Office of the Secretary of Agriculture. He
    provides leadership in the area of Farm and Foreign Agricultural
    programs and more specifically exercises general direction of programs
    administered by the Farm Service Agency (Commodity Credit Corporation),
    the Risk Management Agency (Federal Crop Insurance Corporation), and
    the Foreign Agricultural service.
        Prior to his appointment to this position, Mr. Schumacher was
    Administrator of the U.S. Department of Agriculture's (USDA) Foreign
    Agricultural Service. As Administrator, Schumacher was a strong
    advocate for the interests of America's farmers both at home and
    abroad. He oversaw the administration of programs to foster exports of
    American agricultural, fish and forest products. FAS reports on
    international agricultural production and trade, handles USDA's
    responsibilities in international trade agreements and negotiations,
    administers the Export Enhancement, Foreign Market Development and
    Market Promotion Programs, coordinates USDA's role in international
    food aid programs and provides linkages to worldwide resources and
    technologies that can benefit U.S. agriculture.
        Before coming to USDA, Schumacher worked for the World Bank's
    agricultural lending group on a series of projects on agriculture
    sector policy adjustment, forestry and biodiversity protection in
    Central Europe, Belarus and Ukraine. In addition, he has worked in
    China, Latin America, the Middle East and Africa.
        Schumacher also served as Commissioner of Food and Agriculture for
    the Commonwealth of Massachusetts during 1985-90. During his tenure as
    Commissioner of Food and Agriculture in Massachusetts, Schumacher was
    heavily involved in the joint efforts of USDA and the National
    Association of State Departments of Agriculture (NASDA) to promote
    agricultural trade. He hosted the 1990 NASDA Food Expo in Boston and
    participated in several agri-trade missions to Europe and Japan. As
    Commissioner, he also fostered several state market development
    initiatives including the Women, Infants, and Children (WIC) farmers'
    market coupon program.
        Schumacher is from a farm family in Lexington, Mass. He attended
    Harvard College and the London School of Economics. He was also a
    research associate with the Agribusiness Department of the Harvard
    Business School.
                                     ______

                                  keith kelly
        Keith Kelly, a native of Red Lodge, Montana, is the Administrator
    of USDA's Farm Service Agency (FSA). As Administrator, Mr. Kelly
    reports to the Under Secretary of Agriculture for Farm and Foreign
    Agricultural Services, and is responsible for the administration of
    farm commodity programs, agricultural credit programs, and certain
    disaster and Federal crop insurance programs.
        In 1990, Mr. Kelly served as the first Director of the newly-
    created Arizona Department of Agriculture. He was appointed by Governor
    Rose Mofford and was reappointed by Governor Fife Symington in 1991.
    Under the direction of the Arizona State Legislature, he consolidated
    four autonomous state agencies into a unified, cabinet-level department
    with 450 employees and an appropriated budget of approximately $13
    million. Mr. Kelly was instrumental in the adoption of a bilateral,
    livestock health agreement with the state of Sonora, Mexico, and he has
    actively promoted the North American Free Trade Agreement as a member
    of the Arizona-Mexico Commission. He negotiated the first official
    boxed-beef agreement for Arizona processors in the Mexican states of
    Sonora and Sinaloa in 1996-97. He was appointed by Secretary Glickman
    and U.S. Trade Representative Mickey Kantor to the Agricultural Policy
    Advisory Committee in 1995. Following in the foot- steps of his
    grandfather (Commissioner of Agriculture, 1939-1941), Mr. Kelly served
    as Director of Montana's Department of Agriculture (1983-1988), after
    serving two years as deputy director. From 1976 to 1980, he served as
    Administrative Assistant for Agriculture and Natural Resources for
    Montana's Governor's Office. He is past chairman of the National
    Governors Association Staff Advisory Council for Agriculture.
        From 1972 to 1974, as a marketing specialist for the Montana Wheat
    Commission, he developed the first toll-free Grain Market News Service
    in the United States; and from 1974 to 1976, he was assistant director
    of Western Wheat Associates, based in Washington, D.C., where he
    developed marketing plans for U.S. wheat producers.
        Mr. Kelly was raised on his parents' sheep and cattle ranch in Red
    Lodge. He attended Montana State University where he received a B.S.
    degree in Agricultural Business in 1968 and an M.S. degree in
    Economics/Agricultural Economics in 1973. He served in the U.S. Army
    Infantry, 101st Airborne Division, in Vietnam and was awarded the
    Bronze Star.
        Mr. Kelly and his wife, the former Norma Jean Walsh of Butte,
    Montana, are the parents of four children.
                                     ______

                                lon s. hatamiya
        Lon Hatamiya is the Administrator of the Foreign Agricultural
    Service (FAS) of the United States Department of Agriculture (USDA),
    where he oversees various programs that foster exports of American
    agricultural, fish, and forest products. FAS is responsible for USDA's
    obligations in international trade agreements and negotiations along
    with coordinating the Department's role in international food aid
    programs. This agency also reports on international agricultural
    production and trade, administers various export assistance programs,
    and provides linkages to worldwide resources and technologies that can
    benefit U.S. agriculture.
        Prior to his appointment to FAS in October of 1997, Lon was the
    Administrator of the Agricultural Marketing Service (AMS) of USDA from
    1993 to 1997, where he was responsible for over 50 federal programs.
    During his tenure, AMS received two ``Hammer Awards'' from the National
    Performance Review in recognition of increased efficiency and cost
    savings within a federal government program.
        Lon was born and raised in Marysville, California, where his family
    has been farming for the past 90 years. He graduated with honors from
    Harvard University, with a B.A. in Economics. He received his M.B.A. in
    Entrepreneurial Studies and International Business from the Anderson
    Graduate School of Management at the University of California, Los
    Angeles (UCLA), and his J.D. from the UCLA School of Law. He is
    admitted to practice law in California.
        Lon has worked in the private sector in various capacities over the
    last fifteen years. As a purchasing manager with the Proctor and Gamble
    Company in Cincinnati, Ohio, he assisted in the development of material
    acquisition and allocation strategies for their production facilities
    around the world. Lon has also served as a consultant to the Sony
    Corporation in Japan, developing a marketing strategy for broadcast
    equipment in Western Europe; and to the Port of Long Beach, developing
    a long-term intermodal transportation plan. In addition, Lon was an
    attorney with the national firm of Orrick, Herrington & Sutcliffe, in
    the practice of public finance, corporate, and political law. In the
    vast third Assembly District in Northern California, Lon was the
    Democratic nominee and the first Japanese American to run for the
    California State Legislature in the last decade.
        Lon, before his appointment by President Clinton to USDA in
    September 1993, was involved in the general management of his family's
    farming business, H.B. Orchards Company, Inc., in Marysville,
    California, which grows 1,200 acres of prunes, peaches, walnuts, and
    almonds. He was also founder and President of BHP Associates, Inc., an
    economic development, education, and agribusiness consulting firm in
    Sacramento, California.
        In 1991, Lon was selected for the California Agricultural
    Leadership Program of the California Agricultural Education Foundation,
    comprising top leaders of California agriculture. He was appointed by
    the California State Assembly in 1992 to serve on the Rural Economic
    Development Infrastructure Panel. He also served on the Boards of
    Directors of Planned Parenthood of the Sacramento Valley and the
    Marysville Chapter of the Japanese American Citizens League (JACL); as
    President of the Sacramento Chapter of the JACL, he was recognized for
    his longtime work on obtaining reparations for Japanese Americans
    interned during World War II.
        Lon currently serves as a member of the National Advisory Council
    of Minorities in Agriculture, Natural Resources, and Related Sciences
    (MANNRS); as a member of the Board of Governors of the Japanese
    American National Museum; and served on the USDA/Hispanic Association
    of Colleges and Universities (HACU) Leadership Council.
        Lon and his wife Nancy are the parents of two sons, Jon and George.

                          Dairy Options Pilot Program

        Senator Cochran. Before proceeding with my questions, I am
    going to yield to the distinguished Senator from Wisconsin,
    Senator Kohl, for any comments, statement, or questions that he
    might have. Senator.
        Senator Kohl. Well, that is very kind of you, Senator
    Cochran. I do appreciate it. I have three questions which I
    would like to address to the panel with respect to the dairy
    issue.
        USDA's Risk Management Agency is finalizing the dairy
    option pilot project rule, as you know. The Extension Service
    in Wisconsin and dairy farmers in Wisconsin are quite anxious
    to begin using this new marketing tool. The success of the
    program will be determined by how many dairy farmers actually
    adopt this new marketing tool after the pilot project expires.
        I want to see to it that throughout Wisconsin this pilot
    project is maximized in terms of its exposure to Wisconsin
    dairy farmers. My concern is that it may be used in as little
    as six counties, I understand, and it may be used for as few as
    6 months, and then it may move on. You know the dairy industry
    in Wisconsin, as well as other places, but in Wisconsin,
    because we are so important to the dairy industry in the
    country and it is such an important industry in our State, as
    you know. And it is in dire straights, as you also know. We
    want them very much to use new methods to market their products
    like the options program.
        I would like to feel that you are going to give Wisconsin
    more of an opportunity to participate in it than what I fear
    may be the case. Could I get hopefully a favorable response
    from you right now?
        Mr. Ackerman. Thank you, Senator. I appreciate the support
    that you and many others have given to this program. We think
    it is a very important one.
        At this point, as you note, the comment period on the rule
    for the dairy options pilot program is closed. We are reviewing
    the comments right now. At an appropriate point, once the
    comments are reviewed, we will be making decisions on where the
    first set of States and counties will be that will be
    initiating the program. We are hoping that will be done in an
    expeditious way. We have gotten quite a lot of interest around
    the country in the program and we take that as a very healthy
    development.
        As you note, the dairy options pilot program is designed to
    start small. We intend in the first 6 months--in the first
    round of it--to start in six States, six counties per State.
    The reason for this is that it is a brandnew program. We have
    never done this before and are not sure that it works. We want
    to make sure that it works, and once we have gained a little
    bit of experience, then we will be able to enlarge it. But as
    you note, on the first round, we will be limited in size to six
    States and six counties per State.
        Also, it is designed as a temporary program. Any individual
    farmer would be in the program for 6 months, and the reason
    again is to teach the farmer how to use exchange traded options
    and futures contracts. This is very new to dairy producers.
    Dairy futures have only existed for a couple of years. Once
    farmers have been through it, we hope that this will enable
    them to use the markets on a permanent basis with the education
    and experience they have gained.
        Senator Kohl. I do appreciate that and I appreciate the
    program and its potential value to dairy farmers, and I am
    hopeful that I can work with you to see to it that Wisconsin
    dairy farmers get the maximum exposure as the program unfolds.
    It is intended to be a 3-year program.
        Mr. Ackerman. That is correct.
        Senator Kohl. With a 6-month kind of a startup phase, and
    hopefully then to go on for another 2\1/2\ years. So, my hope
    is that we can work to maximize Wisconsin dairy farmers'
    exposure, and I am sure that you would be more than happy to do
    that.
        Mr. Ackerman. That is correct, and we would be happy to do
    that with you.

                         Dairy Export Incentive Program

        Senator Kohl. Thank you.
        Now, the second question. In the first 2 years, middle of
    1995 through the middle of 1997, of the GATT implementation
    period, the United States notified WTO that about 141,000
    metric tons of nonfat dry milk had been exported through the
    dairy export incentive program [DEIP]. It is my understanding
    that the U.S. Government approved contracts totaling that
    amount, but only some 91,000 metric tons were actually
    exported; 141,000 were reported. The difference is
    approximately 50,000 metric tons was reported as exported, but
    apparently never left the United States.
        The question I am asking is when will the Department
    reannounce this tonnage so that the product can actually be
    exported.
        Mr. Schumacher. Senator, this is a very, very important
    question, one that we are working on a great deal. That is, the
    amount that was registered and then canceled. I am going to ask
    Lon or Chris where are we in terms of getting announcements on
    those tonnages out.
        Mr. Goldthwait. We have met with the representatives of the
    dairy industry a number of times on this question. We have told
    them that for any tonnages that were canceled within this same
    GATT counting period, there is no problem. That tonnage will be
    reannounced probably around the beginning of May.
        With respect to tonnage from prior years, we have this
    issue under study. We are looking very carefully at whether
    there is a way to reannounce that tonnage which would not be
    inconsistent with our GATT commitments. That review is still
    ongoing and we hope to conclude it rather shortly. Obviously we
    would like to do something about this quickly.
        The other thing we have undertaken to do--in fact, already
    done--is to make certain flexibilities available to the
    exporters with respect to their sales under the DEIP program so
    that fewer contracts will be canceled in the future. Such
    flexibilities may involve changing, for example, the buyer in
    the purchasing destination if the first buyer is unable to
    fulfill those contracts.
        So, we have this question very much under study and we
    certainly appreciate the importance of the DEIP program, its
    benefit to America's dairy farmers.
        Senator Kohl. Thank you. I would like to stay in touch with
    you as you move ahead with that.
        Mr. Schumacher. Absolutely.
        Senator Kohl. Hopefully we can maximize the exports.
        Mr. Schumacher. We are using the full funding. I think
    Chris and Lon's people are working very hard on that issue
    under some criticism from a certain number of our competitors,
    but I think it is vitally important. I think we are approaching
    $1 billion in dairy exports, and that then does help a little
    bit on the price.

                           State Trading Enterprises

        Senator Kohl. All right. I thank you so much.
        Last question, gentlemen. Users of State trading
    enterprises are the most vocal in calling for the total
    elimination of, quote, traditional export subsidies. What
    measures does USDA suggest to ensure that State trading
    enterprises like the New Zealand Dairy Board, that their
    anticompetitive advantages, which they have and use, are also
    addressed and hopefully eliminated?
        Mr. Schumacher. That is a very vital issue--not only the
    single desk trading of the New Zealanders but also the
    Australia Wheat Board and the Canadian Wheat Board. It is
    something that we are working on in terms of the next round. It
    is one of our two or three top priorities, Senator.
        I am going to ask Lon to address this specific issue. It is
    one that our friends in Canada, Australia, and New Zealand--
    they are all friends--but they still have these State trading
    organizations or single desk trading and it is a very difficult
    issue because it does give them a competitive advantage.
        Mr. Hatamiya. Mr. Kohl, let me answer that briefly, if I
    could.
        Under the WTO Agriculture Committee, we continue to bring
    up State trading enterprises as a major focus of discussion. It
    is a target for us to take a look at. We are looking for
    transparency in the marketplace. STE's do not provide that. We
    proposed a questionnaire form of approaching STE's. They are
    among a number of the highest priorities we are going to be
    looking at for our future negotiations in the WTO leading into
    the 1999 and 2000 round. So, not only are STE's important, but
    tariff reductions, tariff rate quotas, export subsidies, as
    well as other issues are major points of contention that we
    will continue to address at that appropriate level.
        Mr. Schumacher. There is one additional issue, and that is,
    as I mentioned in my opening remarks, we have been aggressively
    using the liquidity stabilization provided by our GSM. In the
    situation of Asia across the board, liquidity is the problem
    right now, and State trading has not been as effective in the
    sense that they are having some problems on that side.
        So, I think the ability to fully use the authorities that
    Congress has provided to us in the GSM is certainly helping
    American farmers maintain market share, and it is a tool that
    we continue to use firmly around the world. Certainly there has
    been some strong criticism from some of our good friends for
    our timely use of that, and there are certainly interesting
    statements from some of their capitals.
        Senator Kohl. Well, I thank you and I thank you for your
    cooperative attitude and your willingness to work together.
    Thanks a lot.
        Thank you very much, Mr. Chairman.

                               Prepared Statement

        Senator Cochran. Thank you, Senator. We will insert your
    prepared statement in the hearing record.
        [The statement follows:]

                       Prepared Statement of Senator Kohl

        Mr. Under Secretary, we appreciate your willingness to
    testify before the subcommittee today regarding the Farm and
    Foreign Agriculture Service Agency's proposed budget.
        My constituents have kept me abreast of the difficulties
    the new farm program has caused in your attempts to deliver new
    farm and conservation programs and risk management products to
    farmers. Your task is further complicated, by the reduction of
    USDA's work force by 22,000 employees over the past few years.
        I am particularly interested in your plans and goals for
    expanding the U.S. market share for dairy products like cheese.
    Currently, the world prices for dairy products are 30 to 40
    percent under the U.S. price. If the U.S. is going to be a
    major exporter then either the U.S. price must drop to the
    world market or the world market must go up. I expect probably
    a combination of the two will happen. If this is the case, the
    dairy industry is in for additional stress over the next five
    to ten years. Your leadership and expertise will play a very
    important role during this period.
        A tremendous number of challenges, such as reining in state
    trading enterprises, transfer pricing issues, World Trade
    Organization strategy for the next round of discussions, and
    expanding exports need to be addressed if the industry is to
    become a successful player in the international market. I will
    be particularly interested in hearing today how we can make
    trade agreements work better for farmers in rural Wisconsin.

                         Needs for Disaster Assistance

        Senator Cochran. Mr. Secretary, let me ask a couple of
    general questions about the budget request and then get to some
    specifics with the other members of the panel who are here with
    you today.
        The supplemental request, for example, is under
    consideration by the Senate on the floor today, and we hope to
    complete action on it by the end of the day. Since the request
    was submitted by the administration, there have been some
    additional disasters that have occurred in Georgia particularly
    and elsewhere in the country.
        I hope that you will help us try to assess the needs for
    disaster assistance that we should try to fund in this
    supplemental. We will still have an opportunity to negotiate in
    conference with the House and work out differences between the
    two bills that are passed by the two bodies. But I hope that we
    can have up-to-date information from the administration to work
    with and your assistance in that regard could be very helpful
    to us.

            Cutback in Foreign Market Development Cooperator Program

        In connection with our foreign agriculture activities, I
    noticed that in the budget request, there is a cutback in funds
    for the Cooperator Program, where the Government makes
    available money that is matched with private sector money
    through trade associations, like the U.S. Wheat and American
    Soybean associations and other groups like that, to try to help
    open up new markets and expand our market share around the
    world.
        With the cutback proposed by the administration in these
    funds, what will the impact be insofar as our total commitment
    to market development around the world? Is this going to have a
    negative consequence at a time when we need to be doing more
    maybe rather than less?
        Mr. Schumacher. First, Senator, on the first question, on
    the Georgia and other disasters, we will get back to you. I
    visited Gainesville with Commissioner Ervin a year or so ago.
    It is the home of the original poultry industry and I was very
    sad to see a number of the poultry houses knocked down. So, we
    are going to work carefully and we will get back to you very
    quickly on the impact of recent disasters.
        On the Cooperator Program, the cooperators and I work very
    closely. That program has been going since 1954. They have done
    an absolutely outstanding job of increasing our market share--
    particularly value-added products--and also maintaining our
    market share on bulk commodities. Our exports would be down, I
    believe, without the strong support and the cost sharing of the
    Cooperator Program. They simply do an outstanding job here and
    particularly overseas.
        The budget provides $22.0 million for the Cooperator
    Program. MAP is fully funded and the Emerging Markets Program
    is fully funded. We are putting a complete package together and
    making that a bit more efficient so we can look at all the
    funds that the cooperators will have access to.
        We are hoping to get a bit more cost sharing from the
    cooperators. There was report language in last year asking for
    that.
        So, we would like to work with you very closely. We think
    that should be sufficient, but there may be differences of
    opinion on that.

                        Fiscal Year 1998 MAP Allocation

        Senator Cochran. For the Market Access Program, $90 million
    is requested in the budget, which is the amount mandated by law
    to be spent on the program. The program is not a discretionary
    program that we fund. We simply go along with the direct
    funding that the law makes available for the program.
        But my question is, are those funds being used? In this
    fiscal year, for example, there has been a holding back on the
    allocation of funds and making those funds available for the
    purpose for which they are to be spent.
        Can you tell us how much of the $90 million in this fiscal
    year has been spent and are there any intentional delays in the
    process to try to keep from spending that money?
        Mr. Schumacher. Well, I know the cooperators very well and
    the MAP participants. I think they are pretty aggressive on
    using this program. I would like to defer to Lon to discuss the
    fiscal year 1998 MAP allocation process.
        It is one of the most important programs that we have. We
    have fought very hard to maintain the funding at the $90
    million level. We have made a lot of changes in the program to
    benefit small businesses and cooperatives. There have been
    legislative changes made. So, I will defer to Lon.
        Mr. Hatamiya. Mr. Chairman, let me agree with Under
    Secretary Schumacher. To the contrary, we are being as active
    as possible with the use of all tools, as he has mentioned. The
    MAP program is now under a new uniform export strategy
    application process that may have delayed slightly the
    allocation of those funds but for the long term will make more
    efficient use of all of the tools provided, not only the
    Cooperator Program, but the MAP funds, as well as the Emerging
    Markets Program. We are trying to coordinate each one of these,
    in addition to the Cochran program, to ensure that all of the
    available funds are most efficiently used.
        As Mr. Schumacher has said, we are actively pursuing every
    avenue of export development. On Friday, I returned from a trip
    to Asia, the second in 3 months, to ensure that we are an
    active exporter in that very important market. I led a
    delegation of agricultural leaders to Japan and Korea to ensure
    that our presence was felt. Many of those are participants
    within the MAP and Cooperator Program. I think they expressed
    their general positive impressions as to the use of these
    funds.
        Again, we are trying to streamline and make most efficient
    this process, and I think that is working quite well.

                     Reasons for Declines in Asian Exports

        Senator Cochran. Thank you. That is very reassuring. We
    will continue to follow the use of those funds and hope that
    there will not be any delays or backing away from the
    commitment to be aggressive in the use of those moneys.
        In looking at the statements that were submitted about our
    export situation, I noticed that even last year, we saw
    declines in our export sales in the Asian marketplace. While we
    were increasing our exports in other places in the world, we
    were ahead of the downward trend in agriculture exports. It
    seemed like nobody else was talking about financial problems in
    Asia until just a few months ago, but the agriculture exporters
    could already tell that something was wrong.
        What were the reasons for the declines that agriculture
    exporters had in the Asian markets? Given all the tools that
    you have and the growing economies that seemed to be doing well
    a year ago, why were they not buying more of the U.S.-produced
    commodities?
        Mr. Schumacher. I will defer to Lon, but I think we began
    to see a strengthened dollar, for example in Japan--the yen I
    think has strengthened from 80 to, what, 130, Lon? And that
    started about 18 months ago and that has certainly affected our
    high value products. The inability to stabilize and grow is
    having a softening effect on our high-value product exports,
    especially the meats and some of the horticulture.
        Mr. Hatamiya. I think in addition to that, the strength of
    the dollar in the Asian marketplace, not only in Japan but also
    throughout the region. We have seen a nearly 50 to 70 percent
    reduction in the currencies of many of the countries in that
    region. That led to the decline and softening of agricultural
    exports in the United States into that market in the latter
    part of last year.
        Also, China had a bumper crop in a lot of the grains. They
    are also becoming much more competitive in some of the higher
    value products as well. With decreased values in the currency,
    it makes American products less competitive.
        We are trying, as you mentioned, to utilize every tool we
    have available. We are trying to minimize the impacts that it
    might have in 1998 with use of GSM-102, with the use of other
    tools that the Congress has provided us, and so we are hoping
    to, again, minimize the decrease in exports into that very
    important market region.

                          Chinese Import Restrictions

        Senator Cochran. A couple of months ago, I read in the
    paper where China had suspended the importation of some of the
    commodities from the United States. I think cotton was one of
    them. They just shut down the ports to U.S.-grown cotton.
        Has that changed now? Have they changed their mind and let
    those goods flow into the country, or are we still under some
    kind of embargo there that is commodity-specific from China?
        Mr. Schumacher. Lon, do you have any information on that?
    Chris?
        Mr. Goldthwait. I believe, Senator Cochran, the situation
    was as follows. The Chinese woke up one morning and suddenly
    decided that they had cotton stocks in the interior regions of
    China that they had not counted before. What they actually did
    was not place an embargo or stop deliveries that were on the
    water, but they simply ceased purchasing. So, we have seen much
    less purchasing in the past 2 to 3 months from China.
        At the same time, however, we have seen increased sales of
    cotton both to Latin American destinations and into some other
    markets like Turkey. So, all in all, our cotton exports, if not
    exactly where we would like them to be, are doing I think
    relatively better than, for example, some of the grains.
        Senator Cochran. Thank you very much.
        I have some other questions, but at this time I am going to
    yield to my good friend from Arkansas for any questions he has.

                         Reductions in FSA Staff-Years

        Senator Bumpers. Mr. Chairman, thank you very much.
        I want to take this opportunity to accede to a request by
    Senator Byrd because it touches on a question that I had also.
    Secretary Schumacher, without going through the details of the
    RIF, the proposed fiscal year 1999 budget assumes an additional
    reduction of 855 non-Federal county committee employees. That
    is almost a 10-percent reduction. It assumes an additional
    reduction of 263 Federal employees, about a 4-percent
    reduction.
        Can you tell me the percentage of reductions nationwide of
    the non-Federal county committee employees as compared with the
    percentage of Federal staff reductions since the reorganization
    took place on October 1, 1995?
        Mr. Schumacher. Yes; I will get the exact number from
    Keith, but there have been more county employees laid off than
    Federal employees, and this is a problem.
        What I want to do is--and it is something I am particularly
    looking at--to be fair to all of our employees. To minimize
    further difficulties and protect farm programs and delivery of
    services, we are doing three things, Senator.
        First, we are looking at ways we can make cuts in
    administrative overhead at the headquarters, regional, and
    State levels so that we have less need to reduce county
    employees to meet our budget targets. This is very important,
    and we are working very hard. This initiative is called
    administrative convergence. The Secretary has charged us with
    getting on with it and getting it done by October so that we
    not cut county people who actually deliver programs.
        Second is collocation. We are really trying to work very
    hard to collocate all our offices and make further savings and
    cut administrative costs so we can minimize further cuts in
    county office employment.
        Then the third is responding to budget realities that will
    require some cuts. What we are trying to do is be fair, to be
    equitable, and to look at workload efficiency.
        On the exact numbers, Keith, do you have the precise
    numbers for the Senator?
        Senator Bumpers. Mr. Kelly?
        Mr. Kelly. Yes; Senator Bumpers, compared to the 1993
    ceiling, prior to reorganization, the cuts will be in the
    aggregate about 33 percent for county employees and slightly
    under 26 percent for the Federal employees by fiscal year 1999.
        Senator Bumpers. What was the latter figure?
        Mr. Schumacher. Twenty-six percent.
        Senator Bumpers. What was the latter figure?
        Mr. Kelly. Thirty-three percent for county employees and 26
    percent for Federal employees. The primary reason the cuts fall
    heavier on the county employee side is that the 1996 farm bill
    brought about significant workload decreases in certain
    activities there. The non-Federal county work force was reduced
    by 14.9 percent in response to workload changes as compared to
    5.8 percent for Federal employees because of the farm bill
    impact. The non-Federal county employees had a lesser workload.
    That is where the cuts fell the heaviest.
        Senator Bumpers. Senator Byrd also asked for those same
    statistics in West Virginia, the percentages.
        Mr. Kelly. I will get that. I do not have them at hand for
    the 5-year period, but I will get them for you.
        Senator Bumpers. I will submit this question and other
    questions by Senator Byrd, with the chairman's permission, for
    the record and you can respond directly to him. OK?
        Mr. Kelly. OK.
        Senator Bumpers. I had a question along the same line. I am
    not sure it is true, but staff indicates to me that despite--
    let us see. Your 1999 budget would make 1,100 additional staff-
    year reductions, and earlier this year there was a RIF of 152
    employees, all of which were non-Federal county employees. In
    spite of these RIF's, both at the county and Department level,
    apparently FSA is hiring new personnel. Is that true?
        Mr. Kelly. That is correct. We have been hiring for
    agricultural credit positions.
        Senator Bumpers. How do you rationalize that?
        Mr. Kelly. Because of changing workload, Senator. Again,
    going back to the farm bill, the workload is decreased on some
    of the traditional farm programs that we had. However, on the
    credit side, we have seen the work increase to cover servicing
    of our agricultural credit portfolio to ensure that we reduce
    the delinquencies.
        So, we added, I believe, 150 Federal county employees or
    hires this last year on the agricultural credit side. We
    advertised the jobs to all sources, which meant that non-
    Federal county employees could apply for them, and our hope and
    desire was to hire those county employees that were being
    RIF'd, if they were qualified.
        Senator Bumpers. Well, needless to say, Senator Byrd and I
    are both hearing from our people back home about what they
    consider to be the unfairness of these RIF's.

                          Single FSA Personnel System

        Mr. Kelly. Senator, that is why we would be very supportive
    of one personnel system, as the Secretary has recommended--a
    Federal personnel system--because there are some inequities
    between the two personnel systems. Having one system would
    certainly solve the problem, because the RIF's and/or the
    reallocation of employment would be all within the same pot of
    people. Now it is not the case. We have separate ceilings for
    non-Federal county staffing and Federal staffing, including
    Federal county employees.
        Senator Bumpers. Mr. Kelly, it would be helpful to me and I
    think to Senator Byrd both if you would address a letter to us
    explaining these RIF's and why they were necessary and the
    percentages and so on. Obviously we have a parochial interest
    in our States, so if you could include the RIF's in our States.
    We want to be sure that, even if we agree with the RIF, for
    example, Arkansas and West Virginia are not being discriminated
    against on the numbers.
        Mr. Kelly. Senator, I will be glad to provide that. I want
    to reemphasize what the Under Secretary said. We want a fair
    and equitable treatment for all employees, and we are working
    internally within our administrative capability to try and make
    the two different systems look and behave as one within the
    limits on what we can do administratively.
        [Clerk's note.--See questions Senator Byrd submitted for
    the record.]

                          Flood risk Reduction Program

        Senator Bumpers. Secretary Schumacher, what is the status
    of the flood risk reduction program?
        Mr. Schumacher. Let me just consult here.
        Senator Bumpers. Do you have somebody else to defer to on
    that?
        Mr. Schumacher. Yes; Dennis, are you aware of where we are
    on that one?
        Mr. Kaplan. No.
        Mr. Schumacher. I better come back to you on that one,
    Senator, rather than taking time here.
        Senator Bumpers. OK.
        Mr. Schumacher. Randy mentioned we are still working on
    that one, but we will certainly get back to you with a note on
    that, Senator.

                             Market Access Program

        Senator Bumpers. The what is now apparently called the
    Market Access Program used to be the Market Promotion Program.
    Is that correct?
        Mr. Schumacher. That is correct.
        Senator Bumpers. I would like you, if you would, to provide
    me with the number of grants and the amounts of the grants made
    under that program in 1997. Can you supply that for me?
        Mr. Schumacher. Yes; we will. We have made a lot of changes
    in this program. Of course, a lot of guidance has come from you
    and members of your committee and the Congress that has
    radically changed this program over the last few years and I
    think it is working pretty well.
        [The information follows:]

               Market Access Program Allocations, Fiscal Year 1997

            Trade organizations                                   Allocation
    Alaska Seafood Marketing Institute......................      $2,965,056
    American Brandy Association--Export.....................          36,294
    American Forest and 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 U.S.A.........................................         162,938
    Blue Diamond Growers....................................       1,412,689
    California Agricultural Export Council..................         525,178
    California Cling Peach Growers Advisory Board...........         727,009
    California Kiwi Fruit 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.............................................         103,000
    Kentucky Distillers' Association........................         499,401
    Mid-America International Agri-Trade Council............         190,833
    Mohair Council..........................................          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. (cooperative).....................       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

        Senator Bumpers. I am well aware of that.
        I have a figure here that shows that the European countries
    spend $400 million on market promotion and about one-half of
    that comes from their members. Presumably the other one-half
    comes from the exporter or the exporters. Is that correct?
        Mr. Schumacher. I think that probably is correct.
        Senator Bumpers. In other words, one-half is coming from
    the EU members, the other one-half must be coming from the
    exporters.
        Mr. Goldthwait. That is correct. The same situation
    pertains to the Market Access Program where the participants
    put up funding of their own to match what we are providing.

                Market Promotion Spending by American Producers

        Senator Bumpers. Mr. Goldthwait, since you are the guru on
    this subject, do you have any way of knowing how much American
    agricultural interests spend on market promotion, export market
    promotion?
        Mr. Goldthwait. Including what is not covered under the
    program?
        Senator Bumpers. Well, I am trying to figure out for
    comparative purposes. Apparently in Europe half of the
    expenditures for export promotions is paid for by the companies
    who do the exporting or the agricultural interests who do the
    exporting. I would like to have a comparative figure of what
    American companies pay for that.
        For example, in my State we have Riceland Foods who do a
    lot of exporting, and there are hundreds of other similar
    companies. I would just like to know if you have a figure or if
    you can get a figure on how much the private companies in this
    country spend to promote agricultural exports. I am sure ADM
    spends a lot.
        Mr. Goldthwait. We can provide you with an estimate of the
    total farm market promotion expenditures of the private sector.
    Under the Market Access Program, whereas in fiscal year 1996
    our outlays--I am including a little carryover from the
    previous year--were $92 million, the private sector
    participants contributed roughly $115 million.
        Senator Bumpers. $115 million?
        Mr. Goldthwait. Yes; so, they more than matched what the
    Government provided.
        Senator Bumpers. Now, is that the Market Access Program?
        Mr. Goldthwait. Yes.
        Mr. Schumacher. Yes; one of the concerns we have, Senator,
    is export restitutions, for example, on a lot of the high-value
    products such as beef, wine, and all the other high-value
    products that is creating a lot of problems for us in Europe. I
    think as we move into the next round, we have to really work at
    eliminating those export subsidies, particularly on high-value
    products that are putting our industry at a competitive
    disadvantage in addition to market promotion.

                                EEP Expenditures

        Senator Bumpers. How much did we spend last year on the EEP
    program?
        Mr. Schumacher. On just the EEP itself, we did not spend
    any.
        Senator Bumpers. I know it is a mandatory program, but you
    spent a lot of money on it, did we not?
        Mr. Schumacher. We allocated the funds. We did not use the
    program last year.
        Senator Bumpers. You did not?
        Mr. Schumacher. Did not. We did for the Dairy Export
    Incentive Program, but we did not use the money for the Export
    Enhancement Program last year.

                          Reduction in Public Law 480

        Senator Bumpers. The budget request calls for a reduction
    in title I of Public Law 480. What is the purpose of that?
        Mr. Schumacher. The administration has proposed a reduction
    in the title I program of $133 million from last year's amount.
    We have fully funded titles II and III, but because of the need
    to balance the budget, the administration felt that this was an
    area for which less funds would be proposed.
        Senator Bumpers. Mr. Chairman, I have a few other questions
    that I will submit for the record and give our panel sufficient
    time to answer those questions.

                                IMF Supplemental

        Senator Cochran. Thank you very much, Senator Bumpers.
        On the subject of the Asian market again, we are including
    in a supplemental bill funds for the IMF at $18 billion at the
    request of the administration. Our committee approved that and
    we will be taking that up and trying to work with the House to
    get some level of funding so that we can continue to
    participate in helping to stabilize market conditions and
    encourage reforms in some of those areas so that our trade
    opportunities will continue to be available.
        How strongly do you feel that we need those funds approved
    by this Congress? When we go to the floor and try to answer
    questions from opponents of the funding, what are some of the
    arguments that you think are most effective to persuade the
    general public and Senators to vote for that?
        Mr. Schumacher. Mr. Chairman, when Lon and Chris and I were
    working over the Christmas holidays to make this program
    operational, particularly with Korea and then the additional
    funds for other countries, we could not make it operational
    without an IMF program in place because of the creditworthiness
    score. These are funds Congress provides from the taxpayers,
    and we simply cannot in good faith, to Congress and
    particularly the taxpayers, make the allocations and make it
    operational without a sound IMF program in place. So, the IMF
    had to come first.
        As I said in my opening statement, the improvement we made
    in the hides and skins to help cattle or the stability and the
    sanctity of the contracts on cotton could not have been done
    unless the IMF was there first, a very important issue.
        Initially the IMF was very helpful because they looked at
    some of the problems in the number of countries that affected
    agricultural trade, in Korea on transparency, on port
    procedures, and consistency with WTO and phytosanitary issues,
    and Indonesia on some of the monopoly practices. They require
    the tariffs on food to drop from 20 to 40 down to 5. They noted
    yesterday that soybeans now is at zero tariff. That contributed
    heavily by the IMF negotiators as they made those funds
    available.
        So, two points. First we cannot operationalize the GSM
    without the IMF standby in place, and second, the IMF has
    strategically made a number of requirements which will help
    trade in agriculture.
        Senator Bumpers. Mr. Chairman, would you yield for just an
    observation?
        Senator Cochran. Senator Bumpers.

                     Reasons for Declines in Asian Exports

        Senator Bumpers. I was just curious. Are you seeing a
    measurable decline in exports to the Asian markets?
        Mr. Schumacher. Yes.
        Senator Bumpers. At this moment?
        Mr. Schumacher. Yes.
        Senator Bumpers. How significant is it?
        Mr. Schumacher. We are monitoring it pretty carefully.
    Certainly in Korea--meat was down substantially. In Indonesia--
    last year, Senator Bumpers, we exported $776 million to
    Indonesia. Probably that will be cut in half this year,
    affecting particularly high-value products. We are working very
    hard to maintain our important cotton market in Indonesia, and
    I think GSM is operating for cotton in Indonesia as we speak.
    It is a major market for cotton. We want to keep that market
    open. We will also be providing some Public Law 480 assistance
    that is now being negotiated with Indonesia which will
    hopefully include rice, wheat, and soybeans.
        Senator Bumpers. Thank you, Mr. Chairman.

                   Goal for Next Round of Trade Negotiations

        Senator Cochran. You have mentioned a couple of times the
    WTO, the World Trade Organization, and the next round and the
    negotiations that you are preparing for leading up to the next
    round. What specifically are the administration's goals for the
    next round, and do you have the funds included in this budget
    request to staff and support the effort that we will need to
    make in order to achieve success?
        Mr. Schumacher. That is a very, very good question. I am
    going to ask Mr. Hatamiya to briefly outline the four or five
    key goals and then the issue of the budget on our trade policy
    side.
        Mr. Hatamiya. Mr. Chairman, I think I previously mentioned
    in an answer to Senator Kohl about some of the highest
    priorities of what we hope to achieve in the next round of the
    WTO negotiations, one being the State trading enterprises,
    seeing some reforms there, also looking at tariffs and tariff
    reductions, reductions in tariff rate quotas, and also reforms
    in that round.
        Reforms to export subsidies is another important factor, as
    well as bringing some rationality to sanitary/phytosanitary
    measures. Many of those are false trade barriers that are
    placed in front of us, and we think it is necessary to address
    those so that there is a common international standard that is
    utilized.
        We are using the avenue of the WTO Agricultural Committee
    to continue those discussions, but those are the highest
    priorities we are looking at the current time. We think it is
    necessary to make changes there because it is important. The
    United States has the most open and freest market in the world.
    We would hope that other trading partners do the same.
        Senator Cochran. I had a letter the other day from the
    president of the American Farm Bureau Federation suggesting
    that I go to Geneva. Is that where the WTO----
        Mr. Schumacher. In May there will be a followup to
    Singapore in Geneva in preparation for the next round. That is
    correct, sir.

                Congressional Participation in WTO Negotiations

        Senator Cochran. I have not discussed that with anyone, but
    I am curious to know whether you think it would be helpful in
    the process of preparing for or observing the negotiations in
    Geneva, if representatives of this committee or our Agriculture
    Committee would go to Geneva and participate in that process?
        Mr. Schumacher. We would be honored.
        Senator Cochran. How long will it take? [Laughter.]
        Mr. Schumacher. I think the meetings are for 4 or 5 days.
    In Singapore, when Deputy Secretary Rominger went, there were
    47 representative agricultural groups that attended and that
    was quite a long distance from the United States. So, there is
    tremendous interest in the next round by the agricultural
    community. We are working very closely with all the
    representatives and a representative of this committee. We
    would be very honored to have you attend.
        Senator Cochran. What are the dates of the scheduled
    negotiations in May?
        Mr. Hatamiya. I think it is the 18th through the 20th.

                               FSA Reorganization

        Senator Cochran. Thank you very much.
        Senator Bumpers mentioned the layoffs, the RIF's, that were
    occurring in the organization of the Farm Service Agency. Mr.
    Kelly, you spoke to that some and so did Mr. Schumacher. There
    seems to be a good deal of concern out in the States--I hear
    this from my own State--about whether or not the reorganization
    of the Department's agencies in the States is complete or what
    other changes are expected to be made or planned, the absence
    of any clear indication from Washington as to what is going on,
    or when will the next shoe fall. It has everybody sort of
    anxious and concerned, and it has had a negative effect on
    morale. That is my assessment of the situation.
        What can you tell us about the plans for the continued
    reorganization of the States and county offices?
        Mr. Schumacher. Well, I will defer to Keith, but I think
    there are two themes, Senator, that the Secretary and I and
    Keith are operating under. One is administrative convergence,
    which will start to take place during this calendar year, and
    which has created some uncertainty, particularly among the
    administrative staffs at the Washington level, the regional
    level, and the State office level. But we feel we can make
    savings on the administrative side, so we avoid layoffs at the
    county level where programs are actually working directly with
    farmers.
        The other one is the service centers and the collocation, a
    very important issue. We feel that we should be all under the
    same roof--Keith's shop, Rural Development, and the NRCS--to
    better service farmers and to make continued efficiencies. We
    do not need three Xerox machines or two carpools or whatever.
    There should be one. Again, those savings could then be used
    keeping county-level employees employed to service farmers.
        There is some uncertainty and we will try and minimize
    that. We welcome any comments from your State and other States
    where there are particular questions. We will try and address
    them so we can provide good information to those people who
    feel unsure as these changes approach.
        Keith?
        Mr. Kelly. Yes, Senator; those are the two themes, as the
    Under Secretary mentioned. On service center collocation, we
    are about 60 percent completed. The idea again is to achieve
    cost savings by creating service centers for ``one-stop
    shopping'' with the objective of customer service for farmers
    and ranchers in the communities.
        The other one, probably what you had in mind when you
    referred to the other shoe falling, is administrative
    convergence. The goal there is to streamline administrative
    costs, which probably fall heaviest on the headquarters. We
    have too many people buying pencils and papers when we can all
    do it one and the same way and more efficiently if we combine
    administrative staffs of our Natural Resources Conservation
    Service, Rural Development, and the FSA.
        Policymaking and program operation still stay with the
    individual agencies. So, for example, the Farm Service Agency
    will continue setting policy and implementing its agricultural
    credit and other programs. It is just the administrative
    services that are going to be merged. I believe that we are
    targeting October 1 for that to take place and be phased in.
        Again, Under Secretary Schumacher said it correctly. It
    does create uncertainty out there, and it is probably in part
    because it is following a significant reorganization over the
    last several years. As was mentioned earlier I believe by
    Senator Bumpers, the agricultural credit programs of the old
    Farmers Home Administration and various programs of the old
    ASCS were consolidated. I am not sure we had completely worked
    all of the bugs out of that reorganization. Now we are starting
    on administrative convergence. But I think what the farmers and
    ranchers will get is a much more streamlined, cost effective,
    and efficient delivery of services for the programs available
    out there.
        Senator Cochran. Well, I think that is the emphasis we want
    to make, and that is to be sure that we not forget the farmer
    in the process and the landowner who has to come to the service
    center or the Farm Service Agency office, whatever you want to
    call it, and get information and file farm plans and deal with
    the requirements of the Federal farm programs. So, I know that
    you will try to ensure that that is kept in mind by the
    administrators up and down the line.
        But the employees are important too, the employees of the
    service centers. We hear from them. They are constituents too.
    They are people too. I hope that they are all treated fairly
    and you will ensure that that is the case.
        Mr. Schumacher. Absolutely.
        Mr. Kelly. Senator Cochran, it would certainly support
    fairness if we were all under the Federal employment system. It
    would be much more fair to the employees if they all had equal
    chances and options. Right now it is a challenge to manage the
    two different systems.
        Senator Cochran. I was glad to hear something about your
    background. I notice that your grandfather was the commissioner
    of agriculture, whatever the name of it is, in Montana. You
    have a long heritage of doing this kind of work.
        Where is Red Lodge exactly in Montana?
        Mr. Kelly. Senator, Red Lodge is 30 miles north, as the
    crow flies, from Yellowstone National Park on the northeast
    corner.
        Senator Cochran. That is pretty country up there.
        We share a constituent named Steven Ambrose who spends one-
    half of his time in Mississippi and the other one-half in
    Montana. He is the fellow who wrote that book about the Lewis
    and Clark expedition out there. ``Undaunted Courage'' is the
    name of the book. It is quite a masterpiece. You ought to read
    it if you have not read it.
        Is Red Lodge very far from where the Lewis and Clark
    expedition traveled through Montana?
        Mr. Kelly. Senator, it is not too far because they did
    travel up 15 miles from Red Lodge. There is the Clark Fork
    River that drains into the Yellowstone River, and that was
    named for George Rogers Clark.
        I would hazard a guess that your Mr. Ambrose probably
    spends his summer months in Montana and the winter months in
    Mississippi. [Laughter.]

                         Proposed Risk Management Tools

        Senator Cochran. You are absolutely right.
        One other issue that has been touched on and I wanted to
    ask some more about is the crop insurance program. The
    statement that you filed with the committee has some
    interesting suggestions for reform, additional legislative
    provisions. Mr. Ackerman makes some specific recommendations
    for changes in the law. These are all very interesting, and I
    hope they will be carefully considered by the Congress, the
    legislative committee. We cannot make these legislative
    changes, though, and we have to kind of deal with the law as it
    is.
        We notice you talk about other risk management tools
    besides crop insurance. Specifically what are these tools that
    you are talking about and are there requests for funding that
    we need to consider in this next budget cycle?
        Mr. Ackerman. Thank you, Mr. Chairman. A very specific
    example is the one that Senator Kohl raised earlier in the
    hearing, the dairy options pilot program. This is a new tool
    for us. It is different from the options pilot program that
    existed within FSA a number of years ago. It is a noninsurance
    tool. It is a way for dairy farmers to ensure price with a
    subsidized tool based on options traded on the organized
    futures exchanges. It is a new idea and one that we very much
    want to test because we think there is a demand for it.
        Other examples of tools that we are looking at are new
    types of insurance policies based not on a crop-by-crop premise
    but on a whole-farm premise. We have had a number of ideas
    suggested to us by the private sector along those lines.
        There are a number of others, just to give you a sense of
    the range of ideas that are percolating out in the country. We
    have one idea that we have been looking at that has been
    recommended by a number of the farm groups. It is based on a
    Canadian program, the NISA, which is basically a risk
    management savings account where farmers would put part of
    their income every year into an account that would grow over
    time and provide a nest egg, a safety net, for them if they had
    a loss. It is a tool that would potentially require legislative
    changes to implement in this country, but one that has gained
    some popularity in Canada where it has been in effect and which
    is gaining a fair amount of recognition here among many of the
    farm groups. So, there is a range of ideas like that that we
    are considering.

            GAO Report on Expense Reimbursement to Private Companies

        Senator Cochran. There is a recent GAO report, dated March
    20, 1998, on the subject of crop insurance, increases in
    insured crop prices and premium rates, and the administrative
    expense reimbursement paid to companies. There are some
    interesting findings that we have come across here.
        Has this been made available to you, or do you have any
    information about this GAO report? Of course, that is done at
    the request of the Congress. It is not your investigation.
        Mr. Ackerman. Senator, I have seen a draft of it, but we
    have not yet examined it in detail.
        Senator Cochran. I was curious. You have probably been
    provided a draft and asked for comments or reactions.
        Mr. Ackerman. That is correct.
        Senator Cochran. One thing that we noticed here talking
    about the expenses, and that is relevant to this appropriations
    process that we are going through, it says that higher insured
    crop prices and higher premium rates led to a 13-percent
    overall increase in premiums. That is a disincentive to buy the
    insurance if the farmer gets hit with that kind of an increase.
        The report noted, we concluded that FCIC could reduce the
    reimbursement rate another 3 percentage points below the 27
    percent level we found to be justified in 1994 and 1995 to a
    level of 24 percent of premiums and still adequately reimburse
    the companies for their administrative expenses.
        What is your reaction to that? Is that a fair assessment of
    the situation?
        Mr. Ackerman. Well, Senator, without getting into the
    details of the report because, as I say, we have not analyzed
    it in detail yet--we did go through a process with the industry
    last year. We renegotiated the standard reinsurance agreement,
    and as part of that process, made a significant reduction in
    the expense reimbursement to companies. It fell from
    approximately 29 percent of net book premium the prior year to
    27 percent of net book premium, plus the elimination of what is
    called excess loss adjustment. All totaled, that is about $40
    million a year and that was coupled with a significant
    additional underwriting risk that we put on them last year.
        Certainly this is something we are monitoring very closely.
    In our legislative proposal, to close the gap on mandatory
    spending, we do propose an additional reduction beginning in
    the year 2000. We are trying to be cautious in the way that we
    do this, however. The delivery system is very important to this
    program. We rely on the companies to deal face to face with
    farmers, and generally our experience with agents and companies
    around the country has been very favorable. They do a good job.
    We want to make sure that, while we are tightening our belt and
    finding savings, we do it in a way that is moderate and
    nondisruptive. That is why, for instance, in our proposal we
    did propose going down to a 25-percent reimbursement rate, but
    we began it in the year 2000 so that companies can plan for it,
    build it into their business plans, and be able to absorb it.
        Senator Cochran. As you know, we are in conference right
    now in the legislative committee with the House trying to work
    out the ratio of mandatory spending to other creative devices
    for coming up with the money to support this program. It is
    quite a challenge dealing with the constraints the
    administration has put on us, with insistence that so much of
    the money be allocated to Food Stamp Program activities, and
    Budget Committee provisions which restrict us in the leeway
    that we have within which to negotiate. But we are working hard
    to try to come up with a funding mechanism for the crop
    insurance program, and we will continue to work with both the
    legislative committee and the Budget Committee and the
    administration to try to resolve it so that we save the
    program, that we have a risk management program in place that
    the farmers can rely upon and not just take a chance on the ad
    hoc responses to these disaster situations which we are trying
    to deal with right now with the supplemental.
        But we appreciate your bringing your best efforts to bear
    on the process and we thank you for your cooperation with our
    committee.

                              FSA Data Collection

        Let me ask a couple of questions about the acreage
    determinations. There is a memorandum of understanding between
    APHIS and FSA which would provide collection insuring of crop
    acreage data in boll weevil eradication zones for the purpose
    of administering that program. We had report language in the
    appropriations bill last year and we are curious to get the
    response of the administration to what language, if any, we
    need to include in this year's appropriations bill to help make
    sure that there is an accurate process and a fair process for
    collecting crop acreage data information.
        The Department has the new collection procedures. We are
    curious to know whether they are working. Do we have the funds
    in the budget to support the program? I need your reaction to
    that.
        Mr. Schumacher. Do you have a comment on that?
        Mr. Kelly. Senator, I will get back in detail with you.
    With regard to the acreage report collection, that is an
    agreement that we work out with the APHIS boll weevil
    eradication program staff, to collect the acreage report data
    that is necessary to ensure that the proper mapping is done out
    there in the States.
        Right now most acreage reporting is voluntary, and support
    for it is included in the user fee proposal in the budget. If
    this proposal is adopted through the appropriation process,
    then the funding for acreage reporting would depend upon actual
    collection of user fees from private individuals and companies.

                            Boll Weevil Eradication

        Senator Cochran. One other concern that I have heard
    expressed is the decline in support from the FSA for loans to
    help pay the costs of boll weevil eradication expenses. There
    is a request in here that is substantially less than last year.
    The budget shows the loan program level would decline from $40
    million in fiscal year 1997 to $30 million in fiscal year 1999.
        We are curious to know what the explanation is, if any, for
    $4 million which is for the APHIS Federal cost share of the
    boll weevil eradication program, why the program level is
    declining like that. We have farm income being pressured with
    low prices at market for cotton and people are planting less
    cotton now than they did before because of the drop in prices
    and the continued increases in costs of production. Now it
    looks like the available loan support to help pay the costs of
    the boll weevil eradication program is going to drop as well.
        Is it realistic to expect farmers are going to continue to
    participate in the program if they have a hard time getting
    help from the Government?
        Mr. Kelly. Senator, I acknowledge that because of the need
    to meet budget targets the request is down somewhat from last
    year. It is hoped that it would come close to meeting the
    demands of the various States to carry out the boll weevil
    eradication program. I will acknowledge that it is somewhat
    short.
        Senator Cochran. Well, we are concerned about that and hope
    that you will be responsive to requests to help make sure that
    we have a program that works.
        I note that APHIS is really the lead agency for this
    program, but what is your impression of the status of the
    program and the need for funds to achieve complete boll weevil
    eradication? Is this something that your agency is actively
    involved in trying to support?
        Mr. Kelly. Senator, we work closely with APHIS on the boll
    weevil eradication program, and we are actively supporting it.
    It is the old adage, an ounce of prevention is worth a pound of
    cure. Having come from Arizona as a State director of
    agriculture, the boll weevil eradication program was very
    successful in reducing costs to cotton farmers. Thus the whole
    pesticide issue and ground water contamination was
    significantly reduced because of a very concentrated
    eradication program. So, personally, given where I came from, I
    support it.
        I stand corrected on my answer to the previous question.
    Our loan level is about $21 million in 1998 compared to $40
    million in 1997, and our request is going up to $30 million in
    1999. So, there is support and a commitment within our agency
    for the boll weevil eradication program.
        Senator Cochran. We appreciate that and we appreciate your
    continuing attention to that problem and support for the goals
    of the eradication program.

                  Resources for the Cochran Fellowship Program

        I notice there were a couple of mentions of the Cochran
    Fellowship Program and there is a budget request for $3
    million. We had in the past some additional funds made
    available from the AID Program and from the emerging markets
    program. What are the other resources that the Administrator
    has to work with in making these program benefits available
    throughout the world? What are the prospects next year in this
    next budget cycle for additional funds that can be used for the
    Cochran Fellowship Program?
        Mr. Schumacher. I think you are correct, Mr. Chairman,
    funds were allocated from the Emerging Markets Program and I
    think some from the USAID. I think, Lon, do you have some of
    the details?
        Mr. Hatamiya. Yes; I do. Mr. Chairman, for fiscal year
    1998, in addition to the $3 million you mentioned in
    appropriated funds, we are expecting to receive $1 million from
    the Emerging Markets Program and an additional $2.3 million
    from USAID, for a total of $6.3 million for this program, which
    I believe is the most ever. We are anticipating the number of
    participants in the program, an estimated 760, to be well above
    where participation has been in the past.
        Again, let me repeat, this has been a tremendous program.
    We see the benefits worldwide in terms of increased exports
    sales. When we bring Cochran fellows into the United States,
    they gain an increased knowledge as to markets in the United
    States, our export capability, the reliability of U.S.
    producers, and that continues to benefit American agriculture
    not only currently but hopefully into the future.
        Senator Cochran. We appreciate having that information. If
    we could have a report for the record showing the countries
    that had participants selected and how many there were and
    where they went, what they did when they were here, some kind
    of capsule report of the program for our hearing record, that
    would be helpful.
        Mr. Hatamiya. Mr. Chairman, we can do that for you. No
    problem.
        [The information follows:]
                           Cochran Fellowship Program
        In fiscal year 1997, a total of 707 participants from 45 countries
    received training under the Cochran Fellowship Program. The following
    provides the fiscal year 1997 participant levels by region and by
    country:
      --Asia: 154 participants from seven countries: Korea (20
            participants), Malaysia (21), China (35), Thailand (17),
            Indonesia (18), Philippines (26), and Vietnam (17).
      --Eastern Europe: 182 participants from 13 countries: Turkey (19),
            Poland (56), Hungary (9), Czech Republic (10), Slovakia (11),
            Albania (6), Bulgaria (11), Slovenia (12), Croatia (10), Latvia
            (8), Estonia (9), Lithuania (7), and Rumania (14).
      --Latin America: 87 participants from seven North, Central, and South
            American countries: Mexico (37), Venezuela (13), Trinidad and
            Tobago (9), Barbados and Other West Indies (3), Panama (6),
            Colombia (14), and Chile (5).
      --Africa: 61 participants from African countries: Cote d' Ivoire (9),
            Tunisia (10), South Africa (30), Namibia (2), Kenya (5), Uganda
            (2), and Senegal (3).
      --New Independent States: 223 participants from the New Independent
            States of the Former Soviet Union: Russia (53), Ukraine (45),
            Kazakstan (23), Kyrgyzstan (8), Uzbekistan (27), Turkmenistan
            (8), Tajikistan (5), Armenia (16), Moldova (21), Georgia (10),
            and Azerbaijan (7).
        In fiscal year 1998, the Cochran Fellowship Program will continue
    work in the above mentioned countries. In addition, pilot programs will
    be started in Brazil, Bosnia, Costa Rica, Guatemala, and Tanzania, and
    the program will be expanded in size (increase in the number of
    participants) in Kenya, Uganda, and Senegal.
        We expected to provide training to about 760 participants in fiscal
    year 1998. Delay in receipt of U.S. AID and EMP until May, 1998,
    however, will most likely reduce the number of participants from
    countries in the NIS and Eastern Europe during fiscal year 1998.
        The benefits of 1997 the Cochran Fellowship Program to U.S.
    agriculture can be categorized under the following topics:
        I. Sales of U.S. Agricultural Commodities.--An immediate benefit of
    the Cochran Program is the sale of U.S. agricultural commodities or
    products that come about from information gained and/or direct contacts
    provided by participant training. Each year we receive information from
    past participants, from U.S. companies and associations, and from
    various agricultural offices about sales of products or commodities
    that are directly and indirectly related to Cochran Program training
    activities. The following provide examples of some of our most recent
    sales information:
        FAS/Fish and Forestry Products Division reports that a Cochran trip
    to U.S. lumber mills for Polish furniture manufacturers was very
    effective in promoting U.S. exports of hardwood lumber. The trip: (i)
    created personal relationships that resulted in each participant making
    orders for U.S. hardwood lumber, (ii) cleared up misunderstandings
    about contract specifications, and (iii) may result in future exports
    of U.S. hardwood totaling $25 million.
        Another report from Poland states that a 1997 participant purchased
    over 300 metric tons (about $500,000) of U.S. prunes and several tons
    of U.S. almonds and sunflower seeds. Another participant started
    imports of U.S. shelled peanuts, his first order in June, 1997,
    amounting to $25,000.
        A 1995 Polish participant reports that he gained ideas on how to
    use U.S. popcorn. Today he imports over 100 containers/year of U.S.
    popcorn (30 containers by June 1997) for use in caramel corn and other
    popcorn snacks.
        The Agricultural Office in Sweden reported that Latvian and
    Estonian importers contracted for $300,000 per month of U.S. consumer
    and confectionery products after their program at the Food Expo in
    Chicago.
        A 1996 Slovenian feed mill team returned from their Cochran Program
    and ordered 20,000 MT of soybean meal--the first of many purchases.
        A 1997 Colombian participant has finalized arrangements to be a
    distributor of a line of U.S. consumer ready products and expects to
    import 14 containers (@$400,000) by the end of the calendar year.
        Almost immediately after a 1997 joint Cochran/CoBank/National
    Cattlemen and Beef Association (NCBA) program for Mexican bankers on
    the GSM-103 Livestock Program, there were five livestock sales
    registered with USDA (about $2.2 million), and two other sales were
    reportedly in the works ($3 and $4 million respectively).
        The New Jersey Department of Agriculture reports that New Jersey
    seafood exports to China have doubled since a Cochran Seafood Buyers
    program in September 1995. Exports now exceed $1 million per year.
        The Agricultural Office in Malaysia states that ``the Cochran
    NASDA/FMI program has proven to be very effective in generating sales
    of U.S. high value products as the participants are importers and
    supermarket managers. Although specific figures are lacking, the FAS
    office has received feedback from FMI exhibitors/suppliers who
    indicated that they had received trade leads from the participants and
    are very positive in establishing business ties.''
        A Vietnamese participant stated recently that his company has been
    importing 2-3 containers per month of U.S. pistachios since June, 1997.
    Another Vietnamese supermarket owner has imported 3 containers of
    consumer ready products to test the market for U.S. products. Sales
    thus far are encouraging.
        A 1997 Armenian supermarket owner reports that he has widened his
    U.S. product lines to include deli meats, fish, baby food and cookies
    after participation in his Cochran Consumer Foods Program.
        II. Constraints to Imports of U.S. Agricultural Commodities and
    Products.--Many constraints to the export of U.S. agricultural products
    can be categorized as sanitary and phytosanitary (SPS) restrictions to
    trade or market access barriers. Cochran training through agencies such
    as the Food Safety Inspection Service (FSIS); Grain Inspection, Packers
    & Stockyards Administration (GIPSA); Animal and Plant Health Inspection
    Service (APHIS), State Departments of Agriculture, Food and Drug
    Administration (FDA) and the Environmental Protection Agency (EPA), and
    with private agribusinesses, provide technical information to country
    counterpart agencies and help to improve the opportunities to export
    U.S. products into countries.
        During 1997, 59 Cochran fellows from 18 countries participated in
    24 programs directly related to providing information on the safety of
    the U.S. food and fiber system as well as providing direct contact with
    U.S. counterparts.
        The Agricultural Office in Stockholm reports that the meat
    inspection program for two Latvian veterinarians has been used to help
    establish new sanitary border inspection procedures. He states that
    ``such education is essential support to the already growing import and
    transit markets for a widening array of meat and meat products.''
        The Tunisian Agricultural Office reports that the Veterinary Team
    ``is in the process of developing with APHIS a live cattle and bovine
    embryo protocol for U.S. imports in Tunisia, as well as a memorandum of
    agreement with Texas A&M University for promoting the exchange of
    faculty and qualified students in areas of mutual interest, such as
    infections and parasitic diseases of food animals and nutrition.''
        The Agricultural Office in Indonesia states that the participant
    ``has used his food safety training to develop a draft regulation on
    Food Security as well as input into drafts of the Indonesian Food Law
    Regulations.''
        The Agricultural Office in Vienna writes: ``The new Chief
    Veterinary Officer in Slovenia is a Cochran alumnus, which bodes well
    for relations between his office and FSIS as well as this office as we
    work toward agreement on sanitary inspection certificates to allow U.S.
    red meat into Slovenia.''
        The Agricultural Office in Korea states: ``The Cochran Program
    provides the resources to address food safety issues, perhaps the
    largest, singularly most restrictive barrier for U.S. products in the
    Korean market.''
        III. Foster Business to Business Contacts.--One of the major
    objectives of Cochran training is to put the international participant
    in direct contact with U.S. agribusiness. Even if immediate sales do
    not result, follow-up contact with participants in their home country
    may lead to future international opportunities for U.S. business.
        Cochran fellows make contact with thousands of U.S. agribusinesses
    through product or commodity tours, technical discussions, or via
    participation at trade shows. Participation in commodity- or topic-
    specific trade shows or association meetings allow participants first-
    hand contact with a wide-range of U.S. agribusinesses. Several of the
    trade shows that were attended in 1997 by Cochran fellows include the
    Food Marketing Institute/National Association of State Department of
    Agriculture (FMI/NASDA) Food Expo, Produce Marketing Association (PMA)
    Show, Institute of Food Technologists, World Dairy Expo, World Beef
    Expo, San Francisco Seafood Show, International Poultry Expo,
    International Baking Industry Expo, American Seed Trade Conference,
    National Building Products Expo, Woodworking and Furniture Supply, High
    Point Furniture Show, National Homebuilders Association Expo, Wine
    Spectator Showcase, National Restaurant Show, National Barrow Show,
    World Pork Expo, American Feed Industry Association Show, All Candy
    Exposition, and the Fancy Food Show.
        The Agricultural Trade Office (ATO) in Guangzhou writes that the
    Chinese Supermarket Program ``. . . is beneficial to American
    agricultural products because (the team) were so impressed with the
    high quality and diversity of U.S. products that some of them are
    considering carrying more products in their stores. As a result, the
    largest supermarket chain in China is scheduled to host an American
    Food Promotion in December 1997 at 11 major stores.''
        The Director of the Appalachian Hardwood Manufacturers writes about
    a Polish team: ``We hope that our members were able to make good
    contacts with these companies and begin a business relationship. These
    were new companies to our exporters who were interested in exporting to
    Poland. This service allows American companies to have access to new
    business and contacts that would be difficult to establish on their
    own.''
        ``During the last visit of the U.S. Meat Export Federation
    representative to Poland, we had a chance to meet with several former
    participants. Most, who traveled to the 1995 International Meat
    Industry Convention and Expo in Chicago, started to import pork and
    offal from U.S. suppliers. ELKOPOL company became a major player on the
    Polish market, importing large quantities of U.S. tripe and pork offal.
    All claimed that as a result of their Cochran trip, they build their
    first contacts with U.S. suppliers of meat and meat products.''
    (Agricultural Office, Warsaw)
        A Russian textile company employee wrote: ``The Memphis Cotton
    School offered excellent coverage of all facets of textile production
    contract buying. They also provided us with prospects for increased
    cotton purchases from the U.S. in the future.''
        IV. FAS Agricultural Affairs Offices.--The primary contact for
    Cochran activities in each country is FAS's Agricultural Affairs Office
    and Agricultural Trade Offices (ATO). FAS staff describe the benefits
    of Cochran training programs to their offices in terms of initiating
    and maintaining contacts with public- and private-sector decision
    makers, opening lines of communication that are useful for the
    resolution of trade issues, building good relations with international
    governments, influencing trade policy issues, and using former Cochran
    private sector businesses as contacts for U.S. exporters.
        ``Among the South China Supermarket Executives, (the training)
    planted the seed of goodwill and friendship without which business
    relationships can hardly be established and sustained.'' (ATO/
    Guangzhou)
        The FAS Office of Agricultural Affairs (OAA) in Seoul, Korea,
    stated: ``As noted by predecessors, the Cochran Fellowship Program is
    perhaps the single most important tool available to OAA for achieving
    desired dual objectives of development of domestic agricultural systems
    and enhancement of U.S. agricultural interests in Korea.''
        The FAS Agricultural Attache in Vietnam states: ``FAS/Hanoi is
    extremely pleased with the development of the Cochran 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.''
        The Agricultural Officer in South Africa writes, ``From our
    perspective on what the program has done to promote both U.S.
    agricultural interests and USG policy objectives to support the new
    multi-racial democracy in South Africa, the Cochran Program has been
    one of the key ingredients of our program activities in this country
    and the region.''

                              Submitted Questions

        Senator Cochran. Thank you.
        I do not have any other questions at this time. We do have
    a few that we will submit for the record so that we will
    understand the budget request as we have to before we make a
    decision on the committee print. But we thank you very much for
    your cooperation and your assistance to the committee.
        [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
        Question. Mr. Schumacher, in your testimony you mention that the
    Department has entered into a contract with an independent consultant
    who is examining further steps, if any, can be taken to improve the
    efficiency of our farm and rural program delivery system. Is this the
    same study that was proposed last year to see if FSA and NRCS should be
    merged together into one agency?
        Answer. The study currently being conducted by Coopers and Lybrand
    is the same study that was proposed last year.
                             disaster supplemental
        Question. Supplemental appropriations provided a total of $95
    million for the Emergency Conservation Program (ECP) in 1997. At the
    end of fiscal year 1997, $79 million was the unobligated balance. As of
    March 12, 1998, approximately $9.7 million of that total still remains
    unallocated. How much of the remaining balance of $79 million has been
    used for disasters occurring in 1997?
        Answer. Because of the nature of this program it is not unusual for
    the ECP to have a large unobligated balance at the end of the fiscal
    year. For fiscal year 1997, the unobligated balance reflected funding
    that was allocated to States but not obligated before the end of the
    fiscal year. Therefore, although it may appear that the funding is
    available for use, the majority of it had been allocated to the States.
    Also, the large unobligated but allocated balance was due to the timing
    of receiving supplemental appropriations during the fiscal year.
        The beginning unobligated balance for fiscal year 1998 was $79
    million, of which $57 million had been allocated to States during
    fiscal year 1997 and the remaining $22 million is available for new
    allocations starting in fiscal year 1998.
        As of December 31, 1997, a total of $3.1 million had been allocated
    to several States for damages caused by natural disasters, such as
    droughts, flooding, Hurricane Norma, and tornadoes.
        Question. Has any of the unobligated funds of $79 million been used
    for the recent disasters occurring in 1998? If so, how much?
        Answer. As of March 24, 1998, a total of $11.3 million has been
    allocated to several States for damages caused by recent natural
    disasters, such as flooding, ice storms, tornadoes, and typhoons.
        Question. Is the $9.7 million of unallocated money available to
    meet disaster needs in fiscal year 1998?
        Answer. Yes it is. We expect to get additional requests for ECP
    funds because of the high level of damage caused by recent natural
    disasters. It is very likely that all of this funding will be allocated
    well before the end of the fiscal year.
        Question. Please list all items and activities which are covered
    under the ECP program, i.e. irrigations systems, fences, etc.
        Answer. Items and activities covered under ECP practices are:
                        emergency conservation practices
        Practice EC1, Removing Debris from Farmland. This practice provides
    assistance to remove debris from farmland damaged by natural disasters
    and return that farmland to productive agricultural use.
        Practice EC2, Grading, Shaping, Releveling, or Similar Measures.
    This practice provides assistance to grade, shape, and relevel farmland
    damaged by natural disasters and return the land to agricultural use.
        Practice EC3, Restoring Permanent Fences. This practice provides
    assistance to restore or replace farmland or ranch land fencing damaged
    by natural disasters.
        Practice EC4, Restoring Structures and Other Installations. This
    practice provides assistance to restore structures and installations
    such as dams, terraces, and waterways damaged by natural disasters.
        Practice EC5, Emergency Wind Erosion Control Measures. This
    practice provides assistance to apply emergency wind erosion control
    measures such as contour or cross slope chiseling, or deep plowing on
    similar measures, to farmland damaged by natural disasters.
        Practice EC6, Drought Emergency Measures. This practice provides
    assistance to provide water conservation and enhancement measures to
    permit grazing of range or pasture, emergency water for livestock, or
    emergency water supply for existing irrigation systems for orchards and
    vineyards, on land suffering from severe drought.
        Practice EC7, Other Emergency Conservation Measures. This practice
    is to allow other emergency conservation practices not covered above.
        Question. Please explain how initial ECP needs and estimates are
    collected. If these estimates/needs turn out to be incorrect, what is
    the procedure to reallocate this money among other States?
        Answer. Initial estimates on the amount of ECP funds needed are
    obtained from the local county FSA office where the damage has occurred
    and communicated through the State office to the National level. ECP
    funds, if available, are then allocated based on these estimates. If
    ECP funds are not available, these estimates serve as the basis for
    allocations should funding become available. If initial estimates
    exceed the funds actually needed, the funds are returned to the
    National level and made available as needed for disasters in other
    States provided the appropriations act making those funds available did
    not restrict the use of these funds. If initial estimates are less than
    the funding needed, additional funds are provided, if available.
        Question. How does the Agency distinguish between unobligated and
    allocated funds?
        Answer. Allocated ECP funds are funds made available to States to
    cover estimated needs as reviewed at the National level. Obligated ECP
    funds are those which have been officially approved for disbursement to
    pay for completed emergency conservation work; unobligated funds are
    all funds that have not been officially obligated. All allocated funds
    are potentially obligated funds, but because there is a time lag
    between allocation and obligation, a snapshot of the program's
    unobligated funds at any given time includes both allocated funds that
    have not yet been obligated and funds at the National level that have
    not been allocated, if any.
        In instances where a State's allocation exceeds the amount actually
    needed for obligations to cover completed emergency measures, the
    allocated but unobligated funds are, as noted above, returned to the
    National level and may be reallocated to another State as needed.
                                   user fees
        Question. The fiscal year 1999 President's budget proposes user
    fees to cover the costs of collecting and processing information of
    interest to private individuals and companies. Please explain this user
    fee proposal more fully. Which groups of people would be affected by
    this?
        Answer. In 1999, FSA proposes to begin to charge fees to cover the
    costs of collecting and processing information of interest to private
    individuals and companies, such as crop insurance companies,
    appraisers, agricultural consultants, other agencies, etc. Information
    products developed from these collections shall be priced at the full
    costs of processing and dissemination. In FSA county offices, the
    information would include acreage and production reports, Highly
    Erodible Land Conservation and Wetland Conservation certifications,
    CRP/WRP data, and other miscellaneous requests for producer and crop
    data which are requested throughout the year by private and public
    individuals and companies. These requests may range from one report to
    all of these sources of data and can be area specific because of
    different farming practices, farmland values, conservation and water
    rights issues, pesticide and herbicide regulation issues, landlord and
    tenants rights disputes, real estate appraisals, and other types of
    land development issues. An estimated $10 million would be collected
    through fees from these businesses and other agencies, which would be
    available for salaries and expense obligations.
        Question. Is this collection of user fees supplementing existing
    appropriations for these activities?
        Answer. The collection of user fees is substituting for, not
    supplementing, existing appropriations. If fees are not realized, up to
    223 non-Federal county office staff years could not be funded.
    Potential constraints on realizing significant revenue are that FSA
    cannot provide any information that would violate the Privacy Act
    without specific permission from the applicable program participant,
    and the volume of fee waivers could also impact revenue.
        Question. What level of appropriations will be spent on these
    activities in each of fiscal year 1998 and 1999 without the
    implementation of user fees?
        Answer. User fee collections are a proposed source of funding and
    would finance payroll in order to save budget authority of $10 million.
    It has been estimated that these additional fees could generate $10
    million to fund FSA salaries and expenses, but these estimates are
    tentative. To date, there has been no determination of how customers
    would be charged or what the actual charge per request would be. FSA
    does not have any data to indicate the current level of expense for
    these activities.
                             salaries and expenses
        Question. The net fiscal year 1999 program level, not including the
    Common Computing Environment (CCE) earmark of $30 million, totals $946
    million. This is $17 million less than the fiscal year 1998 program
    level of $963 million. The fiscal year 1999 budget request proposes an
    increase of $17.8 million in transfers for administrative expenses. The
    increase will support an increase of 200 full time equivalents (FTE's)
    at the county level, updated computer systems, systems development and
    support. What will be the result of an even further decrease in Federal
    staff years and non-Federal county staff years?
        Answer. FSA has several sources of funds to support staffing
    levels, including funds carried forward from the prior year under
    authority of a general provision in annual appropriation acts. Although
    total S&E available funds have decreased by $36.5 million, the fiscal
    year 1999 ACIF account proposes a requested level of $227.673 million,
    an increase of $17.8 million to provide an adequate level of personnel
    qualified to perform farm loan activities. The fiscal year 1999 Budget
    proposes a net reduction of 1,118 staff years for fiscal year 1999, of
    which 263 are Federal staff years and 855 are non-Federal county office
    staff years. This is composed of a staff-year decrease of 1,060 FTE's
    required by lower funds carried forward from the prior year and the
    direct appropriation, partly offset by an increase of 205 FTE's funded
    through reimbursements and user fees. While lower available funds
    necessitate lower staffing, the decrease is also attributable to
    somewhat lower workload (except for farm loan workload) under the 1996
    Act. The staffing reductions we are proposing for fiscal year 1999 may
    require a reexamination of our county office structure. Any closure
    decisions will be made in light of cost effectiveness and quality of
    service to the producer.
        Question. Will additional county offices be closed?
        Answer. Under the 1994 plan, a total of 373 FSA county offices were
    scheduled to be closed by the end of fiscal year 1997. Five county
    offices were closed at the beginning of this fiscal year to achieve
    this closure plan goal. As of January 1998, there have been no
    additional closures in fiscal year 1998. We expect to be able to use
    the results of the outside contractor study in guiding our actions to
    achieve any required office closures through a solid independent
    workload analysis of the county-based agencies.
        Question. What will the decrease be in Federal staff years and non-
    Federal county staff years from fiscal year 1998 to fiscal year 1999 if
    the new user fee collections are not realized?
        Answer. The anticipated collection of $10 million would fund 223
    county staff years, and the total county staffing reduction would be
    855 versus 1,078 FTE's. If the fiscal year 1999 proposed user fee
    legislation is not enacted, the Agency would need an increase of $10
    million in direct appropriation to fund 223 county office staff years.
    The user fee collections would not impact Federal staff years.
        Question. The fiscal year 1999 budget request proposes a decrease
    of $10.9 million for a 263 reduction of Federal staff years. The total
    reduction for staff years for fiscal year 1999 is 1,118, with the
    remaining reduction resulting in 855 non-Federal county office staff
    years. Was this reduction of staff years included in the total 2000
    FTE's that were to be eliminated as proposed last year or an additional
    reduction of staff years?
        Answer. Yes, the reduction of staff years was included in the
    original total of 2,119 FTE's that were to be eliminated as proposed in
    last year's budget for fiscal year 1998. This fiscal year, FSA is using
    $50.8 million in carryover funding from fiscal year 1997, in lieu of
    appropriations which were reduced by Congress in 1998, for salaries and
    expenses to fund non-Federal staff years. Consequently, a more modest
    reduction of Federal and non-Federal staff years was necessary in
    fiscal year 1998 because of the use of available carryover funds. This
    allowed the Agency to operate consistent with its anticipated fiscal
    year 1998 workload. The remaining reductions were achieved through
    buyouts, a reduction-in-force, the offering of early outs without
    voluntary incentive payments, and normal attrition.
        Question. Due to the proposed staffing reductions, closure of FSA
    county offices will have to be reexamined. Does the Agency have
    preliminary estimates as to how many and the location of these offices
    that may be consolidated or closed?
        Answer. Once the Agency has an opportunity to analyze the impact of
    the results of the independent study which will assess Agency workload
    estimates and identify criteria for determining the most efficient use
    of office staffing and to consider the prospective impact of
    administrative convergence on county office operations, FSA will be in
    a better position to identify the number of offices and the specific
    locations of consolidations and closures, where necessary.
        Question. Mr. Kelly, you state that you will keep the Committee
    apprised of any prospective closures. How do you plan to keep the
    Committee apprised?
        Answer. We intend to continue providing periodic status reports on
    possible office closures, consistent with guidance from the Secretary,
    to ensure that you and other interested Members of Congress are
    apprised of our plans in this area.
        Question. For the Service Center Implementation/Common Computing
    Environment, the fiscal year 1999 budget request proposes an increase
    of $30 million for FSA's salaries and expenses. Natural Resources
    Conservation Service and Rural Development will also contribute funds
    to this project. How much have these agencies proposed to contribute?
        Answer. The Natural Resources Conservation Service and Rural
    Development will contribute $15 million and $7 million, respectively,
    during fiscal year 1999 towards the Common Computing Environment.
        Question. Will the CCE project being completed in fiscal year 1999
    require any more financing?
        Answer. Hardware and software acquisitions for the Common Computing
    Environment will be procured in three phases over several years. Phase
    I will take place in late fiscal year 1998 and throughout 1999 at a
    cost of about $100 million. Phases II and III will take place in fiscal
    years 2000 and 2001 at a cost of about $250 million. This would
    complete the hardware and software acquisition for the Service Centers.
    Funding sources for the Common Computing Environment beyond fiscal year
    1999 have not been identified.
        Question. Why does this require an earmark as proposed by the
    Agency?
        Answer. The $30 million requested under FSA Salaries and Expenses
    (S&E) will be combined with funds from the Commodity Credit
    Corporation, the Natural Resources Conservation Service, and the Rural
    Development agencies to start the USDA Service Center Common Computing
    Environment. The appropriations language we are proposing merely
    denotes that $30 million of the FSA S&E request is for the CCE and is
    not available for any other purpose, including staffing.
        Question. Does the Agency or the Secretary of Agriculture have a
    proposal to convert FSA non-Federal county committee employees, with
    their career tenure, to Federal civil service status? If not, what has
    been proposed by the Secretary?
        Answer. The Secretary of Agriculture is on record as supporting
    pending legislation introduced by Congresswoman Eva Clayton favoring
    converting FSA non-Federal county committee employees, with their
    career tenure, to Federal civil service status. Conversion of these FSA
    non-Federal employees to Federal civil service status would greatly
    improve our program delivery and would eliminate the challenges FSA
    currently faces in operating two different personnel systems for
    employees in county offices.
        Question. Carryover funds used in fiscal year 1997 for staffing
    expenses will not be available for fiscal year 1998 resulting in a
    decrease of $37.8 million. Due to the lack of these carryover balances,
    non-Federal county office staff years will result in a proposed net
    decrease of 855 FTE's from fiscal year 1998 to 1999. Were these numbers
    included in the target reduction number of 2,500 FTE's that you
    announced last year?
        Answer. Yes, the reduction of staff years was included in the
    original total of 2,119 FTE's that were to be eliminated as proposed in
    last year's budget for fiscal year 1998. For fiscal year 1998, FSA is
    using $50.8 million of the available fiscal year 1997 carryover balance
    of $63.8 million to finance fiscal year 1998 staffing and related
    costs, leaving an unused balance of $13 million. In fiscal year 1999,
    FSA will use the remaining $13 million to help finance staffing costs.
    Because of the use of fiscal year 1997 carryover funds, a more modest
    reduction of Federal and non-Federal staff years was necessary in
    fiscal year 1998. These lower reductions were achieved through buyouts,
    a reduction-in-force, the offering of early outs without voluntary
    incentive payment, and normal attrition.
        Question. Wasn't the Agency aware of these unavailable funds last
    fiscal year?
        Answer. Yes, the Agency was aware of the funding situation last
    fiscal year and took action to notify the Department. The carryover
    balances, which resulted largely from States not filling funded
    vacancies in 1997 in anticipation of the large budgeted reductions for
    1998, were taken into account by Congress in appropriating lower than
    requested salaries and expenses funding for 1998. The total available
    funds for non-Federal county office activities in fiscal year 1998
    included funds carried forward from the prior year. For fiscal year
    1998, FSA is using $50.8 million of the available fiscal year 1997
    carryover balance of $63.8 million to finance fiscal year 1998 staffing
    and related costs, leaving a balance of $13 million. In fiscal year
    1999, FSA will use the remaining $13 million to help finance staffing
    costs.
        Question. There is much frustration in the State FSA field offices
    under the current environment at USDA. State Directors feel that they
    do not know what is expected of them nor do they know what human
    resources will be available from year to year. Without clear goals and
    a strategic short term and long term plan of operation the field
    offices are left to make inadequate management decisions. Does USDA
    know how FSA will proceed in the future with the structuring of their
    field offices and does a strategic plan of operation exist? If yes, has
    this been communicated to all State Directors?
        Answer. A strategic plan has been developed for the Agency which is
    included in the USDA strategic plan. FSA is committed to implementing
    the concepts in the Blair House Papers giving more responsibility and
    accountability to State Directors. An FSA SED conference is being held
    March 24 through 27, 1998, in Arlington, Virginia. This conference has
    been scheduled to discuss such issues as administrative convergence,
    outreach/civil rights, farm loan programs, farm programs, management
    issues and strategic planning. A notice will also be released this week
    delegating the responsibility for insuring budget and personnel ceiling
    constraints to SED's. A task force has reviewed the current delivery
    system, but no final decision has been made on the structure of field
    offices.
        Question. Have State Directors been given the criteria used to
    determine their staff ceilings and their budget so they can make
    management decisions necessary to stay within the budget? If not, why?
        Answer. In an August 22, 1997 memo, State Directors were issued
    personnel ceilings for Federal and non-Federal employees for fiscal
    year 1998. After the FSA 1999 appropriations are passed, State
    Directors will be issued ceilings for fiscal year 1999. The analysis
    for determining the allocation of ceilings to each State has not been
    determined at this time. Plans are currently being implemented to
    delegate to State Directors the authority to manage budgets, ceilings
    and personnel within their respective States.
        Question. What is the Agency's plan to respond to and address
    discrimination complaints?
        Answer. FSA is currently staffed with nine EEO counselors located
    in various FSA State offices. The counselors are available to FSA
    employees in the pre-complaint process. By the end of April 1998, FSA
    will be fully staffed with 11 full-time counselors. FSA has established
    15 Fact Finder positions in Montgomery, Alabama, to perform fact
    finding inquiries into program complaints FSA-wide. This staff will
    report to the Director, Civil Rights and Small Business Utilization
    Staff. Within the next four to six months, FSA will be implementing a
    mediation program in the pre-complaint process. This program is
    intended to reduce the number of formal EEO complaints, speed up the
    complaint process, and preserve ongoing working relationships. Prior to
    implementation of this mediation program, all counselors will receive
    mediation training which will give them the necessary skills to act as
    intermediaries.
        Question. USDA created the service center concept during
    reorganization. Service centers are used to provide ``one stop
    shopping,'' thus the Agency's customers can perform all of their
    business transactions at one place rather than traveling to several
    places. Has the service center concept been integrated in all State
    field offices?
        Answer. The Service Center concept is still in the process of being
    implemented in all State field offices. The office closure/opening/
    collocation and the LAN/WAN/VOICE installation phases of this
    initiative will be completed by December 1998. These two initiatives
    provide the foundation for business process reengineering and
    subsequent information technology investment. Integration of business
    processes is under evaluation, with pilot testing currently underway.
    When the pilot testing is completed and the new business processes are
    identified, these processes will be implemented in all Service Centers
    and the Service Center concept fully implemented.
        Question. Why does the administration call a USDA office a
    ``service center'' when in many cases only one Agency (FSA, NRCS, or
    RD) is housed in the office?
        Answer. The National Food and Agriculture Council (FAC), at the
    request of the Secretary, is reengineering, modernizing, and
    streamlining the processes of county-based Service Centers. The
    National FAC established the Service Center Implementation Team (SCIT)
    to design and implement the changes required to achieve an integrated
    Service Center environment that will provide customers with ``one stop
    service.'' Under the service center concept, customers will be provided
    services by trained and knowledgeable USDA employees who are willing
    and able to accommodate customer requests, regardless of a particular
    Agency's presence in a Service Center. While there are many specific
    benefits for both customers and the partner agencies, the primary
    benefit is that of achieving the Secretary's vision of a more efficient
    delivery of USDA programs to rural America.
        Question. USDA is planning to undergo administrative convergence,
    using one administrative support staff for all field offices. Has the
    USDA thoroughly studied all options for administrative convergence?
        Answer. The Secretary of Agriculture announced administrative
    convergence plans in July 1997 to consolidate the administrative
    support functions of the USDA county-based agencies to reduce costs and
    streamline offices. Phase one created the Administrative Convergence
    Action Team (ACAT), comprised of nearly 200 USDA employees,
    representing each of the impacted agencies and every aspect of
    operations. The ACAT was successful in developing the initial report
    that included a thoughtful series of options which set a solid
    foundation for the success of this critically important project. In
    phase two, Deputy Secretary Rominger and members of the Subcabinet
    developed the proposed framework for administrative convergence. Based
    on this proposed framework, the Secretary initiated the implementation
    phase of administrative convergence on March 16, 1998.
        Question. Have plans for implementation been determined and have
    State field offices been notified?
        Answer. Following the Secretary's initial review of the proposed
    framework, USDA's State leaders were given the opportunity to comment
    before the final decision was made. A number of thoughtful and
    important questions were raised and can only be answered during the
    next phase leading up to implementation, which is projected to occur by
    October 1, 1998.
        Question. Will this convergence be considered as the Agency
    undergoes the service center implementation/common computing
    environment?
        Answer. Yes, the Secretary is committed to the continued re-
    invention of basic business processes and the successful establishment
    of a common computing environment.
        Question. The proposed fiscal year 1999 budget assumes a reduction
    in non-Federal county employees and a reduction in Federal employees as
    well. What is the rationale for proposing a major reduction while at
    the same time the Department has hired Coopers & Lybrand to study the
    workload requirements of the field delivery system?
        Answer. The net reduction in staffing is driven by further declines
    in expected workload stemming from the 1996 Farm Bill and the need to
    make hard choices to balance the Budget. The Department entered into a
    contract with Coopers & Lybrand to conduct a study of the farm and
    rural program delivery system of the county-based agencies, FSA, NRCS,
    and RD, to be completed by September 1, 1998. The study will clearly
    identify the purposes Agency operations are intended to achieve,
    provide an independent assessment of Agency workload estimates,
    consider the prospective impact of administrative convergence on county
    office operations, identify criteria for determining the highest value
    use of office staff, evaluate office operations efficiencies gained so
    far, and assemble a profile of the USDA customer base as defined by
    eligibility for program benefits. Finally, the study will identify
    alternative decision systems or organizational structures for matching
    USDA resources with customer needs and preferences. We expect to be
    able to use the results of the Coopers & Lybrand independent workload
    analysis of the county-based workload study in guiding our actions to
    determine the most effective use of office staff which may result in
    office closures or additional consolidations. At the time of completion
    of the study, all recommendations will be analyzed to see what further
    steps, if any, can be implemented to improve the National, State, and
    county-based delivery systems.
        Question. Does the Secretary support the conversion of county
    employees to Federal status?
        Answer. Yes, the Secretary supports converting FSA non-Federal
    county committee employees, with their career tenure, to Federal civil
    service status. Conversion of FSA non-Federal employees to Federal
    civil service status would eliminate the difficulties FSA currently has
    in operating two different personnel systems for employees in county
    offices. These difficulties include the fact that non-Federal FSA
    employees cannot compete for FSA Federal vacancies on an equal footing
    with Federal employees, non-Federal employees who are RIF'd are not
    entitled to assistance and priority placement under the Career
    Transition Assistance Program, and FSA is required by law to establish
    separate supervisory reporting lines for non-Federal and Federal
    employees located in the same county office.
        Question. Why has the Department made the decision to fill ACO
    positions, Federal only?
        Answer. The Secretary favors Federal control of Farm Loan Programs
    (FLP) to maintain uniform management and accountability. The Office of
    General Counsel has advised that if non-civil service (county
    committee) employees are involved in loan making or loan servicing
    decisions, the 90-day finality rule would apply to those decisions
    which would create additional liability for the Department.
        FSA has established Agricultural Credit Officer (ACO) training type
    positions in county offices to perform loan making and servicing
    according to supervised credit principles when there are not enough
    fully trained and experienced credit officers to provide supervised
    credit in the manner needed by FSA. Delegating farm loan making
    authority and some servicing authorities exclusively to Federal
    employees facilitates the effective delivery of FLP in county offices
    by having all ACO's under the same personnel system, supervisors, and
    guidelines. It promotes Federal control of FLP by ensuring that direct
    line authority extends from the Secretary to Federal employees in local
    county offices and eliminates FLP liability from the 90-day finality
    rule.
        Question. The county committee system is the backbone for the field
    delivery system. Retaining county committee authority in decision
    making is very important to the farming community. Under what authority
    did the Department remove from the county committees the eligibility
    determination to apply for guaranteed loans?
        Answer. The Department of Agriculture Reorganization Act of 1994,
    Sec. 227(a), says in part that the Secretary shall use the services of
    committees in carrying out the agricultural credit programs under the
    Consolidated Farm and Rural Development Act. The statute does not
    dictate to what extent the county committees will be used nor is
    committee action to determine eligibility required. The degree of
    committee involvement in FSA farm loan programs is discretionary. The
    Secretary determined that allowing credit officials to determine
    eligibility for loan guarantees would reduce application processing
    time and streamline the approval process. The removal of county
    committees from the loan eligibility process is consistent with
    recommendations from USDA's Civil Rights Action Team and has the full
    support of lenders using the guarantee program.
        We agree that county committee input is very important to the
    farming community and the success of FSA programs. The grass roots
    knowledge that county committees have and the advice that they give is
    very valuable to making decisions regarding farm loan programs, and we
    continue to capitalize on that knowledge and rely on their advice. It
    is not, however, essential for the county committee to be involved in
    determining eligibility on every loan guarantee application, nor is it
    an effective use of the committees' time.
        Question. Reports have surfaced that the Department has developed a
    task force report on the field delivery system. Is this the case?
        Answer. A task force was appointed to address the interim and long-
    term needs of FSA's delivery system. This is still in the developmental
    stage for the Agency. The Secretary has also contracted with Coopers
    and Lybrand to provide alternative approaches to organizing and
    staffing USDA's county-based operations in delivering services that are
    clearly linked to Federal policy and program priorities and that can be
    managed to meet Federal budget targets. The study will (1) identify the
    purposes Agency operations are intended to achieve, (2) provide an
    independent assessment of Agency workload estimates, (3) consider the
    prospective impact of administrative convergence on county office
    operations, (4) identify criteria for determining the highest value use
    of office staff, (5) evaluate office operations efficiencies gained so
    far, and (6) assemble a profile of the USDA customer base as defined by
    eligibility for program benefits.
                               acreage statistics
        Question. Does USDA have authority to allow producers to report
    their planted acreage? Does USDA have authority to share planted
    acreage data with private organizations who need such data?
        Answer. Section 374(a) of the Agricultural Adjustment Act of 1938
    (1938 Act) provides broad authority for collecting land and crop
    information in support of programs administered by USDA. The statute
    states that ``The Secretary shall provide for ascertaining, by
    measurement or otherwise, the acreage of any agricultural commodity or
    land use on farms for which the ascertainment of such acreage is
    necessary to determine compliance under any program administered by the
    Secretary.'' In addition, the 1938 Act and the Federal Agriculture
    Improvement and Reform Act require the collection of acreage
    information for all quota tobacco and quota peanuts and as a condition
    of eligibility for the Noninsured Crop Disaster Assistance Program,
    respectively.
        However, information collections are subject to approval by OMB
    under the Paperwork Reduction Act of 1995. USDA's approval for these
    collections has lapsed as the result of OMB concerns about the
    practical utility of the information being collected. USDA continues to
    accept reports during negotiations with OMB for reapproval.
        Information sharing with private organizations is limited by the
    Privacy Act, 5 U.S.C. 552a, which prohibits disclosure of information
    regarding farm operations without written consent of the individuals to
    whom the records pertain. One exemption authorizes disclosure under the
    Freedom of Information Act (FOIA), 5 U.S.C. 552(a)(b)(2). However, FOIA
    restricts disclosure of information including, but not limited to,
    Social Security Number, farm number, yields, crop bases, tillable
    acres, and acreage information related to USDA-administered
    conservation programs.
        Question. Have other groups, organizations or agencies expressed
    interest in working with FSA to obtain accurate crop acreage data?
        Answer. Within USDA, interest in access to detailed or summary-
    level information has been asserted by the Animal and Plant Health
    Inspection Service; Cooperative State Research, Education and Extension
    Service; Economic Research Service; National Agricultural Statistics
    Service; Natural Resources Conservation Service; Risk Management
    Agency; and World Outlook Board. USDA's Office of the Inspector General
    classifies FSA's collection of this information as a key internal
    control for $11 billion in annual program disbursements.
        Beyond USDA, many State governments and local entities use the FSA-
    collected land and crop information in support of State and local
    programs, such as pesticide and fertilizer control programs and local
    crop forecasts and analysis. Private crop insurance agents, reinsured
    by USDA, also use and rely on FSA-collected information to verify crop
    data reported by producers for crop insurance.
        Appeals for continued collection and sharing of the information
    have been received from the American Farm Bureau Federation, American
    Sugar Cane League, National Cotton Council, National Farmers Union, and
    a variety of rural land interests, such as the American Society of Farm
    Managers and Appraisers.
        Question. What is the status of any cooperative efforts between
    USDA and NASA which decides the use of NASA facilities, personnel and/
    or equipment to collect data using remote sensing, satellite or other
    advanced technology?
        Answer. USDA and NASA are in the final stages of establishing a
    Memorandum of Understanding (MOU) on Cooperation and Coordination in
    Science and Technology Research, Development, Transfer, Utilization and
    Commercialization. The purpose of the MOU is to provide a framework for
    the continued cooperation and coordination in the area of remote
    sensing.
        Both parties view this agreement as important for improving the
    capability to collect data needed to improve precision agriculture
    technologies, global crop-condition assessments, and natural resource
    management. The Secretary signed the proposed MOU for USDA on February
    27 and has forwarded the document to the NASA Administrator for his
    signature.
                             fsa combination leases
        Question. During 1997 FSA proposed classifying all combination
    leases, those with a share and cash provision, as share leases. Based
    on concerns expressed by landlords and tenants who participate in such
    leases, FSA delayed implementation of the proposed procedure. Since
    these leases are utilized in areas where low prices for cotton and
    other commodities are causing production financing difficulties and
    since the change would generate minimal savings, if any, would the
    Agency consider allowing those who have historically utilized
    combination leases continue to do so thereby making the change apply
    only to new leases or to those combination leases where both parties
    agree to the new determination?
        Answer. The reclassification of combinations leases does not mean
    that producers are prohibited by FSA from continuing to use such
    leases. Audits conducted by the Office of the Inspector General (OIG)
    confirmed that the majority of combination leases actually result in
    share leases unless a disaster affects the crop. This meant that even
    though the terms of the lease resulted in a crop share, FSA was
    recognizing the lease as a cash lease in most cases. This resulted in
    AMTA payments going to the operator when a portion should have gone to
    the owner. OIG views combination leases that are considered cash leases
    as a tool for allowing landlords to evade payment limitations. The
    change corrects this inequity. The final regulation will be issued in
    the near future and will address the issue of which leases/producers
    will be subject to its requirements.
                   boll weevil eradication program and loans
        Question. Since the program is continuing to expand, please provide
    the Committee with an analysis of whether the program can succeed
    without significant funding for Federal cost sharing and for the FSA
    loan program--particularly while prices are low and acreage is in
    decline.
        Answer. We believe the boll weevil eradication program can succeed
    with fewer Federal cost-share funds and a flexible loan program. Cotton
    acreage has fluctuated significantly over the last two years, largely
    due to recent changes in farm legislation. These swings in acreage make
    it more difficult to provide the cash flow for the eradication program
    in each new area. High acreage during the expensive few years of
    eradication will result in high overall program costs. If acreage then
    declines in the post-eradication phase as loans are being repaid,
    grower assessments may not be sufficient to retire existing debt on
    schedule.
        Question. Is it accurate that USDA and Land-Grant University
    analyses have concluded that the boll weevil program has generated
    significant economic and environmental benefits in the Southeastern
    States?
        Answer. A report written by USDA and University of Georgia
    researchers summarized the tremendous economic and environmental
    benefits of boll weevil eradication in Georgia. According to the study,
    cotton production has increased dramatically each year since the
    program was completed in 1990. Average yield has increased from 482
    pounds per acre in the pre-eradication period (1971 to 1986) to 733
    pounds per acre in the post-eradication period (1991 to 1995). Acreage
    has increased from an average of 288,000 to 770,000, and average gross
    crop revenues have increased from $70 million to $400 million per year.
    In addition, net crop revenues (gross revenues less insect pest
    management costs and amount of damage) have increased from $187 to $451
    per acre.
        The report also identifies environmental advantages to growers and
    residents of the State due to a significant decrease in insecticide use
    in Georgia cotton. The average number of insecticide treatments has
    decreased from 14.4 per acre in the pre-eradication period to 5.4 per
    acre in the post-eradication period. In most cases, the materials used
    are more specific, and the amount of active ingredient applied during
    each treatment has been reduced from pounds per acre to a few ounces
    per acre.
        Question. How much of the APHIS funds go directly to the field and
    how much are attributed to administrative overhead?
        Answer. Approximately 86.1 percent of APHIS' funding is allocated
    to the field for program delivery costs while 13.9 percent is allocated
    for Agency and program-level support costs.
                     government performance and results act
        Question. How are the Agency's annual performance goals linked to
    the Agency's mission, strategic goals, and program activities in its
    budget request?
        Answer. The annual performance goals measure incremental
    achievement of the Agency's strategic goals and, ultimately, the
    Agency's mission. As such, many of the annual performance goals in the
    Annual Performance Plans are similar to the strategic goals encompassed
    in FSA's strategic plan. Furthermore, the Annual Performance Plan
    reflects the program activities in the Agency's budget request,
    summarized on a GPRA basis, including FTE staffing and funding
    associated with achievement of annual performance goals.
        Question. Could you describe the process used to link your
    performance goals to your budget activities?
        Answer. As a part of the budget process this year, a fiscal year
    1999 Annual Performance Plan was developed and submitted which
    contained performance goals relating to the Agency's strategic plan.
    The Annual Performance Plan encompasses all program activities included
    in the Agency's budget, and reflects the program activities associated
    with identified performance goals. Both the Annual Performance Plan and
    the fiscal year 1999 budget discuss the need for resources relative to
    achieving program performance goals. This linkage also enables
    decision-makers to assess the FTE's and funding requirements of the
    strategic plan goal encompassing the program activities associated with
    achieving annual performance goals.
        Question. What difficulties, if any, did you encounter, and what
    lessons did you learn?
        Answer. Difficulties associated with establishing this linkage
    included developing outcome measures for each of the program activities
    encompassed in the budget, while maintaining an Annual Performance Plan
    that is informative and concise and establishing quantitative
    performance goals for program activities to show a definite cause and
    effect relationship between the funding requested for program
    activities and the expected outcome. There were also some timing
    problems associated with linking available funding (e.g., receipt or
    establishment of budgetary allowances) with related performance goals.
        Question. Does the Agency's Performance Plan link performance
    measures to its budget?
        Answer. As part of the budget process discussed previously,
    regarding linking performance goals to budget activities, performance
    measures were incorporated in budget material to indicate expected
    performance to be achieved, based on available funding.
        Question. Does each account have performance measures?
        Answer. Performance measures were developed for each FSA budget
    account. Performance measures were developed for the strategic goals
    and annual performance goals and then linked to budget accounts. Budget
    accounts were aggregated where appropriate to tie in with strategic
    goals.
        Question. To what extent does your performance planning structure
    differ from the account and activity structure in your budget
    justification?
        Answer. The performance planning structure was aligned with the
    structure reflected in the Strategic Plan. As such, annual performance
    goals, measures, indicators, and baselines were developed for each
    strategic goal and management initiative. The budget account structure,
    however, differs from the performance planning structure. The budget
    account structure encompasses program and salaries and expenses funding
    requirements but does not separately address certain administrative and
    support functions, such as outreach, equal employment opportunity, and
    information technology initiatives. Instead, these functions are
    aggregated and reflected in the Agency's salaries and expense accounts
    by goal. Also, the performance plan will report whether or not annual
    performance goals were achieved with available funding for those
    activities. The budget justification is not currently developed to
    justify these types of resources primarily on a performance budget
    basis.
        Question. Do you plan to propose any changes to your account
    structure for fiscal year 2000?
        Answer. Presently, there are no plans to change the FSA account
    structure for fiscal year 2000, since there is linkage between the
    account and activity structure in the budget and GPRA program
    activities.
        Question. How were performance measures chosen?
        Answer. Performance measures were developed by Agency
    representatives within their respective areas of responsibilities. The
    FSA Corporate Affairs Group worked closely with Agency representatives
    from program and administrative areas to ensure performance measures
    captured significant, vital operations. This ongoing interaction
    continues as the Agency strives to develop a greater number of outcome
    measures reflecting results, or impacts, of Agency programs.
        Question. How did the Agency balance the cost of data collection
    and verification with the need for reliable and valid performance data?
        Answer. In many instances data collection systems and verification
    methods were already established prior to the development of
    performance measures. As such, managers were able to utilize existing
    technology, processes, and resources to collect and evaluate data.
    Instances in which data collection systems and/or verification methods
    were not available required consideration of several factors to
    evaluate the cost versus the benefit of data collection and
    verification methods. Factors considered included actual/anticipated
    policy or organizational changes within program and administrative
    operations, available technology and funding, internal and external
    risk factors, and the degree to which FSA operations influence
    performance results.
        Question. Does your plan include performance measures for which
    reliable data are not likely to be available in time for your first
    performance report in March 2000?
        Answer. As reflected in the Annual Performance Plan, some
    performance measures exist for which resulting data may not be
    available for inclusion in the fiscal year 1999 Annual Performance
    Report, which is due in March 2000. Instances in which data is not
    available will be reflected in the Annual Performance Report
    accompanied by an explanation supporting the reason data is unavailable
    and anticipated timeframes to obtain the data. However, prior to
    preparation of the fiscal year 1999 Annual Performance Plan Report, FSA
    will diligently strive to develop systems facilitating the collection
    and evaluation of all required data.
        Question. What are the key performance goals from your fiscal year
    1999 Annual Performance Plan that you recommend this subcommittee use
    to track program results?
        Answer. The Agency was diligent in ensuring that the most critical
    performance goals were included in the FSA Annual Performance Plan.
    Lower-level, less critical performance goals were evaluated for
    inclusion in Division and Branch level plans. As such, we recommend
    that the subcommittee track all of the annual performance goals in the
    1999 Annual Performance Plan.
        Question. In developing your Annual Performance Plan, what efforts
    did your Agency undertake to ensure that the goals in the plan include
    a significant number of outcome measures?
        Answer. During the development of the 1999 Annual Performance Plan,
    Agency managers were apprised of the distinction between output and
    outcome measures and were encouraged, to the extent possible, to
    develop outcome measures in their area of responsibility. We also
    worked with OMB and USDA staff offices to assist in this effort.
    Currently, the majority of the performance measures in the Annual
    Performance Plan are outputs rather than outcomes. Furthermore, output
    measures are often most appropriate for evaluating achievement of
    annual performance goals, for often outcomes will take multiple years
    to be achieved and evaluated. The Corporate Affairs Group, however,
    will continue working with program managers to develop outcome
    measures, where applicable.
        Question. Do you believe your program managers understand the
    difference between goals that measure workload (output) and goals that
    measure effectiveness (outcome)?
        Answer. Agency program managers understand the distinction between
    output and outcome measures. However, developing outcome measures is
    often not feasible for interim timeframes, such as the short-term
    timeframes encompassed in Annual Performance Plans.
        Question. What are some examples of customer satisfaction measures
    that you intend to use? Please include examples of both internal and
    external customers.
        Answer. Management initiative number 3 in the Annual Performance
    Plan focuses strictly on customer satisfaction. Specifically,
    performance measures have been developed to evaluate customer
    satisfaction with each of FSA's major programs. The management
    initiative also includes a discussion regarding the strategies that
    will be implemented to achieve greater customer satisfaction, including
    electronic warehouse receipts, paperwork reduction, and various
    automation techniques to issue payments in a more timely manner. In the
    recent past, the Agency has also used national customer (producer)
    satisfaction surveys.
        Question. How were the measurable goals of your fiscal year 1999
    Annual Performance Plan used to develop your fiscal year 1999 budget?
        Answer. The Agency's Strategic Plan was completed in September
    1997, at which time development of the Annual Performance Plan
    commenced. However, budget timeframes required submission of
    preliminary budget documents in July 1997. As such, the budget and
    Annual Performance Plan were prepared to accommodate the timeframes
    associated with each of these initiatives. However, for fiscal year
    2000, the Annual Performance Plan will be prepared prior to the start
    of the budget process. As such, the annual performance goals included
    in the fiscal year 2000 Annual Performance Plan will be a primary
    influence in budget development.
        Question. If a proposed budget number is changed, up or down, by
    this committee, will you be able to indicate to us the likely impact
    the change would have on the level of program performance and the
    achievement of various goals?
        Answer. The ability to assess the impact of proposed budget changes
    on targeted performance will vary among program areas depending on the
    extent and nature of proposed funding changes. For instance, the
    ability to effectively administer farm loan programs is dependent on
    adequate funding levels. As such, farm loan program personnel can
    immediately assess the impact on performance and the achievement of
    various goals, such as delinquency rates that are related to loan
    servicing, if proposed budget numbers are changed, up or down.
        Question. Do you have the technological capability of measuring and
    reporting program performance throughout the year on a regular basis,
    so that the Agency can be properly managed to achieve the desired
    results?
        Answer. In most instances, FSA will be able to measure and evaluate
    program performance throughout the year. However, data will not be
    available for all measures included in the 1999 Annual Performance Plan
    until new software and/or systems are in place.
        Question. The Government Performance and Results Act requires that
    your Agency's Annual Performance Plan establish performance goals to
    define the level of performance to be achieved by each program activity
    set forth in your budget. Many agencies have indicated that their
    present budget account structure makes it difficult to link dollars to
    results in a clear and meaningful way. Have you faced such difficulty?
        Answer. No, we have not faced that difficulty. The program
    activities in the Annual Performance Plan are linked and crosswalked to
    the budget account structure. As a result, performance goals have been
    developed for each program activity in the Annual Performance Plan that
    define the level of expected performance.
        Question. Would the linkages be clearer if your budget account
    structure were modified?
        Answer. Since there is linkage between the budget and the
    activities in the Annual Performance Plan, we believe, at this time,
    there is no need to modify the budget account structure. However, until
    we have had time to evaluate data reported on the achievement of
    performance goals, we cannot speculate on whether modifying our budget
    account structure would make linkage to the budget clearer.
        Question. If so, how would you propose to modify it and why do you
    believe such modification would be more useful both to your Agency and
    to this committee than the present structure?
        Answer. We do not propose to modify the budget structure because
    linkage exists between the Annual Performance Plan and program
    activities in the budget.
        Question. How would such modification strengthen accountability for
    program performance in the use of budgeted dollars?
        Answer. At the present time, we do not think modifying the budget
    account structure would necessarily strengthen accountability for
    program performance.
        Question. Does your fiscal year 1999 performance plan--briefly or
    by reference to your strategic plan--identify any external factors that
    could influence goal achievement?
        Answer. The discussion of external factors is primarily reflected
    in FSA's Strategic Plan. The measures in the Annual Performance Plan
    are linked to the goals, objectives, and measures in the Strategic
    Plan. Therefore, the same external factors identified in the Strategic
    Plan will influence achievement of annual performance goals. Including
    external factors in the annual performance plan would be a repetitious
    presentation of information and would compromise our efforts to make
    the plan as concise as possible.
        Question. If so, what steps have you identified to prepare,
    anticipate and plan for such influences?
        Answer. Management assesses risk in the administration of their
    daily operations and determines the impact on resource estimates and
    achieving targeted levels of performance. This discussion was not
    included in the Annual Performance Plan, for a variety of alternatives
    are utilized to manage risk, and including this discussion would result
    in a voluminous document.
        Question. What impact might external factors have on your resource
    estimates?
        Answer. That depends on the extent and type of external factors.
    For example, with unfavorable weather conditions, it may become
    impossible to achieve performance goals established for Agency program
    activities, such as for the Non-Insured Disaster Assistance Program
    (NAP), with available or requested resources. Another possible impact
    might be increased difficulty in determining the appropriate level of
    resources needed to achieve a desired program outcome.
        Question. Through the development of the Performance Plan, has the
    Agency identified overlapping functions or program duplication?
        Answer. The discussion of partnerships and coordination in the FSA
    Strategic Plan reflects government and private entities with whom FSA
    administers complementary program functions. The same partnerships and
    coordination also apply to the program activities included in the
    Annual Performance Plan.
        Question. If so, does the Performance Plan identify the overlap or
    duplication?
        Answer. The Performance Plan does not identify overlap or
    duplication of functions or programs. However, the Agency is involved
    in several cross-cutting issues to streamline and consolidate
    duplicative and overlapping functions. For example, the USDA Service
    Center initiative will collocate the county-based agencies (FSA, NRCS
    and RD). Another major initiative underway is the administrative
    convergence of the NRCS, FFAS, and RD mission areas.
        Question. Future funding decisions will take into consideration
    actual performance compared to expected or target performance. Given
    that, to what extent are your performance measures sufficiently mature
    to allow for these kinds of uses?
        Answer. The Agency has established measures enabling FSA to compare
    targeted to actual performance. However, the Agency is continuing
    efforts to develop measures which will better reflect program
    performance. As such, newly developed performance measures will need
    sufficient time to mature to facilitate a comparison between actual and
    targeted levels of performance.
        Question. Are there any factors, such as inexperience in making
    estimates for certain activities or lack of data, that might affect the
    accuracy of resource estimates?
        Answer. Agency managers develop estimates in view of their existing
    knowledge of program operations and anticipated political and economic
    environment. Changes in these estimates, and the resulting impact on
    resource estimates, require a coordinated effort between Agency program
    managers and budget representatives.
        Question. Based on your fiscal year 1999 performance plan, do you
    see any need for any substantive revisions in your strategic plan
    issued on September 30, 1997?
        Answer. The Agency has identified a need to revise the September
    1997 Strategic Plan. However, the Annual Performance Plan was not the
    primary influence in the decision to revise the Strategic Plan.
    Instead, other factors, such as administrative convergence and the
    change in Agency leadership, are the primary factors influencing the
    need to revise the Strategic Plan.
                                     ______

                      Questions Submitted by Senator Burns
                          conservation reserve program
        Question. Mr. Kelly, what is the process whereby contracts are
    being presented for acreage in the Conservation Reserve Program?
        Answer. Producers may offer land for the Conservation Reserve
    Program (CRP) through three different methods. One method is through
    the CRP general signup where offers are submitted at the local FSA
    office during a specified signup period. The local FSA and Natural
    Resources Conservation Service (NRCS) make eligibility determinations
    and collect environmental benefits data. All offers are evaluated based
    on the environmental benefits index (EBI) and ranked using the EBI.
    After offers are determined acceptable, NRCS, in conjunction with the
    producer and conservation district, develops a conservation plan to
    implement the offered conservation practices. After the conservation
    plan is approved, the CRP contract is approved by the local county FSA
    committee.
        The second method to participate is through the CRP continuous
    signup. Continuous signup allows producers to enroll at any time during
    the year for certain highly desirable environmental conservation
    practices such as filter strips, riparian buffers, contour grass
    strips, and grass waterways. Producers apply for enrollment in the
    continuous signup at the county FSA office. This is a non-competitive
    process because of the relatively small acreages of these practices and
    extraordinarily high level of environmental benefits to be obtained.
    All other land and producer eligibility requirements apply.
        The third way to participate is through the Conservation Reserve
    Enhancement Program (CREP) where Federal and State resources are
    combined to target areas of environmental importance to the State and
    nation. States are expected to contribute significant resources toward
    the enhancement program such as additional funding for longer-term
    (beyond the CRP contract) producer obligations. All CREP agreements are
    subject to all CRP land and producer eligibility requirements. CREP
    agreements have been signed with the Governors of Illinois, Maryland,
    and Minnesota.
        Question. Last year there was a great deal of concern about the way
    the program was being administered. Can we foresee these same problems
    in the coming year?
        Answer. We are very pleased with the results of signup 16 and have
    noted that only a few concerns have been raised. We agree that some
    questioned whether USDA could implement signup 15 under the aggressive
    schedule we announced. However, the FSA and NRCS employees conducted
    the largest CRP signup ever and announced the acceptability of
    contracts using the least amount of time that has ever been used. After
    signup 15, FSA and NRCS convened a group of employees from all levels
    of the Agencies to identify policies and processes that could be
    modified to improve and streamline the program. As a result, there have
    been no major issues raised under signup 16. Although there are
    isolated areas where concerns have been raised, we believe that these
    issues can be resolved administratively.
                                     ______

                     Questions Submitted by Senator Bumpers
                              fsa staff reductions
        Question. You have stated that ``The Farm Service Agency is the
    agency that family farmers and ranchers interact with most
    frequently.'' Still, is spite of this agency's importance to family
    farmers, the fiscal year 1999 budget would make 1,100 additional staff
    year reductions. Earlier this year, the agency conducted a RIF of 152
    employees, all of which were non-Federal county employees. Is it true
    that in spite of this year's RIF, FSA is hiring new personnel?
        Answer. Yes. Although the Agency is going through an overall
    downsizing, we did identify a need to shift staff resources from the
    farm programs to the farm loan programs. To accomplish this, a training
    type Agricultural Credit Officer (ACO) position was created to develop
    staff as credit officers. Initially, these new positions were being
    advertised internally to FSA, both under the county committee (non-
    civil service) and through merit promotion for FSA Federal employees.
    The position descriptions and qualifications were almost identical and
    the State Executive Director and/or State Committee selected the person
    who was considered best qualified for the job. Since FSA has separate
    ceilings for the county committee (non-civil service) and Federal
    positions and is in a downsizing mode, the employee selected remained
    in whatever system (Federal or non-civil service), they came from,
    allowing what was, in effect, a transfer of staff resources from one
    program to another and meeting what we believe was the spirit of the
    interchangeability provision of the reorganization act. Unfortunately,
    based upon opinions from the Office of the General Counsel, we learned
    that loans approved and servicing actions taken by county committee
    employees (non-civil service employees) would be subject to the 90-day
    finality rule which could have an adverse effect on the farm loan
    program. In addition there were issues raised concerning possible
    conflicts of interest since the non-civil service employees) are
    actually employed by the farmer-elected committees. Given these issues,
    the Agency in consultation with the Secretary's office determined that
    a change in policy was appropriate and that these ACO positions would
    be filled solely as Federal positions They were, however, advertised as
    ``all sources'' which allowed non-civil service county committee
    employees to apply. However, in some cases, non-civil service employees
    may be disadvantaged when applying for a Federal vacancy through being
    blocked for consideration by a veteran or a displaced Federal employee
    with Career Transition Assistance Program (CTAP) reemployment rights.
    As of March 27, 1998, 125 of these positions had been filled; 48 were
    formerly FSA non-civil service employees, 53 were FSA Federal
    employees, and 24 were from outside FSA.
        Question. If so, what is barring RIF'd employees from filling the
    open positions before you open the announcements to public applicants?
        Answer. Non-civil service county committee employees do not have
    Federal civil service status and for this reason cannot be considered
    as internal candidates for Federal positions. Therefore, in order to
    consider non-civil service county committee employees for Federal
    vacancies, the vacancy announcement must be open to members of the
    general public. Non-civil service county committee employees who are
    RIF'd do not have reemployment priority rights to any Federal civil
    service vacancies, as Federal employees who have been separated under
    the Career Transition Assistance Program do.
        Question. In regard to RIF's, do you think non-Federal employees
    are being treated fairly?
        Answer. FSA extends re-employment priority rights to non-civil
    service employees for comparable non-civil service vacancies. Because
    Federal Career Transition Assistance Program (CTAP) provisions apply
    only to Federal civil service employees, displaced non-Federal county
    committee employees do not receive any priority consideration for
    Federal vacancies. FSA believes this is an inequity and would have no
    objection to extension of CTAP coverage to FSA non-civil service
    employees so that they have priority for USDA vacancies, consistent
    with the CTAP coverage that Federal FSA employees receive.
        Question. If not, what steps can be taken to make the situation
    more equitable?
        Answer. Because of statutory distinctions between non-civil service
    county employees and Federal employees, action by Congress to convert
    all of our non-civil service county committee employees, with status,
    to Federal positions would eliminate the inequities that now exist and
    would provide us with additional flexibility in carrying out required
    reductions and in shifting staff resources between programs. Absent
    this, exemption of the farm loan programs from the 90-day rule would
    allow us to revisit the issue of utilizing non-civil service employees
    fully in the farm loan programs with some additional changes in our
    current handbooks and regulations. In addition, extension of Career
    Transition Assistance Program coverage, as indicated in the above
    answer, would also help to alleviate some of the inequities that now
    exist.
        Question. You mention that ``the Secretary favors converting FSA
    non-Federal county committee employees, with their career tenure, to
    Federal civil service status.'' What specific steps are being taken to
    execute this intention?
        Answer. The Secretary of Agriculture is on record as supporting
    pending legislation introduced by Congresswoman Clayton, as contained
    in H.R. 2185, favoring converting FSA non-Federal county committee
    employees, with their career tenure, to Federal civil service status.
    Conversion of these FSA non-Federal employees to Federal civil service
    status would eliminate the challenges FSA currently faces in operating
    two different personnel systems for employees in county offices.
        Question. What problems are stopping this process?
        Answer. There are other aspects of the bill which have created
    concerns. Specifically, we have technical concerns regarding language
    that provides funding for farm ownership and operating loan programs.
    We also have some concerns with Section 201 of the bill which modifies
    restrictions on FSA lending to farmers if they have received debt
    forgiveness on a prior loan or if they are delinquent on an existing
    loan.
                               combination leases
        Question. In 1997, FSA proposed a change to classify farm leases
    that contained elements of both ``cash'' and ``share'' leases (so-
    called ``combination'' leases) as share leases. This change would limit
    the ability of landowners to participate in the Agricultural Market
    Transition Assistance program (Freedom to Farm). Because of the timing
    of the proposed change, it was delayed until this year to avoid the
    need to redraft leases for the 1997 crop year that had already been
    executed. I have heard from producers in my State that they still feel
    the proposed change is unnecessary and unfair. Has the Farm Service
    Agency taken into consideration the effect of the combination lease
    ruling on the Agency's farm credit portfolio?
        Answer. On the contrary, this change means that landowners who may
    have been previously considered as cash leasing their land can earn
    AMTA payments. The change will have some impact on the Agency's farm
    credit borrowers because borrowers who are land owners will receive
    more money and the operators will receive less money. However,
    nationwide, there are very few combination leases. The combination
    ruling has no effect on the agency's farm credit portfolio. The 1996
    Act took away the authority to lease FSA inventory land. There are
    fewer than 447 leases on inventory land, including non-farm property,
    currently in effect. None of these leases are combination leases.
        Question. What policy objectives will be realized by the
    combination lease ruling?
        Answer. It is our opinion that treating all combination leases as
    share leases will result in more consistent administration of program
    provisions by county committees and will be more equitable to all
    producers. Additionally, treating all combination leases as share
    leases will eliminate their use as a means to circumvent payment
    limitation provisions.
        Question. If the objectives include savings, what level of savings
    will be achieved?
        Answer. The payments earned by the farm will not change; only the
    distribution of payment between producers on the farm will change. We
    recognize that there will be some savings if an affected producer
    reaches the payment limitation. This would be verification that fewer
    producers will be circumventing that provision as a result of this new
    policy. However, as previously indicated, the change was made to treat
    producers consistently and equitably and to ensure the integrity of the
    payment limitation provisions, not to achieve savings.
        Question. Will this change not result in landlords amending their
    leases to totally ``cash'' leases and, therefore, have a detrimental
    effect on tenants?
        Answer. Both totally cash and totally share leases are normal
    leases used throughout the country. We do not believe that cash leases
    are detrimental to producers. The type of lease negotiated is dictated
    by various factors, including provisions of the 1996 Act.
        Question. Why do you believe this change does not refute the claim
    that the Freedom to Farm provisions were to provide farmers with
    ``certainty'' of Federal assistance?
        Answer. This change does not impact the ``certainty'' of Federal
    assistance since the amount of payment earned by the participating farm
    does not change and is not tied to market prices. As previously
    indicated, the purpose of the change is to treat all producers
    consistently and equitably, and to stop the circumvention of payment
    limitation rules. The Statement of Managers that accompanied the 1996
    Act directed USDA to ensure that production flexibility contract
    payment shares could be changed annually to reflect the changes in
    leasing arrangements on a farm.
                      non-insured assistance program (nap)
        Question. The Crop Insurance Reform legislation of 1994 created the
    NAP program to assist farmers whose production losses are not covered
    by crop insurance. Congress is now considering an emergency
    supplemental appropriations bill to assist dairy, maple, and other
    producers who have suffered from recent storms. Still, as in the case
    of maple or dairy, the NAP does either not cover these losses or does
    so in a way that does not reflect actual losses. Is there any way to
    amend these programs to ensure all farmers are treated fairly and
    consistently?
        Answer. The 1996 Act Sec. 196 (a)(2)(A) specifically excludes
    livestock (and by inference, livestock products) in the NAP definition
    of eligible crops: ``. . . the term `eligible crop' means each
    commercial crop or other agricultural commodity (except livestock)''.
        NAP covers maple sap production losses, on a yield per-tap basis,
    which are directly related to a natural disaster. Future year
    production losses are not covered.
        Sec. 196 (a)(2)(B) specifically includes otherwise ineligible crops
    under the food or fiber restriction. The crops specifically included
    are: floriculture, ornamental nursery and Christmas tree crops,
    turfgrass sod, seed crops, aquaculture (including ornamental fish), and
    industrial crops.
        Except for Christmas trees and some woody ornamental nursery crops,
    NAP does not cover losses to trees, including maple trees or wood lots.
        Under NAP, Christmas trees do not have to be intended for harvest
    in the year of disaster or loss. The value of the Christmas tree at the
    time of loss is considered when assessing damage.
        Regarding the assertion that NAP needs to be made more fair for all
    producers, it is FSA's position that NAP is equally available to all
    producers of crops determined eligible. To allow payments on crops
    currently not eligible for NAP benefits would require a change to the
    statute.
                              effect of user fees
        Question. During last week's hearing, when asked who would bear the
    brunt of proposed FSIS user fees, Secretary Woteki responded by saying
    that ``economists'' have determined that meat and poultry consumers
    would pay those costs at the supermarket. We know that you could lay
    all the economists in the world end to end and they still wouldn't
    reach a conclusion. Rather than an answer based on economic theory,
    perhaps the answer to my question last week lay with economic common
    sense. Do you think the meat and poultry companies are more competitive
    in the retail markets or with their suppliers?
        Answer. We know that the meat packing industry has become quite
    concentrated. For example, the four largest packers accounted for 82
    percent of steer and heifer slaughter in 1994, versus 72 percent in
    1990 and 36 percent in 1980. Although a concentrated industry, USDA
    studies and ongoing monitoring of the market find competition exists.
    The number of meat packers bidding for supplies varies by region. The
    poultry industry is characterized by vertical integration with poultry
    growers producing birds under contract with large integrators. It is
    not unusual to find slaughter plants engaged in some further
    processing.
        Meat packers and poultry firms sell to processors, wholesalers/
    distributors, and directly to large retail food chains and restaurants.
    They face a large number of buyers who can and do procure from multiple
    sources.
        Question. Which of these two groups is more ``captive'' to the
    companies?
        Answer. The Department would not use the word ``captive'' to
    describe the relationship of meat and poultry companies to any other
    market sector. However, given the level of concentration in the meat
    and poultry slaughter and processing industries, these industries are
    most likely able to exert some influence on both the price they pay for
    live animals and birds and the price they receive from wholesale or
    retail customers. The overall industry is structured so that a
    relatively few packers and processors purchase most of the live animals
    and birds from a relatively large number of producers and then sell
    their products to a relatively large number of wholesale and retail
    buyers.
        Economic studies have consistently found that consumer demand for
    meat and poultry products is relatively inelastic. This means that the
    quantity demanded by consumers is relatively insensitive to price
    changes. In markets where demand is inelastic, consumers will bear most
    of a cost increase. This is what we expect will happen with user fees.
    Because user fees would be small compared to the base price of meat and
    poultry, the quantity purchased by consumers would show little change.
    Producers are unlikely to see an appreciable change in either the price
    they receive or the quantity they can sell to meat packers and poultry
    integrators.
        Question. How many beef cattle or poultry producers have loans with
    the Farm Service Agency?
        Answer. FSA does not track loans by type of producer.
        Question. Did FSIS consult with you about the effect of proposed
    user fees on agricultural producers?
        Answer. No, FSIS did not consult with FSA about any possible
    effects of user fees on producers.
                          flood risk reduction program
        Question. What is the status of this program?
        Answer. The 1996 Act authorizes the Secretary to offer flood risk
    reduction contracts to producers on farms that are frequently flooded
    and that have contract acreage under the production flexibility
    program. Producers can receive in advance up to 95 percent of the
    projected production flexibility contract payments the producer would
    otherwise have received from the time of enrollment in the Flood Risk
    Reduction Program through September 30, 2002. In return, producers must
    terminate their production flexibility contract with respect to the
    enrolled acreage, comply with swampbuster and conservation compliance
    provisions, and forgo future disaster payments, crop insurance
    payments, conservation program payments, and loans for contract
    commodities, oilseeds, and extra long staple cotton. There has been no
    activity to date, and the fiscal year 1999 Budget reflects no proposal
    for program implementation.
                      boll weevil eradication loan program
        Question. What is the identified need for this program?
        Answer. This loan program is an important component of USDA's
    overall boll weevil eradication strategy. Already regions of this
    country are benefiting from complete boll weevil eradication. The
    benefits of this program include reduced chemical applications, higher
    net farm income, increased land values, and other attributes important
    to the vitality of rural America. This program benefits not only
    farmers, but everyone interested in a clean environment and economic
    prosperity.
        These loans are used to enhance the funding of the Boll Weevil
    Eradication Program and are made to participating States' individual
    boll weevil eradication foundations. There are still large regions of
    the country where the Boll Weevil Eradication Program is either in the
    very early stages or has not yet begun. With this in mind, it is very
    important that we continue assisting affected regions to help protect
    the environment and to help sustain rural economies.
                                     ______

                      Questions Submitted by Senator Byrd
        Question. Chairman Cochran, Senator Bumpers, members of the
    Subcommittee, and Undersecretary Schumacher, I am pleased to be here
    today to review the U.S. Department of Agriculture's (USDA) Farm
    Service Agency (FSA) programs. As result of the USDA Reorganization Act
    of 1994 and the 1996 Farm Bill, FSA staff reductions are occurring
    nationwide and the traditional cornerstone of the FSA's mission has
    been significantly altered. I have been contacted by FSA employees in
    my State of West Virginia who are concerned about further staff
    reductions. These employees are also concerned about the equity of
    treatment between Federal and non-Federal county committee FSA staff
    when separated from their jobs. I have several questions regarding the
    FSA in this regard. The proposed fiscal year 1999 budget assumes an
    additional reduction of 1,078 non-Federal county committee employees--a
    9.9 percent reduction. It also assumes an additional reduction of 223
    Federal employees--a 3.8 percent reduction. Can you tell me the
    percentage of reductions nationwide of the non-Federal county committee
    employees as compared with the percentage of the Federal staff
    reductions since the reorganization took place on October 1, 1995?
        Answer. The percentage of reductions nationwide of employees from
    the 1993 baseline streamlining plan to the fiscal year 1999 budget is a
    decrease of 25.9 percent at the Federal office level and 33.3 percent
    at the non-Federal county level, a total FSA reduction of 30.8 percent.
    Headquarters employees were reduced 34.9 percent over this same period.
        Question. In West Virginia?
        Answer. Due to reduced funding levels, the fiscal year 1999
    staffing reductions proposed in the fiscal year 1999 Budget would
    reduce non-Federal county office staffing by 855 staff years and
    Federal office staffing by 263 staff years. I cannot provide any
    specific details on any reductions that may take place in West Virginia
    in fiscal year 1999 because specific Agency or USDA plans for reducing
    employees or numbers of offices, by State, have not been finalized as
    Congress has yet to act on the President's proposals.
        Question. The Federal Crop Insurance Reform and Department of
    Agriculture Reorganization Act of 1994 explicitly stated that Federal
    employees who were transferred to the FSA from the former Farmers Home
    Administration's farm credit program and the non-Federal county
    committee FSA employees who were transferred from the former
    Agricultural Stabilization and Conservation Service, would be used
    interchangeably to carry out the programs of the new FSA. However, I
    understand that a decision was made several months ago by the FSA that
    the non-Federal county committee employees would be excluded from
    carrying out certain aspects of the farm credit program. Specifically,
    I understand that non-Federal county committee employees are not
    eligible to approve loans or to fully participate in the Agricultural
    Credit Officer training program that the FSA recently implemented.
    Please explain how this restriction on non-Federal county committee
    employees is not in conflict with Congress' intent that all FSA
    employees be used interchangeably.
        Answer. FSA is fully supportive of using non-Federal county
    committee employees and Federal civil service employees interchangeably
    to implement FSA programs in local county offices. In fact, the
    Secretary has gone on record as supporting Congresswoman Clayton's bill
    to convert non-Federal county committee employees to Federal civil
    service status. Because of statutory distinctions between non-Federal
    employees and Federal employees in such areas as supervisory/employee
    reporting relationships, applying for civil service jobs, Career
    Transition Assistance Program (CTAP) entitlements, leave transfer,
    etc., we feel that legislation converting non-Federal employees is
    necessary to make these positions truly interchangeable.
        FSA has been using both non-civil service county committee
    employees and Federal civil service employees in comparable positions
    interchangeably. It is true that after the reorganization that
    established FSA, county level trainee type positions were established
    so employees could learn the intricacies of the farm loan program and
    become credit officers. These new positions are Agricultural Credit
    Officers (ACO's) and are different from the Credit Specialists and Loan
    Technicians transferred from FmHA and the County Executive Director and
    Program Assistant positions transferred from ASCS. Initially, these new
    positions were being advertised internally to FSA, both under the
    county committee (non-civil service) and through merit promotion for
    FSA Federal employees. The position descriptions and qualifications
    were almost identical and the State Executive Director and/or State
    Committee selected the person who was considered best qualified for the
    job. Since FSA has separate ceilings for the county committee (non-
    civil service) and Federal positions and is in a downsizing mode, the
    employee selected remained in whatever system (Federal or non-civil
    service), they came from, allowing what was, in effect, a transfer of
    staff resources from one program to another and meeting what we believe
    was the spirit of the interchangeability provision of the
    reorganization act.
        Unfortunately, based upon opinions from the Office of the General
    Counsel, we learned that loans approved and servicing actions taken by
    county committee employees (non-civil service) would be subject to the
    90-day finality rule which could have an adverse effect on the farm
    loan program. In addition, there were issues raised concerning possible
    conflicts of interest since the non-civil service are actually employed
    by the farmer elected committees. Given these issues, the Agency in
    consultation with the Secretary's office determined that a change in
    policy was appropriate and that these ACO positions would be filled
    solely as Federal positions. They were, however, advertised as ``all
    sources'' which allowed non-Federal county committee employees to
    apply.
        Question. Given the ongoing restructuring within the Agency, does
    this restriction disadvantage non-Federal county committee employees in
    pursuing new staff positions required for the Agency's evolving
    mission?
        Answer. As mentioned above, we have advertised the ACO positions so
    that non-Federal county committee employees can apply and be
    considered. As of March 27, 1998, FSA has filled 125 ACO positions, of
    which 48 were formerly FSA non-Federal employees, 53 were formerly FSA
    Federal employees, and 24 were from outside FSA. In some cases, non-
    Federal county committee employees may be disadvantaged when applying
    for a Federal vacancy through being blocked for consideration by a
    veteran or a displaced Federal employee with Career Transition
    Assistance Program reemployment rights. In addition, it does not allow
    us to truly use our existing employees interchangeably.
        Question. Does FSA plan to repeal the restriction? If not, why?
        Answer. We are in the process of finalizing revisions in the
    handbook that deals with conflicts of interest and ethics which will
    make all FSA employees, Federal and non-civil service, subject to the
    same rules. (Non-civil service county committee employees are not
    always covered by conflict of interest or ethics statutes; however, the
    Agency has and will continue to make them subject to these statutes
    through regulation.) We are also looking at ways to ensure that the
    farmer-elected county committee cannot, or is not perceived as being
    able to, unduly influence the decision of a non-civil service employee
    involved in the farm loan program. However, even with these changes, we
    will still be faced with the 90-day finality rule and the additional
    liabilities created in the farm loan program if non-civil service
    county committee employees are fully involved in the program. We are
    hopeful that there will be some movement in Congress to convert to
    Federal status our non-civil service employees, with status and credit
    for their years of service in the county committee system. If this does
    not happen, we may, in consultation with the Secretary's office, need
    to reassess the policy of filling the Agriculture Credit Officer
    positions as only Federal. We do recognize the Senator's concern that
    we fully comply with the interchangeability requirement of the
    reorganization act and the need to be fair to all of our employees.
        Question. I am particularly interested in the effect that the FSA's
    policy excluding non-Federal county committee employees from carrying
    out certain aspects of the farm credit program had on the Agency's
    recruitment of Federal Credit Officer positions, classified as trainee
    level. I understand that while the FSA was conducting the reduction in
    force (RIF) of 150 non-Federal county committee employees, the Agency
    was simultaneously hiring persons from outside the FSA for the new
    trainee level Credit Officer positions. Given the experience and
    knowledge of the Agency's mission and clientele possessed by the RIF'd
    employees--who in my State have a minimum of 8 years with FSA--why did
    FSA not initiate opportunities for qualified non-Federal county
    committee employees to fill these new positions?
        Answer. As mentioned in the previous response, FSA was initially
    filling these new type positions in a way that allowed all employees
    (non-civil service and Federal) to apply within their respective
    personnel systems and allowed us to stay within our separate county
    committee non-civil service and Federal ceilings. For the reasons
    cited, this policy was changed; however, FSA did announce the ACO
    positions with an area of consideration that permitted non-civil
    service employees to apply. As noted above, 48 non-civil service
    employees were selected among the 125 ACO vacancies. Although our
    county committee non-civil service employees are paid with Federal
    funds, carry out what is considered Federal work and work under a
    personnel system which we have made very similar to the Federal system,
    they are supervised by non-Federal farmer-elected county committees and
    are not, therefore, considered Federal. We are, therefore, not able to
    non-competitively reassign RIF'd non-civil service employees to these
    ACO positions.
        Question. For employees who have likely served USDA and farmers
    well over the years, would such an approach help mitigate the emotional
    and economical impact of downsizing on those RIF'd?
        Answer. FSA encouraged non-Federal employees to apply for the
    Federal ACO positions. Of the 125 ACO positions filled as of March 27,
    48 (38.4 percent) were filled with non-Federal employees. Action by
    Congress to convert all of our non-civil service county committee
    employees, with status, to Federal positions would alleviate the
    problems outlined in your question. This would also provide us with
    additional flexibility in carrying out required reductions and in
    shifting staff resources between programs. Absent this, an exemption in
    the 90-day finality rule for farm loan programs would alleviate one
    concern and would allow us to revisit the issue of using all employees
    interchangeably.
        Question. Would such an approach comply with Congress' intent that
    all FSA employees be used interchangeably?
        Answer. FSA has extensively cross-trained county employees and is
    using non-civil service and Federal employees in comparable positions
    interchangeably. Conversion of non-civil service employees to Federal
    status with credit for their years of service under the county
    committee system would allow us to use all employees interchangeably.
    Absent this type of action by Congress we will continue to face
    challenges in truly being able to treat employees under the two systems
    identically as far as career advancement and opportunities for various
    positions within FSA. We will, however, continue to do all we can,
    within the constraints of the various statutes, to be as fair as
    possible to all our employees (non-civil service and Federal), and to
    utilize these employees as effectively and efficiently as possible so
    we can continue to provide quality service to farmers and ranchers.
        Question. I understand that there is yet another component
    complicating the downsizing--that is, that the non-Federal county
    committee employees who have been RIF'd might not be on equal
    competitive footing with their FSA Federal employee counterparts for
    vacancies or new job openings, due to the Federal Career Transition
    Assistance Program. I would like to hear your views on this matter and,
    if this situation is inequitable, the Agency's options on implementing
    a downsizing plan that is equitable and fair for all affected FSA
    employees. This concludes my questions, Mr. Chairman, and I look
    forward to working with you, the Ranking Member, and other Subcommittee
    members in conjunction with the Undersecretary, on these important
    issues confronting the Farm Service Agency.
        Answer. Non-Federal county committee employees who are RIF'd do not
    have reemployment priority rights to any Federal civil service
    vacancies, as Federal employees who have been separated do under the
    Career Transition Assistance Program (CTAP). FSA believes that this is
    an inequity and would have no objection to extension of CTAP coverage
    to FSA non-civil service employees so that they have priority for USDA
    vacancies, consistent with the CTAP coverage that Federal FSA USDA
    employees receive.
                                     ______

                      Question Submitted by Senator Leahy
        Question. Mr. Under Secretary, one thing that became very clear in
    the wake of the January ice storm is that there are some significant
    gaps in FEMA and Department of Agriculture programs. As I visited farms
    hit by the ice storm, I was struck by the fact that most of these
    farmers did not expect to get Federal assistance because of the type of
    damage the storm inflicted and the nature of their crops. The greatest
    agricultural damage in Vermont was suffered by maple sugarers and dairy
    farmers, neither of which fits neatly into existing assistance
    programs. The result of these gaps was a great deal of confusion about
    who to turn to for help and what kind of help could be provided. FEMA
    came out with a report not long ago which helps to lay out some of the
    holes in our Federal disaster safety net. In particular, the report
    urges the Small Business Administration and the Department of
    Agriculture to work together to identify their legislative authorities
    and clarify how each can better serve farmers in future disasters. Is
    the Department working with FEMA and the Small Business Administration
    to identify and fill these gaps in disaster assistance? I hope that one
    result of this FEMA report will be a document that clearly lays out for
    farmers of all types of crops the kind of assistance they are eligible
    for in the event of a natural disaster.
        Answer. Representatives of FSA, the Small Business Administration
    (SBA), and the Office of Management and Budget (OMB) met on March 20 to
    discuss gaps in the Federal disaster safety net. These gaps surfaced in
    a report prepared by the Federal Emergency Management Agency (FEMA)
    following the New England ice storms.
        Both FSA and the SBA are taking a hard look at their respective
    statutory and regulatory authorities to determine exactly where the
    gaps exist. A list of unmet needs will be established. Once specific
    unmet needs are identified, FSA, SBA, OMB, and FEMA will meet again and
    work together to determine what can reasonably be done to meet these
    needs.
                                     ______

                          Foreign Agricultural Service
                     Questions Submitted by Senator Cochran
                            export subsidy programs
        Question. Please provide the total amount of bonus awards to U.S.
    exporters under the Export Enhancement Program and the Dairy Export
    Incentive Program in fiscal year 1997 and estimated for fiscal year
    1998.
        Answer. The Export Enhancement Program (EEP) was not operational
    during fiscal year 1997. For fiscal year 1998, the CCC budget baseline
    has an estimate of $150 million for EEP, but the program is currently
    not being operated. For fiscal year 1997, Dairy Export Incentive
    Program (DEIP) bonus awards totaled $121.5 million. It is difficult to
    estimate fiscal year end 1998 awards as bonus levels fluctuate
    significantly with changes in market conditions. However, the fiscal
    year 1998 estimate for DEIP bonuses in the CCC budget baseline is $98.7
    million.
        Question. You indicate that the fiscal year 1999 budget includes a
    $82.3 million program level for the DEIP. What is the fiscal year 1999
    maximum GATT-allowable limit for this program?
        Answer. The fiscal year 1999 maximum subsidies under the Uruguay
    Round Agreement are as follows:

    Non-fat dry milk........................................     $97,926,000
    Other dairy products (whole milk powder)................       5,762,000
    Cheese..................................................       4,317,000
    Butterfat...............................................      36,215,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................     144,220,000
                           cochran fellowship program
        Question. The fiscal year 1999 budget maintains the $3.0 million
    fiscal year 1998 level of funding for the Cochran Fellowship Program.
    Is additional funding still being provided by USAID and through the
    emerging markets program to supplement the direct appropriations for
    this program? How much is being provided for fiscal year 1998? What
    additional funding is expected for fiscal year 1999?
        Answer. In fiscal year 1998, the Cochran Fellowship Program
    requested $2.3 million from USAID for the program in the New
    Independent States (NIS), and $1.12 million from the Emerging Markets
    Program (EMP) for implementation of the program in Vietnam, the NIS,
    and in Eastern Europe. Agreements with both U.S. AID and EMP are still
    pending, but we believe funding will be forthcoming by at least May,
    1998. We are expecting $1.8 million from USAID and $1.12 million from
    EMP
        In fiscal year 1999, we are requesting $2.5 million from USAID for
    the NIS, and about $1 million from the EMP for continuation of our
    programs in South Africa, Brazil, and Eastern Europe. The NIS
    Coordinator at the State Department has indicated his support for the
    Cochran Program in 1999. We also have preliminary support from EMP for
    our program in South Africa. We do not at this point have specific
    agreements or amounts in place.
        Question. Please provide the fiscal year 1997 and 1998 program
    participant levels by country and region.
        Answer. In fiscal year 1997, a total of 707 participants from 45
    countries received training under the Cochran Fellowship Program.
        The following provides the fiscal year 1997 participant levels by
    region and by country:
        Asia.--154 participants from seven countries: Korea (20
    participants), Malaysia (21), China (35), Thailand (17), Indonesia
    (18), Philippines (26), and Vietnam (17).
        Eastern Europe.--182 participants from 13 countries: Turkey (19),
    Poland (56), Hungary (9), Czech Republic (10), Slovakia (11), Albania
    (6), Bulgaria (11), Slovenia (12), Croatia (10), Latvia (8), Estonia
    (9), Lithuania (7), and Romania (14).
        Latin America.--87 participants from seven countries: Mexico (37),
    Venezuela (13), Trinidad & Tobago (9), Barbados & Other West Indies
    (3), Panama (6), Colombia (14), and Chile (5).
        Africa.--61 participants from seven countries: Cote d' Ivoire (9),
    Tunisia (10), South Africa (30), Namibia (2), Kenya (5), Uganda (2),
    and Senegal (3).
        New Independent States.--223 participants from 11 countries: Russia
    (53), Ukraine (45), Kazakstan (23), Kyrgyzstan (8), Uzbekistan (27),
    Turkmenistan (8), Tajikistan (5), Armenia (16), Moldova (21), Georgia
    (10), and Azerbaijan (7).
        In fiscal year 1998, the Cochran Fellowship Program will continue
    work in the above mentioned countries. In addition, pilot programs will
    be started in Brazil, Bosnia, Costa Rica, Guatemala, and Tanzania, and
    the program will be expanded in size (increase in the number of
    participants) in Kenya, Uganda, and Senegal.
        We expected to provide training to about 760 participants in fiscal
    year 1998. Delay in receipt of U.S. AID and EMP funding until May,
    1998, however, will most likely reduce the number of participants from
    countries in the NIS and Eastern Europe during fiscal year 1998.
        Question. Please provide examples of success of the 1997 Cochran
    Fellowship Program.
        Answer. The benefits of 1997 the Cochran Fellowship Program to U.S.
    agriculture can be categorized under the following topics:
        I. Sales of U.S. Agricultural Commodities.--An immediate benefit of
    the Cochran Program is the sale of U.S. agricultural commodities or
    products that come about from information gained and/or direct contacts
    provided by participant training. Each year, we receive information
    from past participants, from U.S. companies and associations, and from
    various agricultural offices about sales of products or commodities
    that are directly and indirectly related to Cochran Program training
    activities. The following provide examples of some of our most recent
    sales information:
      --FAS/Fish & Forestry Products Division reports that a Cochran trip
            to U.S. lumber mills for Polish furniture manufacturers was
            very effective in promoting U.S. exports of hardwood lumber.
            The trip: (i) created personal relationships that resulted in
            each participant making orders for U.S. hardwood lumber, (ii)
            cleared up misunderstandings about contract specifications, and
            (iii) may result in future exports of U.S. hardwood totaling
            $25 million.
      --Another report from Poland states that a 1997 participant purchased
            over 300 metric tons (about $500,000) of U.S. prunes and
            several tons of U.S. almonds and sunflower seeds. Another
            participant started imports of U.S. shelled peanuts, his first
            order in June, 1997, amounting to $25,000.
      --A 1995 Polish participant reports that he gained ideas on how to
            use U.S. popcorn. Today he imports of over 100 containers/year
            of U.S. popcorn (30 containers by June 1997) for use in caramel
            corn and other popcorn snacks.
      --The Agricultural Office in Sweden reported that Latvian and
            Estonian importers contracted for $300,000 per month of U.S.
            consumer and confectionery products after their program at the
            Food Expo in Chicago.
      --A 1996 Slovenian feed mill team returned from their Cochran Program
            and ordered 20,000 metric tons of soybean meal--the first of
            many purchases.
      --The Agricultural Office in Cote d' Ivoire reports that a 1997
            participant bought 5,000 metric tons (@ $500,000) of U.S. corn
            on a commercial basis upon his return. He also purchased
            poultry equipment ($32,000) and day old chicks.
      --A 1997 Colombian participant has finalized arrangements to be a
            distributor of a line of U.S. consumer ready products and
            expects to import 14 containers (@ $400,000) by the end of the
            calendar year.
      --Almost immediately after a 1997 joint Cochran/CoBank/National
            Cattlemen & Beef Association (NCBA) program for Mexican bankers
            on the GSM-103 Livestock Program, there were five livestock
            sales registered with USDA (about $2.2 million), and two other
            sales were reportedly in the works ($3 and $4 million
            respectively).
      --The Agricultural Office in Vladivostok, Russia reports that three
            Russian participants signed sales contracts for U.S. fruit and
            vegetables at the Produce Marketing Association (PMA)
            exhibition in October 1997.
      --The Agricultural Office in South Africa reports that after
            training, a South African company interested in U.S. soybeans
            for food began working to purchase a large volume of U.S.
            soybeans.
      --The New Jersey Department of Agriculture reports that New Jersey
            seafood exports to China have doubled since a Cochran Seafood
            Buyers program in September 1995. Exports now exceed $1 million
            per year.
      --The Agricultural Office in Beijing states: ``As a result of the
            fiscal year 1996 Supermarket Team, an upscale grocery home
            delivery service is now purchasing two containers a month of
            mixed grocery products.''
      --The Agricultural Office in Malaysia states that ``the Cochran
            NASDA/FMI program has proven to be very effective in generating
            sales of U.S. high value products as the participants are
            importers and supermarket managers. Although specific figures
            are lacking, the FAS office has received feedback from FMI
            exhibitors/suppliers who indicated that they had received trade
            leads from the participants and are very positive in
            establishing business ties.''
      --A Vietnamese participant stated recently that his company has been
            importing 2-3 containers per month of U.S. pistachios since
            June, 1997. Another Vietnamese supermarket owner has imported 3
            containers of consumer ready products to test the market for
            U.S. products. Sales thus far are encouraging.
      --A 1997 Armenian supermarket owner reports that he has widened his
            U.S. product lines to include deli meats, fish, baby food and
            cookies after participation in his Cochran Consumer Foods
            Program.
        II. Constraints to Imports of U.S. Agricultural Commodities and
    Products.--Many constraints to the export of U.S. agricultural products
    can be categorized as sanitary and phytosanitary (SPS) restrictions to
    trade or market access barriers. Cochran training through agencies such
    as the Food Safety Inspection Service (FSIS); Grain Inspection, Packers
    & Stockyards Administration (GIPSA); Animal and Plant Health Inspection
    Service (APHIS), State Departments of Agriculture, Food and Drug
    Administration (FDA) and the Environmental Protection Agency (EPA), and
    with private agribusinesses, provide technical information to country
    counterpart agencies and help to improve the opportunities to export
    U.S. products into countries.
        During 1997, 59 Cochran fellows from 18 countries participated in
    24 programs directly related to providing information on the safety of
    the U.S. food and fiber system as well as providing direct contact with
    U.S. counterparts.
      --The Agricultural Office in Stockholm reports that the meat
            inspection program for two Latvian veterinarians has been used
            to help establish new sanitary border inspection procedures. He
            states that ``such education is essential support to the
            already growing import and transit markets for a widening array
            of meat and meat products.''
      --The Tunisian Agricultural Office reports that the Veterinary Team
            ``is in the process of developing with APHIS a live cattle and
            bovine embryo protocol for U.S. imports in Tunisia, as well as
            a memorandum of agreement with Texas A&M University for
            promoting the exchange of faculty and qualified students in
            areas of mutual interest, such as infections and parasitic
            diseases of food animals and nutrition.''
      --The Agricultural Office in Indonesia states that the participant
            ``has used his food safety training to develop a draft
            regulation on Food Security as well as input into drafts of the
            Indonesian Food Law Regulations.''
      --The Agricultural Office in Vienna writes: ``The new Chief
            Veterinary Officer in Slovenia is a Cochran alumnus, which
            bodes well for relations between his office and FSIS as well as
            this office as we work toward agreement on sanitary inspection
            certificates to allow U.S. red meat into Slovenia.''
      --The Agricultural Office in Korea states: ``The Cochran Program
            provides the resources to address food safety issues, perhaps
            the largest, singularly most restrictive barrier for U.S.
            products in the Korean market.''
        III. Foster Business to Business Contacts.--One of the major
    objectives of Cochran training is to put the international participant
    in direct contact with U.S. agribusiness. Even if immediate sales do
    not result, follow-up contact with participants in their home country
    may lead to future international opportunities for U.S. business.
        Cochran fellows make contact with thousands of U.S. agribusinesses
    through product or commodity tours, technical discussions, or via
    participation at trade shows. Participation in commodity- or topic-
    specific trade shows or association meetings allow participants first-
    hand contact with a wide-range of U.S. agribusinesses. Several of the
    trade shows that were attended in 1997 by Cochran fellows include the
    Food Marketing Institute/National Association of State Department of
    Agriculture (FMI/NASDA) Food Expo, Produce Marketing Association (PMA)
    Show, Institute of Food Technologists, World Dairy Expo, World Beef
    Expo, San Francisco Seafood Show, International Poultry Expo,
    International Baking Industry Expo, American Seed Trade Conference,
    National Building Products Expo, Woodworking & Furniture Supply, High
    Point Furniture Show, National Homebuilders Association Expo, Wine
    Spectator Showcase, National Restaurant Show, National Barrow Show,
    World Pork Expo, American Feed Industry Association Show, All Candy
    Exposition, and the Fancy Food Show.
      --The Agricultural Trade Office (ATO) in Guangzhou writes that the
            Chinese Supermarket Program ``. . . is beneficial to American
            agricultural products because (the team) were so impressed with
            the high quality and diversity of U.S. products that some of
            them are considering carrying more products in their stores. As
            a result, the largest supermarket chain in China is scheduled
            to host an American Food Promotion in December 1997 at 11 major
            stores.''
      --The Director of the Appalachian Hardwood Manufacturers writes about
            a Polish team: ``We hope that our members were able to make
            good contacts with these companies and begin a business
            relationship. These were new companies to our exporters who
            were interested in exporting to Poland. This service allows
            American companies to have access to new business and contacts
            that would be difficult to establish on their own.''
      --``Thanks for introducing the group to us. This is good old
            fashioned teamwork between the private business sector,
            entrepreneurial business persons in the developing countries,
            and the American government. It can be a win-win for all.''
            (Chairman, McClane Group, Temple, TX)
      --``During the last visit of the U.S. Meat Export Federation
            representative to Poland, we had a chance to meet with several
            former participants. Most who traveled to the 1995
            International Meat Industry Convention and Expo in Chicago
            started to import pork and offal from U.S. suppliers. ELKOPOL
            company became a major player on the Polish market, importing
            large quantities of U.S. tripe and pork offal. All claimed that
            as a result of their Cochran trip, they build their first
            contacts with U.S. suppliers of meat and meat products.''
            (Agricultural Office, Warsaw)
      --A Russian textile company employee wrote: ``The Memphis Cotton
            School offered excellent coverage of all facets of textile
            production contract buying. They also provided us with
            prospects for increased cotton purchases from the U.S. in the
            future.''
        IV. FAS Agricultural Affairs Offices.--The primary contact for
    Cochran activities in each country is FAS's Agricultural Affairs Office
    and Agricultural Trade Offices (ATO). FAS staff describe the benefits
    of Cochran training programs to their offices in terms of initiating
    and maintaining contacts with public- and private-sector decision
    makers, opening lines of communication that are useful for the
    resolution of trade issues, building good relations with international
    governments, influencing trade policy issues, and using former Cochran
    private sector businesses as contacts for U.S. exporters.
      --``Among the South China Supermarket Executives, (the training)
            planted the seed of goodwill and friendship without which
            business relationships can hardly be established and
            sustained.'' (ATO/Guangzhou)
      --The Cochran Fellowship Program is an important tool for promotion
            of a broad array of U.S. agricultural interests in the central
            European region, particularly in the spheres of market
            development and combating technical barriers to trade.
            (Agricultural Affairs Office/Vienna)
      --``Post has built upon the Cochran Program relationships and expects
            those ties to enable us to further obtain marketing and
            regulatory information and influence policy discussions.''
            (Agricultural Affairs Office/Nairobi)
      --The FAS Office of Agricultural Affairs (OAA) in Seoul, Korea,
            stated: ``As noted by predecessors, the Cochran Fellowship
            Program is perhaps the single most important tool available to
            OAA for achieving desired dual objectives of development of
            domestic agricultural systems and enhancement of U.S.
            agricultural interests in Korea.''
      --The FAS Agricultural Attache in Vietnam states: ``FAS/Hanoi is
            extremely pleased with the development of the Cochran 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.''
      --The Agricultural Officer in South Africa writes, ``From our
            perspective on what the program has done to promote both U.S.
            agricultural interests and USG policy objectives to support the
            new multi-racial democracy in South Africa, the Cochran Program
            has been one of the key ingredients of our program activities
            in this country and the region.''
        Question. Are available resources sufficient to extend fellowships
    to all countries seeking to participate in the Program? If not, what
    additional funding would be required to meet these requests?
        Answer. Currently, the Cochran Program is funded by three sources
    of funds: appropriations, USAID, and EMP. Of the 707 participants in
    the Cochran Fellowship Program in 1997, 375 participants (53 percent of
    the total) were funded by appropriations, 161 participants (23 percent
    of the total) were funded by EMP, and 171 participants (24 percent of
    the total) were funded by USAID.
        Funding from USAID and the emerging markets office is extremely
    important to maintaining the Cochran Program at its present level of
    involvement around the world. USAID funding is essential to
    implementation of Cochran Program activities in the New Independent
    States, and EMP funding provides for essentially all Cochran Program
    activities in South Africa and Namibia, Brazil, Vietnam, and for about
    50 percent of our participants in 13 Eastern European countries.
        The demand for the Cochran Fellowship Program is expanding every
    year. The 1998 increase in appropriations has enabled us to initiate
    pilot programs and expand the size of our programs in several African
    and Latin American countries. In most current countries, the demand for
    fellowships far exceeds the available funding, but we have been able to
    prioritize our programs to achieve most of our objectives.
        FAS Agricultural Offices in Nigeria, Ghana, Pakistan, and several
    Middle Eastern countries requested the initiation of the Cochran
    Program in 1998. We were unable to meet these requests because of
    funding.
        We have been working with several Cochran countries on follow-up to
    participant training, and on evaluation of the results of the training.
    Formal Cochran alumni groups have been formed in Poland and Ukraine and
    they are requesting assistance, mostly in terms of information and
    contacts with U.S. industry. We currently have a data base of over
    4,000 Cochran fellows and would like to initiate a more sustained
    system of follow-up and evaluation, using Internet as well as distance
    learning technology. This type of follow-up would keep us in regular
    contact with former fellows and continue to track the results of the
    program.
                             market access program
        Question. I note that the availability of funds for the fiscal year
    1998 Market Access Program was not announced until February 17, 1998.
    Why is there a delay in the announcement of funds for this program--
    nearly 5 months into the fiscal year?
        Answer. Last fall, the Foreign Agricultural Service (FAS) began a
    new initiative--known as the Unified Export Strategy (UES)--to more
    effectively coordinate strategic planning and resource allocation
    processes across the various agricultural export assistance programs
    administered by FAS. The UES was developed to streamline the
    application process for these programs and facilitate better use of
    complementary marketing tools and resources. Through the submission of
    a single proposal, organizations may apply for assistance under the
    Market Access Program, the Foreign Market Development Cooperator
    Program, the Emerging Markets Program, Section 108, and make
    recommendations for trade policy initiatives, Cochran Fellowships, or
    Export Credit Guarantee programs.
        The UES was more difficult to implement than originally anticipated
    because FAS needed to accommodate a wide range of commodity strategies
    without unduly limiting flexibility and imposing new information
    requirements. As a result, the program announcement was delayed until
    mid-February. FAS established an April 20 deadline for receipt of
    applications in order to give applicants sufficient time to prepare
    their proposals under the new UES system.
        Question. When do you expect fiscal year 1998 MAP allocations to be
    made?
        Answer. FAS intends to announce 1998 MAP allocations on June 1,
    1998.
        Question. The Secretary indicated to this Committee that the
    Department has taken steps to make the Market Access Program more
    targeted and friendly to small businesses. What specific steps have
    been taken in this regard?
        Answer. Within the MAP's brand program, FAS continues to give
    priority assistance to cooperatives and small-sized entities. The
    Commodity Credit Corporation reimburses up to one-half of the eligible
    costs MAP brand participants incur to promote their brands in targeted
    markets. In fiscal year 1997, 84 percent of all brand promotion funds
    were allocated to cooperatives and small companies. In addition,
    cooperatives and small entities continue to benefit from generic
    activities, including participation in subsidized trade shows and
    retail promotions organized and coordinated by nonprofit trade
    organizations and state regional trade groups--SRTG's.
        On February 25, 1998, CCC issued a proposed rule which would make
    several changes to the MAP to make it more friendly to small
    businesses. These changes include incorporating into the MAP allocation
    process the level of export contributions made by U.S. industry
    participants; authorizing reimbursement of certain travel expenses for
    brand participants and certain necessary packaging and labeling design
    expenses; extending the activity payment deadline following the end of
    an activity plan year; and permitting reimbursement to participants
    based upon issuance of a credit memo as an alternative to a transfer of
    funds. CCC has received public comments and intends to publish a final
    rule prior to the start of the 1998 MAP.
        Question. The explanatory notes on the fiscal year 1999 request
    indicate that $250,000 in Commodity Credit Corporation funds will be
    available in each of fiscal years 1998 and 1999 for Market Access
    Program evaluations. Can you please tell us specifically what program
    evaluations are being funded or are planned in each of these years?
        Answer. During fiscal year 1998 the FAS Compliance Review Staff
    (CRS) anticipates performing financial and compliance reviews of the
    export promotion activities for 49 of the 64 participants under the
    Market Access Program (MAP). The fiscal year 1999 CRS MAP review
    schedule will not be known until September, 1998. However, we currently
    anticipate the number of reviews will be comparable to our fiscal year
    1998 review coverage.
        Question. Please provide the allocations made under the fiscal year
    1997 Market Access Program.
        Answer. Fiscal year 1997 Market Access Program allocations are
    provided for the record.
        [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 Kiwi Fruit 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 & 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 & 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
             office of the inspector general (oig) recommendations
        Question. The Office of the Inspector General has recommended that
    FAS (1) streamline functions of the Market Access Program and the
    Foreign Market Development Cooperator Program by requiring firms to
    submit a single strategic plan and by consolidating their program and
    financial data into a single accounting system, (2) issue regulations
    for the Foreign Market Development Cooperator Program, and (3)
    establish a process to validate the size of companies participating in
    the Market Access brand promotion program. Is the agency responding to
    these recommendations? What is being done?
        Answer. FAS has developed and implemented a new resource allocation
    process whereby organizations have the opportunity to combine their FMD
    and MAP applications and strategic plans into a single submission
    called the Unified Export Strategy (UES). For the fiscal year 1998 MAP
    and fiscal year 1999 FMD programs, each applicant will submit a single,
    strategically coordinated proposal for various USDA market development
    programs including not only the MAP and FMD programs, but also requests
    for assistance under the Emerging Markets Program, Cochran Fellowships,
    Section 108, and several Export Credit Guarantee programs. The new UES
    application will make FAS programs more cost effective by facilitating
    better coordinated export strategies, improving accountability for
    results, streamlining application procedures, and eliminating
    duplicative information requirements.
        Beginning with the fiscal year 1999 FMD program, FAS will track,
    monitor, and control resources expended under the FMD program with the
    financial management system currently used for the MAP. Also in fiscal
    year 1999, FAS will make available an electronic venue for submitting
    reimbursement claims under the FMD via the Internet. The electronic
    submittal of reimbursement claims is currently available and
    operational under the MAP. This new feature will reduce the paperwork
    burden on program participants and FAS, decrease financial errors and
    discrepancies, and expedite the payment process to program recipients.
        FAS is in the process of drafting a proposed regulation and intends
    to issue a final rule governing the FMD program by January 1999.
        FAS currently requires the State Regional Trade Groups (SRTG's) and
    other non-profit trade associations participating in the MAP to review
    and validate the size of companies participating in brand promotions.
    The FAS Compliance Review Staff audits the effectiveness of this
    control during their reviews of MAP participants. Beginning with the
    1998 MAP, FAS will require a size certification statement for all
    companies applying for brand funds through an SRTG or any other non-
    profit trade association.
       international cooperative administrative support services program
        The prepared testimony indicates that the fiscal year 1999 FAS
    budget request includes $4 million for overseas administrative services
    provided by the Department of State in support of the International
    Cooperative Administrative Support Services (ICASS) program, and that,
    in fiscal year 1998, $4.4 million has been transferred from the
    Department of State for this purpose.
        Question. What is the International Cooperative Administrative
    Support Service program?
        Answer. ICASS program was developed in response to National
    Performance Review (NPR) initiatives that introduce a more
    entrepreneurial spirit and a greater sense of teamwork among foreign
    affairs agencies in managing their overseas administrative
    responsibilities. Under ICASS, the Department of State continues to be
    the main administrative service provider overseas. However, FAS and
    other foreign affairs agencies have increased input into administrative
    policy decisions, service standards, and encouraging innovation at
    post. At post and in Washington, the ICASS Council and the ICASS
    Working Group have generally served to build a team approach to
    management while also increasing the transparency of decision-making.
    Under ICASS, administrative support costs are more equitably spread
    which reflects how the benefits of services are distributed; therefore,
    non-State agencies will incur an increased share of administrative
    costs.
        Question. Why has the State Department transferred funds to the FAS
    to support the program this year?
        Answer. In fiscal year 1998, the Department of State transferred
    $4,408,000 to FAS to fund the costs of administrative services
    previously funded by the Department of State, but are now the funding
    responsibility of FAS. FAS is only one of many Federal agencies with
    overseas offices and personnel which received transfers from the State
    Department budget.
        Question. Where is the $4 million increase for this program
    reflected in the fiscal year 1999 FAS budget request?
        Answer. The budget transfer associated with the implementation of
    ICASS took place in fiscal year 1998 and is incorporated into the
    fiscal year 1998 budget base of $140.0 million. Accordingly there is no
    increase requested for ICASS in the fiscal year 1999 budget request
                           budget activity structure
        Question. The explanatory notes indicate that based on an agency-
    wide survey measuring the allocation of staff time and including
    program costs, the distribution of Foreign Agricultural Service
    resources by activity is as follows:

                                                                     Percent
    Market Access.....................................................  24.0
    Market Development, Promotion and Outreach........................  22.2
    Market Intelligence...............................................  24.4
    Financial Marketing Assistance....................................  18.4
    Long-Term Market and Infrastructure Development...................  11.0

        The notes indicate that changes proposed for fiscal year 1999 not
    associated with a specific program will continue to be pro-rated among
    budget activities based on this distribution. How have you reached your
    conclusion that this is an appropriate distribution of the agency's
    resources?
        Answer. The activity structure of the fiscal year 1999 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 budget activity structure that incorporates
    five of the policy objectives included in the FAS strategic plan. In
    developing an allocation model, costs that are directly associated with
    a specific policy objective are assigned to that objective. Agency
    costs that are not specifically associated with a single objective are
    pro-rated into each objective based on a distribution formula. This
    formula, which is re-evaluated annually, reflects the percentage of
    time FAS staff devote to each policy objective based on an agency-wide
    survey. We believe this process best displays the costs associated with
    individual policy objectives.
                      overseas currency fluctuations fund
        Question. In response to the conference report on the Fiscal Year
    1998 Agriculture Appropriations Act, the fiscal year 1999 budget
    includes a request to earmark $2 million to establish a revolving fund
    account to enable the Foreign Agricultural Service to manage overseas
    currency fluctuations. Exchange rate losses would be offset from this
    account and exchange rate gains would be deposited into the account.
    Would you please tell us how exchange rate losses and gains will be
    verified; how often this will be done; and how and when funds will be
    withdrawn from the fund.
        Answer. Gains and losses will be verified through ongoing quarterly
    reviews of individual FAS Counselor, Attache and Trade Office operating
    budgets. These reviews will consider the implications of current
    exchange rates with those rates used at the time the post operating
    budgets were developed. While the timing of fund withdrawals remains
    under review, it would most likely occur following the completion of
    the third quarter review. Any exchange rate gains would be transferred
    into the fund following completion of the fourth quarter post operating
    budget review in late September.
        Question. What notifications do you plan to provide this Committee?
    (i.e., will you notify the Committee when exchange rate losses and
    gains are verified and when funds are deposited and withdrawn from the
    fund?)
        Answer. We would anticipate notifying the Committee in writing of
    the results of our reviews of FAS post operating budgets at least on an
    annual basis. Additionally, we would be pleased to meet personally with
    Committee staff to discuss the results of our quarterly reviews with
    respect to exchange rate gains or losses.
                      performance measure tracking system
        Question. The fiscal year 1999 budget requests an increase of
    $500,000 to enable FAS to develop a cross-agency performance tracking
    and evaluation system to determine success rates in implementing goals
    and objectives in the agency strategic plan, and for FAS to ``re-
    engineer'' its market intelligence performance measurement and
    evaluation tools. Is this request a one-time increase?
        Answer. It is not certain at this point whether additional funds
    will be necessary beyond fiscal year 1999 to implement the fundamental
    changes necessary to transition FAS to a performance-based management
    system, as required by the Government Performance and Results Act.
    However, the increase is definitely temporary in nature, and will be
    used solely to effect full implementation of the Act as a management
    tool at FAS.
        Question. Please explain more specifically what costs this
    additional $500,000 will cover and why additional funds are required
    for FAS to evaluate its performance.
        Answer. FAS is seeking the help of private sector experts to
    develop an agency-wide performance tracking and evaluation system to
    verify and validate success rates in attaining goals and objectives
    outlined in its strategic plan. The additional funds also will permit
    FAS to evaluate and re-engineer its market intelligence process. This
    is necessary for three reasons. First, recent management audits by GAO
    and a recent study completed by USDA's Economic Research Service
    question the efficiency of USDA's market information delivery system.
    Second, by taking maximum advantage of enabling technologies, cost
    savings in human, information, and program resources from re-
    engineering the market intelligence process can be shifted to other FAS
    program activities where there is a greater return on investment, e.g,
    market access, market promotion, and outreach activities. Third, it
    will help focus our market intelligence gathering activities to better
    serve the needs of our external and internal customers.
        Question. How will the additional funds requested allow FAS to
    determine success rates in implementing its strategic plan goals and
    objectives? Please be specific.
        Answer. The Government Performance and Results Act requires Federal
    agencies to develop and implement results-oriented performance
    measurement and evaluation systems to assess the public value of
    various program activities relative to investment costs. The additional
    funds will be used to enlist the services of private sector experts in
    developing a meaningful and realistic agency-wide performance
    measurement and evaluation system. This system that will help FAS
    define its level of success in achieving its strategic goals and
    objectives, and provide benchmarks for making appropriate adjustments
    in strategic goals and objectives when needed to achieve the maximum
    public good for dollars invested.
                 foreign market development cooperator program
        Question. The explanatory notes indicate that a competitive
    allocation process has been implemented in the Foreign Market
    Development (FMD) Cooperator Program to ensure available resources are
    directed to the most cost effective market development activities.
    Please describe in detail the competitive allocation process which has
    been implemented for the Foreign Market Development (FMD) Cooperator
    Program. What criteria are being used to determine the ``most cost-
    effective'' market development activities?
        Answer. In determining which proposals to approve for funding, FAS
    considers a number of factors including the organization's
    administrative capability, the conditions or constraints impeding U.S.
    exports, and the likely success of the strategic plan. The strategic
    plan must identify a clear long-term agricultural trade strategy and a
    program effectiveness time line against which results can be measured
    at specific intervals using quantifiable product or country goals.
    Meritorious applications then compete for funds on the basis of the
    following criteria: participant contribution levels, past export
    performance, past demand expansion performance, and future demand
    expansion goals. This competitive allocation process promotes FAS's
    strategic plan goals and objectives, as required by the GPRA, by
    disbursing appropriate levels of funds to those applicants that provide
    the greatest levels of cost-share (contributions) and can document the
    best performance.
        FAS has adopted a results-oriented management (ROM) system based on
    performance measurements to determine the ``most cost-effective''
    market development activities. In keeping with the philosophy of the
    GPRA, FMD funding allocations will be based in part on the
    effectiveness of Cooperators in meeting their goals and objectives. The
    criteria, or goals and objectives, vary between organizations depending
    on products, markets, constraints, and market development programs;
    however, each organization's objectives will be clearly identified in
    its marketing plan. FAS and its industry partners have already
    participated in three seminars on ROM--seminars tailor-made to assist
    FAS and the industry in identifying appropriate performance measures,
    objectives, goals, and the processes for managing our programs based on
    measurable results. We also intend to contract with a proven,
    experienced entity to work with us to further develop and refine this
    effort over the next several program cycles.
        Question. The explanatory notes indicate that a $5.5 million
    reduction is being proposed in Foreign Agricultural Service (FAS)
    activities funded through the Foreign Market Development Cooperator
    Program. This reduction is to partially offset the proposed shift in
    computer facility operating costs from the Commodity Credit Corporation
    to the FAS. The budget indicates that the proposed $5.5 million
    reduction in FAS support for the Cooperator Program will be partially
    offset by increasing the cost-share factor for program participants.
    What is the current cost-share factor and what increase is being
    proposed? How much will this save?
        Answer. I am pleased to report that participants in the Foreign
    Market Development Cooperator Program currently contribute $1.90 for
    each $1.00 in FAS funding. This represents an increase in participant
    cost sharing of over 40 percent since fiscal year 1994 levels. To fully
    offset the reduction of $5.5 million in FAS funding, participant cost
    sharing would have to increase to $2.54 for every $1.00 of FAS funding.
        Question. As you know, U.S. exporters who utilize the GSM-102
    credit guarantee program pay a fee. I believe the fee goes to the
    General Fund of the Treasury. I also believe the total fees paid can
    range up to $20 million per year depending on the volume of 102 credit
    guarantees utilized. Would it be possible to redirect the fees to the
    FMD program?
        Answer. Under Credit Reform Act of 1990, fees associated with the
    GSM-102 program are used in the subsidy calculation which determines
    the level of budget authority and outlays for the program. Further,
    these fees are deposited to the loan financing account for the export
    credit guarantee program, not to the General Fund of the Treasury, to
    be used to help offset claims. To use these fees for some other purpose
    would require a modification to current credit reform law and would
    result in a higher subsidy calculation for the GSM-102 program.
        Question. Please provide a table which shows the total amount of
    funding available for the FMD Cooperator Program in each of fiscal
    years 1994 through 1998 and the amount proposed for fiscal year 1999.
    For each of these fiscal years, please show FAS funding for the
    program; the amount of nonfederal funds provided by program
    participants; and the program carryover balance, both for federal and
    nonfederal funds, from one fiscal year to the next.
        Answer. I will provide a table which shows the total amount of
    funding available for the FMD Cooperator Program in each of fiscal
    years 1994 through 1998 and the amount proposed for fiscal year 1999.
        [The information follows:]

                                   COOPERATOR PROGRAM FUNDING FISCAL YEARS, 1994-1998
                                                [In thousands of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                       1994       1995       1996       1997       1998     1999 \3\
    ----------------------------------------------------------------------------------------------------------------
    FAS funding \1\...............................     31,410     20,800     24,279     27,500     27,500     22,000
    Non-Federal funds \2\.........................     27,594     30,655     31,325     39,862     47,719     53,219
    Federal carryover balance.....................     26,200     16,000     11,200      9,200      6,700  .........
    ----------------------------------------------------------------------------------------------------------------
    \1\ Appropriated funding.
    \2\ Cooperator contributions.
    \3\ Estimate.
    Note: No information available on carryover of non-Federal funds.

        Question. Please provide a breakdown of how the funds for the FMD
    Cooperator Program were allocated in each of the fiscal years 1997 and
    1998.
        Answer. I will provide for the record a breakdown of how FAS funds
    for the FMD Cooperator Program were allocated in each of the fiscal
    years 1997 and 1998.
        [The information follows:]

                           COOPERATOR FUND ALLOCATIONS
    ------------------------------------------------------------------------
                                                   1997            1998
    ------------------------------------------------------------------------
    American Forest & Paper Association.....      $2,555,000      $1,538,553
    American Seafood Institute..............  ..............         129,272
    American Seed Trade Association.........         220,824         174,178
    American Sheep Industry Association.....         138,353         102,905
    American Soybean Association............       5,249,108       5,292,821
    Cotton Council International............         949,000       2,297,114
    EUSAFEC.................................         134,893  ..............
    Leather Industries of America...........         173,722         161,220
    MIATCO..................................         159,840  ..............
    Millers National Federation.............           7,100           8,717
    Mohair Council of America...............          20,000           5,523
    NASDA...................................         334,966  ..............
    National Cottonseed Products Association         124,936         153,551
    National Dry Bean Council...............          71,865          45,841
    National Hay Association................          48,250          50,203
    National Peanut Council.................         467,934         498,151
    National Renderers Association..........         926,000         598,164
    National Sunflower Association..........         173,000         258,994
    Protein Grain Products International....          11,000          17,539
    SUSTA...................................         160,511  ..............
    U.S. Beef Breed Council.................          73,000          25,097
    U.S. Dairy Export Council...............         269,630         224,730
    U.S. Feed Grains Council................       5,551,057       4,341,047
    U.S. Hide, Skin & Leather Association...          48,500          52,294
    U.S. Livestock Genetics Exports.........         385,000         657,891
    U.S. Meat Export Federation.............       1,515,000         966,206
    U.S. Wheat Associates...................       4,767,500       6,208,474
    USA Dry Pea & Lentil Council............         197,379          67,095
    USA Poultry & Egg Export Council........       1,220,000       1,115,597
    USA Rice Council........................       1,340,000       1,558,393
    Western Growers Association.............          10,000             430
    WUSATA..................................         196,632  ..............
    Unallocated Funds \1\...................  ..............         950,000
                                             -------------------------------
          Cooperator total..................      27,500,000      27,500,000
    ------------------------------------------------------------------------
    \1\ Due to the low carryover balances (which are expected to reach $0 in
      1999) and the uncertainty of actual expenditure rates by the
      Cooperators, FAS has set aside $950,000 for future obligation in
      fiscal year 1998. FAS is monitoring monthly expenditures for each
      Cooperator and will obligate the remaining funds as appropriate to
      ensure adequate funding for marketing plan budgets.

               supplier and facilities credit guarantee programs
        Question. Please explain the reason for the new approach proposed
    in the budget to present the estimates for the Commodity Credit
    Corporation (CCC) export credit guarantee programs to reflect level of
    sales expected to be registered rather than the authorized levels. What
    is the budgetary impact of this proposed change?
        Answer. The new approach proposed in the budget for the CCC export
    credit guarantee programs will result in more realistic estimates of
    the costs of the programs since the estimates will be based on the
    actual level of sales expected to be registered rather than the higher
    authorized levels. In the past, when the higher authorized levels were
    included in the budget, these costs tended to be overstated
    significantly. Actual sales registrations usually turned out to be far
    below the level estimated in the budget. The accuracy of the CCC budget
    estimates will improve by using these more realistic estimates.
        It is important to note that the level of guarantees to be issued
    by CCC during the course of the year will not be limited by the budget
    estimates, but instead will be determined by market conditions and
    program demand. This brings the budget treatment of the guarantee
    programs into line with that used for other CCC-funded programs.
        Question. Using the new scoring, you indicate that the budget
    projects an aggregate program level of $5.0 billion for export credit
    guarantees in fiscal year 1998 and $4.6 billion for fiscal year 1999.
    What is the reason for the reduction in fiscal year 1999 from the
    fiscal year 1998 level?
        Answer. The projected program levels for the CCC export credit
    guarantee programs of $5.0 billion in 1998 and $4.6 billion in 1999 are
    substantially higher than the $2.9 billion of sales registered under
    the guarantee programs in 1997. The higher projected program levels for
    1998 and 1999 reflect an increase in guarantee programming in response
    to the financial turmoil in Southeast Asia and the Republic of Korea.
    The reduction in fiscal year 1999 can be primarily attributed to the
    reduced programming level projected for Southeast Asia and Korea in
    fiscal year 1999. In fiscal year 1998, over $2 billion of CCC export
    credit guarantees have already been made available for Southeast Asia
    and Korea. For fiscal year 1999, a reduced amount of $1.3 billion in
    export credit guarantee commitments has been estimated in the fiscal
    year 1999 President's Budget for Korea and the Southeast Asian region
        Question. Please provide specific examples of how the supplier and
    facilities credit guarantee programs are being used to help finance
    U.S. exports.
        Answer. These relatively new programs are just beginning to help
    finance U.S. exports. For fiscal year 1997, registrations under the
    Supplier Credit Guarantee Program (SCGP) totaled $3.74 million for
    sales to Guatemala, Indonesia, and Mexico. For fiscal year 1998,
    registrations as of March 20 total $2.23 million. USDA has been
    aggressively promoting these programs through both domestic and foreign
    outreach efforts, and we expect increased program use particularly for
    sales to Asian markets. As of March 20, USDA has authorized SCGP
    allocations for fiscal year 1998 totaling $323 million to 14 countries
    or regions compared to $160 million for 9 countries or regions for
    fiscal year 1997. Facility Guarantee Program (FGP) interim regulations
    became effective August 8, 1997. USDA has authorized FGP allocations
    for fiscal year 1998 totaling $155 million for 13 countries. There is
    considerable interest in using this program to help finance projects in
    Asia.
                           proposed staff reductions
        Question. What impact will the proposed reduction of 15 staff years
    have on FAS market access activities and how will this proposed
    staffing reduction be applied?
        Answer. Under this proposal, FAS will concentrate available
    resources on the highest priority trade policy issues, including
    preparation for the next round of multilateral trade negotiations under
    the auspices of the World Trade Organization, regional free trade
    agreement negotiations (Free Trade Area of the Americas and Asian
    Pacific Economic Cooperation forum), and resolution of sanitary and
    phytosanitary issues. FAS will also work to use improved computer and
    other technical capabilities to assure the continued effectiveness and
    integrity of these activities.
        We anticipate achieving staff reductions though attrition. While
    the budget proposes a pro-rata distribution of staff reductions among
    budget activities, the actual impact would likely be determined by
    where attrition occurs and the degree to which shifts in staff
    resources may be required to meet priority agency objectives.
        Question. What impact will the proposed decrease of 15 staff years
    have on FAS market intelligence activities and how will this staffing
    reduction be applied?
        Answer. Under this proposal, FAS will concentrate available
    resources on overseas reporting that focuses on the most promising
    market opportunities for U.S. agriculture, as well as the activities of
    competitor exporting countries. FAS will also work to use improved
    computer and other technical capabilities to ensure the continued
    effectiveness and integrity of this function.
        Question. The explanatory notes indicate that the proposed market
    intelligence staff year decreases will force FAS to focus on the most
    promising market opportunities for U.S. agriculture, as well as the
    activities of competitor exporting countries. What are the most
    promising market opportunities for U.S. agriculture? What competitor
    country exporting activities are of greatest concern?
        Answer. The Asian financial crisis notwithstanding, the most
    promising market opportunities over the next ten years are in Asia and,
    to a lesser extent, Latin America. While there are promising market
    opportunities in many parts of the world, these two regions are largely
    responsible for much of the export growth we have experienced over the
    past decade and will likely experience over the next decade. At the
    heart of this growth has been strong economic growth, economic and
    trade liberalization, and rapid expansion of their middle classes.
    Japan, China/Hong Kong, Korea, Taiwan, and Southeast Asia lead the
    ``best prospect list'' in Asia. In Latin America, Mexico and Brazil are
    the leading prospects. However, the nations of Central America and the
    Caribbean offer excellent prospects with both expected to reach new
    record highs in fiscal year 1998.
        Competitor country exporting activities of greatest concern include
    export subsidies provided by the European Union and Canada, as well as
    export monopolies operated by marketing boards in Canada, Australia and
    New Zealand. These countries are major competitors for grains, meat,
    fruit and value added products. In addition, it is important to track
    developments in competitor countries such as Argentina and Brazil which
    export substantial quantities of wheat, corn, soybeans, meat and
    citrus, and China, which is a major exporter of fruits and vegetables
    and other value added products as well as some grains. Finally, recent
    developments in currency markets bear close attention as the devalued
    currencies in several competitor countries may have a negative impact
    on U.S. agricultural export opportunities.
        Question. What impact will the proposed decrease of 12 staff years
    have on FAS financial marketing assistance activities and how will this
    staffing reduction be implemented?
        Answer. Increasing the liquidity of foreign importers to buy U.S.
    agricultural products is the primary goal of this activity. Under this
    proposal, FAS will improve its analytical process to focus appropriate
    financial assistance activities on market development needs identified
    as priorities in its resource allocation strategy. FAS will also
    concentrate available resources on the continued development of new
    approaches to expanding liquidity in potential markets using the export
    credit programs, and on finding ways to use these programs to better
    complement each other and other FAS programs in order to ensure maximum
    benefits to U.S. agriculture. FAS will work to use improved computer
    and other technical capabilities to assure the continued effectiveness
    and integrity of these financial assistance activities.
        Question. The explanatory notes indicate that increasing the
    liquidity of foreign importers to buy U.S. agricultural products is the
    primary goal of the financial marketing assistance activities supported
    by the FAS. How have we been successful to date in this area and what
    new approaches have been identified to expand liquidity in potential
    markets?
        Answer. Under GSM-102, GSM-103, and Supplier Credit Guarantee
    programs more than $5.0 billion of export credit guarantees have been
    made available to date in fiscal 1998. Recipients have used about 40
    percent of these allocations during the first half of fiscal 1998, and
    the programs have played a critical role in softening the effect of the
    Asian crisis on the U.S. agricultural sector. Asian nations have used
    more than $800 million of the approximately $2.0 billion of GSM
    guarantees allocated to the region. These guarantees have maintained or
    restored agricultural trade relationships following the collapse in
    trade during late 1997. FAS continues to expand export credit liquidity
    through the guarantee programs to Mexico, Pakistan, and other emerging
    markets. New approaches to expand liquidity include making more
    financing instruments eligible for coverage under GSM-102 and
    conducting educational seminars to promote the Supplier Credit
    Guarantee program. FAS has implemented a new program to support the
    U.S. agricultural sector--the Facilities Guarantee Program. This
    program will provide credit guarantees to U.S. participants in projects
    to build or improve facilities in emerging markets. These guarantees
    could support projects such as refrigeration, grain handling, and
    storage facilities that would increase the capacity to purchase U.S.
    agricultural products.
        Question. What market development needs are identified as
    priorities in the FAS resource allocation strategy?
        Answer. One of the primary objectives identified in the FAS
    Strategic Plan for 1997-2002 is to, ``Focus and expand foreign market
    development, promotion, and outreach activities to U.S. exporters and
    foreign buyers.'' In meeting this objective, FAS strategic priorities
    include: increasing the share of overseas activities carried out in
    markets identified as priorities through the MAP and FMD planning
    processes; focusing on emerging markets while protecting market share
    in mature markets; increasing domestic awareness of export
    opportunities, programs and market intelligence, with emphasis on small
    and new-to-export firms; and introducing new international buyers to
    U.S. products and exporters through U.S. and overseas training,
    marketing seminars, and missions.
        Over the past year, FAS has developed new processes and procedures
    for use in allocating its market development resources. These efforts
    effectively support the strategic decision-making initiatives of the
    Government Performance and Results Act. For example, beginning February
    1998, Market Access Program (MAP) and Foreign Market Development (FMD)
    program applicants are required to combine their applications in a
    Unified Export Strategy (UES). This UES process and format will for the
    first time ever result in the submission of a unified package including
    not only MAP and FMD applications but also requests for assistance
    under virtually all FAS administered marketing, financial assistance,
    and market access programs. For example, in the UES submission, MAP/FMD
    applicants are asked to also specify their requests for funding
    assistance under the Cochran, Emerging Markets, and Section 108
    programs. The UES also accommodates applicant recommendations for
    financial and trade policy assistance for consideration by FAS in
    allocating guarantee availabilities and staff resources under the GSM-
    102/103 and Supplier's Credit programs and in prioritizing its efforts
    to open or expand access to overseas markets.
        This UES process for our industry partners complements and mirrors
    the Country Promotion Planning process recently completed by FAS's
    overseas offices and the Product Promotion Planning process which is
    now underway in FAS Commodity Divisions. Together these three
    initiatives undertaken by industry, FAS country, and FAS commodity
    experts will provide FAS decision-makers with the necessary information
    base to make sound decisions regarding how limited staff and program
    resources should be allocated to achieve our market expansion and food
    security goals as outlined in the Agency's strategic plan.
        Question. What impact will the proposed decrease of 7 staff years
    have on FAS long-term market and infrastructure development efforts and
    how will this staffing reduction be implemented?
        Answer. Under this proposal, FAS will concentrate available
    resources on the highest priority activities in order to maximize the
    benefits of increased international agricultural cooperation and
    development.
        Question. Please identify the highest priority activities to
    maximize the benefits of increased international agricultural
    cooperation and development.
        Answer. The Cochran Fellowship program, our efforts in
    international collaborative research, especially in support of SPS
    initiatives, and our work on food security issues are the highest
    priority activities in international agricultural cooperation and
    development at the current time.
        Question. Please provide for the record a table providing a
    separate breakdown of the funding and staffing reductions proposed for
    fiscal year 1999, by activity: (1) to offset increased resources
    proposed for the ``overseas buying power maintenance account'', and (2)
    for ``support of USDA's international crop estimates and production
    intelligence capabilities.''
        Answer. I will provide a table providing a separate breakdown of
    the funding and staffing reductions proposed for fiscal year 1999 in
    order to offset the costs of those two components of our budget
    request.
        [The information follows:]

                                              REDUCTIONS BY BUDGET ACTIVITY
                                                 [Dollars in thousands]
    ----------------------------------------------------------------------------------------------------------------
                                                           Overseas account      Crop est. and           Total
                                                         --------------------     production     -------------------
                                                                                 intelligence
                                                            Amount      SY   --------------------   Amount      SY
                                                                                Amount      SY
    ----------------------------------------------------------------------------------------------------------------
    Market access.......................................       $173        2     $1,115       13     $1,288       15
    Market development, promotion and outreach..........        173        2      1,019       11      1,192       13
    Market intelligence.................................        173        2      1,136       13      1,309       15
    Financial marketing assistance......................        173        2        814       10        987       12
    Long-term market and infrastructure development.....         87        1        503        6        590        7
                                                         -----------------------------------------------------------
          Total.........................................        779        9      4,587       53      5,366       62
    ----------------------------------------------------------------------------------------------------------------

                             public law 480 program
        Question. The fiscal year 1999 budget proposes to maintain the
    fiscal year 1998 Public Law 480 Titles II and III program levels in
    fiscal year 1999, but to decrease the Title I program level by $124.7
    million, from the fiscal year 1998 level of $226.9 million to $102.2
    million. What is the reason for the significant reduction proposed for
    fiscal year 1999 in the Public Law 480 Title I program?
        Answer. This reduction supports compliance with discretionary
    spending targets which have been established in conjunction with
    efforts to balance the Federal budget. Program resources will be
    targeted towards the most promising market development opportunities
    which have been identified by the Foreign Agricultural Service in its
    resource allocation processes.
        Question. What impact will this reduction have on commodity
    shipments? Which commodities are likely to be impacted?
        Answer. The proposed program level for fiscal year 1999 will
    provide estimated commodity shipments of 0.547 million metric tons
    grain equivalent (MMTGE) as compared to 1.249 MMTGE estimated for
    fiscal year 1998. Wheat and wheat flour, rice, and vegetable oil are
    the commodities most affected by the reduced Public Law 480 program
    level. The estimated shipment of wheat and wheat flour will be reduced
    from 1.099 MMTGE in fiscal year 1998 to 0.386 MMTGE in fiscal year
    1999. The estimated shipment of rice will be reduced from 0.072 to
    0.016 MMTGE and the estimated shipment of vegetable oil will be reduced
    from 0.021 to 0.005 MMTGE.
        Question. What appropriations would be required for fiscal year
    1999 (for the subsidy costs of Title I agreements, and for ocean
    freight differential grants) to maintain the fiscal year 1998 level for
    the Public Law 480 Title I program?
        Answer. To maintain a $226.9 million program level for Public Law
    480 Title I for fiscal year 1999, we estimate that a Title I
    appropriation of $196.9 million would be needed to cover the subsidy
    costs in the program account. In addition, $20.9 million would be
    required for estimated OFD costs.
        Question. Please provide for the record the Public Law 480 funding
    allocations, by Title, for each of fiscal years 1996 and 1997, and for
    fiscal year 1998 to date.
        Answer. I will provide for the record the Public Law 480 funding
    allocations, by Title, for each of fiscal years 1996 and 1997, and for
    fiscal year 1998 to date.
        [The information follows:]

              Public Law 480, Title I Fiscal Year 1996 Programming

                            [In millions of dollars]

                                                                       Total
            Country                                               allocation
    Angola............................................................   8.7
    Armenia...........................................................  14.4
    Belarus...........................................................   9.9
    Bolivia...........................................................   8.6
    Congo.............................................................   8.0
    Cote D'Ivoire.....................................................  10.0
    El Salvador.......................................................  12.2
    Guyana............................................................   9.0
    Jamaica...........................................................  15.0
    Jordan............................................................  21.0
    Lithuania.........................................................  10.0
    Moldova...........................................................  13.7
    Pakistan..........................................................  10.0
    Philippines.......................................................  15.0
    Sri Lanka.........................................................   9.6
    Suriname..........................................................   1.9
    Turkmenistan......................................................  10.0
    Ukraine...........................................................  20.0
                            -----------------------------------------------------------------
                            ________________________________________________
          Title I Subtotals........................................... 207.0
                            =================================================================
                            ________________________________________________
    Title I funded Food for Progress:
        Albania.......................................................   5.0
        Georgia.......................................................  28.8
        Kyrgyzstan....................................................  15.0
        Tajikistan....................................................  11.0
                            -----------------------------------------------------------------
                            ________________________________________________
          Food for Progress subtotal..................................  59.8
                            =================================================================
                            ________________________________________________
          Grand totals................................................ 266.8

              Public Law 480, Title I Fiscal Year 1997 Programming

                            [In millions of dollars]

                                                                       Total
            Country                                               allocation
    Armenia...........................................................  15.0
    Bolivia...........................................................  10.0
    Cote D'Ivoire.....................................................  10.0
    El Salvador.......................................................   9.2
    Georgia...........................................................  20.0
    Guyana............................................................   7.8
    Jamaica...........................................................   5.3
    Jordan............................................................  20.9
    Lithuania.........................................................   7.6
    Pakistan..........................................................  35.0
    Sri Lanka.........................................................  10.0
    Ukraine...........................................................  10.0
                            -----------------------------------------------------------------
                            ________________________________________________
          Title I subtotals........................................... 160.8
                            =================================================================
                            ________________________________________________
    Food for Progress title I funded:
        Kyrgyzstan....................................................  13.6
        Mongolia......................................................   2.8
        Tajikistan....................................................   8.1
                            -----------------------------------------------------------------
                            ________________________________________________
          Food for Progress subtotal..................................  24.5
                            =================================================================
                            ________________________________________________
          Grand totals................................................ 185.4

            Public Law 480, Title I Fiscal Year 1998 Programming \1\

                            [In millions of dollars]

                                                                       Total
            Country                                               allocation
    Angola............................................................  10.0
    Armenia...........................................................  15.0
    Bolivia...........................................................  10.0
    Cote d'Ivoire.....................................................  10.0
    El Salvador.......................................................  10.0
    Eritrea...........................................................  10.0
    Georgia...........................................................  15.0
    Guatemala.........................................................  10.0
    Guyana............................................................   9.0
    Indonesia.........................................................  25.0
    Jamaica...........................................................   5.0
    Jordan............................................................  18.0
    Nicaragua.........................................................  10.0
    Pakistan..........................................................  10.0
    Peru..............................................................  10.0
    Philippines.......................................................  10.0
    Sri Lanka.........................................................  10.0
    Zimbabwe..........................................................  10.0
    Private trade.....................................................  10.0
                            -----------------------------------------------------------------
                            ________________________________________________
          Title I subtotals........................................... 217.0
                            =================================================================
                            ________________________________________________
    Food for Progress Title I funded:
        Albania.......................................................  10.0
        Bangladesh....................................................  10.0
        Bosnia-Herzegovina............................................  10.0
        Kyrgyzstan....................................................  15.0
        Mongolia......................................................   5.0
        Mozambique....................................................  10.0
        Tajikistan....................................................  10.0
        Russia (private entities).....................................   9.0
                            -----------------------------------------------------------------
                            ________________________________________________
          Food for Progress subtotal..................................  79.0
                            =================================================================
                            ________________________________________________
          Grand totals................................................ 296.0

    \1\ Through March 24, 1998.

        [Clerk's note.--Due to the volume of title II funding allocations
    they do not appear in the hearing record, but they are available for
    review in the subcommittee's files.]

                            TITLE III PROGRAM BUDGET
                            [In millions of dollars]
    ------------------------------------------------------------------------
                                                   Fiscal year--
                                      --------------------------------------
                 Program                                          Estimated
                                       Actual 1996  Actual 1997      1998
    ------------------------------------------------------------------------
    Bangladesh.......................          7.5  ...........  ...........
    Hati.............................         10.0         10.0         10.0
    Honduras.........................          5.0  ...........  ...........
    Nicaragua........................          4.0          1.4  ...........
    Eritea...........................  ...........         15.0          5.0
    Ethiopia.........................         25.0         10.0          9.9
    Mozambique.......................  ...........          4.0          5.0
                                      --------------------------------------
          Program total..............         51.5         40.4         29.9
    Farmer-to-farmer.................          0.1          0.1          0.1
    Claims settlement................  ...........          0.1  ...........
    Transfer to title II.............         10.1  ...........  ...........
    Transfer from title II...........  ...........         -9.0  ...........
    Carry-in.........................        -11.7  ...........  ...........
    Prior year unoblig...............  ...........         -2.1  ...........
                                      --------------------------------------
          Appropriation..............         50.0         29.5         30.0
    ------------------------------------------------------------------------

        Question. Last year the Department indicated that Public Law 480
    Title I funds carried over from one fiscal year to the next were
    increasing: $4.4 million was carried into fiscal year 1993, $4.7
    million into fiscal year 1994, $16.9 million into fiscal year 1995,
    $24.7 million into fiscal year 1996; and $32.9 million into fiscal year
    1997. What is the carryover from fiscal year 1997 into fiscal year
    1998? What is the estimated carryover from fiscal year 1998 to fiscal
    year 1999?
        Answer. The carryover from fiscal year 1997 to fiscal year 1998 is
    $62.9 million. As of March 24, 1998, the estimated carryover from
    fiscal year 1998 to fiscal year 1999 is expected to be $17.0 million.
        Question. Why have the carryover balances for the Title I program
    been growing from year to year?
        Answer. The carryover balances for the Title I program have
    increased in recent years because country allocations were withdrawn
    for unresolved issues related to the recipient country's prior year
    Title I agreements, civil wars within the recipient country, or for
    internal issues within the country which led them to change their
    purchase decisions. In addition, in some instances countries did not
    purchase the full amount of their allocation.
        Question. What is being done to increase the focus of the Public
    Law 480, Title I program on the private sector?
        Answer. Senior level teams have traveled overseas and domestically
    to explain the program to potentially interested private sector groups.
    Overseas they met in Pakistan and Bangladesh with cotton importers.
    Domestically, we have met with USDA cooperators including U.S. Wheat
    Associates and the American Soybean Association to review possible
    projects in southern Africa and Russia. We are presently pursuing a
    regulatory change that would allow USDA to enter into Public Law 480
    agreements directly with foreign, private sector entities without a
    U.S. partner. This change is expected to increase program flexibility
    and private sector use.
                                overseas offices
        Question. Please provide for the record a list of FAS overseas
    counselor/attache and trade offices and the amount of funding and full-
    time equivalent staffing levels provided for each in fiscal year 1997
    and 1998 and proposed for fiscal year 1999.
        Answer. A list of FAS overseas counselor/attache and trade offices
    and the amount of funding and staffing is provided.
        [The information follows:]

     FOREIGN AGRICULTURAL SERVICE OVERSEAS COUNSELOR/ATTACHE AND TRADE OFFICES FUNDING AND STAFF \1\ LEVELS--FISCAL
                                                      YEARS 1997-99
                                                 [Dollars in thousands]
    ----------------------------------------------------------------------------------------------------------------
                                                     Fiscal year 1997--    Fiscal year 1998--    Fiscal year 1999--
                                                   -----------------------------------------------------------------
                         Post                                   On-board              On-board              On-board
                                                     Funding   employees   Funding   employees   Funding   employees
    ----------------------------------------------------------------------------------------------------------------
             Foreign Agricultural Affairs

    Austria.......................................        657          4        730          4        752          4
    Czech Rep.....................................         48          1         40          1         41          1
    France........................................        960          7      1,043          7      1,074          7
    Greece........................................        280          2        244          2        251          2
    Israel........................................        126          1        143          1        147          1
    Italy, Emb....................................        725          6        723          6        745          6
    Italy, Fodag..................................        215          1        215          1        221          1
    Portugal......................................        145          1        165          1        170          1
    Spain.........................................        900          6        901          6        928          6
    Switz, Bern...................................         63  .........         87  .........         90  .........
    Switz, Gen....................................        779          4        908          4        935          4
    Belgium, E....................................        201          1        213          1        219          1
    Belg.Useu.....................................      1,123          6      1,271          6      1,309          6
    Denmark.......................................        239          2        211          2        217          2
    United Kingdom................................        726          5        769          5        792          5
    Germany.......................................        788          6        780          6        803          6
    Ireland.......................................        149          1        162          1        167          1
    Netherlands...................................        667          4        712          4        733          4
    Sweden........................................        378          5        364          5        375          5
                                                   -----------------------------------------------------------------
          Total...................................      9,169         63      9,681         63      9,971         63
                                                   =================================================================
    Argentina.....................................        778          5        761          5        784          5
    Brazil........................................        525          4        726          4        748          4
    Canada........................................        446          5        470          5        484          5
    Chile.........................................        353          3        348          3        358          3
    Colombia......................................        370          4        408          4        420          4
    Costa Rica....................................        296          3        327          3        337          3
    Dom. Rep......................................        329          2        337          2        347          2
    Ecuador.......................................        156          2        156          2        161          2
    Guatemala.....................................        482          2        497          2        512          2
    Mexico........................................        809          8        828          8        853          8
    Peru..........................................        298          3        337          3        347          3
    Venezuela.....................................        531          5        512          5        527          5
                                                   -----------------------------------------------------------------
          Total...................................      5,373         46      5,707         46      5,878         46
                                                   =================================================================
    Algeria.......................................         35  .........         37  .........         38  .........
    Bulgaria......................................        238          3        232          3        239          3
    Bangladesh....................................         37          1         42          1         43          1
    Cote D'Ivoire.................................        280          3        354          3        365          3
    Egypt.........................................        406          3        413          3        425          3
    India.........................................        417          8        395          8        407          8
    Kenya.........................................        234          1        276          1        284          1
    Morocco.......................................        227          2        254          2        262          2
    Nigeria.......................................        392          2        452          2        466          2
    Pakistan......................................        288          3        275          3        283          3
    Romania.......................................         30          1         30          1         31          1
    Syria.........................................         40          1         51          1         53          1
    Serbia-Mont...................................         34          1         37          1         38          1
    So. Africa....................................        534          5        704          5        725          5
    Tunisia.......................................        202          2         73          2         75          2
    Turkey........................................        505          4        558          4        575          4
                                                   -----------------------------------------------------------------
          Total...................................      3,899         40      4,183         40      4,308         40
                                                   =================================================================
    Australia.....................................        323          4        348          4        358          4
    PRC...........................................        953          4        933          4        961          4
    Indonesia.....................................        488          4        659          4        679          4
    Japan.........................................      1,412         10      1,430         10      1,473         10
    Korea.........................................        653          5        520          5        536          5
    Malaysia......................................        247          3        296          3        305          3
    New Zealand...................................        189          2        218          2        225          2
    Philippines...................................        533          5        542          5        558          5
    Poland........................................        505          4        501          4        516          4
    Russia........................................      1,126         10      1,194         11      1,230         11
    Thailand......................................        637          5        665          5        685          5
    Ukraine.......................................         61  .........        174          1        179          1
    Vietnam.......................................        345          1        367          1        378          1
                                                   -----------------------------------------------------------------
          Total...................................      7,472         57      7,847         59      8,082         59
                                                   =================================================================
          Total, FAA..............................     25,913        206     27,418        208     28,241        208
                                                   =================================================================
              Agricultural Trade Offices

    Sao Paulo, Brazil.............................        354          4        375          4        386          4
    Shanghai, China...............................        595          1        660          1        680          1
    Guangzhou, China..............................        461          1        407          1        419          1
    Hamburg, Germany..............................        424          3        463          3        477          3
    Hong Kong.....................................        927          4        961          4        990          4
    Jakarta, Indonesia............................        282          1        321          1        331          1
    Milan, Italy..................................        362          2        341          2        351          2
    Tokyo, Japan..................................      2,174          8      1,983          8      2,042          8
    Osaka, Japan..................................        449          3        476          3        490          3
    Seoul, Korea..................................      1,073          4      1,069          4      1,101          4
    Mexico........................................      1,121          5      1,165          5      1,200          5
    Riyadh, Saudi Arabi...........................        407          3        383          3        394          3
    Singapore.....................................        979          3        946          3        974          3
    Dubai, U.A.E..................................        378          4        369          4        380          4
    Caribbean Basin, U.S..........................        171          1        212          1        218          1
                                                   -----------------------------------------------------------------
          Total, ATO..............................     10,157         47     10,131         47     10,435         47
                                                   =================================================================
          Grand total.............................     36,070        253     37,549        255     38,675        255
    ----------------------------------------------------------------------------------------------------------------
    \1\ Overseas managed on a head count basis, not FTE basis. Total includes FSN's as well as U.S. Foreign Service
      personnel.

      INTERNATIONAL COOPERATIVE ADMINISTRATIVE SUPPORT SERVICES \1\ FISCAL
                                  YEARS 1990-99
    ------------------------------------------------------------------------
                                                   Fiscal year--
                                      --------------------------------------
                                           1997       1998 \2\       1999
    ------------------------------------------------------------------------
    Foreign Agricultural Affairs.....        4,871        7,119        7,119
    Agricultural Trade Offices.......        1,624        2,373        2,373
                                      --------------------------------------
          Total......................        6,495        9,492        9,492
    ------------------------------------------------------------------------
    \1\ Reimbursement to State Dept., formerly Foreign Affairs
      Administrative Support Services.
    \2\ Includes a $4.4 million base transfer.

                     government performance and results act
        Question. How are the agency's annual performance goals linked to
    the agency's mission, strategic goals, and program activities in its
    budget request?
        Answer. FAS' program activities are essentially restated as unique
    strategic objectives with key operating strategies and performance
    goals. Each FAS objective, in turn, is directly associated with FAS'
    strategic goals and mission. FAS' two strategic goals are directly
    linked to the department's objectives and goals.
        Question. Could you describe the process used to link your
    performance goals to your budget activities? What difficulties, if any,
    did you encounter, and what lessons did you learn?
        Answer. Prior to the 1998 budget, FAS had developed its Long-Term
    Agricultural Trade Strategy (LATS) report which identified five key
    drivers of long-term success. In the 1998 budget submission, FAS
    revised its program activities to correspond to these key drivers. As
    FAS began developing and refining its Strategic and Annual Performance
    plans, and following consultations with Senate Agriculture Committee
    staffers on its initial draft strategic plan, FAS identified that it
    had two goals: (1) expand export opportunities for U.S. agricultural,
    fish, and forest products; and (2) promote world food security. FAS
    recognized that with a few modifications, its five program activities
    were actually objectives that support the achievement of FAS' two
    goals. The first four program activities (market access, market
    development etc., market intelligence, and financial assistance) all
    support FAS' goal to expand export opportunities. The last program
    activity (long term market and infrastructure development) supports
    FAS' goal to promote world food security.
        Like other agencies across the Federal Government, FAS learned that
    in order to implement GPRA, planning needs to drive the budget. The
    five program activities in the fiscal year 1999 budget submission
    reflect slight modifications in the five program activities in the
    fiscal year 1998 budget. These modifications are a result of FAS'
    realization that it needed to re-align its budget activities to its
    goals and objectives. As FAS learns more about institutionalizing
    performance-based management processes, it anticipates that there will
    be further changes required to continually adjust the budget to
    accommodate changes in legislation, international trade, and
    technology.
        Question. Does the agency's Performance Plan link performance
    measures to its budget? Does each account have performance measures?
        Answer. Yes, performance measures contained in the agency's
    Performance Plan are linked to each FAS budget activity and are
    displayed in FAS' Annual Performance Plan.
        Question. To what extent does your performance planning structure
    differ from the account and activity structure in your budget
    justification?
        Answer. Little difference exists between FAS' performance planning
    structure and account and activity structure. Objectives identified
    under Goal 1 of the Annual Performance Plan are identical to the first
    four budget program activities. The objectives for Goal 2 of the Annual
    Performance Plan are grouped in the account and activity structure of
    the budget under ``Long-term Market and Infrastructure Development''
    for budget presentation purposes.
        Question. Do you plan to propose any changes to your account
    structure for fiscal year 2000?
        Answer. FAS currently has no plans to change its account structure
    for fiscal year 2000. However, as FAS institutionalizes it performance-
    based management processes and as Federal Government agencies
    transition to a cost accounting system, FAS may propose changes in its
    account structure to facilitate aligning performance goals with all
    operating costs and appropriated/non-appropriated program activities.
        Question. How were performance measures chosen?
        Answer. FAS believes that leadership starts at the top but
    performance comes from the front line. Following this principle, FAS'
    senior management created a draft strategic plan with objectives and
    the Strategic Operations Staff of the Office of the Administrator
    facilitated a series of one-day workshops for nearly every division in
    the agency. The purpose of these workshops was three-fold: (1) to begin
    the education process of all employees and supervisors on GPRA and
    performance management; (2) to validate and improve the draft strategic
    plan prepared by senior management; and (3) to assist the divisions in
    preparing division-level performance plans which identified performance
    measures that are aligned to the agency's strategic goals and
    objectives. Following these workshops, FAS senior management
    participated in the validation of the revised draft strategic plan and
    the performance measures identified by the divisions prior to their
    submission to OMB and Congress.
        Question. How did the agency balance the cost of data collection
    and verification with the need for reliable and valid performance data?
        Answer. The process of making GPRA a reality in FAS is hardly one
    year old and still ongoing. However, FAS believes that its approach of
    ensuring that all employees recognize how his/her activities relate to
    and contribute to the overall mission and performance goals of the
    agency will pay off in superior planning and performance in future
    years. By the end of fiscal year 2000, a track record of learning and
    evaluation regarding both realistic and verifiable performance measures
    and the associated costs will be available.
        Question. Does your plan include performance measures for which
    reliable data are not likely to be available in time for your first
    performance report in March 2000?
        Answer. No, FAS will be conducting GPRA workshops this April
    through June with every division (approximately 23) in the organization
    that has direct responsibility for developing and tracking the
    performance data necessary to meet the March 2000 performance reporting
    requirement. The primary purpose of these workshops is to ensure that
    FAS has procedures in place to verify and validate that it is capturing
    the right performance data.
        Question. What are the key performance goals from your fiscal year
    1999 Annual Performance Plan that you recommend this subcommittee use
    to track program results?
        Answer. While all measures are important to track to understand the
    breadth of FAS' activities, FAS suggests that the subcommittee focus
    on: the number of SPS issues resolved each year; the number of research
    activities facilitated annually by FAS that encourage the use of sound
    science (i.e., Codex Alimentarius) in resolving SPS issues; the number
    of foreign participants trained annually in FAS-sponsored seminars on
    U.S. food safety; the number of potential exporters identified and
    contacted about FAS exporter services; the number of U.S. based
    companies exporting agricultural products; and the percentage use of
    GSM credit guarantees to countries lacking liquidity to purchase U.S.
    agricultural products on the commercial market.
        The rationale for putting priority on SPS issues is that they are
    vital FAS output goals for the U.S. agricultural industry. SPS issues
    raised by foreign countries under the guise of sound science are
    artificial trade barriers which significantly limit U.S. export
    opportunities. Additionally, FAS provides or administers project funds
    for research activities specifically targeted to resolve SPS issues and
    trains foreign participants in U.S. food safety standards. These
    activities, while supporting different objectives under separate goals,
    are linked.
        Two of the performance indicators focus on tracking progress in
    achieving FAS' outreach objectives; namely, increasing domestic
    awareness of export opportunities, USDA export programs, and overseas
    market intelligence. The rationale is to reach out directly to
    potential exporters, especially small and new-to-export agribusiness
    firms, so that strategic partnerships can be built with interested
    organizations. FAS assists in educating their members about the rewards
    of exporting and how USDA can assist them in developing new markets. By
    expanding the number of U.S. firms exporting (primarily high-value
    processed food products), FAS believes that the U.S. agricultural
    industry will benefit by increasing its global market share of high-
    value products.
        Lastly, the GSM Export Credit Guarantee Programs will continue to
    support cash-strapped countries with short-term credit to finance
    purchases of American products. As FAS becomes more adept at deploying
    this financing mechanism in countries lacking liquidity to purchase
    U.S. agricultural products, U.S. exporters will benefit by increasing
    market share and/or maintaining their presence in the market--a
    necessary and important element in international trade.
        Question. In developing your Annual Performance Plan, what efforts
    did your agency undertake to ensure that the goals in the plan include
    a significant number of outcome measures?
        Answer. Using independent analysis from the Economic Research
    Service, FAS was able to calculate the impact (i.e., outcome) of the
    exports supported by its program on rural communities and the national
    economy as a whole. Calculating impact of market development relies on
    procedures approved by the Trade Promotion Coordinating Committee
    (TPCC) and used in preparation of the annual National Export Strategy
    submitted to the Congress. This includes calculating the impact of FAS
    market development programs on exports. Estimating national and rural
    economic impacts involve combining the export impacts with trade
    multipliers associated with direct and indirect effects of agricultural
    exports (multiplier effect per billion dollars of agricultural exports
    are as follows: national economy = $2.4 billion; rural economy = $800
    million; national employment in jobs created = 17,300). These are
    published by USDA's Economic Research Service using results from a 417
    sector input-output model of the United States economy.
        Question. Do you believe your program managers understand the
    difference between goals that measure workload (output) and goals that
    measure effectiveness (outcome)?
        Answer. They are beginning to develop a greater understanding of
    the difference. However, in order to fully institutionalize strategic
    planning at every level of the organization, strategic planning
    workshops were held over the spring and summer of 1997 for every
    division in the agency. FAS will be conducting workshops again in 1998
    and 1999. These workshops will continue the process of linking what
    every employee is doing to support the organization-wide goals,
    introducing the concepts of verification, validation, and process
    improvement in the context of GPRA. Through this ongoing process of
    education and by instituting a quarterly reporting requirement FAS is
    making GPRA real.
        Question. What are some examples of customer satisfaction measures
    that you intend to use? Please include examples of both internal and
    external customers.
        Answer. For internal customers, FAS will perform two separate types
    of surveys. The first is the Peer Evaluations of FAS' headquarters and
    overseas offices' performance and customer satisfaction. The second
    survey will be a Work-life survey in which the employees and managers
    will be asked to identify trends in the work place which inhibit or
    promote productivity and employee development.
        For external customers, FAS has numerous listening sessions with
    various customer groups to identify areas of improvement. For instance,
    FAS works in partnership with the Private Voluntary Organization (PVO)
    community in implementing the Food for Progress program. FAS has a
    yearly listening session where ideas are shared and new initiatives
    announced. These listening sessions have helped both groups (FAS and
    the PVO's) to focus on reducing red tape and improving specific
    projects. Also, FAS has listening sessions with U.S.banks participating
    in the GSM Export Credit Guarantee program. Again, these sessions have
    identified areas of improvement and cooperation.
        Question. How were the measurable goals of your fiscal year 1999
    Annual Performance Plan used to develop your fiscal year 1999 budget?
        Answer. The measurable goals of FAS' fiscal year 1999 Annual
    Performance Plan and its fiscal year 1999 budget program activities
    were developed in tandem and are mutually supportive.
        Question. If a proposed budget number is changed, up or down, by
    this committee, will you be able to indicate to us the likely impact
    the change would have on the level of program performance and the
    achievement of various goals?
        Answer. Yes, that is true for the most part. Depending upon the
    size of the increase/decrease, FAS would be able to estimate changes in
    the associated performance goals and indicators.
        Question. Do you have the technical capability of measuring and
    reporting program performance throughout the year on a regular basis,
    so that the agency can be properly managed to achieve the desired
    results?
        Answer. No, we are not yet able to do so. FAS is requesting in the
    fiscal year 1999 budget funds to build a performance tracking,
    evaluation, and reporting system. Once built and implemented, this
    system will provide the information senior managers need to determine
    whether FAS will meet/exceed its performance goals or whether resources
    need to be re-allocated.
        Question. The Government Performance and Results Act requires that
    your agency's Annual Performance Plan establish performance goals to
    define the level of performance to be achieved by each program activity
    set forth in your budget.
        Many agencies have indicated that their present budget account
    structure makes it difficult to link dollars to results in a clear and
    meaningful way. Have you faced such difficulty?
        Answer. To some extent, we have. The traditional FAS budget
    activity structure was a combination of organizational linkages and
    functional activities which did not fit well in a performance based
    management system. This led to our modification of the FAS budget
    activity structure in fiscal year 1998.
        Question. Would the linkages be clearer if your budget account
    structure were modified?
        Answer. Beginning with the fiscal year 1998 budget, the FAS budget
    activity structure was modified to reflect our implementation of the
    Government Performance and Results Act and transition to a performance-
    based management system. In this regard, FAS has adopted a budget
    activity structure that incorporates five of the policy objectives
    included in the FAS strategic plan. This activity structure was
    modified slightly in our fiscal year 1999 submission.
        Question. If so, how would you propose to modify it and why do you
    believe such modification would be more useful both to your agency and
    to this committee than the present structure?
        Answer. Currently FAS' program activities relate directly to our
    mission and legislated mandates. In general, we believe the current
    budget activity structure is satisfactory. However, modifications could
    be made as our experience in implementing a performance-based
    management system continues to develop.
        Question. How would such modification strengthen accountability for
    program performance in the use of budgeted dollars?
        Answer. Again, we will explore further modifications as our
    experience in implementing a performance-based management system
    develops.
        Question. Does your fiscal year 1999 performance plan--briefly or
    by reference to your strategic plan--identify any external factors that
    could influence goal achievement?
        Answer. Yes it does. Both FAS' strategic and annual performance
    plans cite several external factors. These include foreign competitors'
    continued use of export subsidies, direct credits and credit guarantee
    programs, non-price export promotion, monopolistic marketing boards,
    and various technical assistance programs. Additional external factors
    outside FAS' span of control include variability in crop production due
    to weather conditions, both at home and abroad; effect of foreign
    exchange fluctuations on the price of U.S. products abroad; political
    instability that may undermine demand in key importing countries; and
    reductions in resources of other USDA and Federal agencies with whom
    FAS works in partnership to fulfill its mission and goals.
        Question. If so, what steps have you identified to prepare,
    anticipate and plan for such influences?
        Answer. FAS will continue to use the GSM program to inject
    liquidity into developing country markets suffering short-term
    liquidity crunches similar to the way it did in Asian countries during
    the fiscal year 1998 financial crisis. Additionally, the agency will
    use the Export Enhancement Program, Dairy Export Incentive Program,
    Market Access Program, and Foreign Market Development Cooperator
    program to offset foreign competitors' continued use of export
    subsidies, non-price export promotion, monopolistic marketing boards,
    and various technical assistance programs.
        Question. What impact might external factors have on your resource
    estimates?
        Answer. The impact will vary depending on the external factors. A
    number of the programs administered by FAS fluctuate yearly on the
    basis of market conditions and competitor actions, including export
    credit guarantees, EEP, and DEIP.
        Question. Through the development of the Performance Plan, has the
    agency identified overlapping functions or program duplication? If so,
    does the Performance plan identify the overlap or duplication?
        Answer. Yes it does. In conjunction with other agencies within the
    Department dealing with SPS issues, FAS has, as a result of a General
    Accounting Office review of USDA's approach to resolving SPS issues,
    recently been given the responsibility to support the Special Assistant
    to the Secretary on International Affairs to coordinate USDA wide goals
    and objectives and facilitate the integration of USDA-wide processes to
    improve USDA's efficiency and effectiveness in prioritizing SPS issues
    and bringing them to resolution. Since this initiative has just begun,
    USDA is in the process of determining how all of the USDA agencies will
    jointly plan and coordinate this effort.
        Question. Future funding decisions will take into consideration
    actual performance compared to expected or target performance. Given
    that, to what extent are your performance measures sufficiently mature
    to allow for these kinds of uses?
        Answer. The performance measures identified in FAS' fiscal year
    1999 Annual Performance Plan are focused primarily on outputs, and are
    not sufficiently mature to allow use in measuring program
    effectiveness. In recognition of this challenge, FAS requested an
    increase of $500,000 in its fiscal year 1999 budget request to enlist
    the help of private sector experts in developing an agency-wide
    performance tracking and evaluation system that has meaningful and
    realistic measures and benchmarks of performance to help define
    relative success rates and measure program effectiveness.
        Question. Are there any factors, such as inexperience in making
    estimates for certain activities or lack of data, that might affect the
    accuracy of resource estimates?
        Answer. Yes. The biggest factor is the lack of a cost-accounting
    system which would provide accurate data on costs related to each
    budgeted program activity.
        Question. Based on your fiscal year 1999 performance plan, do you
    see any need for any substantive revisions in your strategic plan
    issued on September 30, 1997?
        Answer. No, we do not see the need for revisions within the next
    year.
                                     ______

                    Questions Submitted by Senator McConnell
                            public law 480 title ii
        Question. It is estimated that more than 800 million individuals
    are chronically undernourished, yet AID failed to program more than $20
    million of Title II humanitarian funding in fiscal year 1997. Will AID
    use all the current year's appropriation, as well as the unspent funds
    carried over from last year, for commodity and processed food purchases
    for donation to Title II feeding programs? If not, why not?
        Answer. USAID currently expects to utilize in this fiscal year all
    funds appropriated for fiscal year 1998 plus the carry-over from fiscal
    year 1997.
        While current plans are that all available funds will be utilized
    this fiscal year, it is possible that there will be an emergency
    requirement at the end of the year which will make it advisable to
    carry over some funds to next year. In past years, the amount has
    always been relatively small. For example, the carry over from 1997 to
    1998 was around 2.5 percent of the Title II total and 5 percent of the
    amount spent for emergencies. Nevertheless, USAID currently expects to
    expend all available funds this year.
        Question. If unspent, what impact will it have on domestic farmers,
    processors, packagers, and other businesses who normally supply the
    program?
        Answer. The impact on U.S. suppliers, processors and shippers would
    not be great. The funds carried over from one fiscal year to the next
    would normally be utilized in the first few months of the following
    fiscal year.
        Question. Traditional Title II ``relief'' programs donated foods
    for the ``poorest of the poor'' for feeding women, children, school
    children, orphans, widows and the elderly, disabled, destitute, and
    others in the most vulnerable circumstances. AID'S fairly recent policy
    change has eliminated traditional ``relief'' programs from Title II
    eligibility, restricting approvals to only ``developmental'' programs.
        Under this policy, it has been pointed out that Mother Teresa's
    programs, were she alive today, would not qualify for Title II
    humanitarian assistance. What is the basis for this AID policy?
        Answer. USAID does not have a policy that eliminates feeding
    activities for the ``poorest of the poor.'' Within the non-emergency
    programs, however, USAID does have a policy to give Title II funding
    priority to programs where the recipient will eventually be able to
    make self-sustaining progress toward food security. We have concluded
    this is most likely to occur with ``developmental'' activities which
    improve household nutrition or enhance agricultural productivity.
    Notwithstanding this policy focus for non-emergency Title II
    activities, USAID does support a large number of traditional ``relief''
    programs in both its non-emergency and emergency Title II activities.
    In all cases, resources are focused on the neediest countries and
    within those countries on the most vulnerable.
        With emergency Title II programs, the U.S. feeds the starving women
    and children we all see on CNN. Recent crises in Bosnia, Rwanda, and
    North Korea are examples of where Title II resources have supported
    traditional relief feeding activities to maintain the health of the
    most vulnerable groups in those societies.
        In non-emergency Title II feeding programs, U.S. commodities are
    often used in maternal/child health activities and food-for-education
    activities benefiting vulnerable groups of women and children. In many
    cases, these traditional feeding activities have been integrated with
    other developmental resources to increase the likelihood of sustainable
    improvements in the health and nutrition of these groups. This category
    also finances food-for-work programs for poor farmers and landless
    laborers in countries like Bangladesh. The beneficiaries of these
    programs are also vulnerable.
        USAID also allocates Title II resources to the sorts of welfare
    feeding programs which Mother Theresa's Missionaries of Charity manage.
    We will continue to do so and have told cooperating sponsors we will
    consider modest expansion of these activities. However, the
    beneficiaries of emergency programs and of non-emergency programs such
    as maternal/child health are also vulnerable and we believe warrant
    continued priority.
        Question. What has been its impact on private voluntary agencies?
        Answer. There has been no adverse impact on our PVO partners. The
    U.S. private voluntary organizations which manage Title II participated
    in developing the Food Aid and Food Security policy, which emphasizes
    the priority of addressing the underlying causes of hunger, and with
    which our current programs are in complete harmony. Since the PVO's are
    a diverse community, it is understandable that individual organizations
    would support some dimensions of the policy more strongly than others.
    On balance, there has been general support, even though it has required
    some adjustments by some PVO's.
        For example, the policy requires Title II to focus on the most food
    insecure countries and within those countries on those most in need.
    This has meant getting out of countries like Indonesia and Philippines
    which, except for emergencies, are making good progress. Conversely,
    the policy means greater focus on Africa.
        The policy, like Public Law 480, Government Performance and Results
    Act (GPRA), and other legislation that apply to USAID and its programs,
    also requires greater attention to achieving program results. This has
    meant more effort must be devoted to specifying objectives, such as
    reducing malnutrition among children, and more effort must be devoted
    to monitoring performance. In some cases, the PVO's have been asked to
    pay greater attention to the long term impact of the programs. In food-
    for-education activities, for example, greater attention is paid to the
    educational benefits of the program.
        Question. Is the policy responsible for AID not using all Title II
    funds in fiscal year 1997, and for likely unspent Title II funds in
    fiscal year 1998?
        Answer. No, the policy had nothing to do with the carry-over from
    fiscal year 1997. The carry-over resulted from management of emergency
    Title II funds at the end of fiscal year 1997. No carry-over is
    currently expected from fiscal year 1998 to fiscal year 1999.
        Question. Did AID comply with the statutory processed, fortified,
    and bagged subminimum tonnage requirement for Title II commodities, in
    fiscal year 1997? If not why not?
        Answer. Based on the traditional method of calculating these
    subminimum levels, USAID fell a bit short in fiscal year 1997. The
    requirement is that 75 percent of the commodities distributed for non-
    emergency programs be in the form of processed, fortified or bagged
    commodities. The actual level was 73.3 percent. In addition, not less
    than 50 percent of the quantity of the bagged commodities that are
    whole grains should be bagged in the U.S. The actual level was 48
    percent.
        There are two reasons these subminimum requirements were not met in
    1997. First, there are commodities such as vegetable oil, soybean meal,
    and milled rice that require some processing but which we traditionally
    have not included in this calculation. While these are ``processed
    commodities'' as that term is used commercially, the legislative
    history, while not foreclosing on such a reading, is not explicit as to
    the congressional intent of the referenced mandate to include these
    commodities in the calculation. Nevertheless, had they been included,
    USAID would have met the percentage requirements stated in the
    legislation. Second, the levels of monetization have increased in
    response to requests from the private voluntary organizations that
    manage most Title II non-emergency activities. Monetization allows
    flexibility to use proceeds for improved management and to strengthen
    development activities. Increased monetization of Title II commodities
    under non-emergency activities negatively affects the processed,
    fortified, bagged mandate because bulk whole grains and bulk vegetable
    oil represent the majority of monetized commodities.
        It is important to note that there are substantial amounts of
    processed and fortified commodities which go through the Title II
    supported emergency programs. For example, in North Korea in fiscal
    year 1997 the U.S. contributed 10,000 metric tons of nutritious corn/
    soya blend for child feeding.
        Question. Will AID comply with the processed, fortified, and bagged
    subminimum requirement in fiscal year 1998? If not, why not?
        Answer. Based on current plans for implementing programs, it
    appears likely that programs will not be in compliance with this
    mandate. Commodity requests from our cooperating sponsors for non-
    emergency activities currently require only approximately 60 percent
    processed, fortified, and bagged commodities. Even if USAID were to
    include bulk vegetable oil, soybean meal, and milled rice (that are
    also processed but not included in USAID's current calculation), the
    percentage would only increase to approximately 69 percent. Again, we
    believe that this shift in commodity demand is primarily due to the
    increased requirements for monetization activities, which is supported
    by its own mandate under Section 203(b) of Public Law 480. So the
    factors which led us to fall slightly short of the requirements in
    fiscal year 1997 remain in force.
        As was the case last year, we expect substantial processed and
    fortified commodities will be shipped under emergency programs.
        Question. Does AID incorporate the statutory processed, bagged, and
    fortified commodity subminimum requirement into PVO program plans and
    approvals. If not, why not?
        Answer. USAID approves the commodity and bagging specifications for
    PVO programs and monitors progress toward meeting these subminimum
    requirements on a monthly basis. However, much like Cargo Preference
    where it would be logistically impossible to apply the 75-percent
    requirement to each individual shipment, USAID does not dictate that
    each PVO program earmark a specific proportion of its program to meet
    this requirement. To do so would result in an inflexible system that
    would severely limit the types of activities our partners could
    undertake.
        Although historically USAID has substantially complied with the
    overall 75 percent subminimum, Public Law 480 permits waiver of these
    subminimum requirements if the PVO programs ``will not be best served
    by the enforcement of such requirements.'' USAID manages implementation
    of the subminimum requirements with a view to the best interests of the
    PVO programs and, if necessary, exercises the waiver authority to
    support those interests.
        Question. In light of the increased number of monetization
    programs, is AID taking steps to insure that the processed, bagged, and
    fortified commodity subminimum is incorporated into these programs?
        Answer. Together with our cooperating sponsor partners, we do look
    for opportunities to monetize processed, fortified and bagged
    commodities in order to help ensure compliance with these subminimum
    requirements. Wheat flour and tinned vegetable oil, as an example, are
    monetized and counted toward the achievement of the mandate.
    Unfortunately, there is not a ready market in developing countries for
    many of the other traditional processed and fortified products, such as
    corn soya blend and cornmeal, so in most cases the monetization of
    these commodities is not feasible.
                                     ______

                      Questions Submitted by Senator Burns
                 foreign market development/cooperator program
        Question. Mr. Schumacher, is it true that the President's budget
    proposes to spend more to renovate the south building than to develop
    markets for U.S. agricultural products through the Foreign Market
    Development/Cooperator Program?
        Answer. The President's budget proposes a funding level of $22.0
    for the Foreign Market Development Program (FMD), a reduction of $5.5
    million from the current level of $27.5 million. However, it is
    anticipated that a higher level of participant cost-sharing will
    minimize program disruption. It is my understanding that the budget
    also proposes $23.5 million for the continued renovation of the South
    Building to correct health and safety hazards and provide modern
    facilities.
        Question. How much money is needed to be appropriated for the
    Foreign Market Development/Cooperator Program for fiscal year 1999 to
    maintain marketing plans for the program at the current level?
        Answer. We are hopeful that with higher participant contribution
    levels, marketing plan levels can continue at the current level with
    the $22.0 million appropriation request set forth in the President's
    budget.
        Question. Why, when U.S. agricultural exports are down, especially
    for bulk commodities that use this program, is the Department cutting
    the Cooperator program or farmers export program by 30 percent?
        Answer. It is simply an issue of money. The FAS budget must absorb
    some of the costs that had previously been funded by the Commodity
    Credit Corporation. Those costs used to be on the mandatory side of the
    budget but now are proposed to be funded on the discretionary side of
    the budget. FAS has a very restricted discretionary budget, and we are
    forced to absorb these additional costs within the constraints of the
    budget. We are hopeful that an increase in participant cost sharing
    will help offset the reduced FAS contribution to this program.
        Question. What does the President's Budget mean by ``increasing the
    cost share'' for the Foreign Market Development/Cooperator Program?
    According to my information, the cooperator contributions to the
    operation of the FMD/Cooperator Program has consistently exceeded 115
    percent. Moreover, if a wheat farmer checks-off $.02 a bushel on a
    bushel of wheat that is worth $2.00 less than it was two years ago, his
    cost share has already increased. What are you trying to do here?
        Answer. The budget assumes a higher level of cost-share
    contributions from Cooperator organizations which will help to offset
    the reduced Federal contribution. This effort is consistent with House
    Committee report language recommending that FAS seek an increase in
    cost sharing from participants in the Foreign Market Development
    Cooperator Program. For fiscal year 1998, FMD participants currently
    contribute $1.90 for each $1.00 in FAS funding.
                             wheat export strategy
        Question. On Wednesday, March 18, 1998, Secretary Glickman told the
    House Agriculture Committee that EEP would result in lower wheat prices
    because other countries, namely the EU, would compete against an EEP
    and drive prices lower. And anyway, our competitors will eventually run
    out of wheat leaving the U.S. to supply the remaining import demand.
    Jack Hay, a wheat producer from The Dalles, Oregon responded that wheat
    producers would take the chance of lower wheat prices if the Department
    would move wheat out of the U.S. and expand U.S. market share.
        At that same hearing, the Secretary noted that the GSM-102 program
    was the centerpiece of the U.S. farm export strategy. This is new since
    the Asian financial crisis. In the fall of 1997 several agricultural
    groups met with the Department to urge the use of the credit guarantee
    programs so that they would not fall victim to cuts like the EEP
    experienced last appropriations cycle. The question is--in the absence
    of a foreign economic crisis--what is the Department's export strategy?
    And what is the Department's strategy for dealing with a U.S. farm
    crisis?
        Answer. While I am not prepared to speak on all actions the
    Department is taking to respond to low prices, what I can do is address
    what we are doing to promote and expand markets. USDA's export strategy
    is to utilize to the maximum extent possible those programs which are
    available and appropriate to assist in opening markets and expanding
    U.S. exports. USDA is currently using a wide range of programs to
    assist exports including the Export Credit Guarantee Program (GSM-102),
    Public Law 480, as well as funding for FMD and MAP. USDA continues to
    monitor world markets and our competitors' actions and reserves the
    right to use the Export Enhancement Program (EEP) if competitor actions
    and market conditions warrant. At the moment, however, we do not
    believe these conditions make EEP the appropriate tool to use.
        In addition, we are working aggressively to resolve a wide range of
    bilateral market access issues. Such efforts have opened up the Chilean
    wheat market and are currently under way to address barriers in China,
    India, Brazil, and many other countries. We strongly believe that
    reducing import barriers to U.S. commodities is the best solution to
    long term success for U.S. farm exports, and it is an area where the
    U.S. Government can play a critical role. To further this cause, we are
    preparing for the next round of WTO negotiations and are assisting in
    the Administration's review of economic sanctions.
                                     ______

                     Questions Submitted by Senator Bumpers
                             asian financial crisis
        Question. You mention that the level of agricultural exports in
    1997 is down slightly from the previous year due, in part, to the
    pending financial crisis in Asia. What US commodities are most at risk
    due to the current financial crisis in Asia? How long do you believe
    this problem will continue? Do you see long term problems for US
    agricultural exports resulting from this problem?
        Answer. USDA expects the Asian crisis will reduce overall U.S.
    agricultural exports by no more than 3-6 percent in fiscal year 1998
    and 1999 from levels that would have otherwise prevailed. In fiscal
    year 1998, two-thirds of the total impact on U.S. exports is expected
    to fall on high value products, led by horticultural products, red
    meats/poultry, and processed foods as these products are more sensitive
    to the price and income changes brought on by the crisis. However, in
    fiscal year 1999, losses for grains and soybeans are expected to grow
    substantially as Asian economies slow further and competitors benefit
    from an appreciating U.S. dollar. Beginning in fiscal year 2000, the
    negative trade effects will likely begin to ease as Asia's currencies,
    economies, and import demand start their recoveries. Assuming we have
    seen the worst of the crisis and these countries make the needed
    economic reforms, USDA sees no permanent long term damage to U.S.
    exports to the region. The most affected countries have well-educated
    and highly productive work forces, flexible economies and generally
    well-developed infrastructure. There is no reason to believe that these
    economies cannot recover much of their previous economic vitality.
                             market access program
        Question. The budget request provides for $90 million, the fully
    authorized level. Please provide information on the amounts of MAP
    grants made available in fiscal year 1997 including the recipient
    commodities, companies, and targeted markets. Also, please provide any
    estimates available on this information for fiscal year 1998.
        Answer. I will provide that information for 1997 for the record.
    Allocations of MAP funding for 1998 have not yet been made, so we
    cannot provide any information at this time.
        [Clerk's note.--The information does not appear in the hearing
    record, but is available for review in the subcommittee's files.]
        Question. You mention that European countries spend around $400
    million on market promotion of which about half comes from EU member
    governments. This suggests that the EU private sector spends about $200
    million annually on market promotion. How much do U.S. companies spend
    on agricultural market promotion on an annual basis? Aside from the $90
    million for MAP, what additional USDA program funding do you categorize
    as ``market promotion''? What other federal spending (non-USDA) could
    be considered as agricultural market promotion?
        Answer. It is difficult to ascertain the exact amount of funding
    spent by U.S. companies on agricultural market promotion. According to
    Dunn & Bradstreet, there are more than 150,000 food companies in the
    U.S., but less than 10 percent of these companies are involved in
    exporting. Of the 10,000 companies that are exporting product,
    approximately 1,000 have received assistance under the Market Access
    Program (MAP). Each company receiving assistance under the MAP is
    required to match federal funds on a one-to-one basis. In 1996, more
    than 500 companies participated in the MAP and contributed
    approximately $22.2 million of their own funds for export promotion
    activities. We know that this figure does not begin to scratch the
    surface as there are more 9,400 additional U.S. companies involved in
    export promotion that are not participating in the MAP and, therefore,
    are not obligated to report their expenditures to the Department.
    However, according to a recent survey of commodity trade organizations,
    the U.S. industry spends in excess of $165 million on agricultural
    market promotion. This figure includes over $88 million in expenditures
    which are reported as contributions by participants in the MAP and/or
    FMD programs.
        There are two USDA programs that are categorized as export
    promotion programs--the MAP and the Foreign Market Development
    Cooperator Program, funded at $22 million in the President's 1999
    budget. USDA has a number of other programs, services, and activities
    which are ``export-related'', but do not meet the definition of export
    promotion as defined by the Technical Working Group of the Trade
    Promotion Coordinating Committee. FAS overseas offices also have a
    small Annual Marketing Plan budget for use in conducting agricultural
    promotion activities in their countries of responsibility.
        At this time we are not aware of any other non-USDA programs that
    could be considered agricultural market promotion. With its technical
    expertise and international market intelligence network, the Department
    is best equipped to develop and implement export promotion strategies
    for agricultural commodities and products.
                                 trade barriers
        Question. The European Union has placed a ban on poultry imports
    from the U.S. because of the practice by US companies to use chlorine
    as an anti-microbial agent. Is FAS involved in resolving this dispute?
    If so, what is the status?
        Answer. FAS, in conjunction with the Food Safety and Inspection
    Service and U.S. industry representatives, is working with the EU to
    resolve the issue regarding the use of anti-microbial treatments in
    poultry production. In the Veterinary Equivalency Agreement, the EU
    committed to undertake a scientific study on the use of anti-microbial
    treatments, including chlorine. The experts which include a person from
    the United States have begun their research, and we expect this study
    to be completed by mid-1998. If the results are positive, the
    Commission has agreed to submit legislation to Member States, reversing
    the EU policy. U.S. officials are closely monitoring the progress of
    the scientific study.
                              aquaculture exports
        Question. You mention that edible fish and seafood product exports
    did not fare as well in 1997 as previous years and had, in fact,
    slipped 6 percent from 1996. What portion of the U.S. edible fish and
    seafood product exports are farm-raised aquacultural products?
        Answer. We estimate that about one percent of 1997 U.S. edible fish
    and seafood product exports are farm-raised aquacultural products
    including: farmed Atlantic salmon ($14.4 million, 93 percent to
    Canada), crawfish ($5.3 million, 99 percent to Sweden (aquaculture
    estimated to be half of the $10.5 million of total crawfish exports)),
    trout ($3.4 million, 71 percent to Canada and 17 percent to China) and
    catfish ($.7 million, 75 percent to Germany and 10 percent to France).
    Exports of these particular products were up 2.9 percent over 1996
    exports. Additional aquaculture products are exported but it is
    difficult to separate farmed versus wild harvest exports.
        Question. Will long-term U.S. aquaculture exports increase at a
    pace equal to increased domestic production?
        Answer. We expect that long-term U.S. aquaculture exports will
    increase at a pace equal to or greater than increased domestic
    production. Exports of these products grew 4.4 percent and 2.9 percent
    in 1996 and 1997, respectively. For 1998, farmed catfish production is
    forecast to grow 2-4 percent and farmed salmon production is expect to
    remain level; crawfish production rose 6 percent in 1997, and trout
    production from September 1, 1996 through August 31, 1997, grew 4
    percent. Although the domestic market is the main outlet for U.S.
    aquaculture products, as U.S. production grows we expect exports of
    some aquaculture products will increase at a greater rate or to a
    greater number of markets. For example, the Catfish Institute is
    considering expanding market promotion activities beyond Germany to
    include Canada and other markets.
                              use of biotechnology
        Question. You mention that biotechnology may provide opportunities
    to meet world food security needs and, at the same time, reduce
    chemical use, provide safer food, and cut costs. What efforts are
    underway to make importing countries more willing to accept products
    modified genetically or produced with other biotechnological methods?
        Answer. USDA assisted Egypt's Ministry of Agriculture develop a
    biotechnology research capability in the early 1990's. In July 1997,
    the Egyptian Ministry of Health made a decision requiring the
    Genetically Modified Organisms (GMO) Certification of all food and
    agricultural imports. FAS alerted the Ministry of Agriculture to the
    issue and to the relevance of its research for the issue's resolution.
        The U.S. Embassy, in its briefing cable preceding Secretary
    Glickman's September trip to Egypt, pointed out that Minister of
    Agriculture Youssef Wally took control of the issue and was a major
    force behind the decision to ``neutralize'' the GMO certification
    requirement. The Embassy emphasized his role in keeping the GMO issue
    from becoming a major trade irritant between Egypt and U.S.
        While in Egypt Secretary Glickman thanked Ministry Wally and
    solicited his support for a reasonable international consensus on the
    labeling of biotech (GMO) products. Other countries in the region often
    follow Egypt's lead with these decisions. He also acknowledged the
    excellent work being done in Egypt in biotechnology and pledged USDA's
    continuing support and collaboration with the MOA on this kind of
    research.
        Because of the importance that biotechnology plays in new
    agricultural products, USDA has recently established a Department-wide
    working group on biotechnology that will coordinate the Department's
    efforts in this area. FAS, in coordination with APHIS, other U.S.
    regulatory agencies, USTR, and industry groups, has initiated
    harmonization efforts in a number of multilateral and bilateral fora.
        The U.S. government holds regular bilateral discussions with the EU
    to encourage the EU to evaluate genetically modified products using
    scientifically based analysis. USDA is working closely with the
    developers of genetically modified products, manufacturers of processed
    products, and exporters to keep them informed of developments in the EU
    and to help ensure that there is no disruption of trade in products
    such as corn gluten feed. FAS is an active participant in the
    Transatlantic Business Dialogue Agri-food Biotechnology Initiative.
        A biotechnology initiative has been undertaken in the Asia Pacific
    Economic Community (APEC) and was endorsed at the recent APEC
    Ministerial in 1997. The U.S. hosted a second workshop on risk
    assessment of biotechnology products in March 1998.
        Bilateral harmonizations efforts continue with Japan. FAS led a
    delegation from U.S. regulatory agencies to speak with Japanese press
    and consumer groups. In addition, USDA has hosted representatives from
    the Government of Japan to gather information on the U.S. approach to
    labeling of biotechnology products. To date, Japan has approved 15
    agricultural biotechnology products for importation.
        In order to mitigate the potential negative effects on trade, FAS
    has played a prominent role in developing the U.S. position for the
    negotiations of a Biosafety Protocol under the Convention on
    Biodiversity and is represented on the U.S. delegation to these
    negotiations.
                                 public law 480
        Question. The budget request calls for a reduction in Title I of
    Public Law 480. What is the reason for this reduction?
        Answer. The proposed reduction in Public Law 480 Title I funding is
    necessary to help meet discretionary spending targets set in order to
    achieve a balanced budget. Public Law 480 Title II and Title III
    funding remains unchanged from fiscal year 1998 levels. This will
    ensure that adequate resources are available to meet serious food
    assistance needs, including emergencies.
                                     ______

                      Questions Submitted by Senator Kohl
                 foreign market development/cooperator program
        Question. How much money needs to be appropriated for the Foreign
    Market Development/Cooperator Program in fiscal year 1999 to maintain
    marketing plans for the program at the current level?
        Answer. We are hopeful that with higher participant contribution
    levels, marketing plan levels can continue at the current level with
    the $22.0 million appropriation request set forth in the President's
    budget.
        Question. Why, when U.S. agricultural exports are down, especially
    for bulk commodities that use these program, is the Department cutting
    the Cooperators program or ``farmers export program'' by 30 percent?
        Answer. It is simply an issue of money. The FAS budget must absorb
    some of the costs that had previously been funding by the Commodity
    Credit Corporation. FAS has a very restricted discretionary budget and
    we are forced to absorb these additional costs within the constraints
    of the budget. We are hopeful that an increase in participant cost
    sharing will help offset the reduced FAS contribution to this program.
        Question. What does the President's budget mean by ``increasing the
    cost-share'' for the FMD/Cooperator Program? According to my
    information, the cooperators contribution to the operation of the FMD/
    Cooperator Program has consistently exceeded 115 percent. Moreover, if
    a wheat farmer checked off 2 cents a bushel on a bushel of wheat that
    is worth $2 less than it was two years ago, his cost-share has already
    increased. What are you trying to do here?
        Answer. The budget assumes a higher level of cost-share
    contributions from Cooperator organizations which will help to offset
    the reduced Federal contribution. This effort is consistent with House
    Committee report language recommending that FAS seek an increase in
    cost sharing from participants in the that participants in the Foreign
    Market Development Cooperator Program (FMD). For fiscal year 1998, FMD
    participants currently contribute $1.90 for each $1.00 in FAS funding.
                           agricultural trade offices
        Question. What are the Department's plans with respect to expanding
    the opening of Agricultural Trade Offices? Is this a wise course of
    action when U.S. agricultural exports are declining?
        Answer. Agricultural Trade Offices (ATO's) have been established
    for the purpose of developing and maintaining markets for U.S.
    agricultural, food, forest and fishery products. The Secretary of
    Agriculture has been directed by statute to establish not less than six
    nor more than twenty-five U.S. Agricultural Trade Offices worldwide.
    ATO's are the export market promotion arm of FAS operations overseas.
    In recent years, the establishment of ATO's has not increased the
    number of FAS American staff overseas. Rather, attache positions have
    been converted to ATO's to reflect an increased emphasis on market
    development and to take advantage of increased market opportunities for
    consumer food products in selected regions.
        U.S. consumer-oriented food and agricultural product exports
    continue their growth, increasing 4.14 percent to $21 billion in 1997.
    While there have been some recent declines due to the financial
    situation in Asia and lower prices for bulk commodities, the long term
    trend is for continued growth in exports.
        Two new ATO's were established in 1997: ATO Sao Paulo and ATO
    Caribbean Basin. In the case of Sao Paulo, the Office of Agricultural
    Affairs was converted to an ATO with no net change in American or local
    staffing. This was done to reflect the increasing export opportunities
    for high-value consumer oriented products as well as increased support
    needed by visiting Foreign Market Development cooperators, Market
    Access Program participants, and other U.S. exporters with expanded
    programs in the region. Import liberalization has resulted in
    spectacular growth in consumer-oriented exports to Brazil from $74
    million in 1994 to over $160 million in 1997, growth of 116 percent.
        The Caribbean Basin ATO is responsible for market development
    throughout the Caribbean. The Assistant Attache position in Santo
    Domingo was converted to the ATO Director position in Miami.
    Establishment of this office was long overdue with U.S. consumer food
    exports to this region exceeding $570 million in 1997, reflecting
    growth of 10.6 percent over 1996 exports.
        The Foreign Agricultural Service believes that dedicated market
    development support overseas through our U.S. Agricultural Trade
    Offices is not only wise but essential to fulfill our mandate to
    develop, maintain, and coordinate market development activities in
    markets with excellent high-value food product export potential.
                              fas outreach program
        Question. Please explain the value of the FAS Outreach Program and
    its direct impact on agricultural exports.
        Answer. Increased agricultural exports are generated by established
    exporters and new-to-export companies and cooperatives. As background,
    Dunn and Bradstreet reports there are approximately 165,000 companies
    in the United States producing, manufacturing, packing or marketing
    agricultural products, yet less 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 FAS Outreach Program uses its extensive communication network
    and relationships with universities, export assistance centers and the
    State Departments of Agriculture to effectively convey to companies and
    cooperatives alike that real export opportunities exist, and that USDA
    can be a full partner with the private sector in expanding sales,
    developing new markets and promoting new products. The resultant
    increase in exports represents tangible evidence of USDA's commitment
    to expanding the number of exporting companies which can be linked to
    the efforts of FAS in partnership with State Departments of
    Agriculture. Targeting small, medium and new-to-export companies in
    addition to cooperatives to provide export assistance and trade
    information has led to a higher rate of export participation among
    these groups, and in turn increased exports of food, fiber, seafood and
    forest products.
                                     ______

                      Questions Submitted by Senator Leahy
                            uruguay round agreement
        Question. I understand that we have reported to the WTO for the
    1995/1996 Uruguay Round Agreement (URA) phase-in year that we intended
    to ship 64,000 metric tons of nonfat dry milk, and for the following
    year (1996/1997), that we intended to ship 67,000 metric tons of nonfat
    dry milk. How much of that combined amount of 131,000 metric tons--
    which amounts to some 290 million pounds--actually has been shipped? If
    it has not been shipped, what steps are you taking to ensure that the
    nonfat dry milk will be exported under DEIP?
        Answer. Agreements under DEIP in 1995/96 and 1996/97 committed
    63,693 metric tons, and 69,890 metric tons, of non-fat dry milk,
    respectively. Of the total tonnage committed of 133,583 metric tons for
    those two years, approximately 89,607 metric tons were shipped. Buyer
    defaults and various other factors accounted for the loss in shipments.
    In order to reduce the rate of DEIP non-performance, the Commodity
    Credit Corporation recently modified its policy concerning amendments
    to DEIP agreements. DEIP exporters now have more flexibility to change
    the buyer on DEIP contracts, renegotiate export sales prices, and
    extend delivery periods. In addition, we have also regionalized our
    DEIP allocations in order to allow for greater program flexibility.
        Question. I understand that the URA technically allows countries to
    carry-over from one year to the next unused export tonnage. Isn't
    reprogramming of canceled, unshipped tonnage, which I believe does not
    involve carry-over, thus also permitted under the URA?
        Answer. Throughout the negotiations leading to the Uruguay Round
    Agreement (URA), it was understood that export subsidies would be
    disciplined by annual tonnage and expenditure limits. The European
    Union apparently interprets certain language in the URA as allowing for
    unused tonnage to be carried forward into another year. Although we
    have not yet confirmed whether the EU has acted to carry or roll-over
    unused tonnage, the United States and many other countries continue to
    have concerns that such an interpretation of the URA could greatly
    undermine the export subsidy disciplines in place on a range of
    commodities.
        Question. Given that reprogramming of unshipped DEIP tonnage is
    permissible under the URA, and given that the 1996 farm bill mandates
    that USDA make full use DEIP, will you ensure compliance with the farm
    bill by reprogramming canceled tonnage that otherwise would not be
    shipped?
        Answer. Re-programming tonnage that was contracted, but canceled or
    unshipped, could adversely affect the URA. Nonetheless, we would view
    with great concern actions by other countries along these lines, and we
    would have to consider what would be the most appropriate U.S. response
    should this occur.
        Question. USDA is estimating that it will remove about 62 million
    pounds of nonfat dry milk in calendar year 1998 under the milk price
    support program, and in fact is currently purchasing about 2 million
    pounds of powder per week. Isn't it cheaper for USDA to ``DEIP'' milk
    powder overseas than purchase it under price support (assuming that
    USDA will have to hold on to the powder it acquires under price support
    for a long period or give it away)? Further, aren't DEIP sales more
    beneficial to U.S. dairy farmers than price support acquisitions, since
    a product that is DEIP'ed is removed from the market forever, but price
    support acquisitions overhang the market and serve to weaken prices?
        Answer. Under current market conditions, it is cheaper to ``DEIP''
    nonfat dry milk than to purchase it under the price support program.
    Unfortunately, our entire Uruguay Round subsidy allowances are already
    fully dedicated under the DEIP program. Price support purchases may be
    cheaper under market conditions that permit short storage periods
    before sale back to the market or if the DEIP subsidies were more
    expensive. However, the dairy price support program ends at the
    beginning of 2000 and the DEIP program offers the opportunity to
    develop long-term dairy export markets.
                                     ______

                             Risk Management Agency
                     Questions Submitted by Senator Cochran
                              legislative proposal
        Question. The Administration proposes in the fiscal year 1999
    budget request to pay all administrative expense reimbursements to
    reinsured companies from the mandatory Federal Crop Insurance
    Corporation Fund. Program changes are proposed as a partial paygo
    offset that would take effect beginning in fiscal year 2000. These
    include: placing a $100,000 limit on Catastrophic Coverage; reducing
    the reimbursement rate on delivery expenses; reducing the subsidy for
    buy-up coverage; and limiting the loss ratio to 1.06.
        By reducing premium subsidies for higher levels of coverage, Mr.
    Ackerman you state that farmers would experience ``a slight increase''
    in producers' out-of-pocket costs to pay premiums, about 10 cents/acre.
    Farmers of which individual crops would be affected by this most?
        Answer. Crops with high values per acre or high premium rates will
    be affected more than this average change. For example, almonds will
    increase about $1.40 per acre due to an average liability of nearly
    $1,700 per acre. Wheat, with a liability of about $75 per acre and
    relatively high rates, will increase about 10 cents per acre. Cotton,
    with an average liability of $211 per acre, will increase about 46
    cents per acre.
        Question. By reducing the statutory loss ratio target from 1.075 to
    1.060 beginning in fiscal year 2000, producers' out-of-pocket expenses
    for premiums rates would increase also. How much does this increase
    farmers' out-of-pockets expenses?
        Answer. This would increase the costs for an average producer by
    about 1.4 percent. The national average, based on premium costs for
    1997, would be 10.4 cents per acre.
        Question. In the years beyond fiscal year 1999, the agency is
    proposing that half of the mandatory offsets would come from proposed
    changes in the crop insurance program and the other from USDA sources.
    What other USDA sources are being considered?
        Answer. The following are proposed Departmental offsets outside of
    the crop insurance program: Create a flexible, multi-year program level
    authorization for the Export Enhancement Program; and reduce the
    expenditures in Cotton Step 2 payments.
                            crop insurance companies
        Question. Mr. Secretary, you indicate in your opening statement
    that the weather in 1997 was particularly good and that the Federal
    Crop Insurance Program had a very favorable loss ratio of less than
    .80, which is well below the statutory requirement of 1.10. Thus the
    insurance companies received underwriting gains based on the risk they
    retained. Under more normal conditions, the companies would have
    received far less.
        How much in underwriting gains did the companies receive in 1997?
    In 1998?
        Answer. At the 1997 Annual Settlement, the companies received
    underwriting gains for the 1996 reinsurance year of approximately $248
    million based on $1.2 billion of premium retained by the companies and
    a loss ratio of 76.1 percent.
        At the 1998 Annual Settlement, the companies received underwriting
    gains for the 1997 reinsurance year of approximately $359 million based
    on $1.3 billion of premium retained by the companies and a loss ratio
    of 50.6 percent.
                                   loss ratio
        Question. You also mention a legislative proposal that would reduce
    the loss ratio, among other things. What will this new loss ratio be?
        Answer. The Risk Management Agency (RMA) proposes to reduce the
    loss ratio target, contained in Section 506 [7 U.S.C. 1506] (o)(2) of
    the Federal Crop Insurance Act, from 1.075 to 1.06.
                     government performance and results act
        Question. How are the agency's annual performance goals linked to
    the agency's mission, strategic goals, and program activities in its
    budget request?
        Answer. RMA's performance goals were derived directly from the
    Agency's objectives contained in its strategic plan. RMA documented its
    business processes (life cycles) in line with its strategic planning
    efforts. These business processes contain the activities that support
    the achievement of RMA's performance goals. RMA is currently working to
    establish the capability to more directly link program activities,
    performance goals, and resource requirements with the strategic plan
    components.
        Question. Could you describe the process used to link your
    performance goals to your budget activities? What difficulties, if any,
    did you encounter, and what lessons did you learn?
        Answer. RMA worked to link performance goals directly to program
    activities found in the current budget structure. However, the budget
    activity structure does not lend itself well to the measurement of
    RMA's progress toward achieving its overall mission and goal. Since RMA
    receives a single discretionary appropriation for administrative and
    operating expenses, it did not report individual program activities for
    this account in its fiscal year 1999 budget. Although the Agency did
    provide activity information on its mandatory account, the Federal Crop
    Insurance Corporation Fund, the current structure is not easily tied to
    the Agency's performance goal. Therefore, the Agency decided to take
    the approach of establishing annual performance goals and indicators
    that gauge progress toward achieving the long-term general goal and
    objectives found in its strategic plan. RMA is considering ways to
    improve the linkage between its performance goals and budget.
        Question. Does the agency's Performance Plan link performance
    measures to its budget? Does each account have performance measures?
        Answer. Yes--RMA's Annual Performance Plan does link performance
    measures to its budget, however, RMA chose to focus their performance
    measures and indicators on the mission, goal, objectives, and
    management initiatives of the Agency rather directly tying them to the
    program activities or accounts found in the budget. For example,
    performance goal #4 in RMA's annual plan, ``Reduce program
    vulnerabilities'' relates to one objective of the Agency, has funding
    tied to it through the discretionary A&O Account, but is not a separate
    program activity in the budget. RMA is currently working to establish
    the capability to more directly link all of these components.
        Question. To what extent does your performance planning structure
    differ from the account and activity structure in your budget
    justification?
        Answer. RMA's performance planning structure and the account and
    activity structure in its budget do differ significantly in format and
    structure. However, RMA's budget estimates and justifications do
    include some linkage to the performance goals and indicators found in
    the Annual Performance Plan, as well as goals and objectives found in
    the Agency strategic plan. This linkage can be found throughout the
    Agency's fiscal year 1999 Explanatory Notes package and 1999 Annual
    Performance Plan. In addition, it is important to note that RMA's
    performance plan is consistent with the Agency strategic plan and
    fiscal year 1999 budget request, as required. The following is a
    description of both the performance planning structure and program
    activities found in RMA's budget request:
      --The performance planning structure in the annual plan outlines the
            performance goals and indicators that RMA would like to
            accomplish in the given fiscal year. This structure is very
            similar to that found in RMA's strategic plan which focuses on
            the mission, goal, and objectives of the agency.
      --However, RMA's budget account and activity structures are based on
            program activities, and currently include two accounts, the
            mandatory Federal Crop Insurance Corporation Fund and the
            discretionary Administrative and Operating Expense Account. The
            FCIC Fund is further broken out by the following program
            activities: premium subsidy; delivery expenses; research and
            development reform costs; and apportionment for excess losses.
            For fiscal year 1999, the A&O account includes only one program
            activity--salaries and expenses. RMA understands the need to
            translate the performance goals and indicators directly to the
            program activities found in the budget, and is considering ways
            to achieve this.
        Question. Do you plan to propose any changes to your account
    structure for fiscal year 2000?
        Answer. At the present time, RMA does not propose any changes to
    the budget account structure for fiscal year 2000. However, if
    modifications were made, analysis would be conducted to determine the
    appropriate structure for future years.
        Question. How were performance measures chosen?
        Answer. RMA documented the life cycles for its core business
    processes using a cross-functional team. The team contained a diverse
    representation of managers and employees from all major functional
    areas of the Agency.
        These life cycles contained the activities, as well as specific
    inputs and outputs to these business processes. RMA selected the
    ``vital few'' measures that they felt would best allow RMA management
    to determine agency results in line with the strategic plan.
        Question. How did the agency balance the cost of data collection
    and verification with the need for reliable and valid performance data?
        Answer. Given current budgetary constraints, RMA has found it
    difficult to fund the development of truly meaningful performance
    measures. We realize that many of the measures in our fiscal year 1999
    budget measure output or workload rather than outcomes. However,
    several of our outcome-based measures require customer surveys which
    demand an investment of significant financial resources and time. RMA
    fully expects there to be lessons learned from the first attempt. These
    lessons will be used to improve the Agency's ability to conduct
    performance measurement in the coming years.
        Question. Does your plan include performance measures for which
    reliable data are not likely to be available in time for your first
    performance report in March 2000?
        Answer. RMA did not have complete baseline data to establish all
    performance targets for inclusion in its 1999 Annual Performance Plan.
    However, RMA has established an implementation plan for the
    institutionalization of its documented performance plan measures. This
    plan takes into account the March 2000 requirement. RMA's intent is to
    have all its performance measures and targets based on current,
    reliable, and/or statistically valid information.
        Question. What are the key performance goals from your fiscal year
    1999 Annual Performance Plan that you recommend this subcommittee use
    to track program results?
        Answer. RMA recommends that its performance measures that are
    outcome based be used to determine applicable program results. RMA's
    output-based measures are intended to help provide additional detail to
    assess programs in achieving outcome targets. It should be noted that
    RMA's outcome and output measures may not be mature enough for
    effective and efficient program management. RMA intends to conduct
    quarterly reviews of its available measures and determine their
    appropriateness as management tools. RMA fully expects adjustments to
    be made to its performance measures as experience is gained in results-
    based management.
        Question. In developing your Annual Performance Plan, what efforts
    did your agency undertake to ensure that the goals in the plan include
    a significant number of outcome measures?
        Answer. In RMA's annual performance planning process, we strove to
    include outcome measures for each objective and management initiative
    in support of our strategic goal. The intent was to include at least
    one outcome measure for each objective and management initiative. RMA
    recognizes that work needs to be done to establish or refine these
    measures. As mentioned previously, funding and time constraints
    precluded the development of some of these measures. As RMA gains
    experience with performance planning, our measures will improve and the
    benefits that can be derived for the Agency will increase.
        Question. Do you believe your program managers understand the
    difference between goals that measure workload (output) and goals that
    measure effectiveness (outcome)?
        Answer. Yes--RMA established measures utilizing cross-functional
    subject-matter experts serving on a team, some of whom were managers.
    These measures (i.e., output and outcome) were presented to and
    accepted by the Agency's senior management. RMA understands the need to
    train program managers on all GPRA concepts as implementation
    progresses.
        Question. What are some examples of customer satisfaction measures
    that you intend to use? Please include examples of both internal and
    external customers.
        Answer. RMA has created two projects that will institutionalize the
    development and administration of surveys to internal and external
    customers. RMA is currently in the definition stage working to
    determine: what data elements are needed; what specific questions
    should be asked; who should be asked; where are they; what vehicle/
    instrument should be used; what should be the frequency of data
    collection; and what the cost would be. Examples of internal customers
    include: employees and unions. Examples of external customers include:
    private reinsured companies and agricultural producers.
        Question. How were the measurable goals of your fiscal year 1999
    Annual Performance Plan used to develop your fiscal year 1999 budget?
        Answer. Actually, the fiscal year 1999 budget process began prior
    to the developmental stage of RMA's Annual Performance Plan. However,
    throughout the budget preparation process, RMA was able to incorporate
    portions of our annual plan throughout the fiscal year 1999 budget
    request. For example, justifications in the budget request link to the
    annual and strategic plans and support the goals within those plans.
    The Purpose Statement and Status of Program sections of the fiscal year
    1999 Explanatory Notes for the Agency outline the contents of the
    annual plan and reflect the resources required to accomplish those
    goals and measures. RMA feels that together, these two tools will
    provide clear direction to manage RMA's activities for fiscal year
    1999. In addition, the annual plan and budget documents clearly define
    the Agency's commitment to meet its goals.
        Question. If a proposed budget number is changed, up or down, by
    this committee, will you be able to indicate to us the likely impact
    the change would have on the level of program performance and the
    achievement of various goals?
        Answer. Yes--however, RMA is working to improve its ability to
    directly link its program activities and performance goals with
    resource and budget constraints.
        Question. Do you have the technological capability of measuring and
    reporting program performance throughout the year on a regular basis,
    so that the agency can be properly managed to achieve the desired
    results?
        Answer. Yes--however, RMA is working to utilize technology to
    improve its current capabilities of reviewing, analyzing, and adjusting
    priorities or business processes to ensure achievement of its
    performance goals. RMA recognizes the need to coordinate and assimilate
    this data into its programs, given that it comes from a variety of
    internal and external sources. RMA has established a project designed
    to institutionalize Agency reviews on a quarterly basis. RMA must
    establish its measure baselines and establish performance targets
    before these reviews will be of maximum benefit.
        Question. The Government Performance and Results Act requires that
    your agency's Annual Performance Plan establish performance goals to
    define the level of performance to be achieved by each program activity
    set forth in your budget. Many agencies have indicated that their
    present budget account structure makes it difficult to link dollars to
    results in a clear and meaningful way. Have you faced such difficulty?
        Answer. Yes--RMA has faced difficulties in linking dollars to
    results under the current budget structure, especially in the mandatory
    FCIC Fund. For example, it was very difficult to produce quantifiable
    and measurable performance goals for program activities such as
    delivery expenses paid to reinsured companies.
        Question. Would the linkages be clearer if your budget account
    structure were modified?
        Answer. It is not clear that linkages would be clearer if RMA's
    budget account structure were modified. However, RMA's mandatory FCIC
    Fund has been reviewed by Congress several times beginning in 1994 with
    the Crop Insurance Reform Act and most recently in the development of
    the Research Title. While the categories are broadly stated, the
    assumptions that underlie them have been analyzed closely.
        Question. If so, how would you propose to modify it and why do you
    believe such modification would be more useful both to your agency and
    to this committee than the present structure?
        Answer. If RMA were to modify its account structure, a thorough
    analysis would be conducted to determine how it could be improved.
        Question. How would such modification strengthen accountability for
    program performance in the use of budgeted dollars?
        Answer. If modifications were made, the strengthening of
    accountability would depend on the analysis stated above. It is assumed
    that modifications would more directly link RMA resources and
    activities (including FTE's, dollars, and business processes) with
    performance goals and provide the Agency with the necessary information
    to strengthen accountability.
        Question. Does your fiscal year 1999 performance plan--briefly or
    by reference to your strategic plan--identify any external factors that
    could influence goal achievement?
        Answer. Yes--in RMA's strategic plan, they identified several key
    external factors that could significantly affect progress in our
    efforts to achieve our goal.
        Question. If so, what steps have you identified to prepare,
    anticipate and plan for such influences?
        Answer. RMA conducted Business Process Reengineering (BPR) that
    allowed for the opportunity to address some of these factors. For
    example, in the area of improving its delivery partner relationship
    with the private sector, the BPR Final Report outlines recommendations
    and steps to improve this relationship.
        Question. What impact might external factors have on your resource
    estimates?
        Answer. RMA external factors can have significant impacts on our
    resource estimates. For example, depending on the level and degree of
    private sector involvement in risk management functions, the
    possibility of significant impacts to RMA resources are extensive.
        Question. Through the development of the Performance Plan, has the
    agency identified overlapping functions or program duplication? If so,
    does the Performance Plan identify the overlap or duplication?
        Answer. The performance planning process itself did not identify
    any significant duplicative functional or procedural steps.
        Question. Future funding decisions will take into consideration
    actual performance compared to expected or target performance. Given
    that: To what extent are your performance measures sufficiently mature
    to allow for these kinds of uses?
        Answer. RMA's measures have not been thoroughly tested and
    therefore proven to be the right measures allowing for proper results
    management of the Agency. Through time and empirical evidence, RMA will
    refine its measures and management processes and become more confident
    in its ability to manage actual performance with targeted performance.
        Question. Are there any factors, such as inexperience in making
    estimates for certain activities or lack of data, that might affect the
    accuracy of resource estimates?
        Answer. Many of RMA's traditional measures are activity-based. RMA
    is in the process of institutionalizing its outcome measures, and
    expects that time and experience will improve the accuracy of its
    resource estimates.
        Question. Based on your fiscal year 1999 performance plan, do you
    see any need for any substantive revisions in your strategic plan
    issued on September 30, 1997?
        Answer. No--RMA's fiscal year 1999 Annual Performance Plan was
    directly derived from its strategic plan. However, RMA expects that
    changes to its strategic plan in the future will result in adjustments
    to any following performance plans.
                                     ______

                     Questions Submitted by Senator Bumpers
                   private insurance company program delivery
        Question. You mention that suggested crop insurance reforms might
    reduce private company profits by 20 percent. What level of profits
    have private insurance companies been making from the crop insurance
    programs in recent years?
        Answer. The company pre-tax return on retained premium based on the
    reinsurance agreement terms effective during that year are as follows:

                                                            Actual return on
                                                            retained premium
            Reinsurance year                                       (percent)
    1992..............................................................     5
    1993..............................................................   -19
    1994..............................................................    19
    1995..............................................................    17
    1996..............................................................    21
    1997..............................................................    28
    1998 (estimate)...................................................    10

        Question. If private companies are realizing sizable profits from
    crop insurance, why does USDA need to provide an additional $188 to
    $205 million to reimburse the companies for program delivery?
        Answer. The Risk Management Agency (RMA) believes that insurance
    gains and losses from administrative and operating expenses subsidies
    should be treated separately. The basic premise behind risk sharing
    provisions of the Standard Reinsurance Agreement (SRA) is for the
    companies to share in both gain and loss years. RMA is contracting for
    a delivery system with private sector insurance companies. The delivery
    of the crop insurance program directly competes with the delivery of
    other lines of insurance which private sector insurance companies may
    choose to sell. Administrative and operating subsidies are intended
    solely to cover delivery expense to ensure that companies do not lose
    money in their delivery. Taken together, risk sharing provisions and
    the payment of delivery expenses provide an incentive for companies to
    sell crop insurance.
        The issue of profitability, as with a share of underwriting gains
    and losses, was a significant one during the negotiations for the
    recently agreed upon 1998 SRA. RMA intends to continue discussions with
    the crop insurance industry regarding profitability in the delivery of
    the Federal crop insurance program. RMA believes the pre-tax rate of
    return provided by the 1998 SRA is similar to the rate of return
    received from the insurance company investments in other lines of
    insurance and allows insurance companies to continue delivering the
    program.
                             other program reforms
        Question. Another suggested reform to achieve savings is to place a
    $100,000 cap on payments to farmers for catastrophic risk protection
    (CAT). Would this change be fair to producers who might raise crops
    with higher market values and higher production costs?
        Answer. The matter of payment limitations affects many people in
    various circumstances differently. You have cited high value or high
    production costs as distinguishing characteristics. The cap would also
    affect small scale farmers differently from large scale farmers. The
    limit is consistent with those established under ad hoc disaster
    programs and the Noninsured Assistance Program (NAP). However, the ad
    hoc and NAP programs are subject to a further limitation for farmers
    with less than $2,000,000 in gross income from all sources, which is
    not proposed under the Department's proposal. Thus, we believe the
    proposed limit is consistent with previous Congressional actions but is
    relatively more liberal to recognize that this is an insurance program,
    not ad hoc disaster assistance.
        Question. For example, would a payment of $100,000 to a rice farmer
    with high production costs be of equal ``value'' as a $100,000 payment
    to a wheat farmer with relatively low production costs?
        Answer. A wheat farmer with relatively low production costs per
    acre would need to farm significantly more acreage than a rice farmer
    to qualify for a $100,000 payment. Hence, even though the costs per
    acre are lower, the total costs associated with a $100,000 payment may
    not differ materially. If this is the case, the value of the payment
    should be roughly equivalent for the two producers.
        Another proposed reform is to reduce the statutory loss ratio from
    1.075 to 1.060. The immediate result of this change would be to
    increase crop insurance premiums.
        Question. Have you determined what effect this change will have on
    the level of crop insurance participation? If so, what did you find?
        Answer. There are no studies that unambiguously estimate what
    economists call the price elasticity of demand of crop insurance. The
    effect of this action would be to increase premiums by about 1.4
    percent. A typical policyholder owed about $1,020 of farmer-paid
    premium in 1997. The increase would be about $14. This probably is not
    large enough to trigger widespread cancellations. Changes due to
    planted acres, yields, or price elections may have a greater effect on
    premiums than would this change.

                              Subcommittee Recess

        Senator Cochran. Our next hearing is going to be next week
    in this same room. We will hear the budget proposal from the
    Food and Drug Administration and the Commodity Futures Trading
    Commission at that time.
        Until then, the subcommittee will stand in recess.
        [Whereupon, at 11:33 a.m., Tuesday, March 24, the
    subcommittee was recessed, to reconvene at 10:04 a.m., Tuesday,
    March 31.]

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 1999

                                  ----------

                            TUESDAY, MARCH 31, 1998

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 10:04 a.m., in room SD-138, 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 our subcommittee is continuing its review of the
    President's budget request for the next fiscal year. This
    morning we are considering specifically the request for funding
    of two independent agencies under the subcommittee's
    jurisdiction, the Commodity Futures Trading Commission and the
    Food and Drug Administration.
        Because we have a vote that is scheduled to occur on the
    floor of the Senate at 10:30, I hope that we are able to
    complete action on the first panel which deals with the
    Commodity Futures Trading Commission, and then I will go over
    and vote. Senator Bumpers may very well be here at that time as
    well. We will either continue the hearing if there is a Senator
    here to chair it or temporarily suspend the hearing until I can
    return from the floor for that vote.

                               Prepared Statement

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

                     Prepared Statement of Senator Bumpers

        Mr. Chairman: All too often, people hurriedly refer to this
    subcommittee as the ``Agriculture'' subcommittee. Sometimes, if
    they are generous, they may refer to it as the ``Agriculture
    and Rural Development'' subcommittee. It is unfortunate that
    people generally fail to recognize that the title of this
    subcommittee ends with ``And Related Agencies'' which include
    the Commodity Futures Trading Commission and the Food and Drug
    Administration, both of whom are with us today.
        Ours is also, perhaps, an unfortunate choice of a name to
    the extent that these two agencies are collectively considered
    as ``Related Agencies''. This term might suggest to some a
    relegation of importance to a level somewhere below our usual
    recognition of ``Agriculture'' or ``Rural Development''. Let me
    assure our guests and my colleagues on the Subcommittee on
    Agriculture, Rural Development, and Related Agencies, that the
    Commodity Futures Trading Commission and the Food and Drug
    Administration do hold responsibilities of great importance to
    our nation.
        The CFTC may not be a household word to every American and
    there may be relatively few Americans who actively participate
    in futures trading. However, for anyone who has ever viewed
    (with fascination, I am sure) the complex workings of the
    futures pits and considered for a moment the effect of the
    numbers on the board to investors and financial security all
    around the world, the members and staff of the CFTC are not
    viewed as simply another agency.
        The American economy is strong. Still, we hear rumblings of
    market instability on foreign shores and we have seen in recent
    years the effect market manipulation can have on a regional and
    global scale. As markets become ever more ``global'' in nature,
    the role of the CFTC takes on greater importance as a regulator
    whose mission it is to ensure protections in the marketplace
    for our investors and our producers.
        The 1996 Farm Bill eliminated many of the traditional Farm
    Safety Net features that farmers had relied on for years to
    protect them from an unstable market place. The Risk Management
    Agency at USDA has the task of creating programs to reduce the
    farmer's risk from nature and, to an extent, from the markets.
    The CFTC also holds an important role in offering the farmer
    tools that will enable him leverage in the market place to
    secure a reasonable price for his products. The use of futures
    is complex and, to many unfamiliar with the practice, a
    frightening and potentially costly alternative. The CFTC has a
    place in working with the farmer as well as the professional
    trader to make certain that products on the futures exchanges
    are available in a manner meaningful and useful to all. To that
    extent, the CFTC plays a role other than as simply a ``Related
    Agency'' but with a real responsibility to ``Agriculture and
    Rural Development''.
        The Food and Drug Administration is one of those agencies
    whose responsibilities are often unrecognized but are, in fact,
    of extreme importance. A loss of the protections to human
    health and safety afforded by this agency are uncomprehensible.
    No American can enter a grocery store, a pharmacy, or a
    hospital in which protections of the FDA are not in place. I
    further believe that no American could imagine the changes to
    his or her lifestyle that would occur if those protections were
    not in place.
        The Food and Drug Administration has taken criticism in
    recent years over delays in drug approval and other items. The
    Food and Drug Modernization Act of 1997 may do much to correct
    some of those problems. Still, regardless of past criticism, I
    would not trade the security of our food, blood, and drug
    supplies in this nation for that of any other country on earth.
    As modern medicine advances, FDA must keep pace and it is the
    responsibility of this subcommittee to provide the resources to
    keep FDA in step with technology.
        FDA, as with USDA, is going through a period of
    introspection, consolidation, and downsizing. Just as agencies
    experience growing pains during periods of growth, similar
    trauma occurs (usually in a more painful manner) in the event
    of contraction. The consolidation of the FDA regional field
    laboratories presents challenges but will provide a much more
    efficient agency with inherent cost savings. I support this
    consolidation and encourage the agency to move as rapidly as
    possible. I will do what I can on this subcommittee to provide
    the resources and direction necessary to effect these changes
    as quickly as are prudent.
        Over the past several years, this subcommittee has provided
    consistent increases for FDA. I am sure that we will do what we
    can for the coming fiscal year to help FDA maintain its
    commitment to quality, protection, and safety. I note that the
    budget submission, again, proposes unauthorized user fees and
    we are all aware of the special problems such assumptions
    create. I admonish my friends in the Administration, just as I
    have to those in previous Administrations, that we should be
    presented with a budget submission that can be reasonably
    assumed to be enacted. If FDA truly expects to achieve a higher
    program level through the collection of new user fees, they
    should first secure those fees from the appropriate committees
    before suggesting a lower request for new budget authority. We
    want to be helpful, but we also demand cooperation.
        Mr. Chairman, this is our last hearing for the fiscal year
    1999 appropriations bill. As such, it is the last hearing I
    will attend in my capacity as a member of this subcommittee.
    Let me again express publicly my sincere gratitude for the
    opportunity to serve with you these many years and for your
    gracious manner in disposing your responsibilities. You have
    always been honest and fair and truly a pleasure to work with.
    While there are some features of public life I will not miss,
    sharing a role on this subcommittee with you and all members,
    Republican and Democrat alike, is not one of them. I will miss
    all of you.

                            Introduction of Witness

        Senator Cochran. We are very pleased to have Ms. Brooksley
    Born who chairs the Commodity Futures Trading Commission as our
    first witness, and we have a copy of your written testimony
    which we appreciate very much. We will make that a part of the
    record in full and invite you to make any comments or summarize
    your statement in any way that you think would be helpful to
    the committee. We then will have an opportunity for some
    questions.
        You may please proceed.

                          Statement of Brooksley Born

        Ms. Born. Thank you very much, Mr. Chairman. The Commission
    very much appreciates this opportunity to discuss the
    President's fiscal year 1999 budget request for the Commodity
    Futures Trading Commission.
        With me today is Madge Bolinger who is the Director of the
    Commission's Office of Financial Management.
        The Commodity Futures Trading Commission is a small agency
    with an important mission. It oversees the Nation's futures and
    option exchanges and the over-the-counter derivatives market.
    The Commission also supervises 64,000 commodity professionals
    who trade on the floor of the Nation's exchanges or represent
    customers. These markets have experienced explosive growth in
    the past decade.
        The President's fiscal year 1999 budget request for the
    Commission is $63.4 million, with a staffing level of 600 full-
    time equivalents. This request represents a $5.3 million
    increase over fiscal year 1998, or approximately 9 percent. It
    calls for an additional 20 full-time equivalent staff-years
    over the fiscal year 1998 appropriation, or a 3-percent
    increase in staff.
        Approximately $3.9 million of the increase is required for
    the Commission to sustain its current level of services, and
    the remaining $1.4 million would support the requested 20
    additional staff-years. The staff increase would raise the
    Commission's staff to approximately the staff level it had in
    fiscal year 1992.
        The Commission is responsible for ensuring the integrity of
    the Nation'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
    encouraging the competitiveness and efficiency of the Nation's
    futures and option exchanges. Through effective oversight
    regulation, the Commission enables the commodity futures
    markets better to serve their vital price discovery and hedging
    functions in the Nation's economy.
        The requested increase will be used to enhance the
    Commission's enforcement, market surveillance, and oversight
    presence in our rapidly changing and growing on- and off-
    exchange markets. The largest portion of the requested dollar
    increase will be dedicated to the Division of Enforcement,
    which will receive an allocation of 10 additional staff-years.
    The addition of these staff-years would, in effect, complete
    the reorganization of the division, which was begun in 1995.
    The division's new flexible organizational structure, which
    will be enhanced by the 10 additional staff-years, will allow
    the enforcement program to devote necessary staff to special
    matters such as quick strike cases and large, complex cases,
    including fraud and manipulation cases, without detracting from
    the Commission's strong enforcement presence throughout the
    industry.
        The increase will also enhance the Commission's market
    surveillance program. Additional staff-years will be used to
    implement the Commission's new integrated market surveillance
    system and to maintain an effective surveillance program over
    the growing markets. A strong surveillance program is critical
    for the Commission to carry out its mission of detecting and
    deterring price manipulation and other major market abuses.
        The requested increase will also provide the resources
    necessary to sustain our oversight over contract market
    practices and standards. The increase will provide the
    Commission with the resources necessary to address new product
    developments, new market linkages, new trading developments,
    and other innovations.
        Overall, the increase in funding and staffing will
    strengthen the Commission and increase its ability to oversee
    the growing and vital futures and option markets that are
    critical to the Nation's economy.
        As part of our commitment to maintaining strong futures and
    option markets, one of the Commission's top priorities in
    fiscal year 1997 and continuing into fiscal year 1998 has been
    to modernize and streamline its regulatory framework. The
    growth and change in our markets, as well as revolutionary
    technological developments, have necessitated a comprehensive
    review of the Commission's regulations. The Commission is
    seeking to eliminate undue regulatory burdens while continuing
    to provide an effective level of regulation and public
    protection.
        Toward that end, the Commission has proposed or adopted a
    number of regulatory reform initiatives in the last year
    relating to exchange markets and commodity professionals, many
    of which are described in my written testimony.
        An additional area of our regulatory reform efforts
    involves a review of our regulatory framework for over-the-
    counter derivatives instruments. It has been 5 years since the
    Commission exempted some types of OTC instruments entered into
    by sophisticated parties from provisions of the Commodity
    Exchange Act, other than prohibitions of fraud and
    manipulation.
        Since that time, the OTC markets have grown dramatically
    both in size and in the diversity of the instruments offered.
    These developments have prompted the Commission to examine its
    approach to this market. The Commission plans to issue shortly
    a concept release which will invite comment on how best to
    achieve an appropriate balance between the need to ensure that
    U.S. entities have the opportunity to remain competitive in the
    global financial marketplace and the need to maintain adequate
    regulatory safeguards.
        We look forward to the input of the industry, users of OTC
    derivative instruments, relevant regulatory authorities, and
    other interested persons, including members of this
    subcommittee, as we go forward with our concept release and
    other regulatory reform initiatives.
        We believe that the increase that the President has
    requested for fiscal year 1999 is essential for the Commission
    to fulfill its congressional mandate and to keep pace with
    growing complex and dynamic markets.
        Thank you very much, and I will be pleased to respond to
    questions.

                               Prepared Statement

        Senator Cochran. Thank you, Madam Chairperson. We
    appreciate your being here and the fact that you have always
    been very willing to discuss with the committee matters that
    relate to the Commission's budget and the activities of the
    Commission. We will insert your prepared statement in the
    hearing record.
        [The statement follows:]
                      Prepared Statement of Brooksley Born
        Mr. Chairman and Members of the Subcommittee: I am pleased to
    appear before you this morning to discuss the President's fiscal year
    1999 budget request for the Commodity Futures Trading Commission
    (``CFTC'' or ``Commission''). In my testimony today, I will provide the
    Subcommittee with an overview of the proposed budget for 1999, discuss
    the need for additional resources for the Commission's programs and
    update you on highlights of fiscal year 1997, including the
    Commission's efforts to streamline its rules and procedures and to
    relieve unnecessary regulatory burdens while maintaining important
    customer protections.
                 request for appropriations in fiscal year 1999
        The President's fiscal year 1999 budget request for the Commission
    is $63.4 million. That sum represents an increase of $5.3 million (or
    nine percent) over fiscal year 1998 appropriations. Approximately $3.9
    million of the increase is necessary for the Commission to maintain its
    current level of services and operations. The remaining $1.4 million
    increase would support the addition of 20 full-time equivalent
    (``FTE'') staff years, a three percent increase in staffing. The budget
    request would provide the Commission with the resources needed
    effectively to perform its legislative mandate under the Commodity
    Exchange Act (``CEA'' or ``Act'').
               overview of funding levels and operational effects
        The Commission has a statutory mandate to oversee the nation's
    futures and option markets, including on- and off-exchange transactions
    in futures and options. The Commission is responsible for ensuring the
    economic utility of these markets by guarding the integrity of the
    markets, protecting customers from fraud and other trading abuses,
    monitoring the markets to detect and to prevent price distortions and
    manipulation, and encouraging the competitiveness and efficiency of the
    nation's futures exchanges. Through effective oversight regulation, the
    CFTC enables the commodity futures markets better to serve their vital
    functions in the nation's economy, price discovery and hedging.
        The Commission also 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,
    maintain financial integrity, use proper sales practices and provide
    adequate risk disclosures to their customers.
        For well over a century, futures transactions have enabled
    producers, merchandisers and processors of agricultural commodities to
    protect against adverse price movements. In recent decades, market
    innovations have expanded to include contracts for other physical
    commodities such as metals and energy products. In addition, the
    derivatives industry has developed new on- and off-exchange futures and
    option products that have given financial institutions and others tools
    to protect against currency fluctuations, equity index variations, and
    interest rate changes. The proven utility of these on- and off-exchange
    derivative transactions has resulted in phenomenal growth in their
    trading volumes.
        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 U.S. futures exchanges. The
    commodity futures and option markets have experienced dramatic growth.
    Exchange futures and option trading has increased by 100 percent in the
    last decade (from 275 million to 555 million contracts). In the last
    year alone the number of futures and option contracts traded on
    designated U.S. contract markets grew from 499 million in 1996 to
    nearly 555 million in 1997, an increase of more than 11 percent. The
    Commission's regulatory program has 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 exercises
    oversight of the rapidly growing and evolving over-the-counter market
    in derivative instruments. The CFTC works with other U.S. financial
    regulators and with the international regulatory community to address
    disclosure and market integrity issues in the global market. This
    enormous market, currently estimated to have a notional value well in
    excess of $27 trillion world-wide, has emerged in the past decade.
        Growing managed funds.--The CFTC regulates commodity pool operators
    (``CPO's'') and commodity trading advisors (``CTA's''). Funds committed
    to professional management for futures trading have grown
    exponentially, from $115 million in 1975 to over $35 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 (``NFA''). Since 1986, the CFTC has
    approved over 450 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 assure that 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. 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
    own oversight and enforcement programs. In 1995 Congress reaffirmed
    these obligations by adopting a reauthorization of the Commission
    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 poses regulatory
    challenges to the CFTC, including the need to police futures and option
    trading advice and sales offered illegally via the Internet.
                                 cftc resources
        During the past four years, both the Administration and Congress
    have recognized the need for additional resources at the CFTC to
    maintain effective oversight over the growing and evolving futures and
    option markets. Accordingly, the CFTC has received increased
    appropriations to maintain current service levels from year-to-year, to
    provide additional resources to the Commission's Division of
    Enforcement and to permit investments in technology to increase the
    Commission's ability to conduct adequate market surveillance.
        The proposed increase in funds for fiscal year 1999 is necessary to
    enable the Commission to keep pace with the rapid growth in volume and
    the profound changes resulting from novel transactions, new trading
    systems, new market practices, advances in technology, and the
    globalization of the markets. The additional resources would be
    dedicated primarily to maintaining an effective enforcement,
    surveillance and oversight presence in these rapidly changing and
    growing markets. In addition, the Commission must remain responsive to
    technological developments, business changes, and market evolution so
    as not to burden innovation and financial market growth with regulatory
    inefficiencies and outmoded regulatory structures. The Commission began
    a comprehensive regulatory review and reform initiative in fiscal year
    1997, which is ongoing in fiscal year 1998 and will continue into
    fiscal year 1999. Without the requested additional resources, the
    Commission would not be suitably equipped to carry out effective
    enforcement, market surveillance and regulatory reform.
        Much of the requested increase will be dedicated to the Division of
    Enforcement, which will receive an allocation of ten additional FTE
    staff years. That allocation of resources would make the Division's
    employment level the strongest since fiscal year 1992. The addition of
    these staff years would in effect complete the reorganization of the
    Division, which began in 1995. The ten additional FTE's will be devoted
    to investigation and prosecution of matters involving fraud, quick-
    strike cases, and large, complex cases, including manipulation cases.
    The Division's new flexible organizational structure will allow the
    Enforcement program to devote necessary staff to respond appropriately
    without detracting from a strong enforcement presence across the
    industry.
        The Commission's fiscal year 1999 budget request would also add
    five FTE staff years to further the Commission's market surveillance
    efforts. These FTE's are necessary to continue the effort started in
    1997 to implement new software for the integrated market surveillance
    system and to maintain an effective surveillance program for a dynamic
    industry. One of the major enhancements of the system is the ability to
    obtain and analyze daily large trader option data. (Previously large
    trader option data was obtained on a weekly basis.) The system also has
    the benefit of reducing the overall reporting burden of certain
    commodity professionals, who will report large trader data only to the
    CFTC rather than to multiple exchanges. Full implementation of the new
    system, together with the Commission's current surveillance system,
    will enhance the Commission's ability to detect and deter price
    manipulation or other major market abuses.
        The final five additional FTE staff years will be allocated to the
    Division of Trading and Markets. The Division of Trading and Markets
    has taken the lead in developing many of the regulatory reform
    initiatives that have been undertaken or are being considered by the
    Commission. A number of those initiatives are discussed in the
    Commission's highlights of fiscal year 1997 described below. Additional
    resources are needed to develop innovative regulatory approaches to
    address new product developments, market linkages, and trading
    mechanisms and to assure that clearing organizations, firms holding
    customer funds, and other commodity professionals operate safely and
    consistently with the public interest. The resources will also enhance
    Commission oversight of contract market standards and practices.
        The requested increase in funding and staffing will strengthen the
    Commission and will increase its ability to oversee the growing and
    vital futures and option markets that are critical to our nation's
    economy.
                         highlights of fiscal year 1997
                            regulatory streamlining
        One of the Commission's top priorities in fiscal year 1997 and
    continuing into fiscal year 1998 has been to modernize and to
    streamline its regulatory framework. Much of the Commission's
    regulatory regime dates back to its early years as an agency. The
    explosive growth and change in our markets as well as revolutionary
    technological developments have necessitated a comprehensive review of
    the Commission's regulations. The Commission must ensure that its rules
    have adapted to changes in the marketplace and continue to provide an
    effective level of regulation and public protection. Toward that end,
    the Commission has proposed or adopted a number of regulatory reform
    initiatives in the last year, some of which I would like to highlight
    here today.
    Fast-Track Review for Contract Designations and Rule Changes
        In fiscal year 1997, the Commission implemented new ``fast-track''
    procedures for processing certain contract designation applications and
    exchange rule changes. These procedures significantly streamlined the
    review process for most new exchange contracts and many exchange rules,
    permitting approval within ten days for many types of contracts and 45
    days for certain other contracts.
        Prior to the adoption of fast-track procedures, the Commission had
    already reduced its average contract approval time to about 90 days.
    During the seven months of fiscal year 1997 that the fast-track rules
    were in place, 15 new contract designations were filed with the
    Commission, seven of which were eligible for fast-track treatment. The
    Commission approved all eligible contracts within the fast-track
    period. Even contracts not subject to the fast track procedures--such
    as stock index futures contracts, which must be submitted to the
    Securities and Exchange Commission (``SEC'') for comment--were approved
    in record time. For example, during fiscal year 1997, the Commission
    approved the Chicago Mercantile Exchange's (``CME'') E-Mini S&P 500
    contract and the Chicago Board of Trade's (``CBOT'') Dow Jones
    Industrial Average contract within days of receiving the statutorily
    required SEC comment letters.
    Reporting and Disclosure Requirements
        The Commission also streamlined many of its reporting and
    disclosure requirements. The agency amended its reporting requirements
    to permit filing by large traders of CFTC Form 40, Statement of
    Reporting Trader, only when requested by the Commission rather than
    annually. In an important development for CFTC registrants who are also
    SEC registrants, the Commission adopted rule amendments to harmonize
    certain financial reporting requirements with the requirements of the
    SEC. The Commission also approved in principle two-part risk disclosure
    documents for commodity pool offerings, which potentially would
    highlight the core information required to be provided to customers.
        In early September 1997, the Commission proposed amendments to its
    rules reducing the risk disclosure obligations of futures commission
    merchants (``FCM's'') and introducing brokers (``IB's'') as to
    financially sophisticated customers. The Commission approved the rules
    on February 20, 1998, and expects the rule amendments to speed the
    account opening process for the customers identified in the rule. The
    rule provides flexibility to FCM's and IB's to design their own
    disclosure of risk by eliminating certain mandatory risk disclosure
    information and procedures. This proposal responded directly to
    industry calls to permit different regulatory treatment of
    sophisticated customers where appropriate.
    Electronic Media
        The Commission has adopted a number of initiatives designed to take
    advantage of the increased efficiencies and reduced costs made possible
    through the use of electronic media. In June 1997, the Commission paved
    the way for FCM's to use electronic media to communicate with their
    customers. The Commission's Advisory permits FCM's to deliver
    confirmations and account statements solely by electronic media to
    customers who consent to electronic transmission in lieu of receiving
    paper documents. Also in June, the Commission authorized CTA's and
    CPO's to provide risk disclosure documents to their customers via
    electronic media. The Commission's interpretation enables CPO's and
    CTA's to provide customers with a risk disclosure summary and a
    hyperlink connection to the entire risk disclosure document.
        The Commission also adopted measures to permit the electronic
    filing of documents with the Commission. In April 1997, the Commission
    adopted a rule allowing CTA's and CPO's to file their required
    disclosure documents with the Commission electronically. The Commission
    has also undertaken a program to permit FCM's to file required
    financial reports with the Commission electronically. These electronic
    media initiatives should increase the timeliness of information flow,
    reduce the administrative costs of commodity professionals and allow
    members of the industry and their customers to reap the benefits of
    technological advances.
    Streamlined Requirements for Commodity Professionals
        The Commission's streamlining efforts have brought significant
    benefits to FCM's, CTA's and their customers. For example, in June
    1997, the Commission approved an interpretation permitting streamlined
    procedures for allocation of customer orders which are bunched for
    execution by CTA's. The Commission provided relief to FCM's with
    respect to the capital treatment of short option positions to permit
    more FCM's to carry such positions for customers and to facilitate
    efficient use of capital without creating undue financial risk.
    Delegations to the National Futures Association
        To improve the efficient use of Commission resources, the
    Commission has focused on whether it could delegate additional
    functions to the NFA. The NFA is a self-regulatory organization of
    commodity professionals designated by the Commission under the CEA to
    perform certain regulatory functions. During the past year, the
    Commission delegated additional authority to NFA in several areas
    including registration decisions relating to floor brokers and floor
    traders with disciplinary histories, various registration and
    processing functions relating to non-U.S. firms, and the review of
    disclosure documents required to be filed by CPO's and CTA's.
                                  enforcement
        During fiscal year 1997, the Commission focused enforcement efforts
    on matters involving allegations of fraud in a variety of contexts. For
    example, the Division of Enforcement pursued cases against commodity
    professionals which failed to register with the Commission, as
    required, and which violated the anti-fraud provisions of the Commodity
    Exchange Act. The Division filed cases alleging fraud in the offer and
    sale of various off-exchange instruments, including precious metals
    contracts and foreign currency contracts marketed to the general
    public. The Division also pursued cases against firms and individuals
    using fraudulent advertising and solicitations.
        In fiscal year 1997, the Division of Enforcement also investigated
    allegations related to certain hedge-to-arrive contracts involving
    grain elevators. As a result, in fiscal year 1997 the Commission filed
    three separate administrative complaints alleging violations of various
    provisions of the CEA and Commission regulations in connection with
    certain of these hedge-to-arrive contracts. The Commission filed an
    additional complaint in fiscal year 1998. The Division of Enforcement
    continues to investigate other individuals and entities in connection
    with hedge-to-arrive contracts.
                             contract designations
        In fiscal year 1997, the Commission reviewed and approved 51
    applications for new futures and option contracts. Several of these
    contracts reflect innovative approaches designed to meet specialized
    hedging needs. For example, the Commission approved contracts based on
    inflation-indexed debt instruments issued by the U.S. Treasury,
    including the CBOT inflation-indexed Treasury bond, long-term Treasury
    note, and medium-term Treasury note futures and option contracts. These
    contracts, the first based on inflation-indexed debt securities, were
    designed specifically to deal with the unique hedging needs of
    institutions exposed to risk arising from holding the inflation-indexed
    instruments recently issued by the U.S. Treasury.
                      international regulatory cooperation
        The CFTC, along with British and Japanese authorities, co-sponsored
    an international regulators conference on physical delivery markets in
    London in November 1996. Regulators from 17 countries issued a
    Communique agreeing on certain basic principles of regulation of such
    markets. The participants also agreed on a year-long work program for
    the development of international ``best practices'' standards on
    contract design, market surveillance, and information sharing. Such
    best practices standards were agreed upon at a meeting of international
    regulators on October 31, 1997, in Tokyo. To date 17 regulators from 16
    countries have subscribed to the standards. International best
    practices standards help to protect the U.S. markets from the impact of
    events on foreign markets due to poor market regulation abroad. They
    also assist in leveling the international regulatory playing field for
    markets and commodity professionals.
                establishment of office of international affairs
        In late July 1997, the Commission created, within the Office of the
    Chairperson, an Office of International Affairs to enable the
    Commission to continue its leading role in international regulatory
    initiatives and to keep abreast of global changes. Over the past
    several years, there has been enormous growth in the international
    marketplace. New exchanges have been established around the world,
    foreign trading volume has grown, new regulatory bodies have been
    created abroad, and the need for cooperation and understanding among
    international regulators and exchanges has become paramount. The Office
    of International Affairs will enhance the Commission's ability: (1) to
    respond quickly to market crises that have global systemic
    implications; (2) to remain an effective supervisor in a global
    marketplace where no one regulator has all the information or resources
    to regulate its markets or its firms; and (3) to eliminate unnecessary
    impediments to global business while preserving core protections for
    markets and customers. The Office of International Affairs will play a
    key role in an evolving process toward international harmonization of
    regulations which ensure market innovation and access while maintaining
    needed customer and market protections.
                           agricultural trade options
        Agricultural options--both on- and off-exchange--were traded in the
    United States at least from the time of the Civil War until the 1930's.
    However, concerns about fraudulent sales practices, failure to perform
    over-the-counter obligations, and the use of exchange-traded options to
    manipulate the prices of agricultural commodities prompted numerous
    industry and government efforts to limit or eliminate trading in
    agricultural options. In 1936, Congress banned all sales of options on
    certain agricultural commodities listed in the CEA. In 1982, Congress
    lifted the 1936 statutory ban, allowing the Commission to permit
    options on certain agricultural commodities listed in the Act. The
    Commission permitted exchange trading in these agricultural options in
    1984. However, the regulatory ban on off-exchange agricultural options
    remains.
        In May 1997, the Commission's Division of Economic Analysis issued
    a White Paper on this issue. The paper analyzed: (1) the current
    regulatory environment; (2) recent developments in agriculture that
    have expanded the need for risk-shifting strategies; (3) the benefits
    and risks of agricultural trade options; and (4) possible ways to
    strike a balance between the benefits and the risks. The staff analysis
    identified, for the consideration of the Commission, risks and benefits
    of lifting the ban. The Commission sought public comment on the issue
    through a Federal Register notice and by holding meetings in
    Bloomington, Illinois and Memphis, Tennessee.
        The Commission published a proposal in the November 4, 1997 Federal
    Register to establish a three-year pilot program that would lift the
    ban on certain agricultural trade options subject to regulatory
    protections. Under the rules as proposed, entities which handle the
    agricultural commodity in normal cash market channels would be able to
    offer to buy or sell options on that commodity with other commercial
    counterparties for business-related uses. These options would require
    physical delivery of the commodity if exercised and could not be
    repurchased, resold or otherwise canceled prior to the expiration or
    exercise of the option. Entities offering to buy or sell the options
    would be required to become registered as agricultural trade option
    merchants, to report to the Commission on their transactions, to
    provide their customers with disclosure statements and to safeguard
    their customers' premiums. As a condition of registration, such
    entities would be required to meet a financial requirement,
    successfully complete a proficiency exam and periodically attend ethics
    training. The Commission also proposed to exempt from the prohibition
    and the other proposed rules described above individuals or entities
    which have a net worth in excess of $10 million. Finally, the
    Commission proposed to remove the prohibition on the offer and sale of
    agricultural options for physicals on designated exchanges. The
    Commission is currently considering all comments received on its
    proposal and expects to conclude its consideration of the matter soon.
      delivery specifications for chicago board of trade futures contracts
        In December 1996, the Commission voted unanimously to notify the
    CBOT under section 5a(a)(10) of the CEA that the delivery terms of the
    CBOT corn and soybean futures contracts no longer accomplish the
    statutory objectives of ``permit[ting] the delivery of any commodity .
    . . at such point or points and at such quality and locational price
    differentials as will tend to prevent or diminish price manipulation,
    market congestion, or the abnormal movement of such commodity in
    interstate commerce.'' That decision was based on a substantial
    reduction of the delivery capacity in Chicago under the CBOT contracts.
        The Commission's notification gave the CBOT until March 4, 1997, to
    submit proposed amendments to its corn and soybean contracts to achieve
    the statutory objectives. On April 15, 1997, the CBOT approved proposed
    contract changes. Nearly 700 comments were received by the Commission
    relating to the CBOT's proposed delivery amendments, many expressing
    objections. On September 15, 1997, the Commission published a proposed
    order to change and to supplement the CBOT's proposed amendments for
    the corn and soybean futures contracts. After providing the CBOT an
    opportunity to be heard, the Commission issued its final order on
    November 7, 1997.
        Since issuance of the final order, the CBOT has submitted new terms
    for its corn and soybean futures contracts for the Commission to
    consider. The CBOT's board of directors, on February 10, 1998, approved
    additional revisions to its current proposal. The CBOT's full
    membership approved the additional revisions on March 19, 1998. The
    revised proposal has since been submitted to the Commission and is
    currently under review.
                          audit trail and dual trading
        Accurate audit trails have been an aim of the Commission since its
    inception. In the past year, the Commission reviewed compliance with
    statutory and regulatory requirements regarding audit trails and dual
    trading in order to assure that trade monitoring systems are in place
    which, to the extent practicable, enable effective detection,
    deterrence, and prosecution of trading abuses, as required.
        During 1997 the Commission took action on all pending exchange
    petitions for exemption from the statutory dual trading ban provisions
    of the CEA, except for the New York Mercantile Exchange's (``NYMEX'')
    petition. (NYMEX asked for a delay in Commission action in light of its
    recent relocation to new facilities with new audit trail systems.) The
    Commission issued unconditional dual trading exemptions to the
    Commodity Exchange, Inc. (``COMEX''), the Coffee, Sugar & Cocoa
    Exchange (``CSCE'') and the New York Cotton Exchange (``NYCE''), each
    of which demonstrated that it met the statutory requirements.
        On November 7, 1997, the Commission issued separate proposed orders
    granting the CME and the CBOT conditional dual trading exemptions in 7
    and 13 affected contract markets, respectively. In addition, the
    Commission granted the CME an unconditional dual trading exemption for
    its S&P 500 futures contract market. The Commission's proposals to
    grant conditional exemptions for the other affected contract markets
    were based on the Commission's finding that the exchanges' trade
    monitoring systems for these markets did not meet all the requirements
    of the Act and Commission regulations. Specifically, neither exchange
    was able to demonstrate that 90 percent or more of its imputed trade
    times are reliable, precise, and verifiable as demonstrated by being
    imputed within a timing window of two minutes or less. Both the CME and
    the CBOT were provided opportunities to present written and oral
    comments to the Commission, and each has done so. The Commission
    expects to issue final orders for both exchanges shortly.
                              use of the internet
        The Commission has taken several steps designed to make information
    and assistance more available to the general public. In addition to its
    Internet monitoring and surveillance program, commenced in fiscal year
    1996, the Commission has used its home page on the World Wide Web as a
    means of providing the public with brief summaries of the types of
    abuses commonly investigated and prosecuted by the CFTC. The
    Commission's website also 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. The website also includes information about individuals and
    firms who are the subjects of pending enforcement actions or who have
    been found liable for violating federal commodities laws in an
    administrative or a civil action previously brought by the Commission.
    Similarly, the website includes the names of individuals and firms with
    sanctions in effect. Finally, the website provides individuals with the
    Commission's entire reparations complaint package.
                     automation of administrative functions
        During fiscal year 1997, the Office of Proceedings implemented a
    new case tracking system. The new system tracks the progress of each
    case from receipt through disposition in the Office of Proceedings,
    appeal to the Commission and appeal to Federal court. This system not
    only assists case management within the agency, but allows the Office
    of Proceedings to provide better information on the status of cases in
    response to public inquiries.
        The Commission took additional steps during fiscal year 1997 to
    make more extensive use of automation to streamline financial and
    fiscal processing. For example, the Commission now has the capability
    to transmit electronic disbursement requests to the Philadelphia
    Finance Center, thereby eliminating the need for magnetic tape
    generation and costs associated with overnight delivery. In addition,
    the Commission can now make disbursements directly to financial
    institutions for vendors and employees and has implemented an
    electronic travel manager system that reduces paperwork and increases
    productivity.
              commission year 2000 computer compliance initiatives
        The Commission has been engaged in conducting analyses and taking
    corrective actions related to the so-called Year 2000 problem since
    1993. The Commission's internal systems needed to be Year 2000
    compliant at that time in order to process futures and option contracts
    with expiration and delivery dates in the year 2000. The Commission
    implemented modifications to our mission-critical mainframe systems to
    accomplish correct turn-of-the-century processing. At that same time
    the Commission adopted a policy that all new systems developed would be
    Year 2000 compliant.
        In response to OMB Bulletin 96-02, our other mainframe systems are
    also being reengineered and converted to Year 2000 compliant client/
    server-based systems. That work is scheduled to be completed by
    September 1999. During the next 24 months, we will be reviewing,
    correcting and testing equipment and software so as to ensure the
    Commission's compliance.
        The Commission is also working with the regulated industry and
    other regulators on Year 2000 compliance matters. Last year, the
    Commission contacted each of the futures exchanges about its
    responsibilities as a self-regulatory organization (``SRO'') to ensure
    internal compliance, as well as the compliance of its member firms.
    More recently the Commission has requested that SRO's produce
    additional materials that will demonstrate such compliance. In
    addition, the Commission has sent a questionnaire to FCM's asking them
    to report material facts on their compliance plans.
        Finally, the Commission is working with other regulators, the
    Futures Industry Association and the Securities Industry Association to
    develop stress testing for computer systems in advance of the year
    2000. This cooperative effort should help determine domestic and global
    preparedness of the financial markets.
                              pending legislation
        Last year I expressed the Commission's concerns with legislation
    pending before the Senate and House Agriculture Committees (S. 257 and
    H.R. 467, respectively) to amend the CEA. In the Commission's view the
    bills, if adopted, would result in pervasive deregulation of our
    futures and option markets, posing dangers to the public interest.
    While both bills remain pending before the Senate Committee on
    Agriculture, Nutrition, and Forestry and the House Committee on
    Agriculture, we understand that no action is currently scheduled. The
    Commission has addressed many of the issues raised in the bills and, as
    illustrated above, has adopted regulatory reform measures to meet many
    of the concerns underlying the bills.
        The Commission has reconstituted its Financial Products Advisory
    Committee (``FPAC'') to serve as a forum for industry members to
    discuss the Commission's regulatory reform proposals. The Commission
    welcomes any regulatory reform suggestions from the industry, market
    participants, members of Congress and other interested persons.
        Separately, the CFTC has been monitoring the progress of the
    Financial Services Act of 1997 (H.R. 10). The Commission's review of
    the proposed legislation has revealed that it could create conflicts
    with the CEA, and the Commission has recommended that the bill should
    include a general savings clause making clear that the legislation is
    not intended to affect the provisions of the CEA or the jurisdiction of
    the CFTC.
                                   conclusion
        The Commission appreciates this opportunity to report to the
    Subcommittee on its accomplishments of the past year and to reiterate
    its commitment to fulfilling its statutory mandate to oversee the
    United States' vibrant futures and option markets. As we look ahead to
    fiscal year 1999, the Commission seeks additional appropriations to
    complete its restructuring of the Division of Enforcement, to improve
    its market surveillance abilities, and to respond to the changes in the
    markets with adoption of regulatory reform initiatives. We look forward
    to working with Congress on these matters, and I would be happy to
    respond to any questions you may have.
        Thank you.
                                     ______

                             Biographical Sketches
                                 brooksley born
        Brooksley Born was sworn in as Chairperson by Acting Chairman John
    E. Tull on August 26, 1996. Ms. Born was nominated by President Clinton
    on May 3, 1996, and confirmed by the Senate on August 2, 1996, for a
    term expiring in April, 1999.
        Ms. Born practiced law at the Washington, D.C., firm of Arnold &
    Porter from 1965 until her appointment to the CFTC. As a partner in the
    firm, Ms. Born specialized in representing institutional and corporate
    clients in complex litigation, primarily in the federal courts, and in
    futures regulation matters.
        Ms. Born is an active member of the District of Columbia Bar and
    the American Bar Association (ABA), having served on the Boards of
    Governors of both organizations. She currently serves on the Boards of
    the American Bar Foundation and the National Women's Law Center.
        Ms. Born was in 1972-1973 an Adjunct Professor of Law at Georgetown
    University of Law Center and a Lecturer at Law at Columbus School of
    Law, Catholic University of America, in 1972-1974.
        A native of San Francisco, California, Ms. Born received her A.B.
    degree from Stanford University in 1961 and her Juris Doctor degree
    from Stanford Law School in 1964, where she graduated first in her
    class and was President of the Stanford Law Review. She is a member of
    Order of the Coif. She has also been honored by the National
    Association of Public Interest Law, the National Legal Aid and Defender
    Association, and the National Women's Law Center. She received the
    Woman Lawyer of the Year Award from the Women's Bar Association of the
    District of Columbia in 1981.
                                     ______

                               madge a. bolinger
        Madge A. Bolinger has served as the Director of the Office of
    Financial Management since 1987.
        A native of Massachusetts, Ms. Bolinger began her Federal career
    with the Commodity Futures Trading Commission in 1976 following receipt
    of a Bachelor of Science degree from Miami University. Prior to her
    appointment as the Director, Ms. Bolinger held positions in budget and
    program analysis and automated data processing.

                           Impact of Tokyo Communique

        Senator Cochran. Madam Chairperson, we notice that in your
    statement, you referred to an international set of standards
    that were discussed and were the subject of a communique--the
    Tokyo Communique I think it is called--relating to the 16
    countries that met to consider uniform standards in this
    regulatory area of responsibility.
        What, if any, budget impact is there on the Commodity
    Futures Trading Commission that would flow from these
    standards?
        Ms. Born. I do not think that there is any budget impact
    from the standards, Mr. Chairman. The standards that were
    adopted as best practices standards by the world's regulators
    of leading commodity markets are already complied with by the
    Commission and consistent with the Commodity Exchange Act.
    Indeed, many of the principles in the Commodity Exchange Act
    have been incorporated into those guidances and are now adhered
    to by the other 17 countries.

                     Losing Business to Overseas Exchanges

        Senator Cochran. One of the problems that was brought to my
    attention within the last year was the concern by some of the
    exchanges here in the United States that we were losing
    business to overseas exchanges. Has that been reversed or does
    that continue to be a problem, or is it a problem that is
    serious and should have the attention of the Congress?
        Ms. Born. In fiscal year 1997, there was no further erosion
    of the U.S. portion of world trading in these instruments. In
    fact, the U.S. exchanges contract volume increased by 11
    percent during fiscal year 1997, and that was approximately the
    level of growth abroad as well.
        Senator Cochran. You mentioned that most of the new money
    that would be appropriated under this request would go to
    enforcement, not all, but a substantial amount in terms of the
    FTE's and total dollar allocation.
        Is there a major problem of any kind that you are
    investigating now or do you foresee the need for any special
    enforcement activity? You mentioned market manipulation as a
    possible area that could receive additional attention. Is that
    the only area that troubles you?
        Ms. Born. No; fraud is a pervasive problem in our
    jurisdiction as well. We just issued yesterday a consumer
    warning about prevalent fraudulent schemes relating to foreign
    currency markets which are being advertised over radio and
    through the Internet and by telemarketing which are targeting
    retirees and various immigrant populations, encouraging them to
    invest their savings in the foreign currency markets. Of
    course, the money disappears rapidly.
        Senator Cochran. Do you have jurisdiction similar to the
    Federal Trade Commission or other Federal agencies where you
    can bring your resources to bear on practices like that, even
    though these may not be exchanges? We normally think of the
    Commodity Futures Trading Commission as dealing with futures
    traders operating out of Chicago or New York or some of the
    other major cities. What is the opportunity that you have or
    the power that you have to reach out and do something about
    things like that?
        Ms. Born. Well, the statute requires that futures and
    option contracts generally are traded on exchanges. So, we can
    bring enforcement actions against what we call bucket shops,
    that is, confidence artists who are selling off-exchange
    futures or option contracts illegally. We can bring actions
    against them on two grounds. One is fraud and the other is the
    fact that they are trading off exchange. There are some
    limitations to our over-the-counter jurisdiction, but we
    certainly can go against bucket shops.
        Senator Cochran. Do you find yourself cooperating with the
    Department of Justice or other Federal agencies in this effort?
        Ms. Born. Very much so. We often cooperate with the
    Department of Justice and the U.S. Attorney's offices in the
    areas where we are investigating bucket shops or Ponsi schemes
    and proceed in cooperation with them, they bringing criminal
    actions which we cannot bring, and we bringing civil actions
    which we do have power to bring. In addition, we cooperate with
    State securities commissioners, with the SEC, with the banking
    regulators, and others as appropriate.

                      Over-the-Counter Derivatives Market

        Senator Cochran. One other over-the-counter activity that
    we have had brought to our attention is the possible conflict
    with the Securities and Exchange Commission regulations for
    dealers that are active in the over-the-counter derivatives
    market. What can you tell us about that and the plan that the
    CFTC has, if any, to deal with this conflict?
        Ms. Born. Well, the SEC published proposed rules at the end
    of the year that would regulate certain over-the-counter
    derivatives dealers. Based on a GAO report in 1997, the SEC has
    jurisdiction over approximately 1.4 percent of the instruments
    that are traded in the over-the-counter derivatives markets--
    that is, options on securities and options on securities
    indexes. We have jurisdiction over other instruments.
        We were quite concerned with the SEC's proposal because it
    would extend over instruments that are within our jurisdiction
    and it would indeed make certain over-the-counter instruments
    permissible for over-the-counter derivatives dealers to trade
    in that we have forbidden under our statute and regulations.
        We did put in a comment letter to the SEC pointing out
    these problems and urging the need for regulatory cooperation
    and coordination on this matter, suggesting that each agency
    should act within its own jurisdiction but try to coordinate
    our actions.
        We also at the same time announced that we are planning to
    release a concept release on our over-the-counter derivatives
    regulations. The last time we acted as a Commission in this
    area was in 1993 when we adopted a certain reduced regulatory
    regime for specified over-the-counter derivatives instruments,
    and we plan within the next month to issue a concept release
    reaching out to the market, the over-the-counter derivatives
    dealers, and the end users of those derivatives to ask them
    whether our regulations adopted 5 years ago still are
    appropriate for a market that has grown tremendously during
    that period.

                       New System for Market Surveillance

        Senator Cochran. One of the other areas you say you need
    additional funds or you plan to use the additional funds in the
    budget request is for market surveillance, and you talk about a
    software system that will require some additional FTE's to put
    in place and to implement. This is a new system, as I
    understand it.
        Could you tell us a little more about what that is for and
    why the new system is needed?
        Ms. Born. Certainly. This was a system for which all the
    funds were obligated in 1996 and which is an ongoing project
    that will be completed in fiscal year 2000. It was designed to
    upgrade our market surveillance by permitting the Commission to
    receive not only daily reports from futures commission
    merchants on large futures positions of the accounts they
    carry, but also large options positions, so that the computer
    system will then be able to analyze the overall position of
    large traders in our markets. This is part of a very
    significant program in the Commission to detect market
    manipulation in its incipiency and to try to move in quickly to
    deter any further price distortion or problems coming from
    attempted price manipulation.
        Senator Cochran. When we mention the word ``computer,'' I
    think about the fact that some agencies are doing better than
    others in getting ready for the year 2000 and the implications
    for the computer systems.
        Are you spending any amount of this year's funds to prepare
    for that, and if not, why not?
        Ms. Born. We are indeed. Our agency identified the year
    2000 problem in 1993, earlier than some agencies because we had
    to think about futures contracts out into the future, and
    realized that soon we would be faced with futures contracts
    expiring in the year 2000. So, we took immediate steps to get
    our market surveillance and contract market systems compliant
    with the year 2000 or to adopt plans to get them compliant. We
    propose to have all our systems compliant by June 1999.
        We are also working very closely with the exchanges and the
    National Futures Association and the Futures Industry
    Association to make sure that both the exchanges and the 64,000
    commodity professionals are year 2000 compliant by the year
    2000.

                   Cost of Preparing for Year 2000 Transition

        Senator Cochran. What do you estimate--or can you
    estimate--the total cost of preparing for the year 2000
    transition? Is there any way to do that?
        Ms. Born. For our markets and our traders, I think it will
    be many billions of dollars. I do not have an estimate.
        Senator Cochran. What about the agency itself? Is there a
    way to identify the costs that have been sustained or that will
    be between now and 2000?
        Ms. Born. We could certainly attempt that. Some of the
    costs may be difficult to determine as they go back to 1993. In
    addition, some of the costs are included in the overall costs
    associated with our compliance with OMB's mandate to move from
    a mainframe computer to a client server system which has been a
    more or less simultaneous effort. So, it may be a little hard
    to pare out of the overall reorganization that part that
    relates just to the year 2000 computer compliance issue, but we
    could make an attempt.

                      Streamlining Operation of the Agency

        Senator Cochran. I know that you have been trying to
    streamline and make more efficient the operation of the agency,
    and you have talked about that in your statement.
        One of the things that you have done is to delegate some
    additional functions to the National Futures Association. I
    know that has been a subject of some interest for several years
    now. Would you judge that to have been a successful effort?
    Have these steps enabled the Commission to still maintain its
    regulatory supervision but at the same time maybe achieve some
    savings in the operation of the Commission?
        Ms. Born. Yes, indeed; I think it has been a great success.
    The NFA does a wonderful job in the functions that we have
    delegated to it. What we have tended over the years--and this
    is also true in the last year--to delegate to the NFA are those
    tasks under our jurisdiction which involve very staff-intensive
    efforts like registration of the 64,000 commodity
    professionals, reviewing all the disclosure documents that
    those professionals are required to prepare whenever there is
    any significant change in their operations.
        By delegating those very staff-intensive activities, I
    think we have been able to keep our staff at a relatively small
    size. If we get the increase we are requesting now, we will be
    only at the level we were in 1992, and that, despite enormous
    increases in the markets we are overseeing and the number of
    people we are overseeing as well.

                    Fraud or Abuse in Off-Floor Transactions

        Senator Cochran. I understand the Commission is considering
    a proposal to permit noncompetitive, off-floor transactions,
    that is, allowing exchanges to adopt rules for sophisticated
    market participants to privately negotiate the terms of large
    transactions and then report the transactions to the exchange.
        Do you think there are systems in place to protect the
    exchanges and customers against fraud or abuse in these
    transactions?
        Ms. Born. We actually do not have any proposed rules out.
    What we put out, a couple of months ago, was a concept release,
    reaching out to the exchanges, to commodity professionals, and
    to big traders, asking whether they would see a benefit to our
    changing our rules to allow exchanges to permit this kind of
    activity, and if so, what kinds of protections would be
    necessary. The comment period is still open. I think we put it
    out originally for 60 days, but have gotten a request to keep
    it open another 30 days.
        So, I cannot answer that question yet, Mr. Chairman.
        Senator Cochran. The jury is still out.
        Ms. Born. Indeed.
        Senator Cochran. Well, I appreciate so much your testimony
    this morning. It has been very helpful to our understanding the
    budget request and what the funds will be used for if we are
    able to approve them, and I hope we can. I know the work of the
    Commission is very important. The integrity of the exchanges is
    important, and the process can be very helpful to agriculture
    producers and consumers and our Nation's economy as well, all
    tied to the successful operation of this important agency.

                              Submitted Questions

        We think you have done an excellent job as chair of the
    agency and we commend you for that. Thank you very much for
    your cooperation and you are dismissed. We will submit
    additional questions to be answered for the record.
        We will suspend the hearing temporarily while I go over and
    vote on this amendment to our budget resolution, and I will be
    back soon.
        [A brief recess was taken.]
        [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
                            regulatory streamlining
        Question. One of the efforts undertaken by the Commission was the
    expedited review of new contracts and exchange rule changes. How has
    this ``fast-track'' procedure for processing contract market
    designation applications and exchange rule amendments been received by
    the futures exchanges and employees of CFTC responsible for
    implementing the procedure?
        Answer. Since its implementation, the vast majority of new contract
    proposals were filed, and ultimately approved, under the fast-track
    procedures. Since fast-track went into effect, 45 new contracts have
    been approved, of which 37 were deemed approved under the fast-track
    procedures. The seven non-fast-track approvals included five equity
    index contracts which were not eligible for fast-track, two currency
    contracts which the exchange removed from fast-track procedures, and
    one contract which was approved under regular procedures before the end
    of the fast-track period. Two of the equity index contracts were
    approved in 52 days, and the other two were approved in 77 days. The
    currency contracts were approved in 70 days. In that same period, over
    100 rule changes have been submitted, of which about half were
    submitted under the fast-track procedures. Many of the submissions,
    although eligible for fast-track treatment, were made under the regular
    procedures of regulation 1.41(b) at the discretion of the submitting
    exchange. Rule changes approved to date that were submitted under fast-
    track were either deemed approved in 45 days, as provided by the fast-
    track procedures, or they were approved sooner by the Commission under
    its regular review procedures.
        Question. What problems, if any, has reducing the approval time for
    new contracts and rule changes to anywhere from 10 to 45 days presented
    to the futures exchanges and the Commission?
        Answer. The Commission's staff is reviewing the fast-track
    procedures to determine if any modifications are warranted. In general,
    the fast-track provisions appear to be working well both for the
    futures exchanges and the Commission. Accordingly, we would expect that
    any modifications would be nonsubstantive and would be designed to
    address primarily technical problems with the procedures.
        Question. What are the eligibility requirements for fast-track
    treatment of a new contract or rule change?
        Answer. Filings under fast-track are at the discretion of the
    exchange. New contract applications eligible for 10-day fast-track
    procedures include: (1) futures contracts using cash settlement rather
    than physical delivery, based on any commodity except those covered
    under the CFTC/SEC Accord, such as stock index and corporate bond
    contracts and certain enumerated agricultural commodities; (2) physical
    delivery futures contracts on major currencies; and (3) options on
    futures. New contract applications eligible for 45-day fast-track
    include physical delivery and cash-settled futures and option contracts
    based on any commodity except those covered under the CFTC/SEC Accord.
    Under the fast-track procedures, an exchange may list a contract for
    trading on the ``effective date,'' which is the day following the end
    of the 10- or 45-day period, unless the date is extended or fast-track
    review is ended. Under fast-track, the initial 10- or 45-day effective
    date may be extended once for an additional 30 days. For applications
    not meeting fast-track requirements, or if requested by the exchange,
    fast-track review is ended and the regular review procedures for new
    contract applications apply.
        Question. How, if at all, has this ``fast-track'' procedure
    improved the ability of the futures exchanges and the Commission to
    conduct their business?
        Answer. The fast-track procedures were designed to address concerns
    expressed by US futures exchanges about Commission contract approval
    time rather than to improve the Commission's conduct of its business.
    The exchanges had indicated that faster contract approval times would
    enhance their global competitiveness by enabling them to bring
    innovative products to market more quickly. The fast-track procedures,
    therefore, should foster the domestic exchange's competitiveness.
        The fast-track procedures also should provide the exchanges with
    more certainty about the likely approval date of contracts awaiting
    Commission approval. With more precise information about possible
    approval dates, the exchanges can better make necessary arrangements to
    launch the new products, such as education and marketing efforts,
    computer programming, as well as possible redesign of the trading
    floor.
        Question. CFTC has adopted several initiatives to encourage the use
    of electronic communication of information, such as filing required
    disclosure documents and required financial reports with the Commission
    electronically, and delivering monthly statements, trade confirmations,
    and risk disclosure documents to consenting customers electronically.
    How have these efforts served to streamline regulation?
        Answer. The Commission, like most federal regulators, developed
    many of its regulations at a time when almost all formal communication
    took place in a written, hard copy form. In recent years, however,
    technological advances that foster faster, more efficient communication
    have transformed business practices. Both Commission registrants and
    their customers have discovered the advantages of electronic
    communication for day-to-day business transactions. As a result, the
    Commission initiated a process of analyzing its regulations for
    unnecessary limitations on electronic communication. Where adequate
    measures exist to safeguard its regulatory interests, the Commission
    has increased the communication options available to registrants and
    their customers by permitting them to use electronic communication in
    fulfilling regulatory obligations. By moving toward a regulatory
    framework that is more technologically neutral, these initiatives
    permit registrants to respond more quickly to ongoing advances in
    communication technology.
        Question. How many commodity trading advisors, commodity pool
    operators, futures commission merchants and customers have participated
    in these programs so far?
        Answer. Two general types of communication are affected by the
    Commission's electronic communication initiatives: communication
    between registrants and their customers and communication between
    registrants and the Commission. The initiatives affecting the first
    category have been in place for less than a year, and the Commission
    does not have substantial data on either the number of registrants who
    have developed programs to communicate eligible documents to customers
    electronically or the number of customers who have agreed to accept
    electronic communications in lieu of hard copy disclosure.
        The initiatives affecting communications between registrants and
    the Commission have been in effect for a little more than a year.
    During this period, approximately 18 commodity pool operators or CPO's,
    and 86 commodity trading advisors, or CTA's, have electronically
    submitted disclosure documents for Commission review. In addition,
    Commission staff have been communicating their comments on these draft
    disclosure documents electronically to the CTA's and CPO's. As a
    result, the overall efficiency of the review process has been
    materially enhanced.
        As of March 31, 1998, there were 225 firms registered as futures
    commission merchants, or FCM's, and seven were filing financial reports
    electronically with the Commission as part of a testing phase. The
    Commission anticipates that, by the end of April 1998, approximately 54
    FCM's will be filing their financial reports electronically, and more
    will be added during the remainder of 1998.
        Question. Do you anticipate that all reporting will be done
    electronically within the next fiscal year?
        Answer. No. The Commission's current policy is that the use of
    electronic communication should be voluntary, not mandatory. In the
    short term, it is unlikely that all eligible registrants and their
    customers will elect to use the electronic communication option.
        In an effort to minimize development costs incidental to the
    Commission's initiative for electronic filing of financial reports by
    FCM's and introducing brokers, or IB's, the Commission is collaborating
    with two futures exchanges that have already developed an electronic
    filing system for their members. The Chicago Mercantile Exchange, or
    CME, and the Chicago Board of Trade, or CBT, jointly developed a
    software program called WinJammer that permits electronic filing of
    financial reports with the exchanges. The Commission is also using the
    WinJammer software for its electronic filing system. The National
    Futures Association, or NFA, an industry-wide self-regulatory
    organization supervised by the Commission, maintains an independent
    electronic filing system. Commission staff are working with NFA to
    adapt the data structure of its system to be compatible with the data
    structure of the system used by the Commission. Eventually, the
    Commission intends to have a single regulatory database that combines
    data from all FCM's into a single database for regulatory purposes.
        Almost 60 percent of the FCM's who are members of CME and CBT will
    be capable of filing financial reports with the Commission
    electronically by the end of April. In the near term, the Commission
    plans to focus on bringing the remaining CBT and CME firms on line
    while working with NFA to extend the electronic filing system to
    registered FCM's who are not members of these exchanges. The Commission
    intends ultimately to expand its electronic filing system to include
    introducing brokers.
        Question. Are there any concerns on the part of professional market
    participants, customers, or the CFTC that the electronic filing of
    documents may compromise the security or reliability of the information
    contained in those documents?
        Answer. The electronic filing of documents raises issues relating
    to data security and integrity that are somewhat different from those
    raised by systems that rely on hard copy format. For example, the
    traditional method for authenticating a written submission--a
    signature, sometimes supported by a verification--is not easily
    adaptable to an electronic filing system. Moreover, due to its nature,
    electronic media may be easier to alter, and there is less likelihood
    of detecting the alteration than in hard copy media. Procedural or
    technological techniques must be used to reduce the risk of alteration.
        Question. If so, what has been done to assure those using the
    electronic filing system of the security of the system?
        Answer. The Commission has taken a variety of steps to address
    relevant security/integrity issues. For communications between
    Commission registrants and the Commission, required measures have
    varied with the nature of the information being provided. Permitting
    FCM's to provide important financial information electronically raises
    issues concerning the reliability of the information provided and the
    confidentiality of the communication system. The Commission has
    addressed these concerns by requiring firms to use Commission-issued
    personal identification numbers, or PIN's, in submitting financial
    information to the Commission. A firm's use of its PIN is deemed the
    equivalent of a manual signature for purposes of the Commission's
    attestation requirement. PIN's are issued by the Commission only after
    the authorized signer for the registrant has filed with the Commission
    a signed attestation that will be kept permanently on file. Moreover,
    the electronic filing system being used by the Commission provides a
    safeguard to minimize the likelihood of an unauthorized interception
    and alteration of financial data transmitted by an FCM. Financial data
    files are encrypted prior to transmission and unencrypted by Commission
    personnel prior to processing and review.
        Security/integrity issues are of somewhat lesser concern in the
    system for electronic filing of CTA and CPO disclosure documents with
    the Commission because the documents at issue generally do not include
    confidential financial information and are subject to review and
    discussion prior to circulation to the public. Registrants who file
    electronically must use their NFA identification number to authenticate
    their submission and receive an electronic receipt as evidence that the
    Commission received the electronic submission. At the time the
    Commission adopted this initiative, consideration was given to
    requiring encryption procedures to guard against unauthorized
    interception of disclosure documents transmitted to the Commission
    electronically. The Commission determined that such a requirement was
    unnecessary in light of the voluntary nature of the program, but did
    state that Commission staff would cooperate with registrants who
    voluntarily adopted an encryption procedure.
        For communication between Commission registrants and their
    customers, the Commission has placed a strong emphasis on the necessity
    for informed consent by customers. Because customer participation in
    these initiatives is voluntary, informed consent gives customers an
    opportunity to balance the efficiency benefits of electronic
    communication against the potential costs related to security/integrity
    concerns. For example, prior to transmitting confirmation, purchase and
    sale or monthly account statements to customers electronically, FCM's
    must generally obtain a signed, hard copy revocable consent from their
    customers. Similarly, CTA's and CPO's who fulfill their initial
    disclosure obligations by means of electronic delivery must obtain both
    a revocable consent and an acknowledgment of delivery of the required
    risk disclosure statement from their customer. While customer consent/
    acknowledgment may be communicated electronically, the Commission
    requires that CTA's and CPO's verify the authenticity of the consent/
    acknowledgment by using a PIN or another electronic methodology that
    uniquely identifies the specified person who has provided the consent/
    acknowledgment.
        As for the reliability of information registrants communicate to
    the customers electronically, the Commission has required that
    registrants make a hard copy of the relevant information available to
    customers. This permits customers to monitor the reliability of the
    registrant's electronic communications. The Commission has also stated
    that FCM's should implement supervisory systems and procedures
    necessary to assure timely and appropriate delivery of required
    information and to detect and deter misconduct in connection with the
    delivery of such information. In addition, the Commission has noted
    that FCM's should take reasonable steps tailored to the particular
    electronic medium being used to ensure the confidentiality of personal
    financial information transmitted electronically. It also has directed
    self-regulatory organizations to enhance their audit programs to review
    these precautions.
                                  enforcement
        Question. The budget justification indicates that the ten
    additional staff years requested would complete the reorganization of
    the Enforcement Division which began in 1995. How has this
    reorganization improved the ability of the CFTC to fulfill its
    enforcement responsibilities?
        Answer. The reorganization of the Division of Enforcement has
    improved the efficiency and effectiveness of its operations, which has
    enhanced the CFTC's ability to fulfill its enforcement
    responsibilities. Prior to August 1995, the operating units of the
    Division were organized in three sections, each of which reported to
    one of three Deputy Directors in headquarters. The sections were:
    Western Operations, comprising the Central Regional Office in Chicago
    and the Western Regional Office in Los Angeles; Eastern Operations,
    comprising the Eastern Regional Office in New York and the Southern
    Regional Office in headquarters; and Manipulation and Special
    Operations, comprising three specialized units at headquarters--the
    Manipulation and Trade Practice Unit, the State/Federal Liaison Unit,
    and International Operations.
        To enhance flexibility and responsiveness, the headquarters units
    were reorganized: the Manipulation and Trade Practice Unit, the State/
    Federal Liaison Unit, and the Southern Regional Office were replaced by
    four general investigation/litigation teams which are referred to as
    HQ1 through HQ4. International Operations was moved to the Office of
    Chief Counsel. Two of the deputy positions were eliminated, resulting
    in the four headquarters teams and the three regional offices reporting
    to a single Deputy Director and, ultimately, to the Director. The
    Deputy Director reviews and assigns all investigative referrals to
    Division staff and reviews all recommendations that the Division of
    Enforcement makes to the Commission. The position of Counselor to the
    Director was established, in part, to assist with the review of
    recommendations through the Director's office.
        As to the litigation teams themselves, each of the four
    headquarters teams is now headed by an Associate Director, and each
    regional office is headed by a Regional Counsel. The Management
    Analysis Officer has been given responsibility for supervising all
    administrative staff in Washington. This responsibility previously had
    been assigned to the unit within which a particular administrative
    employee worked.
        In addition to the major structural changes described above, the
    Division has made organizational changes in the regional offices.
    Within the last six months, the Central Regional Office has been
    reorganized to include both attorneys and investigators in the same
    teams; a similar structure already existed in the Eastern Regional and
    Headquarters offices. Previously, investigators in Chicago reported
    through a separate supervisory structure. In addition, there is now a
    separate intake team in that office to perform preliminary
    investigative work. Also, the Eastern Regional Office has created the
    supervisory attorney positions, designed to provide more supervisory
    structure to investigations and litigation in that office. Finally, the
    Division's Office of Chief Counsel now has primary responsibility for
    preparing briefs in appeals to the Commission of Administrative Law
    Judges' initial decisions. Previously, the teams that handled the
    litigation before the ALJ had primary responsibility for appeal briefs.
        The restructuring achieved several things. First, specialized units
    at headquarters were replaced by general investigation/litigation teams
    so that any one of the teams could respond immediately to any matter
    requiring investigation and legal action. The Division believes that
    this, in combination with the Deputy Director's handling of referrals,
    has evened workloads and enhanced the Division's ability to respond
    efficiently to new matters. The elimination of the two deputy director
    positions similarly was intended to streamline the review process, to
    enhance consistency in the policy review process, and to even workloads
    of the Division's seven operational units.
        Second, designating the Office of Chief Counsel, in lieu of
    investigation/litigation teams, to handle all appeals to the Commission
    has left more time for the teams to pursue their investigations and
    cases. Just as important, centralizing this responsibility with the
    Office of Chief Counsel has ensured that the Division handles matters
    on appeal to the Commission consistently and more effectively.
        Finally, shifting the responsibility of management of
    administrative staff to the Management Analysis Officer has reduced the
    amount of time investigation/litigation teams spend on administrative
    and personnel matters and allows more efficient utilization and
    oversight of support personnel. The changes in Chicago and New York are
    similarly designed to permit more effective management and oversight of
    the work of the attorneys and investigators, with the goal of
    performing the work and overseeing personnel more efficiently and
    effectively.
        Question. If you receive the requested Enforcement staff-year
    increase, do you have a plan of action to recruit and hire the
    necessary employees to fill these positions in a timely manner?
        Answer. The Division plans to use the additional FTE's to fill both
    professional and administrative positions in several different offices.
    If we were to receive the requested funding increase, the Division
    would immediately implement an active recruiting plan. With regard to
    professional positions, the Commission posts all vacancy announcements,
    including the Division's, on its CFTC website and forwards vacancy
    announcements to the Office of Personnel Management for inclusion on
    its nationwide Current Job Openings website. The Division also
    advertises in large, general circulation newspapers in the region where
    the job opening is located.
        To focus more directly on qualified candidates, the Division also
    advertises in selected legal periodicals and--depending upon the
    experience required for particular openings--forwards vacancy
    announcements to law school placement offices. Also, each year
    representatives from the Division participate in a limited number of
    recruiting programs run by law schools. The Division's objective is to
    draw from the largest, most qualified, pool of candidates. For
    administrative staff, the efforts are similar, but do not include
    recruiting through educational institutions or professional
    periodicals.
        Question. Please highlight for the Committee the cases of
    misconduct in connection with the hedge-to-arrive contracts and futures
    and options trading which were investigated by the Enforcement program
    of the CFTC in fiscal year 1997, and those which have been investigated
    so far in fiscal year 1998. How many cases were investigated? What were
    the outcomes of the investigations? Which provisions of the Commodity
    Exchange Act or CEA, and Commission regulations were violated? What
    measures have been taken to protect the public and the industry from
    future similar violations of the rules and regulations?
        Answer. In the spring of 1996, the Commission's Division of
    Enforcement commenced an investigation into certain grain transactions
    referred to as hedge-to-arrive or HTA contracts. The Commission's
    interest in HTA's arose from its surveillance of the grain markets
    during the volatile market conditions in 1995 and 1996, and the effect
    these conditions had on certain types of contracts entered into by
    grain elevators, marketers, and producers. The nationwide investigation
    involved discrete lines of inquiry, some of which resulted in filed
    cases and some of which the Division is still actively pursuing. Under
    the CEA and Commission's rules, these investigations must remain
    confidential, so I am unable to discuss them in any detail in this
    forum.
        I can tell you, however, that the investigation has thus far
    resulted in the filing of four separate administrative complaints
    alleging violations of various provisions of the CEA and Commission
    regulations in connection with certain HTA's. Three were filed in
    November 1996, and one was filed in December 1997. All of these cases
    are pending before administrative law judges, and have not yet resulted
    in final judgments. Until there is some final adjudication of these
    issues, it would be inappropriate to speculate as to what violations
    may have occurred. Moreover, because these cases may come before the
    Commission on appeal, it would not be appropriate for me to discuss the
    merits of the matters. Accordingly, I will describe them to you
    generally to give you an idea of the types of violations alleged.
        One complaint charges that a grain elevator offered and sold HTA
    contracts that constituted illegal futures contracts. This case
    involves alleged violations of Section 4(a) of the CEA, which prohibits
    offering or entering into illegal futures contracts. This matter is
    captioned In re Grainland Cooperative, CFTC Docket No. 97-1.
        A second case charges a cooperative grain elevator with offering
    and entering into illegal futures and options contracts; an individual
    with acting as an unregistered commodity trading advisor or CTA, and
    with fraud in connection with his marketing and promotion of, and his
    entry into, illegal futures and options contracts; and a futures
    commission merchant and one of its employees with aiding and abetting
    the unregistered activities and trading without proper authorization.
    This case involves alleged violations of Section 4(a) of the CEA;
    Section 4c(b) and Regulation 32.2, entering into illegal agricultural
    options; Section 4m(1) acting as an unregistered CTA; Section 4o(1)
    fraud by a CTA; Section 4b fraud in connection with futures contracts;
    Section 4c(b) and Regulation 33.10 fraud in connection with options;
    Regulation 4.13(b) failure to file an exemption statement or to deliver
    to pool participants disclosure documents or account statements;
    Regulation 4.41(a) solicitation of agreements to guide clients
    commodity interest trading without delivering requisite disclosure
    documents; and Regulation 1.37(a) failure to maintain records of
    persons exercising control over customer accounts. This matter is
    captioned In re Wright, et al., CFTC Docket No. 97-2.
        A third complaint alleges that a cooperative grain elevator
    violated Section 4c(b) of the CEA and Commission Regulations 32.2 and
    33.10 by selling illegal agricultural options and engaging in fraud in
    connection with its marketing of the illegal instruments. This matter
    is captioned In re Southern Thumb Coop Inc., CFTC Docket No. 97-3.
        Finally, a fourth complaint, captioned In re Competitive Strategies
    for Agriculture, Inc., et al., CFTC Docket No. 98-4, alleges fraud in
    connection with illegal futures contracts, failure to supervise by a
    registered introducing broker, or IB, and failure to identify a branch
    office of a registered IB. The sections of the CEA and Commission
    regulations alleged to have been violated include Section 4(a); Section
    4o(1); Section 4b(a); Regulation 166.3 failure to supervise; and
    Regulation 166.4 failure to properly identify a branch office to the
    public.
        With respect to measures taken to protect the public and the
    industry from future similar violations of the rules and regulations,
    the Commission has taken a number of steps. Specifically with regard to
    HTA contracts, in May 1996, the Commission's Division of Economic
    Analysis issued two policy and guidance statements relating to HTA
    contracts. The first concerned the mutual decision by producers and
    elevators to use cash payments in unwinding, working out or terminating
    such contracts, and the second addressed the risk implications of
    particular features and practices associated with HTA contracts for the
    future delivery of grain. The statements were publicized by a press
    release, were posted and remain posted on the Commission's website, and
    were published in the Commerce Clearing House reporter. Similarly, the
    Commission has issued press releases regarding the filing of each of
    the enforcement cases discussed above, and the Commission's website
    provides access to full-text copies of each of the complaints. Also in
    1996, Commission employees participated in a series of town meetings
    hosted by state authorities to discuss risk management and risk
    associated with the use of HTA contracts. Commission staff has also
    fielded numerous inquiries from the public regarding these instruments
    and will continue to do so.
        More generally, the Commission has taken a number of steps to
    educate the public and the industry on risk management issues. For
    example, as the Committee is aware, the Federal Agricultural
    Improvement and Reform Act of 1996 requires the US Secretary of
    Agriculture to provide, in consultation with the CFTC, ``education in
    management of the financial risks inherent in production and marketing
    of agricultural commodities.'' In 1997, the Commission entered into an
    agreement with the USDA which established the basis for a joint risk
    management education effort directed at farmers and third parties who
    deal directly with farmers regarding tools to mitigate risks. In
    September 1997, the two agencies held a risk management education
    summit to establish the basis for a nationwide education effort.
        Finally, the Commission has engaged in extensive efforts to keep
    the public and industry informed of its policy on agricultural trade
    options. The Commission recently adopted a three-year pilot plan that
    lifts the ban on off-exchange agricultural trade options, another
    possible vehicle for farmers to hedge price exposure. In connection
    with its adoption of the program, which was announced on April 9, 1998,
    the Commission has engaged the public and industry in an extended
    dialogue regarding these instruments. In December 1995, the Commission
    held a public roundtable at which commodity industry experts,
    regulators, academics and market users exchanged their views regarding
    the prohibition of agricultural trade options. In May 1997, the
    Commission released a staff white paper entitled ``Policy Alternatives
    Relating to Agricultural Trade Options and Other Risk-Shifting
    Contracts.'' In June 1997, the Commission published advanced notice of
    proposed rulemaking in the Federal Register seeking comment on whether
    it should propose rules to lift the ban. It also held a series of field
    meetings at which members of the public had an opportunity to address
    the Commission and to ask questions regarding the ban.
        As a result of the recommendations contained in the white paper and
    the comments received from the public, in November 1997 the Commission
    published notice of a proposed rulemaking in the Federal Register
    regarding the pilot plan. The proposed program provided for streamlined
    registration of those selling the instruments, required that customers
    be provided with disclosure statements and account information,
    provided certain financial protections, and required that options
    vendors file reports on their market activity. After a public comment
    period in which over 440 comments were received, the Commission adopted
    a three-year pilot program.
        Question. Please provide the Committee a description of the
    reorganization of the Enforcement Division which has taken place since
    1995, including the funding and personnel resource changes during each
    fiscal year.
        Answer. As a result of the reorganization described earlier, since
    the fall of 1995, the Division has put in place an almost entirely new
    senior management team, including a new Director, Deputy Director,
    Chief Counsel, Counselor to the Director, two Associate Directors and
    three Regional Counsels. In terms of total numbers, since 1995,
    Division staff has increased from 144 in 1995, to 147 in 1996, and to
    154 in 1997. Division obligations, which include all program costs,
    were $12.8 million in 1995, $13.9 million in 1996, and $16 million in
    1997. For the same time periods, the Commission's obligations were $49
    million, $53.5 million, and $54.7 million.
                   market surveillance, analysis and research
                              trading and markets
        Question. The President's budget for fiscal year 1999 requests five
    additional full-time equivalent positions for the Market Surveillance,
    Analysis and Research Division and the Trading and Markets programs.
    Please explain the need for these staffing increases.
        Answer. The five additional FTE's in the Division of Trading and
    Markets are needed to enhance the Commission's regulatory reform and
    streamlining efforts, address new product developments, and sustain
    Commission oversight over contract market practices and standards.
        Two of the additional FTE's are needed to continue development of
    innovative regulatory approaches, to address new product developments,
    market linkages and trading mechanisms, and to develop rules that
    foster the competitiveness of clearing organizations, firms holding
    customer funds, and commodity professionals in dynamically evolving
    market conditions without loss of customer protections. The
    globalization of markets, the blurring of distinctions among financial
    institutions, and the explosive growth of technology have made it
    essential that the Commission's rules are appropriately adapted to
    market conditions.
        Three additional FTE's are needed for the Contract Markets
    subprogram. One is needed to provide increased efficiency in reviewing
    new programs and to be certain that increasingly innovative linkages
    between US and offshore markets, as well as cash and futures markets,
    maintain appropriate customer and market safeguards without imposing
    undue burdens or adversely affecting equitable access to the
    marketplace. The second is needed to assist in developing new
    initiatives regarding appropriate regulatory standards for
    sophisticated market participants who trade on, or are subject to the
    rules of, a contract market. The third is needed to address the
    increasingly complex oversight of SRO practices to assure appropriate
    incentives to maintain effective compliance programs. The Commission is
    expanding the ways in which it reviews SRO programs, reviewing both
    individual programs and particular practices across all exchanges
    (horizontal reviews), and developing a compendium of `best practices'
    that can provide guidance to increasingly linked markets worldwide.
        The additional resources will allow the Division to be more
    responsive to market participants and the public by reviewing rules to
    determine if they should be streamlined and modernized in light of
    technological and market developments; providing guidance and relief to
    foster innovative transactions and trading systems; maintaining US
    leadership in setting internationally accepted standards for the
    regulation of markets and trading; addressing intermarket issues
    through the President's Working Group on Financial Markets; and
    encouraging technological improvements and market innovation.
                establishment of office of international affairs
        Question. Chairperson Born, in your prepared testimony you state
    that the Office of International Affairs was created in July 1997,
    within the Office of the Chairperson, to ``enable the Commission to
    continue its leading role in international regulatory initiatives and
    to keep abreast of global change.'' What funding was used to create
    this office? How many FTE's are being used to staff this office, and
    from where were they taken?
        Answer. The Office of International Affairs was funded and staffed
    with eight positions from the Office of Trading and Markets. The
    reassigned staff represented the Commission's principal expertise in
    the international area. The reorganization was accomplished within the
    Commission's fiscal year 1997 FTE ceiling and budget. The Office of
    International Affairs reports to the Office of the Chairperson.
        Question. How has the creation of this office affected other
    offices within the CFTC, both in dollars and FTE's?
        Answer. The creation of the Office of International Affairs
    resulted in a transfer of approximately $900,000 and eight FTE's from
    the Division of Trading and Markets to the Office of the Chairperson.
        Question. What role has the Office of International Affairs had in
    dealing with the Asian financial crisis and its effect on the
    commodities and futures markets in the United States and around the
    world?
        Answer. During the recent Asian volatility crisis, Commission staff
    from the Office of International Affairs, or OIA, has assisted in
    obtaining information from and providing information to foreign
    regulatory authorities as needed. For example, OIA staff successfully
    assisted a US futures commission merchant who initially experienced
    delays in receiving funds from a Malaysian broker by communicating with
    the Malaysian Securities agency and urging a quick resolution of the
    matter. In addition, OIA staff assisted in obtaining regulatory
    information from authorities in Japan and Hong Kong and transmitted
    that information to the Commission's operating divisions to assist in
    surveillance of our domestic markets.
        Separately, OIA staff has participated in several international
    fora addressing these issues. For example, at the Commission's annual
    international regulators' conference in March of this year, organized
    in large part by OIA staff, Hong Kong, Brazil and Mexican authorities
    made presentations on the impact of Asian volatility on each of their
    markets, their immediate regulatory response, and their views on what
    their longer-term response may be.
        Question. How cooperative have other countries been in sharing
    information and resources?
        Answer. The collapse of Barings Plc., a UK firm, in 1995 resulted
    in a greater awareness of the need for regulators to share information
    and to implement emergency procedures domestically that help to
    minimize the spread of systemic risks resulting from defaults. Since
    that incident, cooperation from other countries in sharing information
    with the Commission generally has been good. For example, during the
    sell-off in world equity markets in the fall of 1997, the Commission
    received early information of the steps being taken by Japan to address
    the financial situation and also information on the status of specified
    Japanese firms with some proprietary business on US derivatives
    markets. When the staff requested additional specificity about certain
    firms, the information was provided promptly. When the Japanese
    authorities suspended trading in a particular firm, they took care,
    consistent with recommendations made at the Windsor Conference, to
    permit the continued margining, offset and transfer of futures
    positions of customers. Also, in January 1998, during increased
    volatility in the Asian currency and equity markets, the Hong Kong
    Securities and Futures Commission notified the CFTC of one US-related
    firm with an exposure in the Hong Kong futures market which had reached
    a trigger level under the Declaration on Cooperation and Supervision of
    International Futures Markets and Clearing Organizations.
        Additional examples of information sharing are the increasing
    number of formal arrangements entered into by the Commission with
    foreign regulators. Since amendments were made to the Commodity
    Exchange Act in 1992, the Commission has entered into 44 formal and
    informal arrangements for cooperative enforcement and regulatory
    information sharing with authorities in 21 jurisdictions. The formal
    arrangements include 13 Memoranda of Understanding; two Agreements; one
    exchange of Diplomatic Notes pursuant to a Treaty, signed by the
    Department of State on behalf of the Commission; and one joint
    communique. In 1997, the Commission signed two new formal arrangements
    for cooperative enforcement and regulatory information sharing: a Joint
    Communique on the Exchange of Information for Cooperation and
    Coordination signed on May 27, 1997, by the Commission and the
    Financial Services Board of South Africa; and an MOU between the
    Commission and Germany's Bundesaufsichtsamt fur den Wertpapierhandel
    concerning cooperation and consultation in the administration and
    enforcement of futures laws.
        A principal feature of the response to Sumitomo's losses, and an
    action item from the one-year work program commenced in London in 1996
    and concluded in 1997 in Tokyo, was amendment of the multilateral
    support for exchange of large exposure information known as the
    Declaration on Cooperation and Supervision of International Futures
    Exchanges and Clearing Organizations. Those amendments were
    specifically designed to assure that all relevant regulatory
    authorities could be signatories and to clarify that disruptions
    related to manipulative and other abusive activities were covered and
    were successfully completed in November 1997 and March 1998,
    respectively.
        The CFTC has also entered into a variety of arrangements with
    foreign authorities for the purpose of sharing information regarding
    regulatory matters. In October 1997, the CFTC concluded a new
    arrangement with the SEC, the Bank of England and Financial Services
    Authority to facilitate information sharing for prudential and risk-
    assessment purposes with respect to US, UK and/or third-country owned
    broker-dealers, FCM's or banks which conduct operations in both the
    United Kingdom and United States.
        In addition to these formal arrangements, the Commission receives
    information informally through the many relationships established over
    the years with foreign regulators through its participation in
    international organizations such as IOSCO.
        Question. Are there any concerns on the part of the Commission,
    market participants, or customers that participation in the
    international marketplace will compromise the security of the United
    States futures markets?
        Answer. The recent volatility that has shaken world equity and
    currency markets has demonstrated more vividly than ever before that
    the markets are inextricably linked through common products and related
    market participants. Therefore, events that occur in one market can and
    frequently do cause global regulatory concerns. The shocks to the world
    financial system caused by the 1995 collapse of Barings Plc., a UK firm
    which traded on numerous world futures markets including Singapore,
    Japan, Hong Kong and the UK, and the 1996 copper losses suffered by the
    Sumitomo Corporation, a Japanese firm trading on the London Metal
    Exchange, illustrate that this is true for derivatives markets as well
    as securities markets.
        The CFTC has played a leadership role in the international
    community in improving world standards for oversight mechanisms to
    reduce potential problems from market disruptions and for handling of
    defaults and protection of customer funds. The CFTC believes that more
    can be done to improve the integrity of global markets and is actively
    participating in ongoing international initiatives.
        The CFTC also maintains an immediate crisis management response to
    global events in order to secure further the futures markets and its
    participants. For example, in the Barings and Sumitomo crises the CFTC
    promptly assessed the effects on US interests in the following areas:
    the extent of direct participation or trading activity by the affected
    firm or its affiliates in the US futures markets; whether the firm
    operated a US futures commission merchant, that is, a firm which
    carries customer positions; the extent to which other US FCM's were
    clearing or executing trades through the firm on foreign markets; the
    extent to which US FCM's with subsidiaries that clear through exchanges
    in which the firm was a member could be affected by substantial losses
    on those exchanges as the result of clearing assessments or other loss
    mutualization provisions; and the potential impact on US exchange
    member firms if heightened volatility resulted from a firm's failure.
                           agricultural trade options
        Question. Please provide for the Committee a description of the
    three-year pilot program that would lift the ban on off-exchange
    agricultural trade options.
        Answer. Trade options are off-exchange options offered for
    business-related purposes to a producer, processor, merchant, or
    commercial user of a commodity. On April 8, 1998, the Commission
    removed the prohibition on off-exchange trade options on the enumerated
    agricultural commodities pursuant to a three-year pilot program. The
    interim rules for the pilot program permit only agricultural trade
    options which, if exercised, will result in delivery of the commodity.
    Also, the interim rules permit only those entities which handle the
    commodity in normal cash market channels to solicit, to offer to buy or
    sell, or to buy or sell such options.
        Under the interim rules, vendors of such options would be required
    to become registered as agricultural trade option merchants, to report
    to the Commission on their transactions, to provide their customers
    with disclosure statements, and to safeguard their customers' premiums.
    The Commission is exempting from the prohibition and these interim
    rules individuals and entities which meet a substantial financial
    requirement, as it proposed. As part of the same action, the Commission
    also removed a longstanding prohibition on the offer or sale of
    exchange-traded physical options on these commodities.
        The Commission promulgated interim rules because this is a pilot
    program and intends to reexamine the rules during and at the conclusion
    of the pilot program.
        Question. What costs, if any, will be incurred by the Commission
    for this program?
        Answer. The Commission will incur costs related to its oversight of
    trading under the pilot program. These relate to oversight of
    compliance with the interim rules and the cost of analyzing and
    studying the relative merit of the interim rules including possible
    surveys of market activity. The direct costs of registration and
    receiving required quarterly reports from agricultural trade option
    merchants will be borne by the National Futures Association which has
    been delegated these functions by the Commission.
                             audit and dual trading
        Question. The Commission is working with USDA's Risk Management
    Agency on a risk management education program for agricultural
    producers. Can you give me an update on this initiative?
        Answer. The Federal Agricultural Improvement and Reform (FAIR) Act
    of 1996 requires the U.S. Secretary of Agriculture to provide, in
    consultation with the CFTC, ``such education in management of the
    financial risks inherent in the production and marketing of
    agricultural commodities as the Secretary considers appropriate.''
    Consistent with this mandate, in 1997 the CFTC entered into a
    memorandum of understanding with USDA which establishes the basis for a
    joint risk management education effort. This effort is intended to be
    broad in both scope and content, focusing on integrating basic
    information on risk management from all relevant sectors, including
    crop insurance as well as futures and options. The education effort is
    being directed toward two audiences: third parties (such as insurance
    agents and commodity brokers) who deal directly with farmers on a
    variety of tools to mitigate risks, and the farmers themselves. To
    initiate the education program, the USDA held, and the CFTC
    participated in, a risk management education summit on September 16 and
    17, 1997, which attempted to establish the basis for a consistent
    nationwide education effort.
        Current initiatives involve development of educational materials
    and programs for ultimate delivery to farmers, including the February
    10, 1998, issuance of an announcement of availability of grant funds
    and request for proposals for agricultural risk management education.
    In addition, a series of regional conferences, with an emphasis on more
    ``hands on'' training for third-party influences, will be held through
    1998, beginning with a conference in Spokane, Washington, on March 24
    and 25.
        Commissioner David Spears has replaced former Commissioner Joseph
    Dial as the Commission's designee to the Risk Management Education
    Steering Committee which oversees this entire risk management education
    effort.
                               electronic trading
        Question. Has electronic trading become a widely used mechanism of
    trading in the industry? If so, which professional market participants
    and customers use electronic trading, and how often and under what
    circumstances is it used?
        Answer. Currently, there are three electronic trading systems in
    operation at domestic futures exchanges: the Chicago Board of Trade's
    Project A system, the Chicago Mercantile Exchange's Globex system, and
    the New York Mercantile Exchange's ACCESS system. Since the inception
    of Globex and Project A trading in 1992 and ACCESS in 1993, the number
    of contracts traded and the volume of trading on these systems have
    continued to grow. Electronically traded volume, however, remains a
    very small percentage of overall futures trading. For example, volume
    on Project A during 1997 totaled approximately 6 million contracts, as
    compared to pit trading at the CBT of approximately 243 million
    contracts over the same time period. Therefore, electronic trading is
    not as widely used in the US futures industry as pit trading. Since
    these systems operate almost exclusively after the close of regular pit
    trading hours, the participants on electronic trading systems are
    generally institutional customers with facilities for overnight
    trading. These customers generally need to access these overnight
    markets to respond to global events that may influence their overall
    trading strategies.
        Question. Have there been any regulatory problems in relation to
    the electronic trading of futures contracts, to date? If so, what
    measures were taken by CFTC to adjust to the regulatory demands of
    electronic trading? If not, do you foresee any future problems with the
    regulation of electronic trading?
        Answer. To date, there have been no major regulatory problems with
    respect to electronic trading of futures contracts. Notwithstanding
    this, however, Commission staff have been examining electronic trading
    systems from a domestic and international perspective to develop facts
    and analysis with respect to the surveillance and compliance
    experiences at various exchanges. This information will be relevant to
    the Commission's consideration of the regulation of electronic trading
    systems generally, and with respect to such specific issues as the
    applicability of the statutory dual trading prohibition to these
    systems.
        Question. What effect, if any, do you anticipate electronic trading
    will have on traditional pit trading?
        Answer. At this point in the evolution of domestic electronic
    trading systems, it is difficult to predict what effect electronic
    trading systems may have on traditional pit trading. To date, domestic
    electronic trading systems have been developed as after-hours trading
    mechanisms to complement, rather than compete with, traditional open
    outcry pit trading. With one exception, the Chicago Mercantile
    Exchange's E-Mini S&P 500 contract on its Globex system, contracts in
    the US can be traded electronically only after the close of regular
    trading hours. The E-Mini contract, which began trading in September
    1997, is traded concurrently both on Globex and in the pit during
    regular trading hours.
                     government performance and results act
        Question. How are the agency's annual performance goals linked to
    the agency's mission, strategic goals, and program activities in its
    budget request? Could you describe the process used to link your
    performance goals to your budget activities? What difficulties, if any,
    did you encounter, and what lessons did you learn?
        Answer. The agency's annual performance goals represent the
    estimated workload to be accomplished during the year based on the
    activities established in the CFTC Strategic Plan. Each performance
    goal is linked directly to an activity and an outcome objective.
    Performance goals are shown for most of the fifty activities. The
    activity level is the lowest of three levels set forth in the Strategic
    Plan. Each of the fifty activities supports one of the nine outcome
    objectives. Each of the nine outcome objectives supports one of the
    three strategic goals. This makes it possible to link a performance
    goal directly to an activity and an outcome objective.
        Traditionally, the CFTC budget request has been displayed by
    program and subprogram activity only. This year, program and subprogram
    activities are linked to the outcome objectives and goals of the
    Strategic Plan. For instance, the Trading and Markets program
    contributes to outcome objectives in all three goals. Therefore, it is
    possible to review how the performance goals in the Annual Performance
    Plan are linked to the Strategic Plan and to the program activities in
    the budget request.
        This cross-cutting display of budgetary resources required
    Commission staff to revamp the budget formulation system. One positive
    result is the ability to formulate the annual budget request and
    understand its impact by program activity as well as by goal.
        Question. Does the agency's Performance Plan link performance
    measures to its budget? Does each account have performance measures?
        Answer. Yes, the performance indicators or measures in the annual
    performance plan are linked to the budget through the use of annual
    performance targets. The cost of reaching annual performance targets is
    shown in summary fashion on the annual performance plan in the table
    entitled, Budget Request by Program Activity. This table shows the
    amount of funding each program activity or account will require to
    accomplish each goal. There is one table for each goal. Each program
    activity or account has performance measures.
        Question. To what extent does your performance planning structure
    differ from the account and activity structure in your budget
    justification?
        Answer. The performance planning structure is organized by goal
    while the budget justification structure is organized by program
    activity. There is a cross-cutting analysis in each structure. The
    program-based analysis of the budget request is augmented by a
    programmatic distribution of resources by agency goal. The goal-based
    analysis of the Annual Performance Plan disaggregates resources by
    program. Our intent in displaying information in both formats is to
    engender greater understanding of how the Commission's resources
    contribute to the accomplishment of the agency's mission.
        Question. Do you plan to propose any changes to your account
    structure for fiscal year 2000?
        Answer. We do not anticipate any changes to the account structure
    for fiscal year 2000 at this time.
        Question. How were performance measures chosen?
        Answer. The performance measures were developed collaboratively by
    the CFTC Strategic Planning Task Force and the Commission's program
    managers during the development of the CFTC's strategic plan. After the
    Commission adopted a mission statement, three agency goals, and
    corresponding outcome objectives and activities, the Task Force
    prepared a set of corresponding performance measures, which the
    Commission approved.
        Question. How did the agency balance the cost of data collection
    and verification with the need for reliable and valid performance data?
        Answer. To date, the Commission has used existing reporting systems
    to collect all data. For example, data concerning the distribution of
    labor were collected principally through the Management Accounting
    Structure Code system, otherwise known as MASC. These data reflect the
    hours spent on various Commission activities and are provided bi-weekly
    by every employee concurrent with production of the payroll. These data
    are augmented by each division's informal systems for tracking and
    recording time spent on various projects and activities and the results
    or outcomes produced. As a result of the Commission's strategic
    planning experience, program managers have determined that new data may
    need to be tracked to produce a more complete and reliable picture of
    performance. To the extent possible, the Commission will seek to
    utilize and refine existing systems rather than develop new systems.
    More will be known after the first full year of tracking and analyzing
    data for the fiscal year 1999 Annual Performance Plan. Costs may be
    incurred in altering current systems and/or in developing better
    methods of data collection and verification. The costs will need to be
    weighed against the long term benefit of enhanced performance data.
        Question. Does your plan include performance measures for which
    reliable data are not likely to be available in time for your first
    performance report in March 2000?
        Answer. Performance data are being tracked for the first time in
    fiscal year 1998 for some performance goals. While some data may not be
    available, it would be unwise to infer too much from data covering such
    a short period. The Commission is approaching the GPRA initiative as an
    iterative process to build on its positive experiences from year to
    year with a goal of understanding how we best accomplish our mission
    and at what cost.
        Question. What are the key performance goals from your fiscal year
    1999 Annual Performance Plan that you recommend this subcommittee use
    to track program results?
        Answer. The CFTC's recommended performance goals from its fiscal
    year 1999 Annual Performance Plan correspond to four broad indicators
    of success: markets free of disruption; registered and fit market
    professionals and financial intermediaries; self-regulatory
    organizations with sound financial practices and effective enforcement
    programs; and swift and aggressive investigation and prosecution of
    wrongdoing, with sanctions and fines levied for the maximum remedial
    and deterrent effect.
        Question. In developing your Annual Performance Plan, what efforts
    did your agency undertake to ensure that the goals in the plan include
    a significant number of outcome measures?
        Answer. The process of working across professional disciplines and
    programs via the Strategic Planning Task Force ensured the inclusion of
    a significant number of performance measures. The fiscal year 1999
    Annual Performance Plan includes, 12 performance goals and 46
    quantitative performance indicators for Goal One; nine performance
    goals and 76 quantitative performance indicators for Goal Two; and nine
    performance goals and 80 quantitative performance indicators for Goal
    Three. It is our goal to assess these goals and indicators after the
    first year to determine their usefulness and effectiveness.
                     government performance and results act
        Question. Do you believe your program managers understand the
    difference between goals that measure workload (output) and goals that
    measure effectiveness (outcome)?
        Answer. The Commission's program managers understand the concept of
    moving from measuring outputs to measuring outcomes. As we put together
    measurement tools and develop a system for tracking and reporting on
    the fiscal year 1999 Annual Performance Plan, we will continue to
    search for ways better to measure outcome. It is often difficult for
    regulatory agencies to demonstrate the causal relationship between
    efforts and stated desired outcomes. As we have expressed to the Office
    of Management and Budget and our Congressional oversight staff, we
    welcome any suggestions.
        Question. What are some examples of customer satisfaction measures
    that you intend to use? Please include examples of both internal and
    external customers.
        Answer. The Commission's strategic goals are all broadly aimed at
    serving the broad and diverse set of customers who use the US futures
    and options markets. Accomplishing our goals helps to provide globally
    competitive US futures and option markets free of disruption and
    accessible to the public through registered and fit market
    professionals. The Commission also meets customer needs through its
    goal of ensuring that the self-regulatory organizations operating in
    the industry have sound financial practices and effective enforcement
    programs. Most broadly, the Commission serves all market users and the
    public through swift and aggressive investigation and prosecution of
    wrongdoing.
        Beginning in fiscal year 1999, the Commission will monitor progress
    toward each of these customer goals through its annual performance
    plan.
        Question. How were the measurable goals of your fiscal year 1999
    Annual Performance Plan used to develop your fiscal year 1999 budget?
        Answer. The format of the CFTC's fiscal year 1999 budget and annual
    performance plan allows analysis from both a program perspective and
    performance planning perspective. Every staff-year can be attributed to
    a program and every staff-year can be attributed to one, or more,
    agency goals. As the agency's priorities change, so will the resources
    devoted to specific activities and goals. Because activities are linked
    to our program accounts the Commission is able to develop a budget that
    reflects agency priorities.
        Question. If a proposed budget number is changed, up or down, by
    this committee, will you be able to indicate to us the likely impact
    the change would have on the level of program performance and the
    achievement of various goals?
        Answer. Generally, the answer is yes. The CFTC budget can be
    analyzed by program or by goal; any change in the budget will impact
    either a specific program or goal or all programs and goals depending
    on the nature of the change.
        Question. Do you have the technological capability of measuring and
    reporting program performance throughout the year on a regular basis,
    so that the agency can be properly managed to achieve the desired
    results?
        Answer. The agency does not have a comprehensive technological
    system for measuring an reporting data. To achieve the goal of tracking
    performance and reporting on it regularly, we rely on the labor-hour
    distribution system which is a by-product of our payroll system to
    capture data on how the Commission staff spend their time by project.
    We combine this data with data from a variety of data collection
    systems for reporting performance. Currently we analyze performance
    twice a year, once with the development of the OMB Budget Estimate and
    later with the development of the President's Budget. The Commission's
    GPRA Task Force is studying the feasibility of using our existing
    quarterly review process to incorporate additional types of measures
    reportable under GPRA. It may be possible to use this process to
    measure the accomplishment of performance goals on a more regular
    process.
        Question. The Government Performance and Results Act requires that
    your agency's Annual Performance Plan establish performance goals to
    define the level of performance to be achieved by each program activity
    set forth in your budget. Many agencies have indicated that their
    present budget account structure makes it difficult to link dollars to
    results in a clear and meaningful way. Have you faced such difficulty?
    Would the linkages be clearer if your budget account structure were
    modified? If so, how would you propose to modify it and why do you
    believe such modification would be more useful both to your agency and
    to this committee than the present structure?
        Answer. The CFTC has no plans to modify the budget account
    structure currently in use. CFTC financial staff devoted considerable
    resources in fiscal year 1997 to the reconfiguration of the
    Commission's budget formulation system to capture and report data by
    goal, outcome objective, and activity in addition to the current budget
    account structure which is by program and subprogram activity.
        Aligning the new requirements created by GPRA to the existing
    budget account structure allows the Commission to report on resource
    requirements in both formats while ensuring that we may continue to use
    of the underlying financial data from the Commission's payroll and
    labor distribution systems without altering significantly either of
    those systems.
        However, challenges remain as the Commission seeks to modify the
    current labor distribution, or Management Account Structure Code
    System, to better align it with the structure of the activities set
    forth in the strategic plan.
        Question. Does your fiscal year 1999 performance plan--briefly or
    by reference to your strategic plan--identify any external factors that
    could influence goal achievement? If so, what steps have you identified
    to prepare, anticipate, and plan for such influences? What impact might
    external factors have on your resource estimates?
        Answer. Yes, the Strategic Plan identified ten external challenges
    or factors that may impact planning and goal achievement at the
    Commission. They are: the volume of trading in futures and commodity
    options; the number and sophistication of market users; the variety of
    markets traded; the growing use of over-the-counter derivatives; the
    structural changes in the financial services industry; the
    globalization of financial markets; the effect of federal law and
    policies; the advancement of technology; the standards, resources and
    priorities of other organizations, and; events that destabilize the
    commodity markets such as the 1987 stock market break, the 1995
    collapse of Baring Bank and the 1996 copper market events precipitated
    by the Sumitomo Corporation.
        The possibility exists for any number of these external factors to
    influence Commission priorities or to place additional demands, whether
    short or long-term, on the Commission staff. It is the Commission's
    intent to meet these challenges by using existing resources
    effectively, finding efficient methods--such as the Global Markets
    Advisory Committee--to strengthen its capacity to respond to these
    challenges, and seeking the appropriate level of budgetary resources
    each year to fulfill its legislative mandate.
        Question. Through the development of the Performance Plan, has the
    agency identified overlapping functions or program duplication? If so,
    does the Performance Plan identify the overlap or duplication?
        Answer. In developing the Performance Plan, the Commission did not
    identify overlapping functions or program duplication, although the
    Plan did highlight the linkages between the agency's programs. One of
    the positive outcomes of the process was a greater understanding of how
    each program contributes to the agency's goals.
        Question. Future funding decisions will take into consideration
    actual performance compared to expected or target performance. Given
    that, to what extent are your performance measures sufficiently mature
    to allow for these kinds of uses? Are there any factors, such as
    inexperience in making estimates for certain activities or lack of
    data, that might affect the accuracy of resource estimates?
        Answer. As mentioned earlier, performance measures data are being
    tracked for the first time in fiscal year 1998 for some performance
    goals. While some data may be available, it would be imprudent to infer
    too much from ``unseasoned'' data. The Commission is approaching the
    GPRA initiative as an iterative process and hopes to build on its
    positive experiences from year-to-year. Our ultimate goal is to
    understand how the agency best accomplishes its mission and at what
    cost.
        Perhaps the most challenging question facing the Commission is how
    to measure deterrence of wrongdoing, manipulation, and fraudulent
    activity at its incipiency It is very difficult to establish a
    measurable causal relationship between regulatory oversight that relies
    in large measure on deterrence and specific activities of the market
    and market users.
        Question. Based on your fiscal year 1999 performance plan, do you
    see any need for any substantive revisions in your strategic plan
    issued on September 30, 1997?
        Answer. As of this date, the CFTC has no plans for a substantive
    revision to the Strategic Plan released in September 1997. We will
    continue to evaluate the Plan internally and as we receive any further
    comments on it. The Commission continues to invite comments on our
    Plan, which can be found on the Commission website at http://
    www.cftc.gov.
                                     ______

                     Questions Submitted by Senator Bumpers
                       new products for a farm safety net
        Question. Since passage of the 1996 Farm Bill, farmers' concerns
    are growing about the lack of an adequate safety net to protect them
    from an unstable market. For years, various financial instruments under
    the jurisdiction of the CFTC have been considered as tools farmers
    could use to lock in a satisfactory price for their products. Is CFTC
    actively working to help develop products to help provide a farm safety
    net against unstable prices? If so, what are some of these products?
        Answer. The CFTC has no statutory authority to develop risk
    management products such as futures and options. It, however, has taken
    actions that should facilitate the development of such products by US
    futures exchanges and agricultural firms and institutions.
        Examples of recent Commission actions that have facilitated the
    development of agricultural risk management products include: adoption
    of a pilot program to permit the trading of agricultural trade options;
    lifting the ban on US exchange-traded options on physical agricultural
    commodities--previously, futures exchanges could list options only on
    agricultural futures contracts; continuing efforts to streamline its
    contract designation process, resulting in significantly reduced review
    times for new contracts and the virtual elimination of designation
    backlogs; and the release of a statement of guidance on hedge-to-arrive
    contracts and prudent risk-reduction practices.
        Question. Is CFTC working with USDA's Risk Management Agency to
    develop useful risk management products for farmers?
        Answer. As required by the statute, the CFTC consults closely with
    USDA's Risk Management Agency to help provide risk management education
    to farmers and ranchers and to provide any technical assistance
    required by USDA. For example, the Commission has provided technical
    assistance to that agency in its development of a dairy option pilot
    program.
                             fast-track procedures
        Question. In fiscal year 1997, CFTC implemented new ``fast track''
    procedures to approve certain types of contracts and to better
    streamline CFTC activities. What are some of the elements of this
    ``fast-track'' procedure?
        Answer. In April 1997, the Commission implemented fast-track
    procedures for processing certain contract designation applications and
    rule changes to contract terms and conditions. These procedures
    streamlined the review process for most types of contracts so that the
    administrative process for approval could be completed in time periods
    as short as 10 or 45 days following receipt by the Commission. These
    procedures were intended to cut in half the average, 90-day, period
    during which new contracts and substantive rule changes had been
    pending with the Commission.
        Filings under fast-track are at the discretion of the exchange.
    Filings must comply with the form and content requirements of the
    Commission's rules, and may not be amended except as requested by the
    Commission. Under the fast-track procedures, an exchange may list a
    contract for trading on the ``effective date,'' which is the day
    following the end of the 10- or 45-day period, unless the date is
    extended or fast-track review is ended. Under the fast-track
    procedures, the initial 10- or 45-day effective date may be extended
    once for an additional 30 days if the proposed rule raises novel or
    complex issues which require additional time for review. For
    applications not meeting fast-track requirements, or if requested by
    the exchange, fast-track review is ended and the regular review
    procedures for new contract applications apply.
        Question. What safeguards are in place to assure the soundness of
    contract approvals on an expedited basis?
        Answer. The abbreviated review periods established by the
    Commission under the fast-track procedures have not adversely affected
    the soundness of the contract approval process. The Commission
    continues to assess the legality of exchange proposals and their impact
    on the public interest. Moreover, to be eligible for fast-track filing,
    applications must be complete upon submission. Applications that are
    complete can be more readily reviewed within the specified time frames.
    When applications are not complete or contain deficiencies, the
    Commission has the authority to remove them from fast-track to conduct
    a more extensive review.
        To ensure that proposed contracts meet the approval standards and
    that public interest issues are addressed within the streamlined time
    frames, the Commission has modified certain of its internal processing
    procedures, including the standardization of its approval documents and
    streamlined review procedures. While the overall effect on Commission
    staffing has been neutral, the most substantive resource impact has
    been to change the timeline of the reviews rather than the total work.
    In this regard, the new procedures require that the workload be
    concentrated in the time periods immediately following submission of
    the proposals to the Commission, rather than being spread out more
    uniformly over a longer period of time. In addition, the Commission has
    encouraged informal discussions with exchange staffs about potential
    proposals prior to their submission so that issues may be identified
    and corrected by the exchanges prior to submission as well as to
    facilitate the Commission's reviews.
        Also, the Commission's website has been enhanced to include a page
    showing all pending new contracts along with provisions for downloading
    the proposed terms and conditions and filing electronic comments or
    questions. The address is http://www.cftc.gov/dea/pending/newcontr.htm.
    This enhancement will enhance the public's ability to monitor pending
    proposals and to submit comments related to public interest or other
    concerns.
                           ``sophisticated customers"
        Question. Last month, CFTC approved rules designed to speed up the
    account opening process for certain customers. The rule allows
    flexibility for ``futures commission merchants'' and ``introducing
    brokers'' to design their own ``disclosure of risk'' procedures. You
    state that this rule is a response to a request by industry to provide
    different regulatory treatment for ``sophisticated customers'' where
    appropriate. What is your definition of ``sophisticated customer?''
        Answer. In February 1998, the CFTC approved rule changes that
    eliminated requirements that futures commission merchants and
    introducing brokers provide certain defined categories of customers
    with Commission-mandated risk disclosure statements and obtain from
    these customers written acknowledgment of receipt of these statements
    as part of the account-opening process. The customers affected by this
    rule change, who are carefully defined in the rule amendments, would
    generally be considered ``sophisticated'' because they are
    institutional investors, entities regulated by federal or state
    agencies, high net-worth individuals or regulated foreign entities
    which perform similar functions to qualifying US regulated entities.
    Specifically, these customers include securities broker-dealers, banks,
    insurance companies, and other regulated financial intermediaries;
    investment companies with total assets in excess of $5 million;
    employee benefit plans subject to ERISA with total assets exceeding $5
    million or whose investments are managed by specified investment
    professionals; corporations and other entities with total assets
    exceeding $10 million or having a net worth of at least $1 million; and
    natural persons with assets exceeding $10 million.
        These recent rule amendments built upon other CFTC efforts to
    streamline registrants' disclosure obligations. For example, since
    1992, the CFTC's rules have allowed commodity pool operators and
    commodity trading advisors to meet less onerous disclosure requirements
    in pool offerings and managed accounts offered to investors who satisfy
    certain net worth or other financial requirements. In this regard, it
    should be noted that the CFTC rules do not use the term sophisticated
    customer, nor do these rules apply a single definition for qualifying
    customers. Instead, the standards used to define categories of
    customers for whom specific relief can be claimed have been developed
    in each instance to assure that the overall customer protection goals
    of the Commodity Exchange Act are fully maintained.
        Question. Are there any provisions of this rule that could result
    in inadequate CFTC oversight of market activities?
        Answer. The CFTC does not believe that these rule changes will
    reduce its ability to oversee the commodity futures or options markets
    or in any way erode customer protections. These rule changes provide
    futures commission merchants and introducing brokers with relief from
    mandated disclosure requirements when opening accounts for certain
    defined categories of customers. Futures commission merchants or
    introducing brokers relying on this relief continue to have obligations
    under other CFTC rules to provide all their customers with information
    material to a specific transaction. Moreover, in adopting these rule
    amendments, the CFTC carefully considered comments made by members of
    the public. In fact, the CFTC removed government entities from the list
    of customers for whom this relief could be claimed after the Government
    Finance Officers Association indicated that its members would benefit
    from continued receipt of the CFTC-mandated risk disclosure statements.
        Question. Is this rule a precursor of deregulation of certain
    sectors of the futures industry?
        Answer. These rule amendments are not a precursor of deregulation
    of certain sectors of the futures industry. They are part of an ongoing
    CFTC effort to reduce unnecessary regulatory burdens on registrants
    while assuring that customers and the futures and options markets
    themselves continue to receive the high levels of protection required
    by the Commodity Exchange Act.
                                cftc and the sec
        Question. In the past, there has been discussion about merging the
    functions of CFTC with the Securities Exchange Commission. What are the
    views of the CFTC to that proposal?
        Answer. The Commission previously has opposed specific proposals to
    merge the CFTC and the SEC. It has been the Commission's view that a
    merger would not result in appreciable cost savings or increased
    efficiency, nor would it result in any other clear benefits.
    Furthermore, it has been the Commission's view that the public interest
    is best served by retaining an expert and independent agency that can
    devote full attention to the futures and option markets. The Commission
    believes that a more productive approach would be to continue close
    communication and coordinated action between the two agencies on issues
    of common concern.
        In creating the CFTC as an independent agency in 1974, Congress
    determined that the regulator for commodity futures and option risk-
    shifting instruments should not be part of an agency regulating the
    underlying cash markets, whether that agency is the Department of
    Agriculture, the Securities and Exchange Commission, or the Department
    of Energy. Congress recognized that price neutral regulation of risk-
    shifting activity would suffer if placed within a larger agency with
    different, and perhaps at times conflicting, priorities.
        The existing regulatory structure also reflects a functional
    regulatory approach to the financial markets which the Commission
    supports. The jurisdiction of the CFTC and the SEC is divided based on
    the function of the particular financial instrument. The CFTC regulates
    futures and option contracts that serve a price discovery or hedging
    function, and the SEC regulates securities that serve a capital
    formation purpose. The separate regulatory framework for futures and
    options that has evolved over the decades reflects the different
    purposes that those instruments serve.
        Question. What, if any, overlapping exists between the two
    agencies?
        Answer. As I mentioned earlier, the two agencies regulate
    instruments and markets that serve different economic functions. We do
    not believe that there is any overlap between the regulatory missions
    of the two agencies. However, the markets for commodity futures and
    securities are interrelated and share common participants. Accordingly,
    the agencies routinely coordinate and cooperate in carrying out their
    separate regulatory missions.
        Question. Please describe CFTC's relationship with the SEC.
        Answer. Because the markets are inter-related and share common
    participants, the CFTC and the SEC often work together closely in an
    attempt to ensure a consistent regulatory approach and an effective
    enforcement program.
        In the regulatory area, the agencies have worked together over the
    years to ensure that circuit breakers (e.g., price limits and trading
    restrictions that are triggered when the stock market and stock index
    futures markets move a certain number of points) operate across markets
    in a coordinated fashion. The agencies have also coordinated their
    financial reporting rules in order to avoid placing unnecessary and
    duplicative regulatory burdens on market professionals. These are just
    a few examples how the CFTC and the SEC have worked together in the
    regulatory area and how that coordination has benefited the markets.
        In the enforcement area, the staff of the Commission's Division of
    Enforcement and their counterparts at the SEC routinely cooperate in
    their efforts to police wrongdoing in the nation's financial markets.
    From time to time conduct comes to the attention of the two enforcement
    offices that implicates both the futures and securities laws. In those
    circumstances, the offices join forces, often devising coordinated
    investigation strategies for gathering and sharing information. In this
    way, duplication of effort is avoided and expertise and resources are
    shared. Where appropriate, we also coordinate the filing and settlement
    of enforcement actions to ensure a consistent governmental response to
    misconduct.
                       electronic communication security
        Question. You mention that CFTC has adopted measures to permit the
    electronic filing of documents with the Commission. As more and more
    governmental and market transactions are handled through electronic
    communications such as E-mail, what is CFTC doing to help ensure that
    computer-based communications are reliable and not susceptible to
    invasion by computer ``hackers'' who might place at risk the integrity
    of market transactions?
        Answer. The Commission's electronic filing and analysis systems for
    financial reports and disclosure documents are independent of the
    systems used to track market data, such as large trader and trade
    practice data. Accordingly, the security of the latter data is not
    threatened by recent Commission initiatives.
        The Commission has taken a variety of steps to address relevant
    security/integrity issues in the course of its recent initiatives. For
    communications between Commission registrants and the Commission, such
    measures have varied with the nature of the information being provided.
    Permitting FCM's to provide important financial information
    electronically raises issues concerning the reliability of the
    information provided and the confidentiality of the communication
    system. The Commission has addressed these concerns by requiring firms
    to use Commission-issued personal identification numbers, PIN's, in
    submitting financial information to the Commission. A firm's use of its
    PIN is deemed the equivalent of a manual signature for purposes of the
    Commission's attestation requirement. Moreover, the electronic filing
    system being used by the Commission provides a safeguard to minimize
    the likelihood of an unauthorized interception and alteration of
    financial data transmitted by an FCM. Additionally, financial data
    files are encrypted prior to transmission and unencrypted by Commission
    personnel prior to processing and review.
        Security/integrity issues are of lesser concern in the system for
    electronic filing of CTA and CPO disclosure documents with the
    Commission because the documents at issue generally do not include
    confidential financial information and are subject to review and
    discussion prior to circulation to the public. Registrants who file
    electronically must use their NFA identification number to authenticate
    their submission and receive an electronic receipt as evidence that the
    Commission received the electronic submission. At the time the
    Commission adopted this initiative, consideration was given to
    requiring encryption procedures to guard against unauthorized
    interception of disclosure documents transmitted to the Commission
    electronically. The Commission determined that such a requirement was
    unnecessary in light of the voluntary nature of the program, but did
    state that Commission staff would cooperate with registrants that
    voluntarily adopted an encryption procedure.
                         international market stability
        Question. You mention your meetings in London in November of 1996
    and in Tokyo last October in an effort to establish international
    standards for market transactions. Over the past few years, we have
    seen dramatic shocks to the markets originating in foreign countries
    that sometimes had a regional or global effect. In some cases, these
    incidents were direct results of improper market manipulation. Please
    describe the state of market stability and security from international
    market incidents?
        Answer. The Commission's recent international initiatives have
    encouraged international action to address the issues of systemic risk
    posed by our linked markets and have encouraged the worldwide adoption
    of higher regulatory standards. These international initiatives are
    designed to enhance international supervisory cooperation and emergency
    procedures, to establish concrete standards of best practices that set
    international benchmarks for regulation of futures and derivatives
    markets, to encourage improved transparency in those markets, to
    improve the quality and timeliness of international information
    sharing; and to encourage jurisdictions around the world to remove any
    legal or practical obstacles to achieving these goals.
        These structural measures can assist market authorities in dealing
    better with crises and in safeguarding customer funds and assets in
    case of defaults. In addition to such structural measures, the
    relationships established over the years with foreign regulators, both
    through formal memoranda of understanding and informal relationships,
    facilitate the Commission's ability to obtain critical information and
    to assist US firms in addressing the consequences of market events.
        The Commission continues to work in these areas to improve the
    design of regulatory programs to withstand market shocks and to improve
    the execution of existing programs. I would like to submit for the
    record a list of recent Commission initiatives addressing systemic
    risk.
        [The information follows:]
        Barings & Windsor Conference.--Following the collapse of Barings
    Plc., a UK firm which traded on numerous world futures markets
    including those in Singapore, Japan, Hong Kong and the UK, the CFTC co-
    chaired a meeting in Windsor, England, with the UK Securities and
    Investments Board--which has since been renamed the Financial Services
    Authority, or FSA. That meeting, and the resulting Windsor Declaration,
    set in motion a series of international initiatives at both the
    regulatory and market level intended to enhance the resilience of the
    financial marketplace against shocks or stress caused by such defaults.
    These initiatives included:
      --the development of procedures to coordinate and to respond to a
            market crisis once it has materialized;
      --initiatives to increase transparency of market protections and
            procedures, including proposals for the strengthening of
            protections accorded customer funds deposited for investment or
            safekeeping; and
      --initiatives to encourage the development by all markets of default
            procedures intended to isolate risks to the defaulting firm and
            to restrict potential impact on other firms or markets.
        Development of Large Exposure Information Sharing Arrangement.--In
    an era in which exchange member firms and market participants typically
    trade on multiple exchanges, no one regulator or market authority will
    have the information necessary to evaluate the risks to its markets.
    For example, at Barings, a rogue trader with high exposures in
    Singapore claimed that his positions in the Japanese markets were risk
    reducing, but there was no regulatory mechanism available to any single
    regulator to verify this claim. A notable accomplishment resulting from
    the Windsor meeting was the signing in March 1996 at Boca Raton,
    Florida, of the Declaration on Cooperation and Supervision of
    International Futures Exchanges and Clearing Organizations, an
    arrangement under which the occurrence of certain triggering events
    affecting an exchange member's financial resources or exposures prompts
    the sharing of information among regulators. The Declaration, which has
    been signed by 26 regulators to date, and a companion agreement among
    self-regulatory organizations which has been executed by approximately
    65 exchanges and clearinghouses, facilitate the identification of large
    exposures by firms that could have a potentially adverse effect on
    multiple markets.
        Sumitomo & Tokyo Communique.--Similarly, in November 1996,
    following the revelations of huge losses at Sumitomo and the related
    adverse effects on the global copper markets, the CFTC and the UK SIB,
    along with the relevant Japanese authorities, the Ministry of
    International Trade and Industry (``MITI'') and the Ministry of
    Agriculture, Forestry and Fisheries (``MAFF''), co-sponsored an
    international regulators conference in London on physical delivery
    markets in international commodities. The London conference focused on
    the special problems that physical delivery markets pose for regulators
    and considered how contract design, market surveillance and
    international information-sharing can reduce the potential for, and
    assist in the management of, manipulation and other market disruptions.
    The 17 countries participating in that meeting issued a Communique
    agreeing on certain basic principles of regulation and on a year-long
    work program.
        That effort culminated on October 30 and 31, 1997, at a conference
    in Tokyo, Japan, jointly chaired by the CFTC, the Japanese MITI and
    MAFF and the UK FSA where representatives of regulators from 16
    jurisdictions responsible for supervising commodity futures markets
    announced the completion of the work program contained in the London
    Communique issued in November 1996. At the end of the meeting, the
    regulators issued a Tokyo Communique which, among other things,
    endorsed two guidance papers, one on best practices for the design and/
    or review of commodity contracts and another on market surveillance and
    information sharing. The guidances represent the first occasion on
    which regulators responsible for overseeing commodity derivative
    markets have agreed to international standards for the supervision of
    these markets.
        Significantly, the regulators at the Tokyo meeting agreed that they
    should move beyond the mere adoption of statements and expressly
    committed to seeking the removal of domestic legal and other barriers
    to ensure access to information that permits them to detect and deter
    abusive practices and disorderly conditions in the markets, including
    information on concentrations of positions and the overall composition
    of the market. This commitment is significant because many regulators
    need new or expanded powers in order to attain this goal.
        Enhancements in Boca Declaration: removal of restrictive language
    and addition of manipulative activities to scope.--The Tokyo Communique
    also encouraged regulators to participate in, and to make use of, the
    arrangements for sharing large exposure information which are set out
    in the ``Declaration on Cooperation and Supervision of International
    Futures Markets and Clearing Organizations.'' However, we recognized
    that restrictive language in the Declaration made it impossible for
    certain regulators of commodity markets to join in that arrangement.
    Accordingly, in 1997 the CFTC and UK FSA, as co-chairs of the Windsor
    Declaration, successfully led an effort to remove such restrictive
    language from the Declaration. We are pleased to report that the
    following regulators have subsequently signed the declaration: Japanese
    MITI and MAFF, the New Zealand Securities Commission, the Securities
    Commission of Argentina, the Capital Markets Board of Turkey and the
    Securities Commission of Taiwan.
        Participants in the Tokyo Conference also determined that the
    utility of the Declaration could be enhanced by further amending the
    Declaration to clarify its application to potential manipulative or
    abusive practices. Again, the CFTC joined with its Japanese and UK
    colleagues to lead this initiative which was successfully concluded and
    announced at the international regulators conference in Boca Raton,
    Florida on March 20, 1998.
        Question. In what ways will the international standards reduce the
    threat of spreading international market disruptions?
        Answer. At the end of the meeting in Tokyo in November 1997, the
    participating jurisdictions issued the Tokyo Communique which, among
    other things, endorsed two guidance papers--one on best practices for
    the design and/or review of commodity contracts and another on market
    surveillance and information-sharing. The guidances represent the first
    occasion on which regulators responsible for overseeing commodity
    derivative markets have agreed to international standards for the
    supervision of these markets.
        By creating international best practices standards, we hope to
    establish world-wide regulatory benchmarks which can help each
    regulator to assess how its standards and practices compare with the
    benchmarks and to consider possible regulatory improvements. We
    anticipate that market authorities, both regulators and markets, will
    refer to the standards of contract design as providing an international
    consensus as to the elements that should be considered in order to
    reduce the possibility that a commodity contract may be susceptible to
    manipulation or other disorderly conditions.
        Contract design, however, is merely part of overall market
    regulation. Accordingly, the regulators issuing the Tokyo Communique
    also endorsed standards of best practices for market surveillance and
    information-sharing. Among other things, the guidance on market
    surveillance and information sharing recommends that regulators have
    access to information about the exchange positions of large traders.
    Also, they should have access to traders' related cash and over-the-
    counter positions so that they can assess fully the risk of such
    persons' positions to the markets.
        Significantly, the regulators at the Tokyo meeting agreed to move
    beyond the mere adoption of statements and expressly committed to
    seeking the removal of domestic legal and other barriers to ensure
    access to information that permits them to detect and deter abusive
    practices and disorderly conditions in the markets, including
    information on concentrations of positions and the overall composition
    of the market. This commitment is significant because many regulators
    need new or expanded powers in order to attain this goal.
        The best practices guidances adopted in Tokyo demonstrate an
    international consensus on how to regulate derivatives markets and a
    commitment on the part of regulators to enhance their regulatory
    effectiveness.
        The CFTC also has actively participated in the ongoing project of
    the International Organization of Securities Commissions, or IOSCO, to
    articulate the basic elements of an effective regulatory regime for the
    supervision of securities and derivatives markets. We expect a
    consultative document to be released in May, setting forth thirty
    Principles of Securities Regulation and collating, in a user-friendly
    fashion, all existing IOSCO guidance on effective regulation of
    financial services.
        Question. What additional steps, if any, should the United States
    take for protection against international market disruptions?
        Answer. Domestically, the Commission continues to evaluate its
    regulations to ensure that necessary safeguards are in place to respond
    to market events and that its regulations are updated to address
    changes in the marketplace. The Commission supports various on-going
    international initiatives and inter-governmental dialogue to improve
    the transparency of market information. The Commission also supports
    enhanced disclosure of information about relevant rules in place in
    specific markets to permit end-users of markets to advise themselves
    adequately about specific risk. The Commission also supports
    improvements in the protections available worldwide to address the
    insolvency of financial services firms without adversely affecting the
    liquidity of the markets in which they transact or the ability of
    solvent customers of insolvent firms to manage their position risk;
    improvements in the capacity to share information on the whole position
    of market participants, including over-the-counter, cash and futures
    markets positions, wherever located; better policing and oversight of
    markets generally; and appropriate coverage of over-the-counter risks.
        These issues were identified by the Commission in the Windsor
    Declaration and the Tokyo Communique, but may require new national law,
    removal of national barriers or other action at an international level.
    While reforms are in process, the work necessary is by no means
    complete--nor can it be accomplished by a single jurisdiction acting
    alone.
        The CFTC has paid close attention to addressing preparations for
    and containment of market risks in its domestic markets. We have
    updated our contingency plan, developed programs to promote readiness
    for Year 2000 and Euro conversion, engaged in stress testing, performed
    oversight audits of markets and firms, required upgrades of firm
    internal controls, and modified core regulations to address evolution
    of the market. We continue to be vigilant as markets evolve.
                                     ______

                      Question Submitted by Senator Harkin
        Question. Has the CFTC encountered problems in having access to any
    kinds of information on livestock prices and markets it would need to
    investigate claims, should they arise, about market manipulation in the
    futures markets?
        Answer. Reliable cash prices that accurately reflect supply and
    demand conditions are critical to the Commission's market surveillance
    program. One aspect of that program is assessing how well futures
    prices reflect the cash market as a futures contract approaches
    expiration. For physical delivery futures contracts, this entails an
    analysis of the basis or the difference between the futures price and
    the relevant cash price for the commodity. For cash-settled futures
    contracts, the futures price will ultimately be set at the specified
    cash price used for settlement. Consequently, for these markets the
    surveillance issue is whether the cash price is representative of the
    market or is susceptible to manipulation to benefit a futures position.
        For domestic agricultural markets, the reliability of available
    cash price quotations has increasingly been of concern to Commission
    surveillance staff. In the cattle market, cash prices at terminal
    markets are of declining importance due to the prevalence of direct
    marketing from feedlots to packers at prices that may not be reported.
    Several cash-settled contracts, like live hogs, boneless beef, and the
    new pork belly contract, are settled on the basis of prices reported by
    the USDA. The staff also has some concerns about the thinness of the
    underlying cash prices for some of these commodities. Moreover, some
    USDA price reporters are concerned that, by sharing with the CFTC the
    confidential data price they collect, they may jeopardize the
    willingness of some firms to report price data to the USDA.
    Accordingly, the Commission would support initiatives to strengthen the
    USDA's ability to collect and publish reliable price data.
                    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
            JOSEPH A. LEVITT, DIRECTOR, CENTER FOR FOOD SAFETY
            JANICE F. OLIVER, DEPUTY DIRECTOR, CENTER FOR FOOD SAFETY
            MITCHELL R. ZELLER, DIRECTOR, OFFICE OF TOBACCO PROGRAMS
            DENNIS P. WILLIAMS, DEPUTY ASSISTANT SECRETARY, BUDGET,
                DEPARTMENT OF HEALTH AND HUMAN SERVICES

                           Introduction of Witnesses

        Senator Cochran. The subcommittee will please come to
    order.
        We resume our hearing for the purpose of considering the
    annual budget request that has been submitted by the
    administration for funding for the Food and Drug
    Administration. We are very pleased to have Dr. Michael
    Friedman, who is the Lead Deputy Commissioner of the Food and
    Drug Administration, here with us with colleagues. We invite
    you to introduce those who are with you.
        We have your written testimony which we appreciate very
    much. We will make that a part of the record in full and
    encourage you to make any summary comments or other statements
    that you think would be helpful to our committee in
    understanding the budget request. You may proceed.

                        Statement of Michael A. Friedman

        Dr. Friedman. Thank you very much, Mr. Chairman.
        As the Lead Deputy Commissioner of the Food and Drug
    Administration, it is my privilege to be here today to present
    our proposed budget for fiscal year 1999.
        With me are Mr. William Schultz, our Deputy Commissioner
    for Policy; Mr. Robert Byrd, our Deputy Commissioner for
    Management and Systems, both from the Food and Drug
    Administration. Mr. Dennis Williams accompanies us. He is the
    Deputy Assistant Secretary for Budget at the Department of
    Health and Human Services. They and others from the FDA are
    here to help respond to your questions.
        As you recognize, sir, FDA is an agency that serves a vital
    and unique role in promoting and protecting the public health.
    The public demands are great. All Americans expect that the
    food they eat will be safe and wholesome, that the medical
    products they use, drugs, biologicals, and devices, will be
    safe and effective, that children will be protected from the
    harmful effects of tobacco, and that information on the
    products regulated by FDA will be useful and understandable.
        These are important public health responsibilities and we
    take them very, very seriously. Our commitment is an enduring
    one and our high level of performance in the last year
    demonstrates our ability to make good on that commitment.
        As you know, one of our most visible activities is the
    review of new products before they go to market. I am proud to
    say that the agency has performed at historically high levels
    this past year. For example, FDA reviewed and approved 144 new
    drugs and biologicals last year, a record number, as well as
    125 therapeutic supplements. We were 100 percent on time in
    meeting our pharmaceutical review deadlines. We conducted the
    reviews in a median of only 12.2 months. That is for both
    standard drugs and priority products. At the same time we also
    reviewed a record number of generic products, more than 400.
        The Center for Devices and Radiological Health approved 48
    major new devices, 5 more than the previous year, even as it
    cut review times by one-third. Eighteen of these devices
    presented important diagnostic or therapeutic advances such as
    the first surgical implant to restore partial hand movement in
    quadriplegics, a deep brain stimulator for helping to control
    tremors in people with Parkinson's disease, and the first laser
    system for treating tooth decay.
        Overall, FDA's output, as measured by the number of annual
    approvals for all new products reviewed by the agency, has
    improved 17 percent per year for each of the last 4 years. This
    level of performance is even more noteworthy since in each of
    the last 4 years, FDA's workload, as measured by the number of
    all types of applications we receive, has steadily risen at the
    annual rate of 12 percent per year. As you recognize, our
    workload is doubling every 6 years, and we fully expect the
    number of new applications to continue to rise at this very
    exciting but very challenging rate.
        The engine of practical scientific progress is fueled by
    increased support for biomedical research, at NIH now at a
    level of $13.6 billion, and very substantial investments by
    private industry, more than $25 billion per year. These
    organizations are working to turn scientific discoveries into
    practical, marketable therapeutics.
        As a result, we foresee a medical product pipeline filled
    with novel and promising remedies for years to come. The very
    uniqueness of these products challenges FDA's own scientists to
    remain on the cutting edge. We must improve both our intramural
    scientific and research programs and foster better links with
    external scientific bodies in order to be able to understand
    and appropriately evaluate and regulate the very newest
    products.
        In addition, FDA manages important new responsibilities,
    such as the expanded food safety programs and the tobacco
    regulation. Moreover, the agency must be prepared for the
    unexpected, the next outbreak of a novel foodborne pathogen
    such as E. coli O157:H7 or unexpected problems with
    therapeutics already on the market such as the diet drugs
    fenfluramine and dexfenfluramine which were recalled last year.
        Last, let me say a couple of words, if I may, about the
    challenges presented by the FDA Modernization Act of 1997, this
    major piece of legislation intended to improve the regulation
    of medical products, foods, and cosmetics.
        The timely implementation of this ambitious law will be a
    substantial challenge to FDA. The act directs FDA to publish 42
    regulations, 23 guidances, 13 other publications in the Federal
    Register, as well as 25 other tasks such as postmarketing
    approval studies, electronic application submissions, and so
    forth. This will consume a considerable amount of FDA resources
    for which there is no specific budget allocation.
        We, of course, are committed to carrying out the
    congressional directives delineated in the act, even though
    many FDA programs have not benefited from funding increases
    over the last several years.
        To meet these expectations and to support the agency's
    activities, FDA requires $1.26 billion in fiscal year 1999. The
    appropriation request includes $970 million in budget
    authority, $281 million in user fees, and $13 million in other
    reimbursable activities.
        Sir, I want to acknowledge that the proposed budget is
    complicated and I am sure you will have many questions that we
    will do our very best to answer, but before I close, I would
    like to thank you, sir, and the committee for your past
    commitment to bettering the health of our citizens.
        Last year you authorized $24 million for the President's
    food safety initiative. We are using that money to take several
    very important steps to improve the safety of the Nation's food
    supply. These include increasing surveillance for potential
    outbreaks, improving consumer education, increasing focused
    research aimed at detecting pathogens and eliminating them,
    developing strategies to prevent microbial contamination of
    food, developing microbial risk assessment techniques, and
    strengthening the coordination between Federal, State, and
    local authorities. These are very important steps, but the road
    to safer food is long and difficult.
        In our fiscal year 1999 proposal, we are requesting an
    additional $50 million. We plan to further enhance the
    foodborne illness surveillance program, as well as to expand
    our coverage of imported products. Research will focus on
    developing improved methodology for detecting microbial
    contaminants in food, technologies to eliminate or prevent food
    contamination, and enhancing our understanding of how microbial
    resistance to food preservation techniques and to antibiotics
    occur.
        I also want to acknowledge the committee's support for our
    efforts to reduce tobacco use by youngsters. With the $34
    million the committee provided last year, we have taken
    important first steps to protecting the Nation's youth from
    tobacco products. We have established compliance programs in 10
    States already, signed contracts with 3, and are negotiating
    with the next 15. North Carolina signed the first contract for
    this year, and we expect to have compliance programs in all 50
    States by the end of the year.
        With the budget increase proposed for the next fiscal year,
    FDA will expand the enforcement and outreach efforts designed
    to ensure that retailers do not sell tobacco products to
    minors.
        I believe it is clear, Mr. Chairman, that the investment of
    each American taxpayer dollar in the Food and Drug
    Administration is a solid investment in promoting and
    protecting the public health. Americans expect their FDA to be
    caring, to remain vigilant, to promote their health and well-
    being, and to protect them from all types of health hazards.
    This is an important trust. It is a trust this agency will do
    its very best to keep.
        If I may close, Mr. Chairman, with one personal comment, I
    on behalf of the agency want to recognize the contributions of
    Senator Bumpers, convey to him our best wishes as he moves on
    in his retirement this year. He has dealt fairly and
    thoughtfully with complex issues and it has always been a
    pleasure to work with him.
        Mr. Chairman, I appreciate very much this chance to address
    you, to answer your questions, and we look forward to working
    with you. Thank you, sir.

                               Prepared Statement

        Senator Cochran. Thank you very much, Dr. Friedman. We have
    your complete statement and it will be inserted in the hearing
    record.
        [The statement follows:]
                   Prepared Statement of Michael A. Friedman
        Mr. Chairman, members of Congress, ladies and gentlemen, my name is
    Michael Friedman. I am the lead deputy commissioner for the Food and
    Drug Administration and it is my privilege to be here today to tell you
    about our plans and expectations as presented in the Administration's
    proposed budget for fiscal year 1999. And, of course, I am happy to
    answer your questions.
        FDA is an agency that serves a vital role in promoting and
    protecting the public health. Our primary obligation is to the public--
    but we recognize the value of positive interaction with industry,
    academia and other governmental bodies. Moreover, we value a close and
    cooperative relationship with Congress.
        But it is the public that we serve and it is the public that has
    high expectations about the performance of my Agency. Americans expect
    that the food they set on their family table will be safe and
    wholesome. The public expects that new medical products--drugs,
    biologicals and devices--will be safe and effective and available in a
    timely way. The nation expects that children will not use tobacco. And
    it expects that the information provided on the products that FDA
    regulates will be useful and understandable.
        These are important public health responsibilities and we take them
    very seriously. Our commitment is an enduring one, but our practices
    are the subject of re-evaluation and renewal. Important progress was
    made with the FDA Modernization Act of 1997 toward achieving the
    expectations of the public and Congress.
                                    overview
        Today, I would like to examine these public expectations, highlight
    the actions FDA has taken in the past year and project what we
    anticipate doing in the next.
    Food Safety
        Stimulated by recent, publicized outbreaks of food-borne illnesses,
    food safety has become a subject of increased attention and concern.
    What's more, public health experts worry that the risks of food-borne
    disease may be rising as Americans grow older, eat out more, and food
    is more widely distributed and therefore more vulnerable to
    contamination. In addition, we face new threats, such as the emergence
    of novel pathogens like E. coli O157:H7, the strain that led to the
    recent recall of more than 25 million pounds of hamburger and sickened
    consumers of unpasteurized apple juice on the West coast just over a
    year ago, and a drug-resistant strain of salmonella called DT104.
        Outbreaks like these, and the President's ongoing concern about
    food safety, prompted him to launch the National Food Safety Initiative
    last year. Congress responded by allocating $24 million to the FDA's
    food safety initiative for the current fiscal year, as well as giving
    additional funds to other relevant federal agencies. With these
    resources, FDA took specific steps to improve the safety of the
    nation's food supply, including: increasing surveillance for potential
    outbreaks, improving consumer education, increasing research aimed at
    improving detection of pathogens, producing strategies to prevent
    microbial contamination of food, developing microbial risk assessment
    techniques and strengthening the coordination between federal, state
    and local governments.
        In addition, we have moved rapidly on a number of fronts to improve
    the safety of the nation's food. At the end of last year, FDA began
    implementation of the HACCP rules on seafood. As you know, HACCP stands
    for Hazard Analysis and Critical Control Point (HACCP). It is a
    scientifically designed program that identifies the steps in food
    production where contamination is most likely to occur and then puts in
    place preventive measures. FDA recently announced its intention to
    develop HACCP regulations for fresh fruit and vegetable juices and
    proposed regulations to require fruit juice makers to label their
    products so consumers will know which are treated to prevent
    contamination and which are not. We also called on manufacturers to
    voluntarily label their products as soon as possible, even though the
    regulation is not yet in effect.
        In July 1997, FDA hosted a public meeting on the risks of
    Cyclospora. We also convened a federal interagency meeting on food
    safety research and began drafting a federal plan to set research
    priorities. That plan should be available this spring. FDA also helped
    set up a public-private partnership on food safety education along with
    industry, consumer groups, states and other federal agencies.
        In December, after a thorough scientific review, FDA approved the
    irradiation of meat products for controlling disease-causing
    microorganisms. The decision applies to fresh and frozen beef, lamb and
    pork. The Agency concluded that irradiation is safe and does not
    compromise the nutritional quality of these products. Studies show that
    it does reduce the number of disease-causing microbes in or on meats.
        Last summer, FDA acted to prevent the contamination of feed for
    American beef, sheep and goats with the agent that causes bovine
    spongiform encephalopathy or BSE. BSE is a brain-infection by an
    incompletely understood infectious agent related to a degenerative
    disorder in humans called Creutzfeldt-Jakob disease. A cluster of
    Creutzfeldt-Jakob cases in England was associated with eating English
    beef contaminated with BSE. The resulting outcry seriously damaged the
    British beef industry. Although there has not been a documented case of
    BSE in the U.S., FDA acted to protect the safety of America's red meats
    by banning production practices that raised the risk of BSE
    transmission.
        And finally, on the food front, FDA's Center for Food Safety and
    Nutrition (CFSAN) has worked hard to reduce the backlog of food
    additive petitions. By eliminating lower priority activities and
    through hard work and improved management, the center cut the number of
    pending petitions in half--from a high of 295 in 1995 to 143 in 1997--
    and the center continues to make decisions on more petitions than it
    receives. CFSAN fashioned pragmatic solutions without compromising
    scientific rigor.
        This year, FDA is asking for an additional $50 million for food
    safety in fiscal year 1999. With it, we plan to enhance food-borne
    illness surveillance, as well as increase coverage of imported products
    by expanding lab certification. Research will focus on developing
    improved methods of detecting microbial contaminants in foods,
    technologies to eliminate or prevent food contamination and
    understanding microbial resistance to food preservation techniques and
    antibiotics.
        To help implement the National Food Safety Initiative, FDA made key
    personnel changes in January. We reassigned Joseph A. Levitt, an
    innovative and effective manager within FDA who has served as the
    Agency's acting deputy commissioner, to take the directorship of the
    Center for Food Safety and Nutrition. In addition, FDA hired Dr. Robert
    L. Buchanan, a leading authority on food microbiology and quantitative
    risk assessment for microbial foodborne pathogens with the USDA's
    Agricultural Research Service, to be a senior scientist for the
    National Food Safety Initiative. Other high-level recruitment is
    underway. This team will lead CFSAN into the next century as it
    implements an ambitious agenda to improve the safety of the nation's
    food supply.
        In addition, under the President's Initiative to Ensure the Safety
    of Fresh Fruits and Vegetables, FDA, working with the Department of
    Agriculture, will develop and finalize good agricultural practice and
    good manufacturing practice guidances for use by the domestic and
    foreign produce industry. To minimize microbial contamination, FDA also
    will provide technical assistance and educational outreach to the
    domestic and foreign produce industries to promote adoption of the
    voluntary guidance. To support these activities, research is being
    accelerated to develop techniques that prevent microbial contamination
    of produce from the farm to the table.
        FDA will move aggressively to deliver on America's expectation for
    a safe and wholesome food supply, and to work cooperatively with sister
    agencies in the federal government as well as state and local
    officials. Each makes a unique and valuable contribution to the safety
    of the food we eat.
    Pharmaceuticals and Biologicals
        In addition to safe food, Americans expect that they will have
    timely access to new pharmaceutical and biological agents that are safe
    and effective. Since the 1962 Kefauver-Harris Amendments to the Food,
    Drug and Cosmetic Act, FDA has acted as the gatekeeper, allowing new
    therapeutic products onto the American market after clinical studies
    prove their worth. This scientifically complex and time-consuming
    procedure of reviewing applications has sometimes bogged down in the
    past. Since 1992, however, FDA significantly picked up the pace of pre-
    market approvals for drugs and biologics after Congress authorized
    additional resources through the Prescription Drug User Fee Act of
    1992.
        Last year, FDA received a record number of new drugs and biologics
    for review and the Agency approved a record number of them, 144. Among
    these were 62 new molecular entities or NME's, a record number of these
    important new products, which went on the market for the first time in
    this country. NME's often represent hope for patients by providing new
    treatments or by providing significant improvements over existing
    therapies, either through heightened effectiveness or reduced side-
    effects.
        And the Agency has done all this even as it reduced the time it
    takes--on average--to get a drug through review and onto the market
    from 14.8 months in calendar year 1996 to 12.2 months in calendar year
    1997. That's for all types of drugs, both priority drugs and standard
    drugs. FDA has met the agreed to deadlines negotiated by the Agency,
    Congress and the industry. For the last two years, we have approached
    or hit 100 percent on-time performance.
        With the renewal of the Prescription Drug User Fee Act last year,
    FDA will increase the number of reviewers and support staff under this
    program to 820 in fiscal year 1999, ensuring that the Agency will be
    able to continue to perform at its current high level.
        The evidence of PDUFA's success comes not only from the performance
    statistics, but also from the strong support FDA received from industry
    for its renewal, as well as the prestigious Innovations in Government
    Award given for the improvements in the drug and biologics approval
    process. The award is sponsored by the Ford Foundation, Harvard
    University's John F. Kennedy School of Government in partnership with
    the Council in Excellence in Government.
        FDA launched a number of other initiatives related to drugs and
    biologics in the last year. For example, FDA proposed a rule that would
    provide health care professionals with the information necessary to
    prescribe medications more safely for children. The proposed rule would
    assure that labeling for certain new and already marketed drug products
    contain information on the use of the drug in pediatric populations. In
    some cases, companies have been allowed to put pediatric information on
    the label after extrapolating from adult studies along with safety and
    pharmacokinetic data obtained from trials in children.
        Currently, many widely used medicines are not properly labeled for
    use in children, forcing pediatricians to estimate the proper dose of
    an adult medicine for use in a child. Too often this can lead either to
    the side effects of an overdose or a therapeutic failure when too small
    a dose is given. FDA's pediatric labeling initiative is complemented by
    the provisions of the FDA Modernization Act of 1997 that grants a six
    month period of market exclusivity for studies of the pediatric use of
    certain drugs.
        FDA moved to ensure that women are included in early clinical
    trials of drugs and biologics designed to treat life-threatening
    diseases. In the past, women have been excluded because they might be
    pregnant at the time that they receive the experimental therapy. The
    Agency's proposed rule would give it the power to suspend a clinical
    study if the sponsor routinely excluded men or women from the clinical
    study because of potential toxic risks to offspring or reproductive
    organs.
        Under the PDUFA renewal, FDA has promised to improve its drug-
    review performance still more. Under the previous version of the
    program, FDA had 12 months to review a standard drug and six months to
    review priority drugs. We have been meeting those deadlines. Under the
    new program, FDA will gradually ratchet down approval times for
    standard drugs by an additional two months.
        In addition to requesting the increased resources authorized in
    fiscal year 1999, the President's budget also requests supplemental
    appropriations for fiscal year 1998 of $26 million in additional
    revenue for the Agency to begin, in earnest, the enhancements
    envisioned in the reauthorization of PDUFA. With the resources provided
    by this renewal, FDA expects to continue its high level of performance
    and provide American patients with speedy access to drugs and biologics
    while maintaining the Agency's customarily high scientific standards.
    Medical Devices
        Third, Americans expect that the medical devices used to detect and
    treat their illnesses--from diagnosing breast cancer to treating
    Parkinson's disease--will be safe and effective and that they will have
    access to them in a timely way. In addition, we need to be sure
    products include information on how and when to use them and what
    patients can expect when they are cleared for market. That means FDA
    must work closely with manufacturers throughout product development and
    clinical study so useful information is generated efficiently. That
    also helps FDA act quickly to review, independently, the data on safety
    and effectiveness.
        Since 1994, when Congress provided the Center for Devices and
    Radiological Health (CDRH) with some additional resources, the center's
    staff has made substantial and sustained improvements in the quality
    and speed of its reviews. In the past year, CDRH approved a record
    number of pre-market applications (PMA's), eliminated all remaining
    backlogs and improved review times in every product category.
        Forty-eight PMA's were approved in fiscal year 1997, five more than
    the previous year. Nearly all were for new products and 18 of them
    represented important diagnostic or therapeutic advances. The average
    time to approval decreased from 26 months in fiscal year 1996 to only
    17 months in fiscal year 1997. Key device approvals last year included
    the first surgical implant to restore partial hand movement in
    quadriplegics, a deep brain simulator to help control tremors in people
    with Parkinson's disease and the first a laser system for treating
    tooth decay. At the same time, CDRH eliminated the backlog of PMA's and
    PMA supplements.
        The center also made substantial improvement in its 510(k)
    application review times, cutting almost in half the peak average
    review time of 194 days in fiscal year 1994. These 510(k) applications
    are for medical devices substantially like devices already approved for
    marketing.
        CDRH has every hope of its ability to maintain this high
    performance level as it begins the complex implementation of the FDA
    Modernization Act of 1997. Unlike the provisions that renew the
    Prescription Drug User Fee Act, the legislation does not provide CDRH
    with additional resources, so all of the costs to implement FDAMA and
    meet performance expectations must come out of the device program's
    budget. The center's leadership is deeply concerned about the effect
    this will have on existing programs and resources, but they are
    committed to making every effort to provide American patients with
    speedy access to safe and effective medical devices.
    Tobacco
        Fourth, Americans expect that their children will be protected from
    the seduction of tobacco products and the addictive nicotine that they
    contain. In February 1997, the first provisions of FDA's final rule on
    tobacco went into effect, making it a violation of federal law to sell
    cigarettes or smokeless tobacco to anyone younger than age 18. The new
    rule also requires retailers to ask for photo ID from anyone younger
    than 27 before selling tobacco products.
        To enforce the new provisions, FDA established contracts with its
    first 10 states--Arkansas, California, Colorado, Florida, Illinois,
    Massachusetts, Minnesota, Pennsylvania, Texas and Washington--to
    conduct enforcement surveillance. In the current fiscal year, FDA will
    sign contracts with the remaining states and U.S. territories that are
    willing to join with us so they can conduct the enforcement inspections
    of retail operations.
        The Agency also launched an education campaign last year to inform
    retailers of their responsibilities under the new rule--including a
    nationally broadcast teleconference--and a training program for state
    officials.
        FDA's tobacco rule was challenged in federal district court by
    tobacco manufacturers and others. The court upheld the Agency's
    jurisdiction and the age and photo ID provisions were allowed to
    proceed but other portions of the rule were not upheld or suspended
    pending appeal. FDA appealed these adverse rulings and is currently
    awaiting a decision by the U.S. Circuit Court of Appeals.
        For fiscal year 1999, the Administration is asking for a $100
    million increase in the tobacco program for additional enforcement and
    evaluation activities as well as compliance outreach, including trade
    advertising and direct mail targeted to retailers, advertising on
    radio, print and billboards, public education aimed at parents,
    community organizations and voluntary health groups. FDA also
    anticipates beginning a scientifically based product regulation
    program, including setting up a system to review and analyze product
    ingredients.
        When all the provisions of FDA's final tobacco rule are
    implemented, FDA believes that it will significantly reduce the number
    of young people who become addicted to tobacco and will achieve the
    Administration's goal of cutting by half the 3,000 teenagers who become
    regular smokers every day.
    Information
        Fifth, Americans expect that they will be able to make individual
    decisions and choices about their personal health and the health of
    family members. To do that, they expect and need to receive reliable,
    useful and understandable information about the products that FDA
    regulates.
        Some 1.3 million times a year, Americans misuse their medicines and
    are injured, causing thousands of preventable hospitalizations
    resulting in estimated annual costs of $20 to $75 billion. To reduce
    the risk of medical misadventures, FDA helped launch the Medguide
    program last year. Under Medguide, private contractors will develop and
    distribute scientifically accurate and unbiased information that gives
    patients sufficiently specific, comprehensive and easy to understand
    directions on the proper use of their medications. The goal is to
    provide a Medguide brochure every time a patient fills a prescription.
        The Agency also proposed new, easy-to-understand labeling for over-
    the-counter drugs. Consumers spend some $18 billion a year on OTC drugs
    currently. The instructions and warnings on their labels are neither
    standardized nor easy to use. The new regulation is designed to give
    consumers the kind of information they need to make informed
    decisions--just like the food label--in a format that is easier to read
    and understand. As a result, patients will know how to use OTC products
    correctly and better understand their risks and benefits.
        A new guidance proposed by FDA last summer will make it easier for
    pharmaceutical manufacturers to advertise prescription drugs directly
    to consumers. The guidance clarifies the requirements for
    advertisements on television and on radio, including information about
    any major risks, as well as instructions for how consumers can easily
    obtain more detailed information about the drug's approved uses and
    risks. This new guidance will help promote greater consumer awareness
    about prescription drugs.
        To speed the flow of information between FDA and industry, the
    agency is rapidly moving into the age of electronic submissions of
    applications for marketing approval for drugs, biologics and devices. A
    paperless approach has the potential to increase efficiency, speed up
    the review process and even make it easier to retrieve information when
    problems arise after a drug is approved. The full impact of electronic
    filing has yet to be appreciated but the Agency's leaders expect it to
    be profound.
        Information is also the engine of scientific advancement. FDA
    actively tries to ensure that it stays on the cutting edge through
    excellent intramural scientific programs and collaborations with sister
    agencies such as the NIH and the CDC and academia.
        As a science-based organization, FDA will continue to search for
    the best ways to gather and digest the mountains of new information
    pouring out of the nation's biomedical research centers and present it
    to consumers in ways that are timely and useful.
    Other Achievements
        FDA's many accomplishments cannot be covered in a single document.
    There has been important progress in many centers and activities, from
    re-engineering the drug approval process in the Center for Veterinary
    Medicine to breaking ground for the new regional laboratories in
    Arkansas, next to FDA's National Center for Toxicological Research, and
    another at York College in Jamaica, N.Y.
        I should specifically mention that OASIS, the Operational and
    Administrative System for Import Support, became fully operational in
    every U.S. port of entry where FDA-regulated products come into the
    country by sea, land and air. This computerized system electronically
    links all FDA inspection offices with the brokers who bring foreign
    products into the country. Based on the information supplied by the
    broker, OASIS can give automated and immediate clearance for the
    imports or trigger an inspection by a FDA official.
        The implementation of this system comes at a critical time for
    FDA's Office of Regulatory Affairs, which manages the nation's imports
    of foods and medical products. The quantity of FDA-regulated imports
    has nearly doubled from 1.5 million at the beginning of the decade to
    more than 3 million entries or shipments today. Yet the number of FDA
    inspectors and analysts has increased only slightly from just under 700
    in 1990 to just over 800 today. Without the OASIS system, FDA would
    have a difficult time monitoring the products flowing into this country
    and keeping out those that pose a threat to our citizens.
                                   the budget
        The President has requested $1.26 billion for FDA's budget in
    fiscal year 1999. To support this program level, the appropriation
    request includes $970 million in budget authority, $281 million in user
    fees, and $13 million in other reimbursable activities. This amount
    will allow the Agency to carry out a core of critical activities and
    move forward with new initiatives to protect and promote the health of
    the American people.
        The fiscal year 1999 budget for FDA contains the first annual
    performance plan for the Agency. FDA priorities, goals and objectives
    for the year are detailed in the performance plan as well as in the
    budget. Moreover, the plan is closely linked to the resource levels
    requested in the budget.
    User Fees
        The budget proposal for fiscal year 1999 includes $281 million in
    user fees. Nearly $153 million in currently authorized user fees will
    be collected, including $132 million under the enhanced Prescription
    Drug User Fee Act and $21 million in other existing user-fee programs
    to support Mammography Quality Standards Act inspections, export
    certification and the certification of color additives.
        What's more, the budget proposes $128 million in additional
    proposed, but not yet authorized, user fees. These new fees, if
    authorized by Congress, would cover a portion of the cost of the full
    range of premarket and postmarket activities in most of FDA's program
    areas including foods, human drugs, biologics, animal drugs and medical
    devices.
        FDA provides a vital public service by promoting health and
    protecting consumers from unsafe and impure regulated products.
    Additionally, industry derives a direct commercial benefit from
    consumers' confidence in FDA's review process and product surveillance,
    which provides a substantial guarantee of safety. Given the benefits to
    both the public and the industry, and given that workloads are growing
    far faster than government resources, FDA believes it is reasonable to
    share some of the cost between the taxpayer and the industry.
    Consumers, through tax dollars, already substantially support FDA's
    activities. In order to maintain necessary funding program levels in an
    era of fixed, disciplined resource allocation under the balanced budget
    agreement, the Agency is proposing user fees to help support the whole
    range of FDA activities.
        FDA will work with Congress and the Agency's many constituencies,
    including the regulated industries, to further develop the proposed
    fees in conjunction with agreed-upon performance measures and goals
    that will be linked with the proposed resource levels.
                            concerns for the future
        Although the Agency's performance has been steadily improving, we
    have concerns about the future. Our portfolio of important public
    health responsibilities continues to grow. New and sometimes unexpected
    issues, such as concerns about imported foods, safety of novel
    technologies and the emergence of new pathogens, arise continually.
    Rising Workload
        FDA will continue to face a growing workload. The number of
    applications for all of the types of products that FDA reviews each
    year has been going up at 12 percent per year for the last four years.
    With PDUFA funding for drugs and biologics and innovative management
    initiatives in all of the centers, we have kept pace with the growing
    workload; in fact, we have exceeded it. As measured by the number of
    annual approvals for all new products, our output has increased 17
    percent per year Agency-wide.
        We are concerned that we may not be able to continue to achieve
    annual improvements in performance, especially if we do not receive the
    level of resources included in the President's budget. If the workload
    continues to rise at 12 percent per year, it will be a great challenge
    to continue to increase performance given budget projections.
    Fluctuating Staffing
        FDA's staffing has not grown with increased responsibilities. Over
    the past five years, the Agency has steadily reduced staff in many core
    functions supported by appropriations alone even as it increased staff
    in areas supported by user fees. The overall staff levels rose slightly
    from the beginning of PDUFA in 1992 from a total of 8,868 FTE's to a
    high of 9,242 FTE's in fiscal year 1995. After that, there has been a
    modest decline, though an increase is expected in fiscal year 1999 as
    FDA expands with the renewal of PDUFA.
        In addition, total FTE's will rise this year as the Agency adds
    staff for food safety and tobacco. These, however, are focused programs
    that have received specially designated appropriations. While these
    specialized programs continue to grow, core FDA functions have seen a
    steady decline in non-PDUFA FTE's from the fiscal year 1992 level of
    8,868 to a low of 8,444 in the current fiscal year, a 4.8 percent drop.
        The Agency leadership is concerned that the performance
    improvements made in the past few years may not be maintained if
    staffing continues to shrink and workloads continue to increase.
    Increasingly Full Pipeline
        There's little doubt that the workload pressures will continue to
    rise in the future. The National Institutes of Health, with an annual
    budget of $13.6 billion, is an engine of biomedical research and
    medical progress. The basic research that it supports in universities
    and private labs across the country will lead to the development of
    many new medical products.
        At the same time, the industry's research and development
    investment of some $21 billion in drugs and nearly $4 billion in
    medical devices last year continues to grow as companies try to
    transform the advancing medical science into new products. The payoff
    is a product development pipeline filled with promising new
    therapeutics, some of which are strikingly novel.
        For society, the benefit from this investment in basic research is
    great. For FDA, as society's technological midwife for medical
    products, the burden also is great as it struggles to manage the
    burgeoning flow of new products to the market.
        In addition, new issues arise and add to our workload. Let me give
    you an example:
    PostMarket Surveillance
        As more medical products move through the development pipeline and
    receive FDA approval every year, the number of therapeutics on the
    market has reached record proportions. Because FDA has a never-ending
    responsibility for every product--from the time it is first used until
    it becomes obsolete and is withdrawn from the market--the Agency must
    remain vigilant for unanticipated or rare, but serious, problems that
    might arise after patients begin to use it.
        In recent years, much less attention has been paid to postmarketing
    surveillance, FDA's responsibility to understand what happens to a
    product after it is approved and marketed. This is a critical part of
    FDA's responsibility because approved drugs and devices sometimes cause
    unexpected consequences, such as the discovery of heart-valve damage
    caused by the diet drugs fenfluramine and dexfenfluramine last year. As
    you know, we moved quickly to take fenfluramine off the market.
        Postmarketing surveillance becomes even more important for devices
    as the FDA Modernization Act of 1997 is implemented. The act directs
    the Agency to consider how postmarketing surveillance can reduce the
    amount of efficacy evidence required to get a device on the market.
        Clearly, the need for this kind of surveillance is growing rapidly.
    Industry is developing more and more new products; FDA is approving
    them at record rates. At the same time, FDA launched MEDWATCH to get
    doctors to report adverse events and cross-drug reactions. The program
    is accumulating information so rapidly that the number of reports is
    going up logarithmically. We will be increasingly challenged to
    properly analyze those trends.
        With this budget, the Agency expects to respond to the problem
    through increased efficiency, use of information technology--for
    example the computerized Adverse Event Reporting System that is being
    implemented for pharmaceuticals--and by partnering with health
    professional organizations, academia, industry and our international
    regulatory colleagues. If these approaches are not successful, however,
    unexpected adverse effects from already approved therapeutics could
    become a serious problem in the future.
    Emergencies and Other Uncertainties
        When FDA discovers that an approved therapeutic is injuring
    patients or a food product is contaminated with a pathogen, the Agency
    must react quickly and competently. The rapid removal of the diet drug
    Fenfluramine, the quick action of tracking down the source of E. coli
    contamination in apple juice, requires substantial Agency resources. As
    the technology for surveillance improves for food-borne illnesses and
    as more and more pharmaceuticals and medical devices reach the
    marketplace, FDA predicts that there will be an increasing number of
    these kinds of emergencies.
        In addition, we know that FDA will face future uncertainty and
    novel problems. No one could have predicted the first drug tampering
    cases let alone the advent of animal--and the potential of human--
    cloning or avian flu spreading to humans. No one can say what future
    crises will arise, but we do know they will come. And when they do,
    they will consume unbudgeted resources.
        Consider, for example, the avian flu. FDA reacted quickly to the
    first reports, consulting with sister agencies such as CDC, NIH, DOD
    and USDA as well as international health agencies such as the World
    Health Organization and vaccine manufacturers. Once the critical parts
    of the virus were identified, FDA acquired recombinant H5 HA antigen
    from a biotech company and injected it into sheep to produce
    standardization reagents for vaccines that might have to be developed
    on an emergency basis. A high-security, biological containment lab at
    FDA is being used to safely study the virus while preventing the
    unintended release of the H5N1 avian flu into domestic poultry or
    people. FDA already is working with NIH to permit testing of
    experimental purified H5 HA vaccine to prevent the spread of avian flu
    in America.
        Based on the past, the Agency knows that the unexpected lies ahead.
    We need to think about ways to prepare for it.
    International Issues
        FDA has experienced a dramatic increase in its international
    operations. It has been an active participant in the development of
    common approaches to the international approval of new medical
    therapeutics under the International Harmonization Conference with the
    European Union. It has also entered into Memoranda of Understanding and
    Mutual Recognition Agreements for a variety of activities including
    inspection of international production facilities for pharmaceuticals
    and medical devices as well as increased inspection responsibilities
    for imported foods. International activities, however, have proved to
    be more and more complex and resource intensive than expected.
        As global trade in FDA-regulated products continues to grow
    exponentially, the Agency will face an increasing challenge to its
    ability to protect American citizens while maintaining good
    relationships with other countries.
    Implementing FDA Modernization
        Lastly, let me say a few words about the FDA Modernization Act of
    1997. This major piece of legislation focused on modernizing the
    regulation of medical products, food and cosmetics. The act directed
    FDA to carry out a number of programs that will include publishing 42
    regulations, 23 guidances, 13 other publications in the Federal
    Register as well as 25 other tasks, such as mutual recognition
    agreements and global harmonization, postmarketing approval studies and
    electronic applications and submissions, and seven reports. This will
    consume a considerable amount of FDA resources for which there is no
    specific budget allocation. We, of course, are committed to carrying
    out the congressional directives delineated in the act.
                                   conclusion
        I believe it is clear that the investment of each American taxpayer
    dollar in the Food and Drug Administration is a solid investment in
    protecting the public health. From the programs I have described, you
    can see that when Congress invests its trust and resources in FDA, the
    Agency uses the money well and is productive.
        This is an Agency staffed by professionals. We deliver on the
    expectations of Congress and the American public. When we have
    sufficient resources, we meet our goals because we are disciplined.
    When confronted with problems, we make the hard public health choices
    to ensure the greatest good for the largest number of Americans.
        Because FDA is a science-based Agency, it is judicious in the
    problems it chooses and the way it goes about solving them. We know
    what's important and we invest where it will do the most good.
        Americans expect their FDA to remain vigilant, to promote their
    health and well being and to protect them from all sorts of hazards.
    That is an important trust. And it is a trust this Agency will not fail
    to keep.
        Thank you.
                                     ______

                             Biographical Sketches
                              michael a. friedman
        As Lead Deputy Commissioner, Michael A. Friedman, M.D. is the
    senior manager for the Food and Drug Administration. He will act in
    this capacity until a new Commissioner of Food and Drugs is named/
    confirmed. In addition, he continues his duties as Deputy Commissioner
    for Operations, overseeing the operations of the Agency's 6 Centers and
    the Office of Regulatory Affairs, including all field offices. He
    manages high priority scientific and public health issues both within
    and across Centers and participates in a broad range of public health
    issues sponsored by the Department of Health and Human Services. As a
    member of the Agency's senior management team of Center Directors and
    Deputy Commissioners, Dr. Friedman is involved daily in negotiations
    and discussions of food and drug issues with regulated industries,
    patient and consumer groups, congressional staff, other federal and
    state agencies, and representatives of foreign governments.
        Dr. Friedman received a B.A. degree in English from Tulane
    University, New Orleans, Louisiana and an M.D. degree from the
    University of Texas, Southwestern Medical School, Dallas, Texas. 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 appointment as Deputy Commissioner for
    Operations, Dr. Friedman served as the Associate Director of the Cancer
    Therapy Evaluation Program from 1988-1995 and from 1985-1988 as Chief
    of the Clinical Investigation Branch within the Division of Cancer
    Treatment at the National Cancer Institute, 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, the American Federation for Clinical 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 is 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.
                                     ______

                                 robert j. byrd
        Appointed to this position in December 1995, Mr. Byrd is
    responsible for Strategic Planning and Management Systems, and
    providing leadership and direction in all phases of management
    operations. Mr. Byrd is the Chief Financial Officer for FDA and the
    Commissioner's Chief Advisor on all aspects of managing FDA resources.
    Mr. Byrd is also responsible for providing cost effective, customer
    focussed management support for the operating programs, including
    financial management, human resources management, facilities
    management, procurement, grant and contract management, safety and
    security, information systems, and effective planning and assessment of
    Agency programmatic activities.
        Prior to joining FDA in 1994 as Associate Commissioner for
    Management, he was recruited into the U.S. Department of Agriculture's
    Senior Executive Service Career Development Program as a management
    specialist, 1992-1994. There, he designed a model for integrating
    procurement management within USDA. Many of the elements of his model,
    which was presented to the Vice President and to the Secretary of
    Agriculture, were incorporated into the ``Report of the National
    Performance Review.''
        He also served as Assistant Secretary, Services and Logistics in
    Maryland state government from 1990-1992. Prior to that, Mr. Byrd
    served in Maryland's Department of General Services as Director of
    Operations, 1986-1990; Executive Assistant to the Secretary, 1984-1986;
    Administrator, Special Projects, 1981-1984; Executive Director Maryland
    Minority Educational Fund, 1976-1981; Administrator, Architect/Engineer
    Selection Board, Maryland state government, 1975-1984; Accountant/
    Auditor, Maryland Department of Transportation and Maryland Department
    of General Services from 1973-1975. Mr. Byrd received a B.B.A. from
    Loyola College and an M.B.A. with honors from Loyola College in 1987.
    His awards include the Governor's Citation for Outstanding State
    Service, MD, 1983 and 1992; Governor, Comptroller, and Treasurer's
    Distinguished Service Award, MD, 1984; FDA's Award of Merit, 1996; and
    FDA Commissioner's Special Citation, 1997.
                                     ______

                               william b. schultz
        Mr. Schultz is the Deputy Commissioner for Policy at the Food and
    Drug Administration (FDA). As the Deputy Commissioner, Mr. Schultz
    oversees the Agency's policy development activities and the processing
    of all FDA regulations. He is the principal advisor to the Commissioner
    on policy matters before the Agency and bears primary responsibility
    for coordinating FDA's policies with other government agencies and
    countries. He also oversees implementation of the President's Tobacco
    Initiative and the development of the Agency policy positions on
    legislative matters before Congress.
        Prior to his appointment, Mr. Schultz served as Counsel to the
    House Subcommittee on Health and the Environment, which was chaired by
    Congressman Henry A. Waxman of California. Mr. Schultz was the Counsel
    principally responsible for the following laws: Nutrition Labeling and
    Education Act of 1990; Safe Medical Devices Act of 1990; the
    Prescription Drug User Fee Act of 1992; Generic Drug Enforcement Act of
    1992; and DES Education and Research Amendments of 1992.
        Prior to becoming Counsel to the Subcommittee, Mr. Schultz was a
    Senior Attorney at Public Citizen Litigation Group, where he litigated
    cases in state and federal court (at all levels) on a variety of
    issues, including food and drug law, automobile safety, nuclear power,
    voting rights and anti-trust. He also represented Public Citizen before
    Congress and has written a number of articles, principally on food and
    drug law issues.
        Between 1982 and 1996, he was an Adjunct Professor at Georgetown
    University Law Center, where he taught Civil Litigation and Food and
    Drug Law.
        Mr. Schultz served as a Law Clerk to United States District Judge
    William B. Bryant.
        He received his J.D. from the University of Virginia Law School and
    his B.A. from Yale University.
                                     ______

                               dennis p. williams
        Dennis Williams has served as Deputy Assistant Secretary for Budget
    since 1984.
        Dennis provides advice and assistance to the Assistant Secretary
    for Management and Budget, and the Secretary, on program policy and
    management issues dealing with the Department's budget. He is
    responsible for the formulation of the budget for HHS and its
    presentation to the Office of Management and Budget and to Congress.
        From 1982 until 1984 he served as the Director, Division of Welfare
    Budget Analysis in HHS. Before that, starting in 1980 until 1982 he
    served as Chief, Health Care Financing Branch, Division of Health
    Budget Analysis.
        From 1977 until 1980 Dennis was a Program Analyst in the Division
    of Health Budget Analysis.
        Prior to his appointment at HHS, Dennis served from 1968 until 1971
    as a Program Specialist with the Office of Economic Opportunity and
    from 1965 to 1967 with the Peace Corps in Turkey. He was awarded a
    doctorate in International Relations at the Johns Hopkins School of
    Advanced International Studies in 1976.

                             Food Safety Initiative

        Senator Cochran. We appreciate the cooperation that we have
    received from you, Dr. Friedman, in the work of this agency. I
    know that as an acting director, you have been called on to do
    an awful lot of heavy lifting. We have admired the efforts that
    you have made to assume responsibility for the actions of the
    agency and to try to provide strong leadership as the acting
    administrator.
        The questions I have are centered primarily on the
    substantial increases in the budget request. Specifically, the
    first item is the food safety initiative. You pointed out that
    there had been an additional $24 million provided for this food
    safety initiative for the current fiscal year. Now we see an
    additional $50 million increase over that amount being
    requested for this initiative.
        It seems like an awful lot of money and at a time when we
    do not anticipate an increase in allocation to this
    subcommittee. So, if we provide increases in funding, they have
    to come from other programs. We do not have the luxury of just
    reaching up in thin air and pulling down new money to support
    these increases. So, that presents us with some hard choices
    that we have to make.
        So, we need to know what is being done in this area that
    justifies taking $50 million from some other program either at
    FDA or from some other agency that is funded in this
    appropriations bill. So, it is going to be a hard sell I think.
        You pointed out surveillance, education, research, imported
    products requirements.
        Dr. Friedman. Let me do my very best to make that case to
    you, sir.
        Senator Cochran. Why do you need so much more money?
        Dr. Friedman. It is a very appropriate question and I want
    to convey to you both the reasons why we think this is a very
    important investment in our future and the recognition of how
    many worthwhile activities compete for your committee's
    attention and resources. I do recognize that as a very
    significant tension.
        You recognized the background upon which all of these
    discussions occur. Our current assessment of the number of
    illnesses from foodborne infections is rather imprecise, but at
    a low it is a little over 6 million and at a high, perhaps 33
    million individuals become ill each year in the United States
    from foodborne illness. The dollar figures associated with
    their loss of ability to work and function is significant. More
    critical, of course, are the perhaps 9,000 deaths that occur
    each year from foodborne illness.
        The background upon which we are facing food threats is a
    very substantial one. Our population is becoming older and more
    sensitive to foodborne infections. The kind of foods that we
    eat are changing dramatically, much more imports. Our imports
    have virtually doubled over the past 7 years and are going up
    at an even more rapid rate as our consumers want to have fresh
    produce or other products available year-round from all over
    the world.
        Not only that, but the micro-organisms themselves have
    changed. We have seen the evolution of more virulent, more
    deadly micro-organisms. The E. coli O157:H7 is one example but
    by no means the only one. There is a Salmonella subtype. There
    are Campylobacter microbes that are becoming more virulent and
    more deadly.
        When you put all this together, you realize that America
    has a very safe food supply now, but that our citizens want
    this to remain safe and even safer and that the challenges that
    we confront in the future are going to be very substantial.
        I am sorry for that long introduction. I know you
    recognized that but I thought it was worth just restating it.
        We are working very closely and very cooperatively with our
    colleagues in the Centers for Disease Control and Prevention,
    at the U.S. Department of Agriculture, at the Environmental
    Protection Agency, with State and local authorities to try and
    have the most integrated, most powerful system for preventing
    infection, detecting infection, and dealing with it once we
    identify it.
        The paradigm is that we want to control all the possible
    contaminations from the farm where the food is produced, until
    it reaches the consumer's table. It is a formidable challenge
    to cover that entire range, but if you think about the vast
    number of food types, the vast number of opportunities for
    infection--I do not want to seem arrogant--this is a modest
    request and one that we agonized over because we did not want
    to come to this committee asking for an exorbitant amount. We
    think the programs identified here are really very sensible
    scientifically from a public health point of view. We do
    recognize how difficult it is to make these budgetary
    allocations, but this is what I think our citizens want as one
    of their primary desires and I think we can make a very strong
    case for it, sir.
        Senator Cochran. There is one part of the program that we
    understand includes expanding the effort to inspect seafood
    under the new HACCP requirements. What level of funding is
    being allocated for the hazard analysis and critical control
    point requirements and the implementation of a seafood
    inspection program?
        Dr. Friedman. This year we are committing to fully
    implementing the seafood HACCP program with some $8 million to
    recruit an additional 80 seafood inspectors.
        In addition to that, though, there are extensive activities
    in terms of education for State and local regulatory officials,
    but also educational activities for the seafood processors and
    the industry people as well.
        This looks to be so far a very promising start. This was
    the pilot program which the U.S. Department of Agriculture has
    been watching very closely as they model their own HACCP
    program. It seems to be one where there is a good deal of
    cooperation between industry, local authorities, and Federal
    authorities. At this point, sir, we are enthusiastic about it.
    It is the pilot program in some sense. We are deeply committed
    to a full and vigorous implementation of the HACCP program for
    seafood.
        We are of course, examining and will be moving to HACCP
    programs for juices this year as well.
        Senator Cochran. The budget justification that has been
    submitted to the committee indicates that FDA intends to expand
    implementation of HACCP and other food safety assurance systems
    in the food industry. What expansions and new systems do you
    intend to implement?
        Dr. Friedman. Our juice program is No. 1 in that regard.
        Senator Cochran. What is that?
        Dr. Friedman. Fruit juice.
        Senator Cochran. OK. I just did not understand what you
    said.
        Senator Bumpers. You say you are planning to expand it to
    fruit juices?
        Dr. Friedman. Yes, sir; that is right. That will be the
    next area.
        I think that we want to only expand HACCP programs in those
    areas where there is scientific basis and where there is an
    expectation that such a system, as attractive as it is
    intellectually, will actually be practical and will in fact
    offer the consumer something positive.
        Mr. Schultz.
        Mr. Schultz. If I could just comment. I think this
    represents a new philosophy by the FDA and really reflects the
    sort of Reinventing Government approach of this administration.
    We are moving away from what we did before, which was having
    inspectors go in plants. We were accused, I think sometimes
    justifiably, of nitpicking, and it was a very confrontational
    relationship with the industry.
        With HACCP, we are starting with the areas where there is
    the greatest concern, the greatest risk. It involves FDA
    working with the company to develop what is called a HACCP
    plan, which is a plan that says how often do you clean the
    counters, how often do you check the temperature in the
    refrigerator, where do you have to have pasteurization or
    something equivalent in the case of juice. Then, what our
    inspectors do is they come in, they look at the plan, and they
    look at the records, not just what is happening that day, such
    as is the floor dirty? But looking back in time what happened
    when they checked the temperature, when they did this, and when
    they did that.
        It is much more effective in terms of food safety and I
    think it is much more constructive. Obviously, where there are
    serious violations, we will bring enforcement actions, but the
    idea is to get away from the single day, nitpicking kind of
    approach, and really focus on what is important.
        Senator Cochran. It does sound like that is the kind of
    thing that inspectors do in city governments or in local
    governments. Are there not agencies involved in going around
    and certifying restaurants and other food establishments where
    people buy food to see if the counters are clean, et cetera? Or
    am I missing something here? Why do we need a Federal agency
    doing that?
        Dr. Friedman. Well, State and local inspectors inspect at
    the retail level. I think the value of having Federal
    inspectors is a couple of fold. One is in setting the
    principles. For example, the State of Alaska has recently come
    to us and so much appreciated our seafood HACCP program, the
    scientific basis of it, the clarity of it, the logic of it.
    They are incorporating it as their State program and following
    it there.
        In terms of dealing with international suppliers who may
    not supply just one city or one locality but many parts, we
    have a very important role to play there. In terms of
    interstate commerce where seafood is distributed widely across
    parts of the country, we have a very important role to play
    there.
        In terms of having certain authority to set the standards,
    I think that we have a very valuable contribution, but I must
    recognize the important role that State and local authorities
    do play in this. We work closely with them in that regard.
        Senator Cochran. Senator Bumpers.
        Senator Bumpers. Thank you, Mr. Chairman. First, let me
    apologize to you for being a little late. I have a
    responsibility on the Energy Committee as ranking member, and
    they had a big----
        Senator Cochran. Knock down, drag out?
        Senator Bumpers. Yes; exactly. [Laughter.]
        Dr. Friedman. Thank you for being here, sir.
        Senator Bumpers. Like a train wreck, I did not want to miss
    it, but I have sat where you have sat many mornings by myself
    in this committee holding these hearings, and I know what that
    can be like.
        Dr. Friedman, let me first thank you. My staff tells me
    that you paid a great tribute to me before I got here. I wish
    you would have saved it. I would like to have heard it.
    [Laughter.]
        But I know that everything you said was true and a lot
    more. [Laughter.]
        Dr. Friedman. I edited those remarks, sir, yes.
        Senator Bumpers. Thank you very sincerely for your kind
    remarks. I have had an excellent relationship with you and Dr.
    Kessler, all the FDA directors.
        In any event, I have the highest approval rating in my
    State I have ever had, even when I was a young, dynamic, good
    looking Governor, which tells you that when you tell them you
    are going to exit, they all love you. [Laughter.]
        Dr. Friedman, let me just ask you a few questions. I hope
    these have not been asked before, but do not hesitate in
    telling me if this question has been presented to you before.
        I wanted to ask you, first, how long have you been
    inspecting seafood and how is that going?
        Dr. Friedman. Well, I do not have the exact date of when we
    began inspecting seafood.
        Senator Bumpers. Let me tell you. A couple of years ago.
        Dr. Friedman. Do you mean under the HACCP program?
        Senator Bumpers. Pardon?
        Dr. Friedman. Under the HACCP program?
        Senator Bumpers. Yes; I am sorry. Under the HACCP program.
    I am sorry. I left that out.
        Dr. Friedman. Mr. Levitt, who is the Director of our Center
    for Food Safety, may be prepared to deal with more of these.
        The full implementation of HACCP only occurred this last
    December.
        Senator Bumpers. This past December?
        Dr. Friedman. The full implementation.
        Senator Bumpers. I guess it is fair to say then, Mr.
    Levitt, you have not had enough experience yet to know how it
    is going to work, have you?
        Mr. Levitt. We are clearly in the first year of its
    implementation, and we consider this both a learning experience
    for us and the industry. One thing we are doing, I think No. 1,
    we have a goal of inspecting every seafood processor within the
    calendar year.
        Senator Bumpers. Where are you in that goal now?
        Mr. Levitt. Well, we are a quarter of the way into the
    year.
        Senator Bumpers. You are at 25 percent?
        Mr. Levitt. I am not positive we are at 25 percent as yet,
    but we have been doing it for the first quarter of the year.
        What we are doing, which I think is a little unusual, is we
    are providing feedback letters to companies after the
    inspection. Again as Mr. Schultz said, the traditional mode is
    for FDA to have a very kind of arm's length relationship with
    the industry. We are trying to do this much more cooperatively
    and after the inspections, we are providing written feedback to
    companies of potential areas we think improvement could be made
    in their HACCP program in an effort to use this program as a
    way to raise the standards overall and enhance the safety of
    the program.
        So, we consider this first phase of implementation to be
    both the first year that companies are expected to have a full
    seafood HACCP program in place, but also recognizing there is a
    learning curve involved. So, we are trying to provide
    constructive feedback on how they can make it even better.

                              Irradiation of Food

        Senator Bumpers. Do you permit irradiation of seafood?
    Anybody?
        Mr. Schultz. No.
        Senator Bumpers. You do not irradiate seafood. Is there a
    specific FDA prohibition against irradiating seafood?
        Mr. Schultz. In order to irradiate food, we treat that as a
    food additive, so a sponsor has to come and ask permission, and
    I do not know that kind of request has been made for seafood.
        Senator Bumpers. But do you have an answer for them if it
    is made?
        Mr. Schultz. Well, we have to look at the data.
        Senator Bumpers. Do you have any data?
        Dr. Friedman. This is Janice Oliver, Deputy Director in our
    Center.
        Ms. Oliver. Good morning.
        Senator Bumpers. Ms. Oliver.
        Ms. Oliver. We have some data that has been supplied to us
    on irradiation for seafood and we have petitions that are in-
    house that I cannot comment on. But we also have some
    additional data that the seafood industry is gathering at the
    present moment to supply us.
        Senator Bumpers. While you are there, Ms. Oliver, you may
    be the one to answer this. What percentage of the poultry in
    this country is irradiated? Does anybody know the answer to
    that?
        Mr. Schultz. Small.
        Dr. Friedman. I believe it would be a USDA issue.
        Senator Bumpers. I know this is USDA's responsibility but I
    thought you might have some idea.
        Dr. Friedman. My understanding is it is a small percentage
    but I cannot give you a quantified number on that.
        Senator Bumpers. Let me ask you this. If I wanted to start
    irradiating foods, for example, poultry, would I have to come
    to you and ask your permission?
        Mr. Schultz. The answer is yes, and it has been done and we
    gave the permission.
        Senator Bumpers. So, it is done on an individual basis. The
    poultry industry does not have ad hoc authority to just go
    ahead and start, what shall I say----
        Mr. Levitt. Irradiation is considered a food additive under
    the Food, Drug, and Cosmetic Act and needs prior FDA approval.
    Irradiation has been approved for particular products including
    poultry and most recently for red meat.
        Dr. Friedman. Currently, there are several food commodities
    that can be irradiated to kill microbes, spices, poultry, red
    meat. It is perfectly permissible.
        Senator Bumpers. Do you have any idea what percentage of
    the red meat in this country is being irradiated?
        Dr. Friedman. Again, sir, my understanding is that it is
    small. I am not sure that the labeling has been fully worked
    out by the U.S. Department of Agriculture. We have been working
    with them on that. I know they are committed to that, but they
    could give you a better sense of the exact status.
        Senator Bumpers. Did FDA develop this process of doing
    something to the chicken to eliminate all salmonella?
        Dr. Friedman. It is a very interesting product, sir. The
    competitive exclusion, is essentially colonizing the chicks'
    intestines with friendly, less harmful organisms to keep the
    more harmful organisms from setting up colonies there. This
    particular product was developed by USDA researchers. They
    then, working with a private company, submitted that
    application to the Food and Drug Administration. We reviewed
    the application. Our Center for Veterinary Medicine in fact
    agreed that it did exclude some of the harmful bacteria, and as
    you know, that was approved recently.
        There are a number of other products also under
    consideration for the same kind of thing. This is a very
    interesting microbiologic technique that has even been used in
    humans in some situations.
        Senator Bumpers. I do not know whether this is pervasive in
    the industry or not, but I am hearing from some of them that
    because of a new requirement--and it may be related to this--
    they are having to use 2 gallons of water more per bird than
    they have in the past. Do you know what that is about?
        Dr. Friedman. I do not, sir. I think USDA may be able to
    provide that answer.
        Senator Bumpers. Well, I am advised that that is an FSIS
    thing. I am sorry.
        Dr. Friedman. No, no; it is perfectly OK, sir.
        Senator Bumpers. Do you have any idea how foreigners treat
    irradiation, what their view of it is?
        Dr. Friedman. I know that irradiated products have been
    available in foreign countries.
        Senator Bumpers. There is some resistance to it, is there
    not?
        Dr. Friedman. There is a small symbol that is put on
    irradiated food. I have not seen specific data suggesting how
    many people find it an attractive treatment and how many people
    are worried about it. I do not know that information, sir.

                                Medguide Program

        Senator Bumpers. Mr. Chairman, I guess this is close to my
    last question. I have two questions.
        Last year you launched the so-called Medguide program to
    give consumers better information about the drugs they were
    buying. Now, that works pretty well for me. I take a few
    medications and they always give me this little poop sheet. But
    I thought 2 years ago we also decided that FDA would be the
    final determiner of what information is given on all these
    different drugs that required that. Is that correct?
        Mr. Schultz. Maybe I could try that.
        Senator Bumpers. All right.
        Mr. Schultz. What was worked out with the Congress last
    year was a two-step program. The first step would be to let the
    industry and industry groups voluntarily try and do Medguides
    and to reach certain goals. So, we are currently in that
    voluntary phase where we are looking at two things. One is how
    often do consumers actually get a piece of paper when they get
    a prescription drug, and the answer today is fairly frequently.
        Senator Bumpers. Virtually all the big drug companies do
    that, do they not?
        Mr. Schultz. The drugstores do, the drug chains, yes.
        Senator Bumpers. That is what I am talking about.
        Mr. Schultz. The computer has just helped us immensely
    because there are companies that basically put out packages of
    the information and then the pharmacist can very easily print
    it out on an inexpensive printer.
        The second issue, though, also very important, is what is
    the quality of the information. That varies quite a bit. So, I
    think the effort over the next few years is going to be to get
    that information up to a very high quality, not such that FDA
    is writing it, or saying exactly what the words have to be, but
    making sure the key elements are there. We will then do a
    survey in the year 2000 to see if, I believe the goal is, 75 or
    80 percent of people get adequate information. If the answer is
    no, then the FDA could play a more active role.
        Senator Bumpers. I think all drugs have an admonition, do
    not drink if you take this drug, do they not?
        Dr. Friedman. Not all drugs.
        Senator Bumpers. Not all of them?
        Dr. Friedman. No, sir.
        Senator Bumpers. Just the ones that I buy? [Laughter.]
        Dr. Friedman. I know that you are not proposing new
    regulations for us in that regard.

                          Arkansas Regional Laboratory

        Senator Bumpers. Finally, I talked to you, Dr. Friedman, in
    the office about the disappointment those of us in Arkansas
    experienced when we found out we were not in the budget for
    phase 3 of NCTR, the National Center for Toxicological
    Research.
        Let me ask you. As you know, the consolidation of the
    laboratories by FDA which was designed to save money and become
    more efficient--as long as Arkansas was one of them, I was hot
    for it, of course, and we are one of them and I thank you and
    Dr. Kessler for that.
        But I am just curious. We have got the money and we are
    under construction on phases 1 and 2. I forget the amounts this
    year. I think in 1998 we got $14 million for phase 2. My
    question is, What impact will that have on the efficiency of
    that laboratory or its ability to do what it is supposed to do
    without phase 3 being built at least sometime in the immediate
    future?
        Dr. Friedman. As you recognize, sir, the first two phases
    have to do with the construction of the laboratory components
    for our regulatory activities. The attractiveness of having our
    regulatory laboratories interacting directly with our applied
    scientific laboratories--it is an obvious opportunity that we
    want to take advantage of.
        Phase 3 is constructing office/conference space for the
    staff not only for our regulatory affairs staff, but also for
    some of our scientists at NCTR. We will use temporary
    buildings. We will use other facilities to have offices for
    these individuals.
        Our consolidation plan for our field laboratories is moving
    forward. We have been very successful. I have been very
    gratified with how that has been handled so far. We are
    consolidating. We will be appreciating real savings and
    efficiencies.
        Nonetheless, we recognize that not having phase 3 will mean
    that we cannot be as efficient at our Arkansas facility as we
    possibly could be. As you know, sir, we requested the money
    this year. We are planning to do so again next year. We think
    this is a legitimate, valid project for us to be engaged in. As
    you recognize, the Department recognizes, we all struggle with
    the competition for very important things that need resources.
    We will put this forward again, sir.
        Senator Bumpers. Dr. Friedman, I appreciate your remarks.
        Mr. Chairman, if I may just in closing say that I have been
    a fairly unabashed supporter of the Food and Drug
    Administration. Three years ago, I believe it was, there was a
    mad dash in the Congress to force FDA to speed up the licensing
    of drugs. While that is always a highly desirable goal, it is
    not a goal if you are going to sacrifice any of the kinds of
    experiments and information you need to protect the consumers.
    Every time I talk about how we as Americans are so lucky
    because when we eat our food, we know it has been inspected,
    and when we take medicine, we know that the medicine has been
    tested and tested and tested.
        Dr. Kessler was a little bit on the defensive but certainly
    not because of anything I said. It is very easy to sit up here
    when you are down there and browbeat you and demand that you do
    certain things more expeditiously, but I never joined that herd
    because if it takes longer to be sure that you are not
    dispensing a drug that is going to have some terrible side
    effect--and oftentimes those do not show up for years. So,
    sometimes I know that it is just a roll of the dice almost when
    you do license these drugs because they have not been tested
    long enough to know for sure that somebody is not going to have
    liver cancer 10 years from now and it is going to be traced
    back to that.
        So, as I say, I have always thought you did an excellent
    job. Dr. Kessler's role in this tobacco brouhaha is legendary,
    and he was always tough-minded and deserves a lot of credit for
    it.
        As I say, I think you do a very fine job. We have had a
    great relationship with you in my State at the National Center
    for Toxicological Research, and we appreciate that.
        So, since this will be the last time I will have this
    bittersweet experience of having FDA before me, I just wanted
    to make those comments to you to assure you that I will
    continue to feel that way. If I were king--I have said many
    times I should be. [Laughter.]
        I would take the space station--better still, I would just
    take the cost overruns of the space station. [Laughter.]
        And split it between you and the National Institutes of
    Health. I might give NIH a lot more than I would FDA because
    they are actually on the cutting edge of doing the medical
    research in this country. You are not going to get anything out
    of the space station. We never have.
        I mean, I am a proponent of the space program. Do not
    misunderstand me. But the space station is now--and I am in my
    ``I told you so'' mode this morning. For 7 years I have tried
    to kill that sucker without success, and now we are looking at,
    the first time, the admission of NASA that just the building of
    it, not the deployment and the operation of it, is going to
    cost $6.6 billion more than we had been led to believe. That is
    just the opening salvo.
        As I have said many times, when NIH can only approve about
    27 percent of the good medical applications for good research
    that they get and us getting ready to spend well over $100
    billion over something that has no payback, unless you are
    intent on going to Mars, as I say, I would just take the cost
    overruns and give it to you and NIH and the Centers for Disease
    Control. I will add them too.
        Thank you, Mr. Chairman.

                              Irradiation of Food

        Senator Cochran. Thank you very much, Senator Bumpers.
        Dr. Friedman, I have one other question on this food safety
    issue and that relates to irradiation. I understood that FDA
    had issued an order, regulation finding that irradiation, when
    used for the purpose of killing bacteria and other things that
    made food harmful, was safe and it could be used in the food
    processing industries. Is that a correct statement?
        Dr. Friedman. It is correct, sir, for a number of kinds of
    food. It is true for muscle meats of animals like beef and pork
    and sheep. It is true for poultry. It is true for certain
    spices. There are a number of kinds of foods where it has been
    approved for the killing of bacteria, yes, sir.
        Senator Cochran. My concern is that we are spending a lot
    of money on visual inspections of carcasses to try to find
    things that are unhealthy or could cause people to get sick if
    they ate the food. But we are not spending anything in the food
    processing industries that I know anything about on
    irradiation, or at least it is a very small amount devoted to
    that right now.
        You point out that one of the things that you are doing
    with the money in the food safety initiative is education. Why
    are you not spending some money educating the public that
    irradiation is safe so that there will not be the fear of it
    that exists right now?
        Dr. Friedman. I think the public's perception of
    irradiation and the attractiveness of irradiation to the public
    is an important consideration, and I know that the livestock
    industry, meat producers are certainly focusing on this very
    much.
        As you appreciate, sir, even if irradiation were uniformly
    applied to all products today, that would be very good for that
    particular moment, but if the consumer then did not properly
    handle it, did not clean the surface, did not wash his or her
    hands, did not store it properly, did not cook it properly, the
    opportunities for contamination at the home or at the retail
    store or at the restaurant are still very substantial. We are
    looking at the range of educational activities.
        I think for some consumers, for some products, irradiation
    makes a great deal of sense, and we believe that it is safe. We
    believe it is appropriate, and that is why we approved it. We
    have said that publicly and continue to do so.
        I think that how we use our scarce education dollars over
    the whole range of responsibilities is something that we are
    still looking at.
        Senator Cochran. I may have it wrong but it just seems to
    me that the Federal regulations right now require a lot of
    things to be done in food inspection that are unnecessary or
    that do not really meet the problem head on. Yet, when we come
    up with new technological advances, the Federal Government does
    very little to advance the use of that and to try to help
    acquaint the general public with the benefits of it, the
    processing industries with the benefits of it, and to go to the
    next step. It may be because it is like I said about the food
    safety initiative and the additional $50 million that you need.
    It is a hard sell unless we are going to get some benefits from
    it.
        Dr. Friedman. We certainly expect to get benefits from it.
        I think that the remarks that you are making are important
    remarks, but probably are more appropriate to be directed at
    USDA than ourselves in that regard since they are the ones who
    are developing the labeling for meat irradiation.
        In addition, though, you make a very important point about
    how you use your inspectional resources. Just to reprise what
    Mr. Schultz said, one of the really attractive features about
    the HACCP program is that it is prevention, it is
    scientifically based, it uses our resources much more
    efficiently. We are really trying to explore this because we
    agree with you. To inspect every piece of seafood is not a very
    efficient use of our time and may not even be the very best way
    to do it. We believe that looking at the processes, having a
    scientifically validated way of doing things just makes a lot
    more sense. It is not only more practical but it makes a lot
    more sense. I think your points are very cogent in that regard.
        Senator Cochran. Mr. Schultz, you appear to want to say
    something.
        Mr. Schultz. No, no; I cannot improve on it.
        I think that there are two issues on irradiation that you
    are alluding to. One is, is it really safe? Nobody is going to
    get irradiated, but what does it do to the nutrients in the
    food? We looked at that, as Dr. Friedman said, for meat and
    poultry and are ready to look at it for other products.
        Then there is this major consumer acceptance issue. Because
    of the word ``irradiation,'' people are afraid of it. I think
    you make a very valid point, and we ought to, with USDA, look
    at this issue of consumer education. It is a little bit of a
    chicken and egg issue since nobody is using it, it is a little
    odd to start the education now. But I think it is something we
    should look at.

                                   User Fees

        Senator Cochran. I hope you will. I think that would be a
    wise use of some of your resources.
        In the budget request, there are proposals for new user
    fees. Could you tell us how much in user fees you are
    suggesting be imposed on industries, which industries, and how
    much do the user fees amount to?
        Dr. Friedman. Our budget outlines several kinds of user
    fees.
        Senator Cochran. I am referring to all of them. I want you
    to hang it all out. Tell us what the administration is
    proposing. I am tired of just stating it myself. I want you to
    tell what you are proposing.
        Dr. Friedman. Very good. I will ask Mr. Byrd to assist me
    in this.
        We are asking for a component for prescription drug user
    fees which was reauthorized in our 1997 FDA Modernization Act
    which I believe were $132 million. In addition, there is
    approximately $128 million of new user fees which are
    distributed in a way that Mr. Byrd can outline for you.
        Senator Cochran. Mr. Byrd.
        Mr. Byrd. We are distributing the $128 million of new user
    fees: $10 million for the food additive petitions, $12 million
    for generic drugs, $25 million for devices, $10 million for
    animal drugs and feed, $57 million for postmarket surveillance,
    and $12 million for import reviews, a total of $128 million in
    new user fees.
        Senator Cochran. Who would pay the postmarket surveillance
    user fees, that $57 or $58 million?
        Mr. Byrd. That is right. That is intended to be paid by
    establishments.
        Senator Cochran. What kind of establishments?
        Mr. Byrd. Well, the medical device establishments, the
    businesses. When we talk about establishments, we mean the
    businesses.
        Senator Cochran. What businesses? I want people to know who
    you are going to tax or who you are going to ask to pay for
    these things.
        Mr. Byrd. Medical device businesses, the food
    establishments. When I say food establishments, I mean those
    food--that part of industry that makes food and distributes
    food, processes food. Human drug establishments. Those are the
    pharmaceutical and biologics industries. Those are the
    establishments that we are referring to when we talk about
    postmarket surveillance.
        About $31 million of that $57 million would come through
    the food establishments, about $7 million through human drug
    establishments, about $11 million for medical device
    establishments, about $4.6 million for biologics
    establishments, and about $4 million for animal drugs and feeds
    establishments.

                      Youth Tobacco Prevention Initiative

        Senator Cochran. The budget also proposes a substantial
    increase in funding for the youth tobacco prevention
    initiative. In looking at the budget request, it appears that
    compared with this fiscal year where $34 million was provided
    to the administration for this initiative, next year's request
    is for $100 more million. So, a total of $134 million is
    requested for that initiative. Is that correct?
        Dr. Friedman. Yes, sir; that is correct.
        Senator Cochran. Like the budget request for the additional
    $50 million for the food safety initiative, there is no offset
    anywhere suggested, and it is unlikely that the committee is
    going to get an allocation any higher than it got this year.
    So, we are confronted with a new $100 million request for this
    initiative that either has to be taken from other programs
    administered by the Food and Drug Administration, or from
    programs administered by the Department of Agriculture or the
    Commodity Futures Trading Commission that come under the
    jurisdiction of this committee because we are not anticipating
    an increase in allocation under the budget resolution. There is
    in effect an agreement that was entered into last year called
    the Balanced Budget Act which imposed restraints on spending.
    That applies to this next fiscal year just as well as it did
    the current fiscal year.
        Dr. Friedman. Yes, sir.
        Senator Cochran. So, this is a part of reality that we are
    confronting this morning in looking at FDA's budget request.
        The part I specifically want to ask about I guess is, as we
    try to decide what to put in the bill as we recommend it to the
    full Senate, we have to justify to the Senate that these are
    going to be funds that are well used and that are needed and
    that there is legal authority to use them.
        As I understand it, $24 million of the request is for
    tobacco product regulation. Is there legal authority for the
    Food and Drug Administration to spend $24 million in product
    regulation?
        Dr. Friedman. I will ask Mr. Schultz or Mr. Zeller if you
    would please help with that.
        Mr. Schultz. Well, I think it is straightforward. As you
    know, the agency has said it has jurisdiction over tobacco
    products, and there are some new products coming along. Now,
    the jurisdiction issue is in litigation. The district court
    upheld jurisdiction. It is on appeal to the fourth circuit. It
    has been argued. But, we believe we have jurisdiction and the
    district court upheld it. So, that would mean as new and novel
    products come along, the agency would have the obligation to
    review them.
        Senator Cochran. The additional $51 million over this
    current year's level is for enforcement and evaluation. What is
    to be enforced and evaluated? What do you intend to enforce?
        Dr. Friedman. The enforcement activity referred to is the
    prohibition of selling tobacco products to underage youth.
    These are to be moneys distributed to States. One of the really
    attractive features about this program is its distributed
    nature, the fact that there are not a lot of FDA staff who will
    be working on this here in the Washington area. It is at State
    and local communities where this money will be distributed to
    check and see whether there is compliance with the restrictions
    on selling tobacco products to underage youth and asking for
    identification before such a sale is made to a young
    individual.
        Senator Cochran. I am curious to know whether you are going
    to make decisions on allocating the funds on the basis of
    whether States have already settled cases with the tobacco
    industry and obtain funds for this purpose already on their own
    initiative. Will that be a factor in determining who gets the
    money?
        Dr. Friedman. I do not believe it will be.
        Mr. Schultz. What we have done is we have asked the States
    that are interested to submit contract proposals to us.
    Basically, their people are going out and doing the
    inspections. If they find violations, then we send warning
    letters and can impose fines.
        I do not know that the State settlements are really to
    enforce our 18-year-old restriction, although they obviously
    involve a lot of money that could be used for good purposes in
    terms of tobacco.
        Senator Cochran. How many States have actually applied for
    these funds in the current fiscal year? You have $24 million
    available for the enforcement and outreach program this year.
    Have you made any allocations of these funds to the States?
        Dr. Friedman. I would ask Mr. Zeller who is most conversant
    with that to speak.
        Mr. Zeller. Last year we signed 10 contracts on a pilot
    basis. The total for those first 10 contracts was just under $2
    million. So far this fiscal year we have signed renewals with 4
    of the first 10 States. We have signed three new contracts,
    North Carolina, Nevada, and Rhode Island, and we are in
    negotiations with another 12 to 13 States. We have yet to
    receive word from a single State that they definitely will not
    be applying for funding to help us in the enforcement this
    year. So, we remain confident by the end of the fiscal year, we
    will have signed contracts with 50 States. We even have
    interest from some of the territories.
        Senator Cochran. So, you think you are going to spend all
    the $24 million by giving it to the States?
        Mr. Zeller. The overwhelming majority of the $24 million is
    for the States. It is not 100 percent. We are setting aside
    some money for followup enforcement action that we could take
    at the Federal level. We do not want to reveal how much of the
    $24 million is for the States, but the great bulk of it is for
    State contracts.
        Senator Cochran. I may have missed something, but I am not
    familiar with the details of the Federal laws regarding
    violations of the prohibitions against selling tobacco to
    underage people. Does the Federal Government presume to
    prosecute and deal with offenders, or is this something that
    comes under the State and local jurisdictions?
        Mr. Zeller. A violation of our final rule is pursued by
    FDA.
        Senator Cochran. So, it is a rule. It is not a law then. It
    is not a Federal criminal law.
        Mr. Zeller. No; it is a civil violation of the rule. For a
    first violation, since the program is new, the retailers get a
    written warning from FDA, and then civil money penalties begin
    with a second violation. We have sent out and received our
    first set of civil money penalty payments. For the second
    violation, the fine is $250.
        Senator Cochran. What if these acts are also prohibited by
    local statutes or ordinances? Do you respect the right of local
    law enforcement officials to deal with that?
        Mr. Zeller. Absolutely, as long as they are coordinating
    with us so that we know what actions they are taking
    separately. There is nothing that would happen to the States by
    signing contracts with us to enforce the Federal regulation
    that would impede their ability to proceed separately under
    State law.
        Senator Cochran. So, what is the policy? If someone has
    already been punished, in effect, or disciplined in some way
    for violating these rules, you do not come in and try to put a
    Federal penalty on them on top of the local penalty?
        Mr. Zeller. Only if we have been able to document a
    violation of the Federal regulation. Prior violations of the
    State or local ordinance have no effect on when a particular
    penalty would kick in under the FDA rule. We have to document
    individual violations of our regulation.
        Senator Cochran. Compliance outreach is a part of the
    program, and in this year $10 million was allocated for that
    purpose, as I understand it. Next year you are proposing to
    spend $35 million. What will you do with the additional funds
    in the area of compliance outreach?
        Dr. Friedman. I think it is important to put in perspective
    both what the goal is--that is, to help educate and work with
    the retailers so they understand what the regulations are and
    understand the importance of not selling tobacco products to
    underage youth--and also to recognize really the vast amount of
    money that is spent advertising tobacco products.
        This is a considerable amount of money, $35 million, but
    compared to $5 billion, which is what the tobacco industry
    spends on advertising products, it is a drop in the bucket.
    There are some States like California, for example, that have
    programs that are more expensive and larger than what we are
    proposing for the whole Nation.
        The goal here is to help educate the retailers so that
    their sales staff, cash registers at a 7-Eleven or some other
    kind of store, will understand the necessity of assuring that
    it is an adult who is buying the product and understanding that
    the owner of the store may be at risk for a financial penalty
    should that not be properly applied.
        Mr. Zeller.
        Mr. Zeller. Let me give you some detail on how we would
    propose to spend the increase. With the money for outreach this
    year, just over a month ago, the Vice President announced a
    national multimedia advertising campaign to the tune of about
    $7 million out of the $10 million. It is a combination of
    radio, newspaper, billboard, and in-store advertising. And the
    way it works is each time we sign an enforcement contract with
    the State, when the compliance checks are ready to begin, we go
    in and we make a media buy. It will average about $100,000 to
    $150,000 per State this year. What that means is, if it is a
    smaller State, we will be in two media markets. If it is a
    larger State, we will only be in one media market and only for
    about 4 weeks. So, that is basically what the $7 million buys
    you.
        If we can get the money that we are requesting for next
    year, we will take what is a very modest presence, getting the
    word out to retailers and, just as importantly, to the public.
    And we will be able to do more media next year, and we think
    that it is very important to bring the enforcement and the
    outreach together. It will enhance retailers' understanding and
    hopefully compliance with the rule. We have extensively
    researched this package. We will be researching and monitoring
    the effectiveness of each of the media buys as they are done
    over the course of the year, and we will be able to report our
    progress when we come back next year.
        Senator Cochran. Is it the assumption of the agency that
    these activities are authorized by law now, or are you assuming
    that the Congress will pass legislation that will authorize the
    Federal Government to make these expenditures?
        Mr. Schultz. In this case, this particular issue was before
    the district court. After Judge Epstein issued his decision, he
    had to decide which part of the rule to let go into effect and
    which part to hold back on until there was a further decision.
    He allowed this piece, the prohibition on the sale, to go into
    effect.
        Senator Cochran. I am talking about the part that we were
    just talking about, compliance outreach. This is advertising,
    as I understand it, buying 7 million dollars' worth of
    advertising. You have already done that.
        Mr. Zeller. We have signed the contract and then the agency
    that has the money will then, on a State-by-State basis, place
    the ads as each of the contracts are signed. We will be in the
    first 10 States by the end of the spring. The program started
    about a month ago in Little Rock, AR.
        Senator Cochran. Has the agency ever done any advertising
    of this kind for any other products or any other subject matter
    area under its jurisdiction?
        Dr. Friedman. I think in terms of public education, there
    are a variety of things that we have done.
        Mr. Schultz. I think we have done some. We do have explicit
    legal authority to use publicity in connection with----
        Senator Cochran. I was just curious as to whether you have
    done it before.
        Mr. Schultz. I do not think on this scale.
        Dr. Friedman. Certainly not on this scale.
        Senator Cochran. You have not, for instance, advertised
    that irradiation has been found to be safe in food.
        Dr. Friedman. No, sir; but we have advertised through a
    variety of activities, important health messages, nutritional
    messages, women's health messages, through written materials
    that we have made widely available through our website, through
    personal speaking activities of FDA staff. I think in the
    overall trend of wanting to get good information to the public
    about things that are important to their health, we certainly
    do have a track record.

                                  Blood Safety

        Senator Cochran. Changing the subject to blood safety,
    there has been a good deal of concern over whether or not the
    Federal Government has been doing enough or been aggressive
    enough to address blood safety concerns of the hemophilia
    community and other users of blood products. I know that FDA
    has taken steps to enhance inspections of blood product
    manufacturing facilities and to improve enforcement of better
    manufacturing practices.
        My question is, Do you intend to spend any funds that are
    provided in next year's appropriations for the purpose of
    helping to ensure, through collaborative efforts with the
    Centers for Disease Control or others, surveillance or
    detection of problems with blood products and then doing
    something to help ensure their safety?
        Dr. Friedman. This has been one of our areas of greatest
    activity this current year. There is a very distinguished
    physician who has joined our Center for Biologics to have as
    his primary activity the coordination of the blood safety
    program, Dr. David Feigel, who had a very distinguished career
    in coming up with AIDS treatments previously. He and a team
    that he has assembled plus the staff in our Center for
    Biologics, many of whom are absolutely first rate, have done a
    remarkable job in coming up with a plan which aggressively and
    ambitiously improves our blood safety system.
        There are resources that are being devoted to that this
    year. There will be resources from our Center for Biologics and
    from the Commissioner's office that will be devoted to this
    next year. There are, for example, inspectional resources from
    our field activities.
        We face some difficult choices this year, and there are
    some areas that have had to be deemphasized in terms of having
    fewer inspections. I have made sure that our inspections go up,
    both the number of inspectors and the number of inspections, is
    in the blood and blood product area. This is a very deeply held
    commitment from our agency at this time.
        Senator Cochran. Are there any efforts to convene a working
    group, as the committee directed last year, to develop a system
    to notify patients of adverse events in the blood supply
    system?
        Dr. Friedman. We have reached out I think extraordinarily
    successfully already this year to link our Blood Safety
    Committee to certain communities through the chairmanship of
    our new Surgeon General and Assistant Secretary for Health. Dr.
    Satcher recently testified before House Members on lookback for
    hepatitis C and activities that we were going to be engaging
    in. FDA has a role in that. They are very important activities
    for education that we have been working on. If I may, let me
    give you one or two examples of how that has worked this past
    year.
        There was a product for hemophiliacs that was made with a
    tiny amount of a protein that came from a patient who was later
    found to have Creutzfeldt-Jakob's disease. There was no
    indication that this material would spread that disease, but
    there is a lot we do not understand about that very subtle
    neurologic, degenerative disease.
        What we did was to work directly with the hemophilia
    communities, informing them of this, advising them about it,
    getting their input as to how exactly we should deal with this
    particular product. I think there was a very fruitful exchange
    between those communities, who are very sensitive and very
    knowledgeable about these risks, the manufacturers and our own
    regulatory authorities.

                            New Product Applications

        Senator Cochran. In the area of new product applications
    and approvals, you talked about the fact that this is growing
    at a fairly substantial rate each year. I think you said 12
    percent per year for the last 4 years.
        Dr. Friedman. Correct, sir.
        Senator Cochran. Applications being submitted for all types
    of products that FDA reviews.
        To what extent does this reflect an expansion by FDA on its
    own of its application requirements and to what extent does it
    reflect a rise in the number of products companies are seeking
    to market that have traditionally been approved by FDA?
        Dr. Friedman. It is a very good question. The vast majority
    of this--and I do not have the exact percentage, but I would
    venture to guess more than 90 percent of this represents simply
    the robustness of industry. As a Nation we have been investing
    in basic biomedical research for the past two decades. I think
    that has been one of the most valuable investments that we as a
    Nation could ever make. The fruits of that are being born now
    both in private industry and in our public institutions,
    universities, government organizations, and so forth. What we
    are seeing is a vast wave of new products for things that we
    have traditionally been involved in, and the pressure on us is
    both the novelty of these products, the sheer number of these
    products, and the fact that we are dealing with disease areas
    for which there have never been treatments before in the past.
    It is a very remarkable time. It is a very exciting time, and
    we want to make sure that we make the best of possible
    judgments about these products and the speediest possible
    judgments about these products.
        Senator Cochran. Well, there is no doubt that the Food and
    Drug Administration has an enormous responsibility in terms of
    the consequences of what you do on public health and our
    country in general in many respects. We appreciate the
    leadership you have provided, Dr. Friedman. We know it is a big
    job, and we have been impressed with your high level of energy
    that you brought to the task and your personal enthusiasm for
    trying to do the best possible job at that agency. And we
    commend you for that. I am impressed and congratulate you on
    the job that you have done personally.
        I frankly think the agency has bitten off more than it can
    chew and you are taking on a lot of responsibilities that could
    very easily be handled by State and local authorities and other
    agencies of the Government, and I think you ought to take a
    hard look at that. I know within your own agency and in the
    administration and the Office of the Vice President and the
    President, there is a tremendous amount of political appeal
    about all these new ventures that you are getting into, and I
    will not attempt to list them all. But it seems to me that it
    is time to go back to the basics, take a look at the basics and
    what your original mandate from the Congress required of the
    agency. I think some of the traditional responsibilities are
    being short-changed.
        You do not have the money to do it all. Obviously, if you
    look at the budget request, you are requesting way more money
    than you are going to get. There is just no way in the world
    for the agency to get all the funds that have been requested.
    So, it is either pie-in-the-sky time or somebody has got to
    wake up and realize that it is unrealistic to ask for this kind
    of money under the budget agreement that we have that governs
    the appropriation of dollars.
        I assume that if you get a bill through Congress, for
    example, to provide a lot of new revenues from the tobacco
    companies, that could be a source of additional revenue if it
    is earmarked for the FDA. But I am not sure the Congress is
    going to earmark all of it for the FDA.
        Anyway, I am troubled by the tendency in this
    administration to continue to expand the authority and the
    reach and the activities of the Federal Government. This is not
    just things that come under the jurisdiction of this budget
    request but so many others too. But I made that speech the
    other day in another appropriations subcommittee, and I do not
    want to hear it again. [Laughter.]
        And I know nobody else wants to hear it again, so I will
    not make it again.
        But let me thank all of you for cooperating with our
    subcommittee and being here to help us understand the budget
    request. We will do the best we can.
        Dr. Friedman. Thank you, sir, very much.

                              Submitted Questions

        Senator Cochran. We have additional questions that we will
    submit to you in writing to be answered for the record.
        [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. FDA's fiscal year 1999 budget includes $74 million for
    the Administration's food safety initiative, a $50 million increase
    over the fiscal year 1998 level of $24 million. What is being
    accomplished with the $24 million provided for this initiative and what
    is the justification for the significant increase requested for this
    initiative for fiscal year 1999?
        Answer. The fiscal year 1998 Food Safety Initiative, FSI, request
    represented the first installment on a major government-wide effort to
    reduce foodborne illness through significant enhancements to food
    safety and public health systems that were designed in the early part
    of this century. The requested fiscal year 1999 FSI increase represents
    a second installment, and has two major objectives. One is to permit
    FDA to work jointly with other federal agencies, including USDA, EPA,
    and CDC, and the states to strengthen and expand the food safety
    activities underway and build on gains made with the fiscal year 1998
    resources. The second objective is to increase the emphasis on ensuring
    the safety of domestic and imported fresh produce in response to the
    President's October 2, 1997, directive to ensure the safety of fresh
    produce.
        With the requested resources, FDA and its federal and state
    partners will be able to respond more rapidly and effectively to a wide
    range of health threats posed by foodborne hazards, including emerging
    pathogens, natural toxins, and antimicrobial resistant pathogens. These
    expanded efforts are needed to permit the Nation's food safety
    regulatory systems to deliver on national goals related to protecting
    and improving the health and well-being of our citizens.
        One example is in research conducted at FDA's National Center for
    Toxicological Research, NCTR. Part of their research focus with fiscal
    year 1999 funding will be in the areas of pathogen identification,
    antibiotic resistance, microbial risk assessment and foodborne
    contamination, to include exploring the prevalence of resistance
    determinants in microorganisms and how these determinants are affected
    by selective pressure from the environment. Other studies will be
    initiated to evaluate the bioremediation of veterinary drug residues in
    the environment and to develop procedures to measure pathogens in
    animal feeds.
        Other examples of this increased effort are to enhance surveillance
    systems by expanding the ongoing systematic collection, analysis, and
    interpretation of antimicrobial susceptibility surveillance data, which
    will enable FDA to ensure accurate and valid information that can be
    used to minimize further the transmission of resistant pathogens
    through the food chain. FDA plans to increase the overall capacity--the
    number of microbial isolates in the database--of the National
    Antimicrobial Susceptibility Monitoring Program by 20 percent in order
    to ensure a high likelihood of detection of emerging resistance trends
    in zoonotic enteric pathogens. Educational partnership agreements with
    state and local agencies will be initiated and use existing mechanisms
    such as Cooperative Extension and professional associations to
    strengthen and implement programs to educate producers, veterinarians,
    state and local regulators about proper drug use and the incorporation
    of HACCP principles to reduce foodborne pathogens into industry quality
    assurance programs to ensure public health by minimizing the occurrence
    of residues in edible tissues. Improved and more standardized risk
    assessments would permit the ranking of food safety concerns to provide
    for better public health protection and more efficient utilization of
    resources. These initiatives will also improve the utility of
    confidence in risk assessment among scientists and the general public
    by providing for more transparent risk analysis. These initiatives will
    provide better risk assessments in order to set priorities, to evaluate
    surveillance plans, risk reduction strategies, and research programs
    for improving food safety.
        The second objective of the fiscal year 1999 Food Safety Initiative
    is to increase the emphasis on ensuring the safety of domestic and
    imported fresh produce in response to the President's October 2, 1997,
    directive to ensure the safety of fresh produce. The President's Fresh
    Produce Initiative is designed to expand the scope and focus of the
    original FSI and to develop and implement strategies required to
    address more effectively critical safety issues associated with fresh
    produce. Over the past several years, several major foodborne illness
    outbreaks have been associated with the consumption of fresh fruits and
    vegetables or fruit and vegetable products. These include outbreaks
    linked to Cyclospora contamination of raspberries imported from
    Guatemala and domestically-produced apple juice contaminated with E.
    coli O157:H7. Also, Salmonella contamination has been found on melons
    and other produce.
        There are several important food safety issues that necessitate a
    special focus on hazardous microbial contamination of fresh produce.
    One is the low rate of monitoring provided annually for imported
    produce products. With existing resources, FDA examines for microbial
    contamination only about 0.2 percent of the approximately 430,000
    import entries of fresh produce for microbial contamination. Also, it
    is anticipated that the per capita consumption of fresh produce will
    increase significantly in the future as health conscious consumers
    follow government dietary guidance and take advantage of the
    scientifically established benefits of these products. Current
    estimates indicate that there will be a 33 percent increase in the
    importation of fresh produce between now and fiscal year 2002. FDA
    needs resources to develop and implement science based strategies to
    minimize levels of contaminants that may be injurious to human health
    in these foods.
        Under this initiative, FDA is developing with USDA and the
    agricultural community draft Good Manufacturing Practices--GMP's--and
    Good Agricultural Practices--GAP's--guidance for use by producers,
    domestic as well as foreign. FDA is accelerating research to develop or
    improve the detection and intervention/prevention techniques for
    pathogens, develop and implement education and technical assistance
    programs to promote appropriate appreciation of the guidance, and
    develop appropriate specific guidance on an as needed basis. The
    resources requested for this new initiative will promote use of
    voluntary GAP/GMP guidance through education and technical assistance
    to domestic and foreign producers; and evaluate growing, harvesting and
    production practices in countries that export fresh produce to the U.S.
    Moreover, the President directed that a legislative proposal be
    developed to expand FDA's authority over imported foods to be similar
    to that already provided to USDA for meat and poultry products. The
    bill permits the agency under appropriate circumstances to declare
    foods or specific commodities from a country to be adulterated if FDA
    determines that a particular facility or country's food system does not
    provide the same level of protection that is provided for comparable
    domestic products, and thus, refuse them entry into the United States.
        FDA will continue to work with foreign governments and producers to
    take any steps necessary to help ensure that imported food products
    meet U.S. food safety requirements or otherwise achieve the level of
    protection required. If FDA determines that the steps needed to address
    an existing or potential risk have not been taken and that the affected
    products therefore will not meet U.S. food safety requirements or
    otherwise achieve the level of protection required, FDA is authorized
    to deny such products entry into the United States.
        For fiscal year 1998, FDA has accomplished a significant number of
    activities under the Food Safety Initiative that will contribute to a
    safer food supply. This is due in part to the cooperation received from
    other entities that are involved in food safety, such as the Department
    of Agriculture and the Centers for Disease Control and Prevention, I
    would be happy to provide a listing of these accomplishments by each of
    the six categories.
        I would first like to share a success story that was possible with
    the funding provided in fiscal year 1998. The National Antimicrobial
    Susceptibility Monitoring Program--NASMP--was initiated in 1996. It
    began as a collaboration among FDA, CDC, and USDA to monitor bacterial
    foodborne pathogens for changes in antimicrobial susceptibility, using
    Salmonella as a sentinel organism. The goals of the program are: to
    identify resistance as it emerges and to identify patterns of
    resistance, to allow timely response to changes in susceptibility
    through information sharing and other mechanisms, and to identify areas
    that require more detailed investigation. This initial effort was the
    precursor to the FSI Early Warning System for Foodborne Disease
    Surveillance related to antimicrobial resistance. The 1998 FSI monies
    allowed extensive expansion and augmentation of the NASMP. Isolates
    which are tested through this program originate from clinically ill
    animals and humans, healthy farm animals, and animals at slaughter. The
    number of isolates is increasing annually to obtain an increasing
    representativeness of the sample, including the incorporation of
    produce and animal feed isolates and new bacterial species such as E.
    coli and Campylobacter.
        Having an established surveillance system enabled the Federal
    partners to identify the presence of a multi-drug resistant Salmonella
    typhimurium DT 104--StmDT104--in humans and animals. StmDT104 had been
    responsible for human disease outbreaks in the United Kingdom and was
    recognized as widespread in distribution and increasingly prevalent in
    the United States. This early warning of a potential epidemic, such as
    that seen in the United Kingdom, was achieved through the NASMP and
    enabled CDC to warn state health departments of STMDT104's presence,
    and allowed augmented monitoring for this pathogen. As a result public
    health officials were prepared for the Vermont dairy farm outbreak and
    were in a position to take preventative steps to minimize the spread.
    This farm is currently part of an ongoing investigation as part of the
    NASMP investigational activities. Continuing work in 1998 includes
    international collaborations between USPHS epidemiologists and
    researchers in the U.K. The funding requested would allow for continued
    expansion of this program.
        [The information follows:]
            fiscal year 1998 food safety initiative accomplishments
    Surveillance
        Worked with CDC and other federal agencies to expand the FoodNet
    sites from five to seven (with an eighth site to come scheduled online
    in fiscal year 1998), and expanded the scope of data by adding two new
    State Health Department partnerships/FoodNet sites to the National
    Antimicrobial Resistance Monitoring Programs, increased Salmonella,
    Campylobacter, and E. coli isolates (human database).
        Worked with CDC to create a national electronic network for rapid
    fingerprint comparison for pathogens that will link FDA, USDA and
    states together to allow the rapid sharing of information and permit
    quick determinations about whether outbreaks in different states have a
    common source.
        Increased animal Hazard Analysis Critical Control Point, HACCP
    bacterial isolates (veterinary database).
        Expanded the scope of data by adding three new veterinary
    diagnostic laboratories to further facilitate the comparison of
    veterinary and human resistance trends.
        Expanded data in animal database by initiating Campylobacter
    isolates testing.
        Expanded the information on resistance by initiating multi-
    resistant Salmonella strain testing.
        Developed a plan to conduct molecular microbiological and genetic
    studies to clarify the role of across species transmission of
    resistance.
        Developed a plan to evaluate antimicrobial use databases--promote
    prudent use of antimicrobials.
        Will sponsor a public meeting related to research on antimicrobial
    resistance between August 31 and September 2, 1998.
    Coordination
        Worked with other federal agencies to form the Foodborne Outbreak
    Response Coordinating Group (FORCG) consisting of representatives from
    FDA, the Centers for Disease Control and Prevention, United States
    Department of Agriculture, Environmental Protection Agency, Council of
    State and Territorial Epidemiologists, Association of State and
    Territorial Public Health Laboratory Directors, Association of Food and
    Drug Officials, National Association of City and County Health
    Officials, and National Association of State Departments of Agriculture
    to improve responses to foodborne illness outbreaks.
        The information provided will be used to develop guidance for
    handling future outbreaks. An actual outbreak response was evaluated to
    determine which of the currently used response procedures worked well
    and which needed improvements.
    Inspections
        Expanded efforts to implement HACCP systems in the seafood
    industry. Major accomplishments related to seafood HACCP include:
      --Trained over 1,137 federal, state, and local regulators in seafood
            HACCP. An additional 6,861 persons, including industry
            officials and state and federal inspectors, were provided a
            three-day basic HACCP course by the Seafood HACCP Alliance in
            cooperation with FDA. Also, 30 partnerships were established
            with states to conduct seafood HACCP inspections.
      --In the process of hiring 80 investigators and microbiologists for
            seafood HACCP implementation.
      --After the HACCP regulation became effective in December 1997,
            initiated verification inspections to ensure that domestic
            seafood establishments have effective HACCP systems in place.
            FDA plans to complete initial verification inspections in 2,700
            domestic seafood establishments this fiscal year and to date,
            more than 500 of these inspections have been conducted.
      --Published a proposed rule to require a warning statement on fruit
            and vegetable juice products that have not been processed to
            destroy pathogens and a proposed rule to require HACCP in fresh
            juice production.
        Published draft guidance containing criteria FDA intends to use to
    decide whether another country's regulatory system for food safety
    provides a level of protection that is equivalent to the U.S. system.
    We are currently reviewing the comments received.
        Developed Recommended National Retail Food Program Standards that
    identify the components of an effective retail food regulatory program
    at the state and local level.
        Developed a draft HACCP Principles at Retail Guide.
    Education
        Established the Partnership for Food Safety Education with other
    federal agencies, industry, state associations and consumer groups. The
    Partnership is a broad-based coalition committed to educating the
    public about safe food handling and preparation. Using the combined
    resources of the industry, several consumer and public health
    organizations, and the federal government, the Partnership will conduct
    a multi-year food safety education campaign to make American consumers
    aware of food safety problems and provide information on how these
    problems may be prevented.
        The Partnership launched the ``Fight BAC!'' consumer food safety
    education campaign. The ``Fight BAC!'' campaign features colorful, 30
    second television public service announcements that focus on food
    safety in the home. The television spot highlights four basic safe food
    handling steps that consumers may use to prevent food contamination.
    These steps include washing hands and surfaces often, preventing cross-
    contamination, cooking foods to proper temperatures, and refrigerating
    foods promptly.
        Cooperated with other federal agencies on a Food Safety Education
    Conference, and conducted consumer research on consumer behaviors to
    develop effective food safety advisory and juice warning labels.
        Formed the ``Food Safety Training and Education Alliance for
    Retail, Food Service, Vending Institutions, and Regulators,'' (FSTEA)
    to promote the use of safe food handling techniques by retail food
    service workers.
    Risk Assessment
        Established an interagency Risk Assessment Consortium with
    particular focus on microbiological risk assessment. The Consortium
    includes representation from FDA, USDA, National Institutes of Health,
    CDC, and EPA and operates out of the Joint Institutes for Food Safety
    and Applied Nutrition located at the University of Maryland. Among the
    goals of the Consortium are to inventory existing data research and
    expertise; establish a clearinghouse of risk assessment related data
    and models; and determine long-term research needs.
        Formed a dose response workgroup that is tentatively planning a
    public meeting in July 1998.
        Initiated a comprehensive review of available risk assessment
    methodologies and data.
        Initiated a process to establish the clearinghouse of available
    methodology and data repository for use by all Consortium members.
    Research
        Developed DNA fingerprinting methods for a variety of pathogens to
    increase the ability to trace the source of foodborne disease
    outbreaks.
        Standardized DNA fingerprinting methods for Vibrio cholerae, Vibrio
    vulnificus, toxigenic Staphylococci, Group A Strepotococci, Listeria,
    Salmonella and pathogenic E. coli.
        Published a draft GAP/GMP guidance document to help producers and
    processors minimize microbial hazards in fresh fruits and vegetables.
        Held six grassroots and one international meeting with the
    agricultural communities and other interested parties to gather input
    for the development of GAP's/GMP's.
        Developed enhanced methods for the more rapid isolation and
    detection of a variety of foodborne pathogens from produce and juices.
        Prepared, in collaboration with other federal agencies, a multi-
    year research plan to accelerate research associated with improving the
    safety of fresh produce. This plan focuses on research to develop and
    improve methods for detection, prevention and control of microbial
    contamination in these products.
        Established intramural FSI microbiological staff.
        Began validation of detection procedures for all FSI research and
    surveillance programs.
        Will begin development of detection procedures--meat, milk, eggs,
    animal feeds--for feces, and environmental pathogens.
        Will evaluate procedures to detect salmonella in animal feeds.
        Will initiate research to reduce pathogens in animal feeds.
        Will initiate research to determine impact of animal feed pathogens
    on the food supply.
        Plan to initiate research to reduce resistant pathogens from
    antibiotics used in food producing animals including fish.
        Plan to initiate evaluation of procedures for reducing pathogen
    load in food producing animals including extended withdrawal periods
    and competitive exclusion products.
        Will develop food animal management procedures to mitigate the
    proliferation of resistant pathogens.
        Will begin evaluation of effects of multiple drugs/routes of
    administration/multiple exposure on resistance development and pathogen
    load.
        Plan to initiate studies to determine the cause and factors which
    impact the development of resistant pathogens and the transmission of
    resistance between pathogens in food producing animals and the
    environment.
        Question. What are the specific goals of the food safety
    initiative?
        Answer. The May 1997 report to the President on the Food Safety
    Initiative established several major goals related to improving the
    safety of the Nation's food supply. These goals include decreasing
    foodborne illness; building a new national early-warning and
    surveillance system to help detect and respond to outbreaks of
    foodborne illnesses earlier, and give federal agencies and states the
    data needed to prevent future outbreaks; improving responses to
    foodborne illness outbreaks; improving risk assessment capability,
    particularly microbial risk assessment, to determine the likelihood
    that exposure to a hazard, such as a foodborne pathogen, will result in
    harm or disease in humans; developing better methods for more rapidly
    detecting, preventing and controlling foodborne safety hazards,
    especially microbial pathogens and mycotoxins; improving the safety of
    the food supply through more effective inspection and compliance
    strategies; and using innovative food safety education programs to
    ensure that food preparers and handlers at each point of the food chain
    are fully informed of food safety risks and appropriate safe handling
    practices.
        The FSI also has a set of goals that relate to our work in the area
    of animal drugs and feeds, including reversing the resistance trend of
    animal pathogen development and reducing the transfer of resistant
    animal pathogens to humans; developing, through the National
    Antimicrobial Resistance Monitoring System, timely information upon
    which to base public health decisions relating to the control of
    resistant foodborne pathogens and to be proactive in assisting
    practitioners in the appropriate use of antimicrobials; developing
    alternative strategies to antimicrobial drug use in food-producing
    animals such as improved management techniques and novel drug
    treatments including competitive exclusion to reduce both the overall
    prevalence of animal-carried pathogens and specifically target animal
    carried resistant pathogens; and working to identify and limit animal
    feed contaminants from entering the human food supply.
        Question. How has the food safety initiative improved the safety of
    the food supply since its implementation last year?
        Answer. Though we are only mid-way through fiscal year 1998, FDA
    has still accomplished a significant number of activities under the
    Food Safety Initiative that will contribute to a safer food supply.
    This is due partially to the cooperation and interactions occurring
    with other entities that are involved in food safety, such as the
    Department of Agriculture and the Centers for Disease Control and
    Prevention. I would be happy to provide a listing of these activities
    by each of the six categories.
        [The information follows:]
               fiscal year 1998 food safety initiative activities
    Surveillance
        By the end of fiscal year 1998, FoodNet sites will be operating in
    areas that are representative of the geographic and demographic
    population distribution in the U.S. Data from these sites currently
    allow FDA and other agencies to identify outbreaks and link outbreaks
    in different locations. By the year 2002, the FoodNet sites will be
    able to produce the volume and quality of baseline data against which
    federal agencies can more accurately measure declines in foodborne
    illnesses, the effect of intervention measures and increases in
    illnesses that require the need for new interventions. In addition,
    data produced by the sites will permit FDA and other federal agencies
    to establish more realistic and measurable performance goals and
    targets for their food safety programs.
        FDA, USDA and several states are now linked to the CDC national
    electronic network for rapid DNA fingerprint comparison of microbial
    pathogens. This new system allows data on microbial pathogens
    associated with outbreaks to be exchanged and compared in 10 to 30
    minutes. This eliminates the necessity of mailing cultures of pathogens
    in order to compare isolates from patients and from incriminated foods
    and reduces the time for comparisons from days to minutes. This
    capability will allow the agencies and states to link more rapidly
    distant outbreaks, to identify the implicated food, and to trace it
    back to the source.
    Coordination
        The Foodborne Outbreak Response Coordinating Group (FORCG), which
    consists of representatives from FDA, CDC, USDA, EPA, the Council of
    State and Territorial Epidemiologists (CSTE), the Association of State
    and Territorial Public Health Laboratory Directors (ASTPHLD), the
    Association of Food and Drug Officials (AFDO), the National Association
    of City and County Health Officials (NACCHO), and the National
    Association of State Departments of Agriculture (NASDA), will help
    ensure that responses to foodborne illness outbreaks are more rapid and
    more effectively coordinated. This is critical since each day saved in
    responding to a foodborne illness incident can significantly reduce the
    number of illnesses that occur as well as their economic impact.
        As a ``test case'' to evaluate a typical illness outbreak response,
    FORCG completed an evaluation of the response to an actual outbreak.
    Results of evaluation are being used in the development of SOP's for
    sharing information on outbreaks among agencies and with the public.
    Inspections
        HACCP systems are a key component of FDA's strategy for reducing
    the incidence of foodborne illnesses. HACCP, which places emphasis on
    identifying and properly controlling points in a food processing system
    where safety problems could occur, is designed to prevent food safety
    hazards. Because HACCP systems are designed to prevent food safety
    problems, wide spread use of these systems in the food industry will
    result in safer end products, help eliminate the cost and delay of end
    product testing, and will permit FDA to use its food safety inspection
    resources more efficiently and focus on the highest risks.
        With the FSI resources provided in the fiscal year 1998
    appropriation for the Food Safety Program, FDA is expanding efforts to
    verify that domestic seafood establishments have HACCP systems capable
    of ensuring the safety of seafood products. FDA is planning to conduct
    2,700 initial verification inspections this fiscal year and the States
    will conduct approximately 2000 additional inspections under contract.
    Without the FSI funding, FDA would have taken at least 2 to 3 years to
    conduct these 2,700 initial seafood HACCP verification inspections.
        FDA published a Notice of Intent to mandate the application of
    HACCP systems for fruit and vegetable juice products and require a
    warning statement on fruit and vegetable juice products that have not
    been processed to destroy pathogens. The expansion of HACCP to fresh
    fruits and vegetable juices will help ensure that these products do not
    contain hazardous contaminants that could cause foodborne infections
    and the warning labels will alert consumers, particularly parents, to
    the potential health hazard.
    Education
        The Partnership for Food Safety Education permits FDA and other
    federal agencies to leverage the resources of industry, consumer groups
    and professional associations to increase the effectiveness and breadth
    of food safety education activities. ``Fight BAC!'' and other education
    campaigns undertaken by the Partnership will help prevent foodborne
    illnesses by making American consumers aware of proper safe food
    handling practices. More than 50 national and local organizations from
    the public health, government, consumer and industry sectors have
    agreed to support the campaign and disseminate educational materials.
    There is also a web site where consumers, health professionals,
    educators and the media can obtain the latest information on preventing
    foodborne illness.
        Consumer research conducted on consumer behaviors, and to identify
    barriers to safe food handling, is the basis of developing effective
    food safety advisories, and juice warning labels. This research helps
    FDA determine the most effective medium for reaching the consumer and
    provides information required to more effectively focus future
    education activities to achieve changes in unsafe food handling
    behaviors.
    Risk Assessment
        The Risk Assessment Consortium, which was established in November
    1997, permits FDA and other federal agencies to work with academia to
    advance collectively the science of microbial risk assessment and
    assist federal agencies (HHS, USDA and EPA) to protect consumers more
    effectively from foodborne illness. Through its efforts to coordinate
    and guide overarching federal microbial risk assessment research, the
    Consortium will help eliminate duplication and increase the
    effectiveness of efforts to improve the speed and accuracy of
    techniques for assessing risks associated with microbial pathogens and
    other hazardous foodborne contaminants. The development of microbial
    risk assessment techniques, now in their infancy, will be a critical
    tool agencies use in targeting their food safety activities and
    resources on the highest public health risk.
    Research
        The more rapid isolation and detection methods developed for a
    variety of foodborne pathogens will permit the Agency to identify more
    accurately foodborne safety hazards and increase the ability to trace
    more quickly the source of foodborne disease outbreaks.
    Fresh Produce Initiative
        The information FDA, USDA and other federal agencies obtained
    through the six grassroots and one international meeting with the
    agricultural communities and other interested parties has been
    incorporated into the draft GAP/GMP guidance for fresh produce. This
    guidance is designed to prevent foodborne illnesses by providing
    producers and processors information on how they can minimize microbial
    contamination in fresh fruits and vegetables.
        The Interagency Research Planning Document developed in conjunction
    with USDA and other agencies will ensure that analytical development
    and other research conducted on microbial pathogens and mycotoxins is
    properly focused and coordinated. This will help both agencies
    eliminate any duplications of effort and ensure that available research
    resources are focused where the greatest needs exist.
        Question. Please explain how the ``early warning'' and surveillance
    system to detect and respond to outbreaks of food borne illness and
    provide the data needed to prevent future outbreaks works, how it is
    being enhanced through the President's food safety initiative, and what
    FDA's role is in this system.
        Answer. This system, FoodNet, is an active surveillance program,
    currently functioning at seven sites located around the U.S., that will
    provide more accurate and comprehensive baseline data on foodborne
    illness in this country. The sites currently cover 20 million people or
    8 percent of the U.S. population.
        FoodNet has the capability to detect widely dispersed outbreaks.
    Local health departments have long been able to detect outbreaks of
    several people being made ill from a single occasion such as a banquet.
    Widely distributed outbreaks from commercial ice cream or bean sprouts
    consumed in homes were rarely discovered by the old passive
    surveillance system. FoodNet investigators, at the state level, contact
    clinical microbiology laboratories regularly to obtain information on
    all cases of bacterial and parasitic diseases most often associated
    with foodborne diarrheal illness. The sites submit regularly selected
    microbial isolates for DNA fingerprinting. State-of-the-art computer
    networks compare these isolates looking for matches that could indicate
    widely dispersed common source outbreaks. FoodNet staff enlist many of
    the cases in case-control studies to estimate probable sources of
    infection. When unusual patterns are noted in any of this data, special
    studies are begun to pinpoint the source of the problem. This newly
    expanded capability will mean more discovery of foodborne disease risks
    and more interventions to protect the public.
        The FoodNet data collection technique has already demonstrated its
    usefulness. For example, in the 1980's, CDC surveyed for the occurrence
    of listeriosis over a period of years at the request of FDA. The data
    showed that the incidence of listeriosis decreased as a result of
    measures initiated by the Agency and industry. These studies were the
    predecessor to the FoodNet system. The data currently being generated
    is proving useful, despite a relatively low level of funding support.
    Data from the sites has contributed to investigations of foodborne
    outbreaks, such as a multi-state outbreak of E. coli O157:H7 detected
    in Illinois and Connecticut associated with California lettuce.
        Food Safety Initiative funding will allow CDC, with support from
    FDA and USDA to increase the number of FoodNet sites and greatly expand
    the good work already underway. With the addition of an eighth site
    later this year, FoodNet will improve its representation of the U.S.
    population, both demographically and geographically. Food safety
    initiative funding is being used to conduct focused surveys to learn
    more about the occurrence of specific pathogens and foodborne illness,
    food sources of contamination, e.g., for Campylobacter, based on data
    derived from the FoodNet system. All FoodNet sites have received
    increased assistance in DNA fingerprinting capabilities through the
    addition of FSI funds. FDA's role in this system is to provide support
    funding for the system, participating in the design of ancillary
    studies (e.g., case-control studies for hemolytic uremia syndrome), and
    using FoodNet data to design more effective intervention measures to
    reduce the risk of foodborne illness and to develop policy and
    regulations to enhance food safety.
        With regard to animal drugs and feeds, in 1996, FDA, CDC and USDA
    established the National Antimicrobial Resistance Monitoring System, a
    nationally based program to prospectively monitor changes in
    antimicrobial susceptibilities of zoonotic enteric pathogens from human
    and animal isolates. Beginning in fiscal year 1998, the Monitoring
    System was moved into the Food Safety Initiative and substantially
    expanded and enhanced.
        FoodNet has been used as the foundation for the human arm of the
    National Antimicrobial Resistance Monitoring Program. The FoodNet sites
    plus ten additional sites, consisting of state or county public health
    laboratories, are submitting human Salmonella, E. coli, and
    Campylobacter isolates to CDC's Foodborne Disease Laboratory for
    susceptibility testing to 17 antimicrobics.
        Veterinary isolate testing is conducted at the United States
    Department of Agriculture's Russell Research Center in Athens, Georgia.
    Isolates are collected from three primary sources: clinical samples
    from the APHIS National Veterinary Services Laboratory in Ames, Iowa;
    on-farm studies of health animals from the APHIS National Animal Health
    Monitoring Surveys; and, as of January 1998, healthy animal samples
    collected for Salmonella monitoring at all large slaughter plants as
    part of the Food Safety and Inspection Service mandatory HACCP
    requirement. In addition, samples from large epidemiology studies
    undertaken by USDA are added to the collection. The Salmonella isolates
    are collected and serotyped by USDA as part of their mission. These
    isolates are then susceptibility tested in Athens under an interagency
    agreement with FDA. Only Salmonella was tested until 1998, when
    Campylobacter and E. coli were added.
        The objectives of the Monitoring System are to provide descriptive
    data on the extent and temporal trends of antimicrobial resistance
    among enteric pathogens in human and animal populations, provide timely
    information to physicians and veterinarians, prolong the lifespan of
    approved drugs by promoting the prudent use of antibiotics, investigate
    areas for more detailed investigation, and guide research in the area
    of antibiotic resistance. The capability to investigate resistance
    patterns and trends identified through the Monitoring System are
    essential elements to facilitate timely and appropriate public health
    response activities.
        Question. How are federal agencies coordinating with each other and
    with other state and local public health agencies to detect and respond
    to food-borne disease outbreaks?
        Answer. An interagency Foodborne Outbreak Response Coordinating
    Group--FORCG--has been formed with representatives of FDA, CDC, USDA/
    FSIS, EPA, and organizations of state health and regulatory officials.
    This group is evaluating the current system of outbreak response at the
    local, state, and federal levels to determine what works well and where
    improvements might be made to make the response faster and more
    efficient. As a first step, a subgroup of FORCG conducted a retroactive
    analysis of an actual outbreak response to identify what worked well
    and where improvement was needed. Among the areas identified for
    improvement were: communication among the various agencies; more rapid
    sharing of information and data among the agencies, and providing
    timely, accurate information about an outbreak and implicated products
    to the public. FORCG is now working with state organizations to develop
    standard operating procedures for more rapid communication and sharing
    of information and data among the agencies and with the public.
        Another example is the National Antimicrobial Resistance Monitoring
    System which was initially developed by expanding or redirecting
    existing programs in several federal agencies. FDA is in the planning
    stages to develop and conduct veterinary prescribing practices and
    producer antimicrobial use surveys in collaboration with USDA for
    feedlot cattle. The survey will begin in 1999, and will combine
    antimicrobial use information with on-farm sampling by nesting within
    the ongoing USDA National Animal Health Monitoring Survey. USDA's
    Agency Animal and Plant Health Inspection Service works directly with
    the National Agriculture Statistics Service to develop representative
    samples and we anticipate the quality of results will be much better
    than any obtainable through a contractual arrangement with a private
    organization. This process will also allow several agencies to share
    and use the data obtained from the survey.
        The federal agencies have also worked closely with states in
    developing the Monitoring System. The sources of human isolates are the
    FoodNet state sites plus ten additional state sites. As of January 1,
    1998, we also established veterinary sentinel sites in the states of
    California, Washington, and New York. A recent collaborative effort was
    undertaken in response to an outbreak of salmonellosis among residents
    of a Vermont dairy farm. FDA, CDC, and USDA jointly initiated the
    investigation of this illness caused by Salmonella Typhimurium DT104, a
    multi-resistant pathogen, on the Vermont farm and surrounding area. The
    investigation is on-going in order to determine the status of DT104
    colonization and shedding in cattle and other animal species on the
    farm is on-going.
        Question. Please provide a breakdown of how the funds provided to
    FDA for fiscal year 1998 for the food safety initiative and requested
    for fiscal year 1999 are being allocated to: (1) surveillance, (2)
    coordination, (3) inspections and compliance, (4) education, (5)
    research, and (6) risk assessment.
        Answer. I would be happy to provide a table showing this break-down
    as reflected in our fiscal year 1998 and fiscal year 1999 budget
    requests, as well as our most recent estimate for fiscal year 1998, for
    the record.
        [The information follows:]

                         FOOD SAFETY INITIATIVE FUNDING
                              [Dolars in millions]
    ------------------------------------------------------------------------
                                                   Fiscal year--
                                     ---------------------------------------
                Category                  1998         1998          1999
                                        request    estimate \1\    request
    ------------------------------------------------------------------------
    Surveillance....................        $3.16         $3.18        $2.40
    Coordination....................         0.55          0.55         0.20
    Inspections/compliance \2\......         7.87          8.99        27.40
    Education.......................         2.07          1.84         3.70
    Research........................         6.40          5.96         9.20
    Risk Assessment.................         3.95          3.48         7.10
                                     ---------------------------------------
          Total.....................        24.00         24.00        50.00
    ------------------------------------------------------------------------
    \1\ Estimates as of March 30, 1998.
    \2\ Inspections/compliance estimates are about $1 million higher than
      originally planned to reflect unanticipated costs associated with
      fiscal year 1998 activities for the Fresh Produce Initiative. This
      increase was derived from small reductions from some of the other food
      safety activities.

        Question. For both fiscal year 1998 and the fiscal year 1999
    request, provide a detailed list of the specific activities being
    funded or proposed to be funded by FDA under the above categories of
    the food safety initiative, including the funds and full-time
    equivalent positions allocated to each activity.
        Answer. I would be happy to provide tables showing a detailed list
    of food safety activities that will be funded with both the fiscal year
    1998 appropriation and the proposed fiscal year 1999 level.
        [The information follows:]

               FISCAL YEAR 1998 FOOD SAFETY INITIATIVE ACTIVITIES
                              [Dollars in millions]
    ------------------------------------------------------------------------
                           Activity                         FTE's    Amount
    ------------------------------------------------------------------------
    Surveillance.........................................        8     $3.18
        FoodNet
        Methylmercury study
        Voluntary retail HACCP pilot program
        S.E. Tracebacks
        State Health Department partnerships--increase
         Salmonella, Campylobacter, and E. coli isolates
         (human database)
        Animal HACCP bacterial isolates (veterinary
         database)
        Veterinary diagnostic laboratories to compare
         veterinary and human resistance trends
        Campylobacter isolates testing
        Multi-resistant Salmonella strain testing
        Molecular microbiological and genetic studies for
         species transmission of resistance
        Evaluate antimicrobial use databases
        Public meeting on antimicrobial resistance
         research
    ------------------------------------------------------------------------
    Coordination.........................................        3     0. 55
    ------------------------------------------------------------------------
    Inspections & Compliance.............................       85      8.99
        HACCP implementation and training
        Lab certification
        Federal/State Partnerships
        Retail
        Foreign Country Education & Technical Assistance
        Workshops/Public meetings
        Sample analyses
        Import lot screening
        Guidance & legislative regulation development
    ------------------------------------------------------------------------
    Risk Assessment......................................  .......      3.48
        Risk Assessment Consortium--Develop modeling
         techniques
        JIFSAN
        HACCP review
        Food consumption survey
        Sample retrieval for dose measurements
    ------------------------------------------------------------------------
    Research (many of these projects will carry into            13      5.96
     fiscal year 1999)...................................
        ISSC--Vibrio vulnificus
        Pfiesteria Piscicida workshop
        Toxicological forum
        Evaluation of vacuum packed hot smoked salmon
        Sampling for Pathogens on Produce
        Molecular Characterization-Maverick Strains of E.
         Coli
        Effects of Environmental Conditions,
         Pytochemicals, Modified Atmosphere Packaging and
         other Parameters for the Growth and Survival of
         Foodborne Pathogens on Produce, Particularly
         Sprouted Seeds
        Molecular Mechanisms for Pathogen Emergence
        Identification and Characterization of Virulence
         Determinants for Salmonella enteritidis and
         Vibrio vulnificus
        Cyclospora Detection and Viability Assessment
        Characterization of Pathogenic Aquatic Eucaryotes
         and their Toxins
        Control of Viral and Bacterial Human Pathogens in
         Seafood
        Assessment of Technologies for Pathogen Reduction
         or Elimination
        Mycotoxins
        Virulence Assessment and Molecular Pathogenisis
         of Salmonella typhimurium DT 104 and Shigella
        Minimizing Biogenic Armine Formation in Seafood
         and Other Commodities
        Quantification of Effects of processing on
         Foodborne Pathogens for minimally processed
         foods
        Survival of Food Pathogens during the 60-day
         Aging Period of Hard Cheeses Made from
         Unpasteurized Milk
        Pathway Analysis: Assessment of the Pathogen
         Transmission Capabilities of Disease-Carrying
         Insects
        Effect of a Variety of Stress Factors on the
         Immune Systems of Poultry and Subsequent
         Infection of Shell Eggs by Salmonella
         enteritidis
        Levels of Vibrio vulnificus and Vibrio
         parahaemolyticus in Retail Seafood
        Development of gastroenteritis animal models and
         biomarkers for food-borne pathogens to serve as
         surrogate models for human disease
        Develop Alternative Modeling Tools to Assessing
         Dose Response/Severity Sampling for Pathogens on
         Produce
        Molecular Mechanisms for Pathogen Emergence
        Identification and Characterization of Virulence
         Determinants for Salmonella enteritidis and
         Vibrio vulnificus
        Cyclospora Detection and Viability Assessment
        Characterization of Pathogenic Aquatic Eucaryotes
         and their Toxins
        Quantification of Effects of processing on
         Foodborne Pathogens for minimally processed
         foods
    ------------------------------------------------------------------------
    Education............................................        6      1.84
        Strategic plan for consumer education
        Food Code--Consumer Advisory Research Focus Group
        Evaluate FSI education in schools
        Fight BAC! brochures
        Juice safety mailings
        USDA/FDA Foodborne Illness Education Information
         Center
        Consumer Hotline
        National Food Safety Education Month
        Partnership for Food Safety Education
        Multi-lingual and special population education
        Education forums and local alliances
                                                          ------------------
          Total..........................................      115     24.00
    ------------------------------------------------------------------------

               FISCAL YEAR 1999 FOOD SAFETY INITIATIVE ACTIVITIES
                              [Dollars in millions]
    ------------------------------------------------------------------------
                           Activity                         FTE's    Amount
    ------------------------------------------------------------------------
    Surveillance.........................................       13     $2.40
        Postmarket surveillance data
        New sentinel site for the collection of animal
         microbial resistance data
        Collaborate with APHIS to evaluate drug
         prescribing practices and animal production drug
         use
        Integrate veterinary diagnostic laboratories into
         an international database for evaluating health
         risks from veterinary drug use
        Monitoring
        FoodNet support
    ------------------------------------------------------------------------
    Coordination.........................................        2      0.20
    ------------------------------------------------------------------------
    Inspections/compliance...............................      159     27.40
        HACCP implementation and training
        Lab certification
        Federal/State Partnerships
        Retail
        Foreign Country Education & Technical Assistance
        Workshops/public meetings
        Sample analyses
        Import lot screening
    ------------------------------------------------------------------------
    Risk Assessment......................................       15      7.10
        Continuation of fiscal year 1998 activities
        Multi-disciplinary risk assessment team
        Framework to identify and fully characterize
         potential human health risks
        Strategies to characterize the impact of animal
         drug use on the pathogen load and resistance
         patterns
        Identify data gaps regarding the ecology of on
         farm microbial pathogens--Salmonella,
         Campylobacter, and E. Coli O157
        Data and modeling techniques--understand casual
         relationship between antimicrobial drug use in
         animals and human disease
        Introduce HACCP planning in the rendering
         industry--emphasizing controls against BSE
         infective agent
    ------------------------------------------------------------------------
    Research.............................................       44      9.20
        Continuation of projects begun in fiscal year
         1998
        Detection procedures--meat, milk, eggs, animal
         feeds, feces, and environmental pathogens
        Detection procedures for all FSI research and
         surveillance programs
        Evaluate procedures to detect salmonella in
         animal feeds
        Reduce pathogens in animal feeds
        Determine impact of animal feed pathogens on the
         food supply
        Reduce resistant pathogens from antibiotics used
         in food producing animals including fish
        Develop food animal management procedures to
         mitigate the proliferation of resistant
         pathogens
    ------------------------------------------------------------------------
    Education............................................       17      3.70
        Educational partnerships with veterinary
         practitioner and producer organizations to
         promote good production practices
        Producer quality assurance programs to foster
         appropriate agricultural drug use
        Incorporate food safety into veterinary
         curriculum and veterinary continuing education
         programs
        Educational partnerships with other federal
         agencies, state, and local agencies
                                                          ------------------
          Total..........................................      250     50.00
    ------------------------------------------------------------------------

        Question. Provide a list, in priority order, of the FDA food safety
    initiative activities proposed to be funded for fiscal year 1999.
        Answer. The $50 million request for fiscal year 1999 would allow
    FDA--as part of the intergovernmental efforts in food safety with the
    Department of Agriculture and the Centers for Disease Control and
    Prevention, among others--to continue with some of the important steps
    begun in fiscal year 1998 in the areas of surveillance, coordination,
    inspections/compliance, education, research, and risk assessment. This
    request would also allow the Agency to fulfill commitments made by the
    President to improve the safety of domestic and imported fruits and
    vegetables. We strongly believe in the programs outlined in our budget
    request, and cannot, at this time, put these initiatives in priority
    order. Each is essential to improving for the long term the safety of
    the foods available from all sources to the American consumer. If
    provided an amount less than the full request of $50 million, we would
    be forced, after consultations with USDA and CDC, to restructure our
    plans and reduce coverage and efforts in certain areas.
                           inspections and compliance
        Question. FDA indicates that it is particularly concerned about the
    safety of produce and the potential risks associated with produce
    imports. The food safety initiative proposes to expand inspection and
    compliance efforts. How much of this money in each of fiscal years 1998
    and 1999 will go towards inspections at the border?
        Answer. There are no funds in the fiscal year 1998 budget for the
    Food Safety Initiative directed to the expansion of inspection of fresh
    fruits and vegetables at the border. In the proposed fiscal year 1999
    budget, we have requested an additional $2.7 million for sample
    analysis, some of which will be used for analysis of samples collected
    from entries of imported foods. Another $5.3 million would support
    screening activities at the border. However, monitoring at the border
    has been acknowledged by FDA, GAO, and other experts as not the most
    efficient utilization of resources, as it is a reactive process. In
    addition to the efforts included in our fiscal year 1999 request, we
    will target resources for our monitoring activities on products that
    have a high potential for pathogen contamination or have a history of
    violations of public health significance.
        Question. How much will go to increasing inspections of fresh
    produce?
        Answer. We will refocus import activities and target resources
    toward more prevention activities that should be more effective in
    preventing entry of foods likely to be contaminated with pathogens.
    These activities will include foreign country evaluation, education and
    technical assistance and outreach activities to promote appropriate
    application of the GAP's/GMP's guidance, verifying use of the guidance,
    and inspections, but only when an outbreak has occurred.
        Question. Will a risk-based selectivity system be used to determine
    which food products are inspected? Which foods would that involve?
        Answer. Yes. One of the principles underlying effective food safety
    programs is that efforts should be focused on the hazards that
    represent the greatest risk to consumers. This is a key attribute of
    HACCP programs, and is why this approach to food safety is being
    increasingly adopted by industry and regulatory agencies. The Food
    Safety Initiative correctly identified our inability to measure
    accurately the risks associated with different microbial food safety
    concerns as a serious impediment to the adoption of risk-based systems
    such as HACCP. To that end, the initiative has called for the
    development of microbial risk assessment methods and databases.
        Question. Will part of the food safety initiative inspection and
    compliance funding be used to pay for U.S. inspectors dispatched to
    foreign plants?
        Answer. Funds are requested in the fiscal year 1999 budget for
    seafood HACCP implementation that may be directed towards evaluating
    HACCP implementation in foreign countries. In the fiscal year 1999
    budget request for the Food Safety Initiative and the Produce
    Initiative, FDA has requested $11.9 to support foreign country
    education, evaluation and technical cooperation and assistance. We will
    also provide further GAP/GMP guidance, as a need is indicated, for use
    by the fresh and minimally processed produce industry. Providing the
    type of expertise and assistance that results in safety mechanisms
    being built into food production systems will have a far more profound
    impact on the safety of products offered for import than merely
    depending on end product testing at the borders.
        Question. Does FDA currently have personnel that go into other
    countries to inspect foreign facilities?
        Answer. Yes, FDA does have personnel that go to foreign facilities
    to conduct two types of inspections: low-acid canned food inspections
    and those related to foodborne disease outbreaks from food exported to
    the U.S. For fiscal year 1998, FDA plans on using three fully-supported
    FTE for 40 foreign inspections related to the low-acid canned foods
    program. While we can never accurately predict the number of
    inspections that will be needed for foodborne disease outbreaks, for
    the past three years, in the foods area, we have conducted 72, 9, and
    29 inspections, for fiscal years 1995 through 1997, respectively.
        Question. Is the FDA budget authority request for fiscal year 1999
    adequate to cover both increased domestic and foreign inspections, as
    well as any needed infrastructure?
        Answer. The fiscal year 1999 request is part of a multi-year
    initiative designed to restructure various aspects of the existing food
    safety system in order to reduce the estimated numbers of deaths and
    illnesses related to foodborne pathogens. The fiscal year 1999 budget
    request will provide the resources necessary to carry out the
    initiatives proposed in that document. We would continue with the next
    steps for the fiscal year 1998 Food Safety Initiative, as well as
    expand our efforts in the area of domestic and imported fresh fruits
    and vegetables. This latter effort would include evaluation, not
    inspection, of foreign growing, harvesting, and processing systems in
    order to provide guidance on improving the safety of these products.
    The $50 million request for fiscal year 1999, plus the initial funding
    of $24 million provided in fiscal year 1998, will allow the Agency to
    move toward its goal of reducing the deaths and illnesses associated
    with foodborne outbreaks.
        Question. How many new inspectors does FDA plan to hire for fiscal
    year 1999? How many inspectors are on board (FTE) currently (fiscal
    year 1998)? What was FDA's inspection staffing level for fiscal year
    1997?
        Answer. The fiscal year 1999 budget request includes 104 Consumer
    Safety Inspectors/Officers for the Foods program. The food activities
    performed by these positions include, but are not limited to, providing
    foreign technical assistance, screening and review of import entries,
    policy and guidance for fresh produce development, and HACCP for juices
    and continued implementation of seafood HACCP. These Consumer Safety
    Inspectors/Officers will monitor the safety of food imports by sampling
    and screening at the border with improved methods and targeted sampling
    techniques. They will also evaluate food production systems in foreign
    countries and provide technical assistance and education, as necessary,
    to improve the capability of those systems to provide safe products for
    export to the U.S. A large part of this work will be in the area of
    fresh fruits and vegetables.
        FDA's Foods inspection staffing level in fiscal year 1997 was 407
    total investigative positions and in fiscal year 1998, 455 total
    investigative positions.
        Question. The justification indicates that FDA examined
    approximately 0.2 percent of fresh produce entering the United States
    in fiscal year 1996. What are your goals for expanding FDA's inspection
    of imported fresh produce in each of fiscal years 1998 and 1999?
        Answer. FDA does not plan increase coverage for fiscal year 1998
    but intends to maintain the same coverage as that in the previous
    years. Because the number of fresh produce imports is expected to rise,
    FDA will still need to increase resources to continue to match past
    levels. The fiscal year 1999 President's Budget includes a substantial
    focus on imported fresh fruits and vegetables, and specifically
    providing technical assistance and information, based on the fresh
    fruit and vegetable GAP's/GMP's, to foreign countries and the foreign
    produce industry that will enable them to improve the safety of produce
    exported to the U.S. In following years, increased coverage of imports
    in general will include increased monitoring of imported fresh produce.
        Question. The justification indicates that the Administration is
    proposing legislation ``to expand FDA's authority over imported foods
    to equal that already provided to USDA.'' What does this mean? What new
    authority is the Administration proposing to give the FDA?
        Answer. This bill permits the agency, under appropriate
    circumstances, to declare foods or specific commodities from a country
    to be adulterated if FDA determines that a particular facility or
    country's food system does not provide the same level of protection
    that is provided for comparable domestic products, and thus, refuse
    them entry into the United States.
        FDA will continue to work with foreign governments and producers to
    take any steps necessary to help ensure that imported food products
    meet U.S. food safety requirements or otherwise achieve the level of
    protection required. If FDA determines that the steps needed to address
    an existing or potential risk have not been taken and that the affected
    products therefore will not meet U.S. food safety requirements or
    otherwise achieve the level of protection required, FDA is authorized
    to deny such products entry into the United States.
        Question. How many MOU's are in existence and with which countries?
    What is the substance, scope and objectives of these agreements?
        Answer. FDA has 55 international agreements. This includes
    memorandums of understandings, memorandums of cooperation, and
    exchanges of letters. A manual containing all international agreements
    is being sent under separate cover. I would be happy to provide the
    information for the record.
        [The information follows:]

    ----------------------------------------------------------------------------------------------------------------
                                                                                                Effect
                Number                  Country           Sponsor              Title             date      Term date
    ----------------------------------------------------------------------------------------------------------------
    225-80-8000..................  Australia........  CFSAN.........  Dry Milk Products.....  11/28/79..  Indef.
    225-86-2001..................  Australia........  CFSA N-S......  Shellfish               9/12/8 6..  Indef.
                                                                       Certification.
    EOL..........................  Australia........  CDRH..........  Insp Info on Med Dev    2/17/93...  Indef.
                                                                       GMP (EOL's).
    225-97-8003 EOL..............  Australia........  FDA...........  Orphan Products.......  8/13/97...  Indef.
    225-96-4004..................  Belarus..........  CDER CBER.....  Info Exchange on Drugs/ 3/27/96...  3/25/99.
                                                                       Biologics.
    225-75-2027..................  Belgium..........  CFSAN.........  Dry Milk Products.....  11/6/74...  Indef.
    225-75-2027..................  Canada...........  CDER..........  GMPs Exchange of Drug   10/1/73...  Indef.
                                                                       Plan Inspection Info.
    225-75-6001..................  Canada...........  CDRH..........  Exchange Info on        12/16/74..  Indef.
                                                                       Compliance Prgm
                                                                       Efforts.
    225-75-2021..................  Canada...........  CFSA N-S......  Shellfish Sanitary      4/30/48...  Indef.
                                                                       Controls.
    225-76-4003..................  Canada...........  CFSAN.........  Monitoring Food,        7/26/88...  7/26/98.
                                                                       Beverage & Sanitary
                                                                       Srvs on Common
                                                                       Carriers.
    225-79-8400..................  Canada...........  ORA-GLP.......  GLP's Phase I /Non-     5/10/79...  Indef.
                                                                       Clinical Labs.
    225-96-4001..................  Canada & Mexico..  FDA...........  Scientific and          10/30/95..  Indef.
                                                                       Regulatory Fields of
                                                                       Health.
    225-89-2001..................  Chile............  CFSA N-S......  Exported Oyster, Clams  5/18/89...  5/18/99.
                                                                       & Mussels.
    225-90-8400..................  Chile............  ORA...........  Safety of Imported      10/27/89..  10/27/99.
                                                                       Fresh Fruit.
    225-96-4006..................  Chile............  CFSAN.........  Fish & Fishery          5/13/96...  5/13/01.
                                                                       Products.
    225-88-2002..................  China............  CFSAN.........  Certification of        12/26/88..  Indef.
                                                                       Ceramicware.
    225-75-2001..................  Denmark..........  CFSAN.........  Dry Milk Products.....  1/19/79...  Indef.
    225-84-8000..................  Finland..........  CFSAN.........  Certification of        3/4/84....  Indef.
                                                                       Imported Food
                                                                       Products.
    225-86-8400..................  France...........  ORA-GLP.......  GLP's Phase II Info.    3/18/86...  Indef.
                                                                       Exchange of
                                                                       Toxicological Labs.
    225-75-2024..................  France...........  CFSAN.........  Caseins...............  1/15/87...  Indef.
    EOL..........................  France...........  CFSAN.........  Cert Program for        1/21/87...  Indef.
                                                                       Listeria in Cheese.
    225-89-4001..................  Germany..........  ORA-GLP.......  GLP's Phase II (Joint   12/23/88..  Indef.
                                                                       with EPA).
    225-79-4008..................  Iceland..........  CFSA N-S......  Shellfish Safety of     12/28/78..  Indef.
                                                                       Fresh/Frozen.
    225-97-2001..................  Ireland..........  CFSAN.........  Certification           11/5/96...  11/5/01.
                                                                       Requirements for
                                                                       Caseins.
    225-89-4000..................  Italy............  ORA-GLP.......  GLP's Phase II........  12/19/89..  Indef.
    225-75-2018..................  Japan............  CFSA N-S......  Shellfish Improving &   10/24/62..  Indef.
                                                                       Standardizing
                                                                       Sanitation Practices.
    Note Verbal..................  Japan............  ORA-GLP.......  GLP's.................  4/15/83...  Indef.
    EOL..........................  Japan............  CFSAN.........  Puffer Fish...........  10/24/88..  Indef.
    225-87-2002..................  Korea............  CFSA N-S......  Shellfish               4/8/87....  4/7/97.
                                                                       Certification.
    225-88-8001..................  Mexico...........  OHA...........  Cooperation in          2/22/88...  2/22/98.
                                                                       Scientific &
                                                                       Regulatory Field of
                                                                       Health.
    225-79-4009..................  Mexico...........  CFSA N-S......  Control of Fresh/       11/12/88..  11/12/98.
                                                                       Frozen Bivalve
                                                                       Mollusca for
                                                                       Exportation.
    225-89-4002..................  Mexico...........  ORA...........  Regulation of Raw       11/28/88..  11/28/98.
                                                                       Agricultural Products.
    225-74-2011..................  Netherlands......  CFSAN.........  Dry Milk Products       1/8/79....  Indef.
                                                                       Examined for
                                                                       Salmonellae.
    225-89-4003..................  Netherlands......  ORA-GLP.......  GLP's Phase II........  12/20/88..  Indef.
    225-81-2000..................  New Zealand......  CFSA N-S......  Shellfish Sanitation..  10/30/80..  Indef.
    225-96-2004..................  New Zealand......  CFSA N-S......  Fish & Fishery          12/20/95..  12/20/00.
                                                                       Products.
    225-76-2000..................  New Zealand......  CFSAN.........  Dry Milk Products       11/11/75..  Indef.
                                                                       Facilitate & Improve
                                                                       Importation
                                                                       Procedures.
    225-95-2000 EOL..............  New Zealand......  CFSAN.........  Horticultural Produce   3/13/9 5..  Indef.
                                                                       Pesticides.
    225-82-2001..................  Norway...........  CFSAN.........  Importation of Rennet   2/26/82...  Indef.
                                                                       Casein.
    225-97-2000 EOL..............  Norway...........  CFSAN.........  Listeria Program for    10/15/96..  Indef.
                                                                       Smoked Salmon.
    225-86-2002..................  Philippines......  CFSAN.........  Certification of Food   9/18/86...  Indef.
                                                                       Products.
    225-96-2005..................  Russia...........  CFSAN.........  Food Products.........  3/29/96...  Indef.
    225-94-8001..................  Russia...........  CDER..........  Drugs & Biological      2/2/94....  2/2/97.
                                                                       Products.
    225-94-8001 Revised Annexes..  Russia...........  CDER..........  Drugs & Biological      1/30/96...  Indef.
                                                                       Products Annexes.
    Statement of Intent..........  Russia...........  CDRH..........  Medical Devices Info..  1/30/96...  Indef.
    225-78-1001..................  Sweden...........  CFSAN.........  Dry Milk Products.....  11/7/77...  Indef.
    225-79-4011..................  Sweden...........  ORA-GLP.......  GLP's Phase I /Non-     5/25/79...  Indef.
                                                                       clinical Labs.
    225-75-4057..................  Sweden...........  CDER..........  Upgrade Quality of      10/17/72..  Indef.
                                                                       Drugs in
                                                                       International
                                                                       Commerce.
    225-75-4058..................  Switzerland......  ORA...........  Inspection of           10/28/68..  Indef.
                                                                       Production of Swiss
                                                                       Drugs.
    225-85-8401..................  Switzerland......  ORA-GLP.......  GLP's Phase II          4/29/85...  Indef.
                                                                       Exchange Info.
    225-98-8001 EOL..............  Taiwan...........  CDRH..........  Info Exchange on        1/9/98....  Indef.
                                                                       Medical Devices.
    225-80-2001..................  United Kingdom...  CFSA N-S......  Processing/Labeling of  9/7/82....  Indef.
                                                                       Fresh/Frozen Clams.
    225-86-6000..................  United Kingdom...  CDRH..........  Mutual Recognition of   6/6/86....  Indef.
                                                                       Medical Device
                                                                       Inspections.
    ----------------------------------------------------------------------------------------------------------------

        Question. How many MOU's have been established in the past two
    years?
        Answer. There have been nine international agreements signed since
    the beginning of 1996. I would be happy to provide the information for
    the record.
        [The information follows:]

    ----------------------------------------------------------------------------------------------------------------
                                                                                                Effect
                Number                  Country           Sponsor              Title             date      Term date
    ----------------------------------------------------------------------------------------------------------------
    225-97-8003 EOL..............  Australia........  FDA...........  Orphan Products.......  8/13/97...  Indef.
    225-96-4004..................  Belarus..........  CDER CBER.....  Info Exchange on Drugs/ 3/27/96...  3/25/99.
                                                                       Biologics.
    225-96-4006..................  Chile............  CFSAN.........  Fish & Fishery          5/13/96...  5/13/01.
                                                                       Products.
    225-97-2001..................  Ireland..........  CFSAN.........  Certification           11/5/96...  11/5/01.
                                                                       Requirements for
                                                                       Caseins.
    225-97-2000 EOL..............  Norway...........  CFSAN.........  Listeria Program for    10/15/96..  Indef.
                                                                       Smoked Salmon.
    225-96-2005..................  Russia...........  CFSAN.........  Food Products.........  3/29/96...  Indef.
    225-94-8001 Revised Annexes..  Russia...........  CDER..........  Drugs & Biological      1/30/96...  Indef.
                                                                       Products Annexes.
    Statement of Intent..........  Russia...........  CDRH..........  Medical Devices Info..  1/30/96...  Indef.
    225-98-8001 EOL..............  Taiwan...........  CDRH..........  Info Exchange on        1/9/98....  Indef.
                                                                       Medical Devices.
    ----------------------------------------------------------------------------------------------------------------

        Question. How are MOU's being used to improve food safety?
        Answer. FDA's overall policy for initiating, developing, and
    monitoring MOU's was set forth in a 1995 Compliance Policy Guide, 60 FR
    31485, June 15, 1995. As stated in that document, it is FDA's policy to
    pursue development of MOU's that will further the Agency's public
    health mission.
        The majority of MOU's and other arrangements currently in effect
    were developed to improve food safety by establishing a formal
    mechanism under which a foreign government can address and correct an
    identified non-compliance situation associated with a particular food
    or class of foods from the particular country. These types of MOU's are
    referred to as compliance MOU's. They contain provisions which
    delineate actions by the foreign government and industry aimed at
    preventing continuation of a previously identified problem and provide
    that the foreign government certify that specific foods offered for
    import will comply with the relevant United States regulations. FDA
    audits such foreign government certification through paper reviews and
    laboratory analyses to verify the performance of the foreign government
    and industry.
        Other less formal MOU's and agreements allow FDA to use its limited
    inspectional resources more efficiently by cooperating with the
    government of the producing country to help ensure production of safe
    food. These arrangements normally contain provisions aimed at
    preventing any safety problems associated with a particular food. The
    arrangements accomplish this goal through well-controlled production,
    storage and transportation practices, and sufficient foreign government
    oversight and testing, which provides FDA with reasonable assurance
    that exports of the particular food from that country comply
    consistently with applicable United States regulations. FDA oversees
    the arrangement through appropriate audits, but is able to redirect its
    limited inspectional resources toward those imported products which are
    not subject to such rigorous government oversight in the producing
    country. This type of arrangement is a fundamental step in the process
    of reaching equivalence between the regulatory system of the United
    States and that of a foreign country.
        Question. Please provide the Committee with an update on the status
    of the implementation of the seafood Hazard Analysis Critical Control
    Point (HACCP) requirements.
        Answer. HACCP implementation has involved four primary elements,
    each of which are interrelated: education and technical assistance for
    the industry; education of FDA and state inspectors; regulatory
    inspections of seafood processors; and Federal/State seafood HACCP
    inspection partnerships.
        Under Education and Technical Assistance for the Industry, HACCP is
    a system of preventive controls for safety that are operated by the
    industry. For each processor to be able to operate its own HACCP
    system, the processor must understand both the food safety hazards that
    are reasonably likely to occur for the products being processed and the
    controls that are available to minimize or eliminate the hazards. On a
    day-to-day basis, a processor's core HACCP activities are monitoring
    key processing points to ensure that they are operating in a manner
    that produces a safe product and recording the results of that
    monitoring.
        To help processors understand these concepts and activities, FDA
    participated in the development of low-cost training for industry in
    HACCP principles and their application to seafood. This course has been
    attended by several thousand individuals nationwide. The Agency also
    developed guidance for processors, entitled ``Fish and Fishery Products
    Hazards and Controls Guide,'' which provides advice on hazards that are
    reasonably likely to occur in various situations and on controls that
    are known to exist for those hazards. This guide also includes a
    simple, fill-in-the-blank HACCP plan and instructions on how to
    complete it.
        For Education for Inspectors, HACCP-based regulatory inspections
    involve auditing processor's HACCP systems to determine whether they
    are appropriate for the circumstances and are being operated properly
    on a day-to-day basis. Effective auditing involves expertise and
    judgment on the part of the inspectors and the regulatory agency. The
    FDA regulations do not require that processors submit their HACCP plans
    to FDA for approval in advance of the first HACCP-based inspection. FDA
    does not have the resources to conduct such reviews. Moreover, it is
    difficult to effectively judge a HACCP plan without actually seeing the
    processing operation. Thus, FDA's inspectors must be trained in how to
    evaluate HACCP plans and systems during routine inspections. To prepare
    FDA's inspectors, the Agency sent them to the course developed for
    industry, described above, and to an additional course that FDA
    designed for seafood inspectors on auditing technique. This course has
    also been made available to state inspectors and has been well
    attended.
        Under Inspections, the seafood HACCP requirements became effective
    on December 18, 1997, after a two year grace period. FDA started
    conducting HACCP-based inspections shortly thereafter. The Agency's
    goal is to inspect all 3,800 U.S. seafood processors, other than
    processors of raw molluscan shellfish, which are inspected by States
    under a Federal-State cooperative program, within one calendar year of
    the effective date.
        Even with the training and the guidelines, the Agency has long
    recognized that the development of HACCP systems in many processing
    plants will involve a period of trial and error. Thus, it has always
    been the Agency's expectation that the first round of inspections after
    the effective date would reveal that a significant percentage of HACCP
    systems need some improvement. This expectation is turning out to be
    the case, but it is not regarded as a special problem at this stage of
    implementation. As planned, FDA's inspections are focusing on
    evaluating HACCP systems and providing feedback to the firms. During
    the first round, FDA anticipates that regulatory action will be
    initiated when, in addition to HACCP system deficiencies, the products
    themselves contain contaminants or are in imminent danger of becoming
    contaminated.
        FDA is permitting the industry to challenge the conclusions from
    these inspections. While FDA's inspectors will initially compare each
    processor's HACCP system to the advice in the guidelines described
    above, processors are free to choose alternative approaches so long as
    their HACCP systems provide a level of safety that is equivalent to
    that provided in the guidelines' approach. Moreover, processors are
    free to challenge the scientific validity of the approach taken in the
    guidelines. FDA is always interested in learning about better ways to
    ensure safety and in making improvements in its own guidelines. In
    developing alternatives to the guidelines or challenging their
    validity, processors should be able to establish the scientific
    validity of their systems for the Agency to evaluate.
        Under Federal-State Seafood HACCP Inspection Partnerships, the FDA
    seafood HACCP program provides the opportunity for the Federal
    government and the states to operate inspection systems that are
    consistent in both philosophy and detail, based on HACCP as the common
    element. It is possible for the first time to have a consistent,
    national, Federal-State cooperative program for seafood safety as well
    as to aggregate the results of both Federal and state inspections into
    a common national database. It would also enable both the Federal
    government and the States to leverage their resources by sharing the
    workload. An integrated Federal-State system would enhance consumer
    protection by substantially strengthening the domestic program for
    seafood safety.
        In virtually all states that have significant seafood processing,
    the States conduct their own inspections, often as an offshoot of state
    licensure of processing establishments. Many of these states inspect
    their processors at least once per year, with some mandating as many as
    four inspections per year. Except in certain circumstances, however,
    FDA traditionally has not been able to fully coordinate its seafood
    inspection activities with those of the states because of
    inconsistencies between the programs and the costs associated with
    developing common data bases. As a result, Federal and State
    inspections have tended to overlap.
        To take advantage of the opportunity that HACCP provides, FDA
    developed a model Federal-State partnership for seafood HACCP
    inspection; and a computerized national seafood HACCP inspection
    database into which both FDA and state partners could enter the results
    of their inspections. The Agency also set aside some funds to make
    available to potential state partners to upgrade their inspection
    capabilities through the acquisition of equipment or other means. Much
    of those funds have already been committed to States. FDA has also
    entered into seafood HACCP inspection partnerships with some states and
    is pursuing agreements with many others. About 30 states have entered
    into partnerships or are considering doing so.
        Question. What level of funding is being allocated for seafood
    HACCP in fiscal year 1998? How much is included in the fiscal year 1999
    request for this purpose?
        Answer. The fiscal year 1998 President's Budget included an
    increase of $8.0 million to implement seafood HACCP, the regulation for
    which became final in December 1997. The fiscal year 1999 request
    includes an additional $3.4 million.
        Question. The budget justification indicates that FDA intends to
    expand implementation of HACCP and other food safety assurance systems
    in the food industry. FDA has indicated that in addition to seafood, it
    intends to expand HACCP to fruit juice. What other expansions and new
    systems does FDA intend to implement?
        Answer. In addition to fruit juices, the Agency is also evaluating
    the feasibility and practicality of applying HACCP to the retail food
    industry and to production of animal feeds. FDA has also engaged in
    other HACCP pilots with industry. Expanded activities will include
    working more closely with industry, academia, and professional and
    trade associations by providing technical assistance, training, and
    guidance to appropriate entities. In addition, FDA will continue to
    work with the Department of Agriculture towards the adoption of the
    Food Code. FDA will work with other agencies to increase the percentage
    of domestic produce produced consistent with the new voluntary GAP's/
    GMP's guidance and FDA will monitor and evaluate the effectiveness of
    that guidance. FDA will evaluate fresh fruit and vegetable production
    in areas in the U.S. and foreign countries where there is evidence that
    a potential public health hazard exists and GAP/GMP guidance has not
    been applied. FDA will evaluate ways to increase coverage of imports
    through such means as increased personnel, increased partnerships, and
    innovative partnerships with the states.
        Question. The prepared statement indicates that the Operational and
    Administrative System for Import Support (OASIS) became fully
    operational in every U.S. port of entry where FDA-regulated products
    come into the country. What was the total cost of this system? Please
    provide the resources, both dollars and staff years, which FDA
    allocated to this system in each fiscal year since its initiation, and
    under which activity of the budget these funds were provided.
        Answer. OASIS development was done by private contractors, to whom
    $10.5 million has been paid for their system development work. FDA did
    not spend any staff years on system development of OASIS, since the
    development work was performed by private contractors. The increase in
    FTE utilization for OASIS in fiscal year 1996 was largely because that
    is when the Agency was at the height of the roll out of OASIS to FDA
    field offices nationwide, and were utilizing FDA personnel to get the
    computer equipment ready at these sites, to provide training to our
    field users of OASIS, and to furnish on-site support to the start up of
    the system. All of the budget activities, except for NCTR and Tobacco,
    were used to fund the development costs of OASIS as the ORA import
    inspection program includes formal entries from all other budget
    activities. I would be happy to provide, for the record, the
    information requested.
        [The information follows:]

                              [Dollars in millions]
    ------------------------------------------------------------------------
                        Fiscal year                       Amount     FTE's
    ------------------------------------------------------------------------
    1988-91...........................................       $2.0  .........
    1992..............................................        0.7  .........
    1993..............................................        0.8  .........
    1994..............................................        0.7        4.0
    1995..............................................        3.4        2.0
    1996..............................................        0.8       11.0
    1997..............................................        0.9        5.0
    1998..............................................        1.2        4.0
                                                       ---------------------
          Total.......................................       10.5       26.0
    ------------------------------------------------------------------------

        Question. What is included in the fiscal year 1999 request for
    OASIS? Please provide dollars and staff years.
        Answer. OASIS will require $600,000 in fiscal year 1999 for system
    maintenance to be performed by the development contractor. These are
    funds that relate to the development of OASIS as have been reported in
    previous years.
        Question. Will OASIS allow FDA to regulate imports with fewer
    inspectors and analysts? If yes, what is the savings in each of fiscal
    years 1998 and 1999?
        Answer. We do not anticipate the OASIS will allow the Agency to
    monitor the increasing volume of FDA regulated imports with fewer
    inspectors or analysts. In fiscal year 1992, there were approximately
    1.5 million entries of FDA regulated products. In fiscal year 1997,
    there were approximately 3.9 million entry lines of FDA regulated
    products offered for entry. This does not include those informal
    entries with a value less than $1,250, which is to be raised to $2000,
    effective July 2, 1998, and some formal entries, which may not be
    electronically processed. Entry lines is a more realistic way of
    determining the volume of imports which FDA must evaluate. Since each
    entry could contain more than one line of FDA regulated product, as on
    average an entry contains 1.7 lines, the number of entries
    underestimates the challenge posed in maintaining an effective import
    inspection system.
        The efficiencies and economies that OASIS has brought to the
    processing of import entries has enabled FDA to handle this increased
    volume of work. However, OASIS does not affect the number of products
    that FDA examines in the field, or collects for laboratory examination.
    Nor does it affect the staffing needed to examine product in our
    laboratories. The benefit from OASIS in terms of examinations and
    analysis is to help ensure that the most meaningful entry lines are
    selected for examination and analysis.
                             food safety education
        Question. FDA indicates that it will invest its resources in new
    and innovative education and information sharing strategies for
    improving food handling practices of consumers and retail food service
    establishments. USDA has been carrying out and increasing its
    activities in this area as well. What is the division of labor between
    the FDA and other agencies, such as USDA, in food safety education and
    information sharing to prevent duplication of effort?
        Answer. FDA and USDA have always worked together to coordinate food
    safety education. The Food Safety Initiative has provided ample
    opportunity to become even more closely coordinated. Working groups
    have been formed and meetings occur on a regular basis to delineate
    each agency's specific role and assess progress. The breakdown of
    education programs among the agencies is dependent upon the
    constituencies serviced and the products regulated. FDA is responsible
    for education concerning food safety issues in processing and consumer
    food handling of all foods except meat, poultry, and processed egg
    products. FDA is also responsible for education involving food handling
    in retail food service establishments specifically involving the retail
    Food Code of 1997.
        USDA does food safety education on the production, processing, and
    consumer food handling of meat, poultry, and processed egg products.
    The Department is also responsible for education at congregate meat
    sites, gleaning and food recovery programs sites, school food service
    facilities, and retail stores and restaurants that have on-site meat or
    poultry processing. USDA and FDA are working together with industry to
    develop and educational outreach program for the Good Agricultural
    Practices/Good Manufacturing Practices guidance for fresh fruits and
    vegetables. This program will be a well-organized program applicable to
    the domestic and foreign product industry.
        FDA is also pursuing cooperative programs related to veterinary
    education programs which will focus on proper drug use with a specific
    emphasis on proper use of antimicrobial drugs. These educational
    initiatives will be implemented in conjunction with Surveillance
    activities such as the practitioner prescribing surveys which will
    serve as the foundation for this activity. These activities will be
    accomplished in partnership with professional veterinary associations.
    Additionally, the Agency is working to develop programs dealing with
    food safety to be used in veterinary continuing education and
    incorporation into veterinary school curricula. Producer education will
    be done in partnership with producer associations as well as components
    of the U.S. Department of Agriculture, such as the Animal Production
    Food Safety Program, and Cooperative State Research Education and
    Extension Service.
        Question. What areas of food safety education will FDA be
    responsible for? Please describe in detail the educational strategies
    FDA will conduct, what information will be provided, how it will be
    delivered, and who will be the target audience.
        Answer. In terms of consumer education, FDA has joined CDC, USDA,
    and the Department of Education, members of industry, and consumer
    representatives to form a public-private Partnership for Food Safety
    Education and launched a nationwide public education campaign in
    October 1997. The campaign centers on four key food safety principles
    along with a ``FIGHT BAC!'' logo. The Partnership distributed community
    action kits and supermarket kits containing public education materials
    to support the ``FIGHT BAC!'' campaign in early 1998. Currently FDA is
    advising the Partnership on two school-based initiatives. The first is
    development of a ``Presenter's Guide'' for introducing the ``FIGHT
    BAC!'' message to children in kindergarten through third grade. The
    presenters, our partners at the local level, cooperative extension
    agents, health and consumer educators, have many opportunities to
    present information in a classroom setting. This program will include
    interactive activities to engage the children, as well as information
    to take home to parents. The goal is to have this program in place for
    September. The Partnership is also in the developmental stages of
    creating a science-based food safety education program for children in
    grades three through six. This longer-term project will meet the
    educational needs of children as they are just beginning to learn food
    preparation in the home.
        Both of these projects are based on findings of a report,
    ``Evaluating the Placement of Food Safety Education in American
    Schools,'' contracted for by FDA and USDA. Never before has an
    educational survey been conducted to identify what subjects at what
    grade levels, and to which school personnel food safety education
    should be directed. This report, currently under review, will serve as
    the foundation for developing relevant and effective education
    programs.
        FDA will support National Food Safety Education Month, already
    designated by industry, by sending posters featuring ``FIGHT BAC!'' to
    elementary school food service directors for display in the school
    cafeteria. Work is also underway on a planning guide for use by
    community health educators for promoting National Food Safety Education
    Month that will be distributed this summer.
        A video teleconference is scheduled for May that will reach state
    and local health and education officials concerned with the prevention
    of foodborne illness. Experts from government and private sector
    organizations will, among other things, discuss how to use community
    action materials from the ``FIGHT BAC!'' campaign along with plans for
    National Food Safety Education Month.
        In an attempt to examine the broad range of research data and its
    implication on food safety education practice, a meeting of food safety
    education researchers is planned for this year. The purpose of the
    meeting will be to review the status of food safety education research,
    identify gaps in existing research, and identify strategies for future
    food safety education. One gap that has already been identified is the
    need for further research on the best way to communicate the key food
    safety principles in order to achieve behavior change. Research will
    take place on the barriers to safe food handling.
        FDA and USDA are developing a National Food Safety Information
    Center. This center will build on the agencies' existing information
    dissemination systems by, among other things, enhancing the data base
    capabilities of the FDA/USDA Foodborne Illness Education Information
    Center at the National Agriculture Library, establishing a new food
    safety 800 number, developing the joint foodsafety.gov web page, and
    enhancing publications distribution and electronic publications
    dissemination systems.
        In terms of retail education, FDA has worked with USDA to make the
    HACCP manual for the school lunch program consistent with FDA's Food
    Code. FDA has also joined with government, academic, consumer, and
    industry representatives in establishing the ``Food Safety Training and
    Education Alliance for Retail, Food Service, Vending, Institutions and
    Regulators.'' This group, FSTEA, is working to promote training of
    government and industry employees in retail food service. FSTEA has
    thus far developed an evaluation form to be used by the professional
    association members in evaluating training resources listed in the
    National Agriculture Library's Foodborne Illness Education Center
    database, and are developing recommended qualifications for persons who
    teach retail food safety training to industry employees as well as
    training curriculum for regulatory food inspectors.
        FDA offers a considerable number of training courses for state and
    local retail food regulatory staff through its State Training Branch. A
    special four day Microbiology for Inspectors satellite course will be
    offered in August. A follow up course, Investigation of Foodborne
    Illness will be offered in September.
        FDA has ``Voluntary Retail Food Regulatory Program Standards'' and
    ``Managing Food Safety: A HACCP Principles Guide for Operators of Food
    Establishments at the Retail Level.'' We are conducting workshops
    regarding these with State officials and once the documents have been
    reviewed, the Agency will conduct pilot programs in the states of the
    program standards and the HACCP guide beginning in the fall of 1998.
    FDA is also conducting courses of epidemiology for State regulatory
    officials, and has conducted an investigator course on tracebacks of
    foodborne illness.
        For producer education, FDA is working with USDA to develop an
    educational outreach program for the GAP/GMP guidance for fresh fruits
    and vegetables. An International Working Group consisting of
    representatives from the Office of U.S. Trade Representatives, the U.S.
    Department of State, FDA and USDA have been established to develop a
    system of outreach for assistance to foreign countries to meet
    guidelines required by the Produce Initiative. A conference will be
    held this summer with individuals and representatives from
    organizations involved in producer education to address outreach on the
    domestic and international levels.
        FDA is also responsible for the Veterinary Practitioner education.
    Many initiatives already exist and more are being developed in
    collaboration with veterinary profession associations, such as the
    American Veterinary Medical Association and veterinary speciality
    practitioner groups. The target audience for these programs is
    practicing veterinarians and veterinary students. FDA is working with
    the veterinary academic community to develop programs dealing with food
    safety for use in continuing education programs and to encourage the
    adoption of these programs into veterinary school curricula. Further,
    practitioner education efforts will be conducted in conjunction with
    producer associations such as National Pork Producers Council, and
    National Cattlemen's Beef Association. The Agency will work with these
    associations to enhance producer quality programs and develop new
    quality assurance programs that will emphasize the relationship between
    good husbandry practices and achieving a safe food supply. FDA plans to
    work with producer associations, the Department of Agriculture, and the
    states to enhance safe food production practices.
                              food safety research
        Question. Can you be more specific as to what FDA plans to do with
    the research money requested as part of the food safety initiative?
    Please list specific research work/projects to be funded in each of
    fiscal years 1998 and proposed for fiscal year 1999, the cost of each
    project, and who will conduct the research.
        Answer. An active research program is an integral component of
    FDA's ability to develop and implement scientifically-sound regulations
    and guidance designed to safeguard the U.S. food supply. The Food
    Safety Initiative recognized that solving the new food safety problems
    that will arise as we enter the next century requires a strong
    investment in science, the source of new solutions. This is reflected
    in the inclusion of two research components within the initiative,
    bioresearch and risk assessment, that are devoted to providing the
    needed food safety data, methods, and technologies.
        The Food Safety Initiative, FSI, identified the following five
    broad goals as the focus of the initiative's research programs:
    Improved Detection Methods; Understanding Resistance to Traditional
    Preservation Technologies; Understanding Antibiotic Drug Resistance;
    Prevention Techniques: Pathogen Avoidance, Reduction, and Elimination;
    and Food Handling, Distribution, and Storage. FSI also identified the
    need for methods and scientific data that would enhance the ability of
    federal agencies to assess microbial risk. This included two additional
    broad priority research areas that are critical for addressing this
    goal of the Food Safety Initiative: Develop and Validate Exposure
    Assessment Models Based on Probabilistic Methodology; and Develop and
    Validate Dose-Response Assessment Models for Use in Risk Assessment.
    These seven research goals, with an emphasis on microbiological
    problems associated with fresh or minimally processed produce, were
    reaffirmed under the Produce and Imported Foods Safety Initiative.
        These research priorities were used by FDA to develop a three year
    research plan. The plan, which is in the final stages of development,
    details the projects that FDA is undertaking to meet the goals of the
    Food Safety Initiative and the regulatory mission of the Agency. I
    would be happy to provide, for the record, a table showing research
    projects, estimated FTE's associated with these projects, and whether
    these projects are planned intramurally and extramurally.
        [The information follows:]

                                             FOOD SAFETY INITIATIVE RESEARCH
                                                 [Dollars in thousands]
    ----------------------------------------------------------------------------------------------------------------
                                                          Fiscal year--
                                          --------------------------------------------
               Research project               1998                  1999                    FDA-run or external
                                           estimated  1998 cost  estimated  1999 cost
                                           FTE level             FTE level
    ----------------------------------------------------------------------------------------------------------------
    Sampling for Pathogens on Produce....       11.5       $874       14.5     $1,157  FDA.
    Molecular Characterization of                1.0         76        4.0        319  FDA.
     Maverick Strains of
     Enterohemorrhagic E. Coli.
    Effects of Environmental Conditions,         8.2        623       10.2        813  FDA.
     Pytochemicals, Modified Atmosphere
     Packaging and other Parameters for
     the Growth and Survival of Foodborne
     Pathogens on Produce, Particularly
     Sprouted Seeds.
    Molecular Mechanisms for Pathogen            5.5        418        6.5        518  FDA.
     Emer-  gence.
    Identification and Characterization          3.0        228        4.0        319  FDA.
     of Virulence Determinants for
     Salmonella enteritidis and Vibrio
     vulnificus.
    Cyclospora Detection and Viability           2.5        190        4.5        359  FDA CDC USUHS Colleges.
     Assessment.
    Characterization of Pathogenic              13.7      1,041       14.2      1,133  FDA.
     Aquatic Eucaryotes and their Toxins.
    Control of Viral and Bacterial Human         5.5        418        6.5        518  FDA.
     Pathogens in Seafood.
    Assessment of Technologies for               9.7        737       10.7        853  FDA DOD.
     Pathogen Reduction or Elimination.
    Mycotoxins...........................       15.0      1,114       17.0      1,356  FDA.
    Virulence Assessment and Molecular           3.5        266        4.5        359  FDA.
     Pathogenisis of Salmonella
     typhimurium DT 104 and Shigella.
    Minimizing Biogenic Armine Formation         2.6      1,976        4.6        367  FDA.
     in Seafood and Other Commodities.
    Quantification of Effects of                 1.5        114        2.0        159  FDA.
     processing on Foodborne Pathogens
     for minimally processed foods.
    Survival of Food Pathogens during the        .25         19         .5         39  FDA.
     60-day Aging Period of Hard Cheeses
     Made from Unpasteurized Milk.
    Pathway Analysis: Assessment of the          1.0         76        1.5        119  FDA.
     Pathogen Transmission Capabilities
     of Disease-Carrying Insects.
    Effect of a Variety of Stress Factors        0.7         53        1.5        119  FDA JIFSAN.
     on the Immune Systems of Poultry and
     Subsequent Infection of Shell Eggs
     by Salmonella enteritidis.
    Levels of Vibrio vulnificus and             1.75        133        2.5        199  FDA.
     Vibrio parahaemolyticus in Retail
     Seafood.
    Development of gastroenteritis animal        6.0        456        6.0        478  FDA.
     models and biomarkers for food-borne
     pathogens to serve as surrogate
     models for human disease.
    Developing Alternative Modeling Tools        0.5         38        0.5         39  FDA.
     for Assessing Dose Response and
     Severity.
    Risk Assessment Coordination Group...        3.5        266        3.5        279  FDA.
    Intra- and Interagency Support of            0.8         61        0.8         63  FDA.
     Risk Assessment.
    Development of Risk Assessment               1.5        114        4.5        359  FDA.
     Clearing-  house.
    Scientific Support Group.............        5.2        395        6.2         49  FDA.
    Screen animal feeds for the presence   .........  .........  .........         28  FDA.
     of microorganisms harboring the
     resistance determinants.
    Screen other environmental sources     .........  .........  .........         28  FDA.
     for the presence of microorganisms
     harboring the resistance
     determinants.
    Evaluate the effect of selection       .........  .........  .........         83  FDA.
     pressure on the frequency of
     resistance determinants found in
     zoonotic and indigenous microbial
     populations.
    Monitoring quinolone resistance in     .........  .........  .........         78  FDA.
     Campylobacter spp., as it relates to
     increased use of fluoroquinolone in
     animal husbandry.
    Elucidation of mechanisms by which     .........  .........  .........         93  FDA.
     competitive exclusion products
     prevent colonization in chicken
     intestine by Salmonella spp.
    Evaluate Bacteriological Analysis      .........  .........  .........         33  FDA.
     Manual procedures for detection of
     pathogens in animal feeds and the
     environment.
    Bioremediation of veterinary drug      .........  .........  .........         15  FDA.
     residues in environment as they
     relate to antibiotic resistance.
    Screening animal feeds using           .........  .........  .........         42  FDA.
     molecular techniques for proteins
     derived from mammalian tissue to
     detect possible Bovine Spongiform
     Encephalopathy (BSE).
    Risk assessors on dose-response        .........  .........  .........        100  FDA.
     modeling of pathogenic organisms.
    Use of Human Flora-Associated Rodents  .........        130  .........  .........  Centre national D'Etudes
     to Study the Effect of Low Doses of                                                Veterinaires et
     Anti-  microbials.                                                                 Alimentaires, Fougeres,
                                                                                        France.
    ----------------------------------------------------------------------------------------------------------------

        Question. How much is requested for FDA food safety research for
    fiscal year 1999?
        Answer. The total amount for food safety research included in the
    fiscal year 1999 budget request is $9.2 million and 43 FTE. Of this
    total, $8.5 million is for the Foods program, $0.5 million for the
    National Center for Toxicological Research, and $0.2 million for Other
    Activities.
        Question. How will the research at FDA be different from the
    research that is being done and is planned by USDA?
        Answer. A series of interagency meetings was conducted in the fall
    of 1997 to assure that the resources provided by the Food Safety
    Initiative for research would be utilized optimally. Similarly, one of
    the major goals of the risk assessment activities called for by the
    Food Safety Initiative was the establishment of an interagency risk
    assessment consortium. One of the first activities of the consortium
    has been to assist in the coordination microbial risk assessment
    research.
        For research related to our work in the area of veterinary
    medicine, FDA is coordinating with the Department of Agriculture to
    minimize the duplication of work. FDA's focus will be on those aspects
    of foodborne pathogens related to products regulated by the Agency;
    specifically the development of pathogens detection procedures for
    animal feeds, feces, manure, and environmental samples, the
    contribution of animal feeds to the pathogen load in food producing
    animals, and the evolution of pathogens, including resistant pathogens,
    in animals being fed antibiotics.
        As a result of these interagency exchanges, the Agency has
    identified eight research program areas that were consistent with its
    regulatory mission and could be effectively addressed with the
    expertise and facilities available at FDA. In addition, priority
    research needs in support of specific public health issues currently
    facing FDA were assessed. A total of ten issues associated with three
    broad regulatory issues related to the control of foodborne disease
    were identified as requiring research support. I would be happy to
    provide a list of these activities for the record.
        [The information follows:]
    Research
        Development of Sampling and Detection Methods for the
    Identification of Pathogens that Occur Sporadically at Low Levels on
    Produce
        Salmonella Typhimurium DT104
        Cyclospora cayetenensis
        Development of New Strategies and Technologies for the Prevention
    or Elimination of Pathogens from Foods, Particularly Fresh Produce
        Molecular Mechanisms of Microbial Evolution that Lead to the
    Emergence of New Foodborne Threats to Public Health
    Risk Assessment
        Improved Exposure Assessments Through the Development of Product/
    Pathogen Pathway Analysis Models
        Characterization of Dose-Response Relations for Selected Foodborne
    Pathogens
        Identification of Alternative Modeling Techniques for Enhanced
    Microbial Risk Assessments
    Control of Pathogens in Commodities that do not Receive a Terminal
            Inactivating Treatment Prior to Consumption
        1. Contamination of shell eggs with Salmonella.
        2. Contamination of sprouted seeds with pathogenic microorganisms,
    such as Escherichia coli O157, Salmonella spp., and Bacillus cereus.
        3. Contamination of raw molluscan shellfish with pathogenic
    microorganisms, including Salmonellaspp., Vibrio spp., and Norwalk
    viruses.
        4. Contamination of fresh or minimally processed produce with
    pathogenic microorganisms, such as Escherichia coli O157:H7, Salmonella
    spp., Listeria monocytogenes, and Cyclospora cayetenesis.
    Adequacy of Food Processes and Implementation of HACCP
        5. Validation that current guidelines for the aging of cheeses is
    adequate to assure the elimination of pathogenic microorganisms.
        6. Control of pathogenic microorganisms in fresh fruit and
    vegetable juices, including Escherichia coli O157:H7, Salmonella spp.,
    Listeria monocytogenes, and Cryptosporidium parvum.
        7. Contamination of fresh seafood with marine toxins or parasites
    such as Anasakis simplex that can infect humans.
    Assessment of Public Health Impact
        8. Pfiesteria piscicida--assessment of risk to human health through
    consumption of contaminated seafood.
        9. Contamination of grain-based products with mycotoxins, such as
    fumonisins, deoxynivalenol, aflatoxins, and ochratoxins.
        10. Determination of levels of pathogenic microorganisms in
    specific commodities that would not pose a risk to specific high risk
    populations.
        Question. What criteria are you using for what research FDA should
    do and what research should be conducted by USDA and other federal
    agencies?
        Answer. FDA uses the three criteria for determining what research
    to conduct: (1) whether a particular issue or matter applies to FDA's
    regulatory mission; (2) whether the interagency committees of the Food
    Safety Initiative and the Produce Initiative assigned or placed
    responsibilities on FDA; and (3) whether current or planned FDA
    personnel have the expertise to conduct research applicable to either
    of the two criteria stated above.
        For veterinary medicine, FDA is coordinating with the Department of
    Agriculture to eliminate duplication of work. FDA's focus will be on
    those aspects of foodborne pathogens related to products regulated by
    the Agency, namely the development of pathogens detection procedures
    for animal feeds, feces, manure, and environmental samples, the
    contribution of animal feeds to the pathogen load in food producing
    animals, and the evolution of pathogens, including resistant pathogens,
    in animals being fed antibiotics.
        Question. What criteria are you using to determine what government-
    funded research should be done?
        Answer. The role of research within FDA is support of the Agency's
    regulatory mission. This includes acquiring scientific knowledge and
    principles needed to develop sound food safety policies and guidance,
    developing tools for implementing and assessing the effectiveness of
    its policies, and responding rapidly to newly emerging food safety
    threats to public health. Other criteria focus in a generic sense on
    the contributions of animal feeds and drugs to the development and
    transfer of foodborne pathogens, including resistant pathogens, in
    animal agriculture. An objective that is included is to minimize the
    contributions of animal feeds and antibiotics to the problem,
    recognizing the importance of both to the safety of food and health of
    animals.
        Question. Will the requested increase for food safety research
    involve an increase in the scientific staff at the Center for Food
    Safety and Nutrition (CFSAN)?
        Answer. Yes. CFSAN's scientific staff will increase to fill the
    deficiencies in expertise from a limited number of selected high-level
    scientists. In addition, some increase will be needed in support and
    temporary personnel to make research more cost efficient.
        Question. How will the research be used once it is completed? Is
    all the new research planned targeted at providing the science base for
    better regulation and education for food safety?
        Answer. The information acquired through Food Safety Initiative
    research projects will indeed be used to support the Agency's
    regulatory duties and responsibilities. These are: acquiring scientific
    knowledge and principles needed to develop sound food safety policies
    and guidance; developing tools for implementing and assessing the
    effectiveness of its policies; and responding rapidly to newly emerging
    food safety threats to public health.
        The three-year research plan was developed in an incremental
    fashion. An inventory and review of current and planned research
    projects was conducted to fulfill the Fresh Produce Initiative
    directive to identify, accelerate, and coordinate with other food
    safety agencies research that will reduce microbial risks associated
    with fresh produce, and to prepare FDA's research program for external
    peer review. As this research focus developed, several additional
    factors were considered during the review process. Core research
    support functions, such as electron microscopy, mass spectrometry, flow
    cytometry, pulse field gel electrophoresis, ribotyping, and animal care
    and use, were identified. The needs to maintain and enhance specific
    cross-cutting scientific capabilities and expertise, to support the
    entire research program and the Agency's ability to respond to new food
    safety concerns, were strongly considered. Moreover, a balanced
    research program that addresses both the intermediate and long-term
    needs of FDA is required. Therefore, the majority of the research
    program is designed to address FDA's research needs during the next
    three to five years, but a portion of the effort is reserved for
    ``exploratory research'' that addresses potential food safety concerns
    that may occur during the next five to eight years.
        Further, another objective of the research is to minimize the
    contribution of animal feeds and drugs to the development of
    pathogens--including antibiotic resistant--in food producing animals
    and the transfer of these pathogens to animal derived food. This
    research is expected to contribute to the reduction of pathogens in
    animal feeds and also food producing animals. The research is also
    expected to provide the basis for any changes in feed manufacturing,
    transportation and storage. New, fast detection methods for detecting
    pathogens in feeds, in animals and animal derived food are to be
    developed, evaluated and accepted for monitoring purposes. This
    research will provide the data to serve as the basis for the evaluation
    and monitoring of any new animal antibiotics which affect the
    development of foodborne pathogens in food producing animals. The
    research will also provide the foundation for assessing the human risk
    of using antibiotics in food producing animals. The ultimate goal is to
    reduce the occurrence foodborne pathogens in animal derived food.
                               tobacco activities
        Question. FDA proposes that funding for its tobacco activities
    which received a $29 million increase for fiscal year 1998, be
    increased by an additional $100 million for fiscal year 1999. What is
    the justification for such a significant increase?
        Answer. The proposed increase for tobacco will enable the Agency to
    enter into enforcement contracts with all 50 states to conduct a
    minimum of 500,000 inspections, fund an expanded outreach effort to
    include state by state advertising directed to retailers, and enable
    FDA to begin to implement regulatory controls for cigarettes and
    smokeless tobacco.
        Question. FDA funding for the tobacco initiative for fiscal year
    1998 and requested for fiscal year 1999 is broken into the following
    categories:

                            [In millions of dollars]
    ------------------------------------------------------------------------
                                                          Fiscal year--
                                                   -------------------------
                                                                     1999
                                                        1998       request
    ------------------------------------------------------------------------
    Compliance outreach...........................         10.0         35.0
    Enforcement and evaluation....................         24.0         75.0
    Product regulation............................  ...........         24.0
                                                   -------------------------
          Total...................................         34.0        134.0
    ------------------------------------------------------------------------

        For both fiscal year 1998 and the fiscal year 1999 request, provide
    a detailed listing of the specific activities being funded or proposed
    to be funded under the above categories of the tobacco initiative,
    including the funds and full-time equivalent staff allocated to each
    activity.
        Answer. We are happy to provide this information for the record.
        [The information follows:]
                                fiscal year 1998
        Staffing.--Twenty-five FTE are allocated to tobacco activity for
    fiscal year 1998. Most of the people work on all aspects of the
    program, however, 2 are dedicated exclusively to Outreach and 8 are
    dedicated to Enforcement.
        Outreach.--In fiscal year 1998, FDA is focusing most of its efforts
    on retailer information, continuing its provision of brochures and
    Question and Answer pamphlets for retailers as well as maintaining a
    toll-free hotline telephone number for retailers to call to request
    materials and a WEBsite with similar information. Further, as each new
    state contracts with FDA to undertake compliance checks, the Agency
    sends mailing to all retailers in the state to alert them that
    compliance checks will soon begin in their state. The Agency has
    developed and has begun distribution of in-store materials to all
    retailers answering potential questions, and reminding them of their
    responsibilities under the rule, and assisting them in compliance. In
    addition, FDA has begun placing a modest level of advertising in a
    major market within states in which contracted compliance checks are
    being conducted.
        Enforcement.--In fiscal year 1998, the Agency is attempting to
    establish contractual relationships with each state and territory to
    conduct compliance checks of retail outlets that sell tobacco products.
    FDA is asking each state to attempt to conduct a minimum of 375
    inspections per month. The contracting process requires hours of effort
    by Agency staff reviewing proposals, providing technical assistance to
    states, and finally negotiating the final contract. FDA then trains the
    commissioned officials in each state and oversees the progress of the
    contract.
                                fiscal year 1999
        Staffing.--Twenty-five additional FTE are sought for fiscal year
    1999. This includes four scientific reviewers for product regulation;
    two attorneys, and six program analysts, primarily for enforcement; and
    seven administrative staff, three consumer safety officers, and three
    clerks to be involved in all the aspects of the program.
        Outreach.--In fiscal year 1999, the Agency will design a multi-
    media advertising campaign including radio, print, and billboard
    advertisements and place these ads in major media markets in every
    state with which FDA contracts to conduct compliance checks. It will
    also develop a comprehensive retailer education program which includes
    a retailer kit containing in-store signs, tent cards, fact sheets,
    counter mats and other materials; a letter to retailers in each state
    updating them on the status of compliance checks in their state; a
    series of reminder postcards that can be posted in the store for
    customers and clerks to see; trade advertisements in retailer
    publications; and a toll-free hotline that retailers can call to
    request additional materials and ask questions. It will continue to
    have exhibits at major conferences representing state and local health
    officials, public health organizations, and consumer and retailer
    organizations educating these audiences about the new tobacco rule.
        Enforcement.--The Agency plans to commission state officials in all
    50 states to perform unannounced inspections of over 500,000 retail
    establishments to determine if retailers are complying with the law. It
    will send warning letters to first violators and seek civil money
    penalties from those found violating the law multiple times. Finally,
    it will develop an enforcement strategy for national chains.
        Product regulation.--The Agency will begin to review applications
    for new tobacco products that claim that they may or may not be less
    hazardous. In doing so, it will assess the products to determine what
    effects those products have on the health of current users, whether the
    products will create more demand by young people to initiate use, and
    whether the products will keep from quitting, those who might otherwise
    have quit. Other activities may include: classification of the product
    pursuant to Section 513 of the Act, establishment of quality system
    requirements, and review and analysis of ingredients and constituents
    of tobacco products.
        Question. Provide a list, in priority order, of the tobacco
    initiative activities proposed to be funded for fiscal year 1999.
        Answer. We believe it is imperative that we expand our activities
    in the tobacco program. All the activities we described earlier, when
    taken together, form a program, which if viewed as a whole, instead of
    as three separate parts, designed to move FDA towards its goal of
    reducing youth tobacco use by half.
        Question. Does the FDA have the capability to spend the increased
    funds requested for its tobacco initiative during fiscal year 1999?
        Answer. FDA does have the capability to spend the increased funds
    requested for the tobacco initiative during fiscal year 1999. The
    President's budget provides for a reasonable level of funding for each
    of the three programmatic areas of FDA's tobacco program. Activities in
    fiscal year 1997 and fiscal year 1998 have provided the institutional
    basis for the effective carrying out of the responsibilities planned
    for fiscal year 1999. A substantial amount of time, effort and planning
    has occurred and the Agency is in a good position to undertake the
    expansions envisioned for the program.
        The majority of the funding for the tobacco program is dedicated to
    be used for contracts with the states to commission state officials to
    perform unannounced inspections of retail establishments.
        Question. Will the $34 million for tobacco activities be obligated
    by the end of fiscal year 1998? What portion of these funds have
    already been obligated to date?
        Answer. We will be happy to provide this information for the
    record.
        [The information follows:]

                        TOBACCO FUNDING FISCAL YEAR 1998
                            [In millions of dollars]
    ------------------------------------------------------------------------
                                                 Fiscal year 1998--
                                      --------------------------------------
                                                    Anticipated obligations--

                                         Current   -------------------------
                                       obligations   Last half
                                                     of fiscal      Total
                                                        year
    ------------------------------------------------------------------------
    Salary & Benefits................           .8          1.1          1.9
    Enforcement......................           .9         21.4         22.3
    Outreach.........................          6.8          3.0          9.8
                                      --------------------------------------
          Total......................          8.5         25.5         34.0
    ------------------------------------------------------------------------

        The overwhelming majority of the money anticipated to be obligated
    during the second half of fiscal year 1998 is for enforcement
    contracts. Most of those contracts are in the process of being
    negotiated, with the time consuming process of bidding and drafting
    proposals having occurred during the first half of fiscal year 1998.
        Question. What reduction in youth tobacco use will be achieved with
    the increased funds provided for fiscal year 1998? What is your
    projection if the $100 million increase requested in the fiscal year
    1999 budget is provided?
        Answer. The increased efforts in the arenas of outreach and
    enforcement activities, the proposed product regulation campaign,
    coordinated with the complimentary activities in the CDC, SAMHSA and
    NIH, will dramatically enhance the nations's ability to meet its
    objective of reducing young peoples use of tobacco by 50 percent over
    seven years. It is the combined effect of all these efforts that
    provides the greatest opportunity to reduce the death and disease
    associated with tobacco use.
        Question. Why doesn't the President's budget propose that the costs
    of implementing and enforcing FDA's regulation of nicotine-containing
    tobacco products be covered by a tobacco settlement rather than be
    borne by the American taxpayer?
        Answer. If Congress enacts comprehensive tobacco legislation, then
    funds will be available for the FDA program that would be generated by
    industry payments. The Administration is committed to working with the
    Congress to ensure the enactment of this important legislation.
        Question. FDA is currently proceeding with the age and photo ID
    provisions of its final rule on tobacco since other provisions of its
    rule were not upheld or suspended by the federal district court. If the
    US Circuit Court of Appeals overturns the ruling and the FDA is able to
    proceed to implement all provisions of its rule, will this alter FDA's
    spending plans for fiscal year 1999? If so, how?
        Answer. If FDA could proceed with enforcement of the entire tobacco
    rule, it would require the Agency to renegotiate state contracts to
    call for more and different enforcement tasks for state officials. In
    addition, enhanced outreach efforts would have to be designed and
    disseminated to explain the new provisions to affected industries. How
    much reassignment of funds would be necessary to cover these new
    activities is unclear, but FDA would expect to continue with its
    current plans to begin product regulation, to the extent possible.
        Question. How much of the $34 million provided for fiscal year 1998
    is for FDA contracts with states to conduct enforcement inspections of
    retail operations for compliance with FDA's regulations prohibiting the
    sale of tobacco products to minors? How much is included in the fiscal
    year 1999 request for contracts with states?
        Answer. At least $20 million is allocated for FDA contracts with
    states for fiscal year 1998. The bulk of the $75 million for
    enforcement activities in fiscal year 1999 is intended for state
    enforcement contracts.
        Question. If states do not elect to enter into contacts with FDA,
    what action, if any, will FDA take?
        Answer. FDA is endeavoring to contract with every state and
    territory. Significant amounts of time are being spent trying to
    address each state's individual needs and requirements so that all
    states can participate. However, if we should be unable to contract
    with a state, FDA is prepared to perform compliance checks with FDA
    field personnel in those states.
        Question. If the $34 million provided for fiscal year 1998 was
    intended to cover FDA contracts with all states and territories, why is
    an increase in funding for these contracts required for fiscal year
    1999?
        Answer. There are over 500,000 retailers in the U.S. who sell
    tobacco products (some estimate that it could be as high as 1,000,000).
    The funding provided to date will enable FDA to contract with each
    state to begin enforcement activities. But at current funding levels,
    less than half of all retailers will be inspected. With the increase
    funding for fiscal year 1999, FDA would anticipate being able to
    contract for 500,000 compliance checks.
        Question. Please describe what costs and activities are covered by
    FDA's contracts with the states. What is the federal government paying
    for specifically?
        Answer. The contracts are designed to obtain state assistance in
    the investigational coverage of retail establishments that sell tobacco
    products. We will be happy to provide specific objectives of these
    contracts, for the record.
        [The information follows:]
                     specific objectives tobacco contracts
        To enforce the Regulations, 21 CFR 897.14 (a) and (b).
        To conduct a minimum of 375 unannounced investigations using
    children ages 15-17 in retail establishments that sell tobacco to
    determine compliance with the Regulations, 21 CFR 897.14 (a) and (b)
    (minimum age of purchase 18 and requirement that retailers request a
    photo identification for purchase).
        To train one or more persons in the Contractor's state who in turn
    trains the individual commissioned officers to conduct investigations.
        To document unannounced investigations and coordinate with FDA as
    necessary to achieve substantial compliance with the regulations, 21
    CFR 897.14 (a) and (b).
        The state is responsible for hiring the appropriate personnel,
    training the minors who will assist in the investigations, planning and
    conducting the investigations, filing reports with FDA of the outcome
    of each investigation and conducting follow-up investigations as
    warranted. FDA is responsible for sending out letters to each retailer
    informing him/her of the results of the investigation (compliance or
    violation). If a second or greater number of violations is reported, it
    is FDA's responsibility to bring legal action, specifically, to seek to
    impose civil money penalties.
        Question. What is FDA's goal for the frequency of retailer
    compliance checks through State contracts?
        Answer. A key influence on a retailer's decision to comply with the
    new legal requirement is the extent to which the individual perceives
    he or she is likely to be found in violation. The Agency has developed
    a general enforcement strategy aimed at conducting compliance checks in
    a significant percentage of the approximately 500,000 retail outlets
    that sell tobacco products. In fiscal year 1997, during the start up
    phase of the program, ten pilot states were asked to conduct a minimum
    of 300 compliance checks per month. Currently, all 50 states and
    several territories are being asked to submit proposals to conduct a
    minimum of 375 checks per month. In fiscal year 1999, FDA has committed
    to conducting a minimum of 500,000 unannounced compliance checks of
    retail establishments that sell tobacco. The goal of the program, when
    full implementation occurs, will be to check every facility at least
    once each year and to conduct follow up investigations on those found
    to violate the rule.
        Question. Please provide a summary, by state, of each contract,
    including the total cost of the contract, its terms and length, etc.
        Answer. All the contracts provide for the states to perform the
    same functions. We are happy to provide a detailed summary of each
    contract for the record. In addition to those contracts awarded for
    fiscal year 1998, we are nearing final contract award with five other
    states.
        [The information follows:]

                                      FISCAL YEAR 1997 TOBACCO COMPLIANCE CONTRACTS
    ----------------------------------------------------------------------------------------------------------------
                                                                 Number of
                        State                        Contract   compliance    Total cost     Start date    End date
                                                    award date    checks
    ----------------------------------------------------------------------------------------------------------------
    Florida......................................     06/11/97       2,664        $194,589     06/20/97     05/20/98
    Washington...................................     06/24/97       2,640         167,517     07/01/97     03/01/98
    Illinois.....................................     07/21/97       2,400         230,250     08/01/97     03/31/98
    Texas........................................     07/29/97       2,640         201,475     08/01/97     03/31/98
    California...................................     08/12/97       2,160         277,889     09/01/97     04/30/98
    Massachusetts................................     08/13/97       2,640         124,662     09/15/97     05/14/98
    Arkansas.....................................     09/25/97       2,400         204,364     09/30/97     05/31/98
    Minnesota....................................     09/15/97       1,600         171,522     09/15/97     05/14/98
    Pennsylvania.................................     09/24/97       2,640         177,959     09/30/97     05/31/98
    Colorado.....................................     09/22/97       2,352         111,138     09/30/97     05/31/98
                                                  ------------------------------------------------------------------
          Total..................................  ...........      24,136       1,861,365  ...........  ...........
    ----------------------------------------------------------------------------------------------------------------

                                      FISCAL YEAR 1998 TOBACCO COMPLIANCE CONTRACTS
    ----------------------------------------------------------------------------------------------------------------
                                                                 Number of
                        State                        Contract   compliance    Total cost     Start date    End date
                                                    award date    checks
    ----------------------------------------------------------------------------------------------------------------
    Washington...................................     03/06/98       4,500        $283,978     03/09/98     03/01/99
    Illinois.....................................     03/25/98       9,000         608,151     04/01/98     09/30/99
    Texas........................................     03/24/98       4,400         277,814     04/01/98     03/31/99
    North Carolina...............................     02/18/98       9,000         603,674     02/23/98     08/22/99
    Nevada.......................................     03/06/98       3,300         234,182     07/01/98     06/30/99
    Florida......................................     02/04/98         n/a          72,000     05/21/98     08/20/98
                                                  ------------------------------------------------------------------
          Total..................................  ...........      30,200       2,079,799  ...........  ...........
    ----------------------------------------------------------------------------------------------------------------

        Question. Please explain the differences between state contracts,
    if any, and the reasons for those differences.
        Answer. The main differences between FDA's contracts with the
    states are the cost and proposed number of checks. There could be
    several reasons for these and other differences. For example, some
    states may choose to subcontract with county and local government to
    conduct the unannounced investigations. The size of each state varies,
    therefore travel costs and the number of investigators may differ. Some
    states may have more experience conducting tobacco compliance checks.
    Other reasons may include the variance in the number of retailers in
    each state, and the difference in the lengths of the contracts.
        Question. As I understand it, all the states had laws prohibiting
    the sale of tobacco products to minors at the time FDA issued its final
    regulation. To the extent that states were already implementing
    enforcement and compliance activities with respect to those laws, do
    the contracts include maintenance of effort requirements?
        Answer. FDA's enforcement activities are not intended to supplant
    state enforcement, but to supplement them. Efforts are made during
    negotiations to ensure that state enforcement continues and that
    federal funds be expended only on federal enforcement.
        Question. First-time funding of $24 million is requested for fiscal
    year 1999 for FDA tobacco production regulation. Please explain in
    detail how this funding will be used and why it is required for fiscal
    year 1999?
        Answer. The product regulation activities anticipated for fiscal
    year 1999 are all essential functions under the Food Drug and Cosmetics
    Act and provide the industry with a framework in which to properly
    conduct business.
        The activities planned for fiscal year 1999 in this area include
    the review of applications for new tobacco products that may claim to
    be less hazardous than those currently on the market; the assessment of
    these products to determine what effects they may have on the health of
    current users; whether the products will create more demand by young
    people to initiate their use and whether the products will keep those
    who might otherwise have quit using tobacco products from doing so.
    Other activities may include initiation of classification of the
    product pursuant to Section 513 of the Act, establishment of quality
    system requirements, and review and analysis of the ingredients and
    constituents of tobacco products.
                               proposed user fees
        Question. Please provide the Committee with a copy of the
    Administration's legislative proposal to authorize the new user fees
    proposed in the President's fiscal year 1999 budget.
        Answer. I will provide for the record a copy of the March 31, 1998,
    letter from Secretary Donna Shalala to Albert Gore, Jr., President of
    the Senate, transmitting the Administration's draft bill, the ``Food
    and Drug Administration User Fee Act of 1998.'' The same letter was
    sent to Newt Gingrich, Speaker of the House of Representatives.
        [The information follows:]
                          letter from donna e. shalala
                    The Secretary of Health and Human Services,
                                        Washington, DC, March 13, 1998.
    Hon. Albert Gore, Jr.,
    President of the Senate,
    Washington, DC.
        Dear Mr. President: Enclosed for the consideration of the Congress
    is the Administration's draft bill, the ``Food and Drug Administration
    User Fee Act of 1998''.
        The bill provides authority for the assessment of user fees for
    regulatory activities of the Food and Drug Administration (FDA),
    achieving savings indicated in the Presidents Budget for fiscal year
    1999.
        FDA has had great success in employing user fees to finance
    important Agency activities, such as the review of new human drug
    applications and the inspection of mammography facilities. The
    Prescription Drug User Fee Act program, in particular, has been a model
    for reinventing government and has benefited both consumers and
    industry.
        Industry derives a direct commercial benefit from consumers'
    confidence in FDA's review process and product surveillance, which
    provides a substantial guarantee of safety. Given the benefits to the
    industry, and given that workloads are growing far faster than
    government resources, FDA believes it is reasonable to share some of
    the cost with the industry. In order to finance specific discretionary
    activities in an era of fixed, disciplined resource allocation under
    the balanced budget agreement, the FDA is proposing user fees to help
    support the whole range of its activities.
        Fees would be assessed for applications for marketing approval for
    food additives, generic human drugs, animal drugs, and medical devices,
    and for licensing of establishments manufacturing medicated animal
    feed. Fees would also be assessed for import inspections of, and
    issuance of export certificates for, human and animal drugs, medical
    devices, and foods. Finally, fees would be assessed for monitoring and
    inspections of establishments involved in interstate commerce in FDA-
    related products, including foods, human and animal drugs, devices, and
    cosmetics.
        Fees charged under authorities added by this bill would not
    duplicate fees under the Prescription Drug User Fee authority; they
    could be waived in exceptional circumstances in the public interest.
    Fees could be set at up to the full amount required to recover all
    associated FDA costs. Fee revenues could be used only for the
    regulatory activity for which collected, and would remain available
    without fiscal year limitation (but subject to appropriation).
        We recommend that the Congress give the draft bill its prompt and
    favorable consideration and look forward to working with Congress to
    secure enactment of this important proposal.
        The Office of Management and Budget has advised that there is no
    objection to the transmittal of this draft legislation to the Congress,
    and that its enactment would be in accord with the program of the
    President.
                Sincerely,
                                                      Donna E. Shalala.
        Enclosure.

                                     A BILL

    To provide for user fees for approval, importation, and postmarket
            surveillance of products regulated under the Federal Food,
            Drug, and Cosmetic Act.
        Be it enacted by the Senate and the House of Representatives of the
    United States of America in Congress assembled,
    SECTION 1. SHORT TITLE; REFERENCES IN ACT.
        (a) Short Title.--This Act may be cited as the ``Food and Drug
    Administration User Fee Act of 1998''.
        (b) References in Act.--Except as otherwise specified, references
    in this Act to ``the Act'' are to the Federal Food, Drug, and Cosmetic
    Act, and amendments made by this Act to a section or other provision of
    law are amendments to such section or other provision of that Act.
    SEC. 2. CONTENTS.
        This Act contains the following provisions:
        Sec. 1. Short title; references in Act.
        Sec. 2. Contents.

                               PART A--USER FEES

        Sec. 11. Fees related to food additive petitions.
        Sec. 12. Fees related to generic drugs.
        Sec. 13. Fees related to animal drugs.
        Sec. 14. Fees related to medical devices.
        Sec. 15. Fees related to import inspections and export
    certificates.
        Sec. 16. Fees related to entities under FDA's oversight.

                           PART B--GENERAL PROVISIONS

        Sec. 21. General provisions related to user fees.
        Sec. 22. Agency plan and annual reporting requirements.

                               PART A--USER FEES

    SEC. 11. FEES RELATED TO FOOD ADDITIVE PETITIONS.
        (a) Types of Fees.--Beginning in fiscal year 1999, the Secretary
    shall establish, in accordance with section 21, fees to cover
    activities of the Food and Drug Administration in connection with:
              (1) petitions for food additives submitted pursuant to
            section 409(b) of the Act;
              (2) notifications to the Secretary for food contact
            substances submitted pursuant to section 409(h) of the Act;
              (3) petitions for color additives submitted pursuant to
            section 721 of the Act;
              (4) petitions, submitted pursuant to sections 201(s) and
            701(a) of the Act and regulations thereunder, for affirmation
            that a substance that becomes, or may reasonably be expected to
            become, a component of food is generally recognized as safe;
            and
              (5) notifications to the Secretary, submitted pursuant to
            sections 201(s) and 701(a) of the Act and regulations
            thereunder asserting that a substance that becomes, or may
            reasonably be expected to become, a component of food is
            generally recognized as safe.
    The fees shall be payable at the time the petition or notification is
    submitted to the Secretary.
        (b) Fee Amounts and Availability.--Subject to section 21(a)(1)(A),
    fees for the activities specified in subsection (a) shall be set for
    each fiscal year at amounts that the Secretary reasonably estimates to
    be sufficient to generate revenues totaling $10,335,000 for each of
    fiscal years 1999 through 2003, and shall remain available until
    expended, to the extent provided in appropriations acts, for the costs
    of carrying out such activities.
    SEC. 12. FEES RELATED TO GENERIC DRUGS.
        (a) Types of Fees.--Beginning in fiscal year 1999, the Secretary
    shall establish, in accordance with section 21, fees to cover
    activities of the Food and Drug Administration in connection with
    applications for approval for new drugs submitted pursuant to section
    505(j) of the Act. The fees shall be payable at the time the
    application for approval is submitted to the Secretary.
        (b) Fee Amounts and Availability.--Subject to section 21(a)(1)(A),
    fees for the activities specified in subsection (a) shall be set for
    each fiscal year at amounts that the Secretary reasonably estimates to
    be sufficient to generate revenues totaling $12,377,000 for each of
    fiscal years 1999 through 2003, and shall remain available until
    expended, to the extent provided in appropriations acts, for the costs
    of carrying out such activities.
    SEC. 13. FEES RELATED TO ANIMAL DRUGS.
        (a) Types of Fees.--Beginning in fiscal year 1999, the Secretary
    shall establish, in accordance with section 21, fees to cover
    activities of the Food and Drug Administration in connection with:
              (1) applications, including supplements, for new animal drugs
            submitted pursuant to section 512(b)(1) of the Act, including
            application and other submissions for import tolerances, as
            described in section 512(a)(6) of the Act;
              (2) abbreviated applications, including supplements, for new
            animal drugs submitted pursuant to section 512(b)(2) of the
            Act; and
              (3) applications for licenses to manufacture animal feeds
            bearing or containing new animal drugs, submitted pursuant to
            section 512(m) of the Act.
    The fees shall be payable at the time the application for approval is
    submitted to the Secretary.
        (b) Fee Amounts and Availability.--Subject to section 21(a)(1)(A),
    fees for the activities specified in subsection (a) shall be set for
    each fiscal year at amounts that the Secretary reasonably estimates to
    be sufficient to generate revenues totaling $10,100,000 for each of
    fiscal years 1999 through 2003, and shall remain available until
    expended, to the extent provided in appropriations acts, for the costs
    of carrying out such activities.
    SEC. 14. FEES RELATED TO MEDICAL DEVICES.
        (a) Types of Fees.--Beginning in fiscal year 1999, the Secretary
    shall establish, in accordance with section 21, fees to cover
    activities of the Food and Drug Administration in connection with
    applications for--
              (1) premarket approval of devices (including proposed product
            development protocols) submitted under section 515 of the Act,
              (2) supplements to approved premarket approval applications
            for which clinical data are required,
              (3) supplements to approved premarket approval applications
            for which clinical data are not required, and
              (4) device premarket notification submissions under section
            510(k) of the Act.
    The fees shall be payable at the time the application is submitted to
    the Secretary.
        (b) Fee Amounts.--The fees required under subsection (a) shall be
    as follows:
              (1) $175,000 for applications described in subsection (a)(1);
              (2) $100,000 for supplements described in subsection (a)(2);
              (3) $6,000 for supplements described in subsection (a)(3);
              (4) $4,500 for submissions described in subsection (a)(4).
        (c) Fee Amounts and Availability.--Subject to section 21(a)(1)(A),
    fees for the activities specified in subsection (a) shall be set each
    fiscal year in accordance with section 21 to amounts that the Secretary
    reasonably estimates to be sufficient to generate revenues totaling
    $25,000,000 for each of fiscal years 1999 through 2003, and shall
    remain available until expended, to the extent provided in
    appropriations acts, for the costs of carrying out such activities.
    SEC. 15. FEES RELATED TO IMPORT INSPECTIONS AND EXPORT CERTIFICATES.
        (a) Types of Fees.--Beginning in fiscal year 1999, the Secretary
    shall establish, in accordance with section 21, fees to cover
    activities of the Food and Drug Administration in connection with the
    review of imported human and animal drugs, medical devices, and food
    subject to regulation under the Act (including activities relating to
    admission or detention of, refusal of entry to, and the issuance of
    export certificates for such items). The fees shall be payable at the
    time of each import entry or request for export certificates for
    shipment of the item.
        (b) Fee Amounts and Availability.--Subject to section 21(a)(1)(A),
    fees for the activities specified in subsection (a) shall be set for
    each fiscal year at amounts that the Secretary reasonably estimates to
    be sufficient to generate revenues totaling $12,000,000 for each of
    fiscal years 1999 through 2003, and shall remain available until
    expended, to the extent provided in appropriations acts, for the costs
    of carrying out such activities.
        (c) Collections.--The fees authorized by this section shall be
    collected on behalf of the Secretary by the United States Customs
    Service.
    SEC. 16. FEES RELATED TO ENTITIES UNDER FDA'S OVERSIGHT.
        (a) Types of Fees.--Beginning in fiscal year 1999, the Secretary
    shall establish, in accordance with section 21, fees to cover
    activities of the Food and Drug Administration in connection with
    regulatory activities with respect to regulated products approved for
    marketing. The Secretary shall assess fees for monitoring
    establishments that are subject to regulation (including inspections
    conducted pursuant to section 704 of the Act, and other regulatory
    activities), as follows:
              (1) Food establishments.--An establishment subject to
            inspection under section 704 of the Act because it
            manufactures, processes, packs, or holds food for (or after)
            shipment in interstate commerce, is subject to assessment of
            annual fees under this section. The Secretary may impose an
            annual registration requirement on such an establishment to
            facilitate assessment and collection of the fees.
              (2) Drug and device establishments.--An establishment subject
            to the annual registration requirement under section 510 of the
            Act (with respect to products other than those for which such
            an establishment is subject to section 736 of the Act) is
            subject to assessment of annual fees under this section at the
            time of registration.
              (3) Cosmetics establishments.--An establishment subject to
            inspection under section 704 of the Act because it
            manufactures, processes, packs, or holds cosmetics for (or
            after) shipment in interstate commerce is subject to assessment
            of annual fees under this section. The Secretary may impose an
            annual registration requirement on such an establishment to
            facilitate assessment and collection of the fees.
    This section does not affect any other statutory or regulator'
    requirements imposed on these entities.
        (b) Fee Amounts and Availability.--Subject to section 21(a)(1)(A),
    fees for the activities specified in subsection (a) shall be set for
    each fiscal year at amounts that the Secretary reasonably estimates to
    be sufficient to generate revenues totaling $57,905,000 for each of
    fiscal years 1999 through 2003, and shall remain available until
    expended, to the extent provided in appropriations acts, for the costs
    of carrying out such activities.

                           PART B--GENERAL PROVISIONS

    SEC. 21. GENERAL PROVISIONS RELATED TO USER FEES.
        (a) Assessment of Fees.--
              (1) Fee amounts.--
                      (A) Collections subject to appropriations.--The fees
                    authorized by this Act shall be collected in each
                    fiscal year as provided in appropriation acts for such
                    fiscal year.
                      (B) Relation to costs.--Fees assessed and collected
                    under part A shall not exceed amounts which the
                    Secretary estimates to be sufficient to cover costs of
                    the Food and Drug Administration associated with the
                    activities for which the fees are collected (including
                    costs of assessments and collection of the fees).
                      (C) Variation factors.--The amount of fees
                    established may vary to reflect the cost of those
                    activities with respect to different entities or groups
                    of entities, including the type and size of entity,
                    volume of business, and other factors the Secretary may
                    find appropriate.
              (2) Fee determination and publication.--The Secretary shall
            annually establish fee amounts under part A, and shall publish
            schedules of such fees in the Federal Register as an interim
            final rule. The establishment and publication of such fees
            shall be solely in the discretion of the Secretary and shall
            not be subject to the requirements of sections 553 and 801 of
            title 5 of the United States Code and shall not be reviewable.
              (3) Reduction or waiver of fees.--The Secretary may provide
            for reduction or waiver of the fees under part A in exceptional
            circumstances in the public interest.
        (b) Crediting and Availability of Fees.--
              (1) In general.--Fees collected pursuant to part A shall be
            credited to a special fund in the Treasury for user fees
            collected by the Food and Drug Administration. The fees shall
            be available in the amounts specified in appropriations acts,
            for salaries and expenses necessary to carry out the
            responsibilities of the Food and Drug Administration in
            connection with the activities for which such fees were
            collected, including the conduct of scientific research;
            development of methods of analysis; purchase of chemicals,
            fixtures, furniture, and scientific equipment and apparatus;
            development and acquisition of information technology and
            information management systems; acquisition, maintenance, and
            repair of real property; and expenses of advisory committees.
              (2) Fees available only for the category of activity for
            which assessed.--Fees collected for each category of activities
            specified in part A shall be separately accounted for, and
            shall be used only to finance the costs related to carrying out
            responsibilities in connection with the same category of
            activities for which the fees were collected.
        (c) Collection of Unpaid Fees.--If the Secretary does not receive
    payment of a fee assessed under subsection (a) within 30 days after it
    is due, that fee shall be treated as a claim of the United States
    Government subject to the provisions of subchapter II of chapter 37 of
    title 31 of the United States Code.
    SEC. 22. AGENCY PLAN AND ANNUAL REPORTING REQUIREMENTS.
        The Agency plan for the Food and Drug Administration required under
    section 903(f) of the Act shall include objectives with respect to the
    assessment, collection, and use of the fees authorized under part A,
    and the annual report required by section 903(g) of the Act shall
    describe the performance of the Secretary with respect to such
    objectives.
        Question. The budget justification indicates that the FDA intends
    to work with the Congress, industry, and other affected parties to
    achieve the goal of collecting the total $280 million in existing and
    new user fees assumed in the budget in fiscal year 1999. Has FDA
    discussed the new user fees it proposes with the House and Senate
    authorizing Committees of jurisdiction, and with affected industries
    and other parties? Would you please summarize the status or outcome of
    those discussions.
        Answer. FDA, in concert with HHS and OMB, prepared user fee
    legislation for the new fees proposed in the fiscal year 1999
    President's Budget, which was submitted to the President of the Senate
    and Speaker of the House on March 13, 1998. To date, there have been no
    hearings with the authorizing committees or with affected industries on
    this specific proposal. We do look forward to working with Congress to
    authorize the fees. In order for FDA to maintain its current level of
    consumers' health protection, it is important that the full program
    level in the President's budget be appropriated.
        Question. The fiscal year 1999 budget uses the collections from
    unauthorized user fees to pay for FDA's regulation of foods, drugs,
    biologics, animal drugs, and medical devices. If the proposed user fees
    are not authorized, what impact would the lack of these resources have
    on FDA's ability to carry out its responsibilities in each of these
    areas?
        Answer. The Administration is proposing new user fees of $127.7
    million which would support 1,183 staff years. If the proposed user
    fees are not authorized and the base resources replaced by these user
    fees are not restored, the cuts will be felt across every program area
    of FDA. The review times and backlogs of all FDA-regulated products
    would increase substantially. FDA's ability to meet its statutory
    deadlines and fulfill its mission of protecting and promoting the
    health of the American public would be seriously undermined.
        Question. What is meant by ``postmarket surveillance'' as part of
    the user fee proposal?
        Answer. Postmarket surveillance activities include not only
    traditional domestic postmarketing activities, but also emerging
    strategies, which include partnering with state, local, professional
    and industry groups, and individuals to enhance the quality and safety
    of products. By increasing information sharing and technical
    assistance, establishments can operate with stronger quality assurance
    systems. As a result, the Agency anticipates that less formal
    regulatory intervention may be required. User fees would be collected
    for traditional domestic postmarketing activities such as inspections,
    investigations, sample analyses, regulatory analytical methods
    development, field exams, and recall effectiveness checks.
        Question. How many additives will fall under mandatory ``postmarket
    surveillance''?
        Answer. Food additive and color additive petitions are considered
    as part of the Agency's premarket activities, and as such, none would
    fall under mandatory postmarket surveillance.
        Question. What mechanisms are proposed to ensure that user fees for
    food additives will not be used for increased inspections?
        Answer. In the draft bill the ``Food and Drug Administration User
    Fee Act of 1998'' submitted to Congress by the Secretary on March 13,
    the Department explicitly proposes that fees collected for each
    category of activity be separately accounted for and be used only to
    fund the costs related to carrying out responsibilities in connection
    with that category of activities. Thus, fees related to food additive
    petitions could not be used to fund activities, including inspections,
    other than those specified in the bill.
        Question. What reductions would you propose in FDA's fiscal year
    1999 budget request if the $128 million in collections from proposed
    new user fees are not available and the appropriations request is
    approved?
        Answer. If the $128 million in collections from proposed new user
    fees are not available and the base level of appropriations is not
    restored by this amount, the magnitude of the reduction would have a
    very serious impact on our activities. It is difficult to say what the
    specific reductions would be in each program area; however, I am
    certain that there would be adverse consequences on all of our
    activities, and our ability to act in a timely and complete manner
    would be seriously compromised.
                                rental payments
        Question. For fiscal year 1999, FDA is requesting $88.3 million for
    rental payments to the General Services Administration, an increase of
    $42 million from the fiscal year 1998 level. The budget justification
    indicates that since 1995, there has been a widening gap between
    payments paid and owed by the FDA for leased space and services
    provided by GSA. This Committee has been appropriating the full amount
    requested in the President's budget for FDA rental payments to the GSA.
    Why hasn't the President's budget in past years reflected the full
    amount FDA owed to the GSA?
        Answer. Competition for increases in scarce Federal funding dollars
    has provided higher priority to public health program improvements.
    Again in fiscal year 1998, the President's budget request is for an
    amount less than the actual GSA rent bill. If FDA's rent payments to
    GSA had not been limited as they have been in recent years, FDA would
    have had to divert further critical program resources to pay the rental
    charges.
        Question. I understand Dr. Friedman, that you were notified by GSA
    last year of the arrearage in FDA's rent payments to the General
    Services Administration for space and services received and the need to
    remedy this situation. GSA indicated that it would not be able to
    expand space and services to the FDA as it has been doing over the past
    couple of years without proper reimbursement. Does the fiscal year 1999
    request reflect the full rent due to GSA for all FDA occupied and
    planned space provided by the GSA?
        Answer. Yes, based on the information FDA has currently available
    and that of GSA, FDA believes the fiscal year 1999 Congressional
    Justification reflects the full rent due to GSA for all of FDA's
    occupied and planned space.
        Question. What will be the consequences of not appropriating the
    full amount requested in the budget for fiscal year 1999 for rent
    payments FDA owes to the GSA?
        Answer. If FDA's rent payments to GSA are not fully appropriated or
    if rent payments to GSA are not limited as they have been recent years,
    FDA will have to divert further critical program resources to pay the
    rental charges therefore reducing resources currently applied to
    important public health initiatives.
        Question. Of the $88.3 million requested for fiscal year 1999 to
    fully finance FDA rental payments due to the GSA, the budget requests
    that $5.428 million be financed from Prescription Drug User Fee Act
    (PDUFA) collections. PDUFA user fee collections have not been drawn on
    in the past to defray FDA leased space in support of the user fee
    portion of the process for the review of human drug applications. Does
    the FDA reform bill enacted into law at the end of last year authorize
    the use of PDUFA collections for this purpose?
        Answer. The original legislation, the Prescription Drug User Fee
    Act of 1992, defined expenses associated with the process for the
    review of human drug applications to include leasing, maintenance,
    renovation, and repair of facilities. This section was left intact
    under the provisions of the FDA reform bill enacted into law at the end
    of last year. The FDA Modernization Act however, authorizes the
    transfer of fees from an account without fiscal year limitation to the
    appropriation account for salaries and expenses with such fiscal year
    limitation. The Agency has also received clarification recently from
    FDA attorneys that rent costs could be included in the costs financed
    from PDUFA collections. FDA has requested specific changes in the
    fiscal year 1999 appropriation language to allow the transfer of up to
    $5,428,000 from fees to the Rental Payments to GSA appropriation.
        Question. Please provide the provision of law which specifically
    authorizes the use of PDUFA collections for rental of space payments to
    the GSA. Please include the legal citation.
        Answer. Section 735 (7)(C) of the Prescription Drug User Fee Act of
    1992, Public Law 102-571 defines expenses associated with the process
    for the review of human drug applications to include leasing,
    maintenance, renovation, and repair of facilities, (See 21 USC 379g
    (7)(C)). The Food and Drug Administration Modernization Act of 1997,
    Public Law 105-115 amended Section 736 (g) of the FD&C Act to authorize
    the transfer of fees to an annual appropriation account. (See 21 USC
    379h (g)(1)). Additional appropriations language would be necessary to
    transfer sums in excess of the 5 percent cap that appears on such
    transfers for rental payments in the fiscal year 1998 appropriation.
        Question. Please tell us how the $5.428 million was calculated as
    the estimated amount of the payment for space representing the user fee
    portion of the process for the review of human drug applications.
    Please indicate how many square feet of GSA-provided space, out of the
    total occupied by FDA, is devoted to the human drug applications'
    review process, and how many occupiable square feet the user fee
    portion of this space represents.
        Answer. The calculation of $5.428 million is based on identifying
    the percentage of fiscal year 1998 process FTE's times the FTE's
    applicable to fees (41 percent).
        In fiscal year 1998 an estimated 454,000 square fee of GSA space
    was identified for the process and of this approximately 188,000 square
    feet or 41 percent of the process space was estimated to be applicable
    to the fee. The estimated GSA rent cost that could be chargeable to
    fees in fiscal year 1998 was estimated to be $5.220 million.
        The 1999 budget request of $5.428 million for GSA rent chargeable
    to fees only includes an additional $208,000 above our fiscal year 1998
    estimate. The increase is to cover the costs due to anticipated
    inflation for our existing GSA space.
        Question. How many total occupiable square feet of GSA-provided
    space does FDA's fiscal year 1999 request for rental payments to the
    GSA cover? Please provide a breakdown of this total by the following
    categories: (1) the amount of occupiable square feet of currently
    occupied, GSA-provided space; (2) the total occupiable square feet of
    space being undertaken by GSA on FDA's behalf; and (3) the amount of
    occupiable square feet of GSA-provided space projected for occupancy
    during fiscal year 1999.
        Answer. By the end of fiscal year 1998 FDA will occupy 4.05 million
    occupiable square feet of space that is provided by GSA. This will
    reflect an increase of approximately 51,000 occupiable square feet that
    will have occurred during the course of 1998. The additional 51,000
    occupiable square feet resulted from the occupancy of 318,761
    occupiable square feet and the vacating of 268,129 occupiable square
    feet. GSA is undertaking these additions and the vacating of space for
    FDA at a number of sites. In fiscal year 1999 FDA is expecting to
    vacate a total of 15,000 occupiable square feet which would reduce the
    total FDA occupancy to 4.03 million occupiable square feet of space
    provided by GSA.
        Question. Are the FDA estimates provided in response to the above
    question the same as the GSA estimates? If not, please give GSA
    estimates and explain the differences between the FDA and GSA
    estimates.
        Answer. GSA has estimated that by the end of fiscal year 1998 FDA
    will occupy 3.98 million occupiable square feet of space that is
    provided to FDA by GSA. The difference between GSA's estimate and FDA's
    estimate is approximately 70,000 occupiable square feet. This
    difference can be attributed to minor discrepancies between GSA's
    records and FDA's. When evaluated these individual discrepancies
    typically affect less than 5,000 square feet of space each, but when
    aggregated accumulate to 70,000 occupiable square feet. This, however,
    represents less than two percent of FDA's total inventory of space
    which is dispersed in over 225 buildings. FDA is working to reconcile
    its records with GSA's.
        This reflects an increase of approximately 53,000 occupiable square
    feet that will occur over the course of 1997 and 1998. There is a 2,000
    occupiable square foot variation in the amount of space projected by
    GSA when compared to FDA's projection. This is primarily due to the
    fact that GSA's estimates date back to 1997 and include actions that
    may have already been reflected in FDA's 1998 projection.
        In fiscal year 1999 GSA is expecting FDA to occupy a total of
    100,000 occupiable square feet of space which would increase the GSA
    estimated FDA occupancy to 4.08 million occupiable square feet of space
    provided by GSA. GSA's estimate includes 50,000 occupiable square feet
    of unspecified growth in FDA's inventory and 50,000 occupiable square
    feet attributable to occupancy of space at the White Oak site in
    Maryland. At this time there is no funding available to construct space
    at White Oak Maryland. Therefore, FDA has not included this space in
    its projected 1999 occupancy. If the GSA projection is reduced by
    50,000 which was assigned to the White Oak site, FDA's and GSA's
    projected occupancy for 1999 are identical at 4.03 million occupiable
    square feet.
        Question. How much is included in the fiscal year 1999 request for
    rental payments to the GSA for operating costs associated with GSA-
    provided space or for the refurbishment of space? Please indicate what
    increases are projected for these costs for fiscal year 1999. Do the
    FDA estimates differ with GSA's. If yes, please explain the differences
    in detail.
        Answer. Of the $88.294 million for GSA rent in fiscal year 1999,
    $4.9 million is expected to be for FDA's building delegation
    operations. This is $0.1 million more than the estimated fiscal year
    1998 amount. FDA estimates its operating cost to be $13.4 million, a
    total of $8.5 million greater that the amount proposed to be provided
    by GSA. The funds provided to FDA, by GSA, are a building delegation
    allowance for buildings that are primarily occupied for special use
    laboratories. However, the funds are provided at a standard level based
    on office operations, not the higher costs associated with the
    operation of a special use laboratory.
        Laboratory space is delegated to FDA because it requires an
    increased level of operational expertise that GSA is not accustomed to
    providing. While GSA charges almost 77 percent more for the occupancy
    of laboratories than for offices they only provide an operating
    allowance that is adequate for office space. Office space operating
    costs are based on a general rule of 10 hours of operation for 5 days a
    week. This results in substantially less operating time than
    laboratories which must operate on a 24-hour basis 7 days a week due to
    the scientific activities that must occur within controlled
    environments.
        Question. In addition to GSA-provided space and services, the FDA
    is funding additional housing costs through its salaries and expenses
    account. For fiscal year 1998, $25.855 million is being allocated for
    these costs. For fiscal year 1999, $27.505 million is requested, an
    increase of $1.650 million. Please provide specific explanation of the
    expenses funded through the ``rent and related activities'' category of
    the salaries and expenses account.
        Answer. We are happy to provide the Committee with information on
    our Rent and Rent Related Activities.
        [The information follows:]

                             FOOD AND DRUG ADMINISTRATION--RENT AND RENT RELATED ACTIVITIES
    ----------------------------------------------------------------------------------------------------------------
                                                                               Fiscal year--
                                                                     --------------------------------    Increase/
                                                                       1998 current                      decrease
                                                                         estimate      1999 request
    ----------------------------------------------------------------------------------------------------------------
    Other rent and rent related activities..........................     $25,855,000     $27,505,000     +$1,650,000
    ----------------------------------------------------------------------------------------------------------------

        Other Rent and Rent Related Activities:
                            explanation of expenses
        FDA incurs rent and rent-related costs for facilities within the
    Salaries and Expenses (S&E) appropriation that are not part of the
    Rental Payments to GSA, which is a separate appropriation. These costs
    are identified in three accounts: Commercial Rent & Related Services,
    GSA Rent-Related Services and GSA Building Delegation Services. Below
    is a description of each of the accounts within Other Rent and Rent-
    related Activities:
        The Commercial Rent and Related Services account consists of
    recurring activities that FDA pays directly to non-Federal sources
    under the delegation of direct lease and service authority. (Note: This
    also includes recurring services for FDA-owned facilities.) Services
    include rental of space, and all recurring services for building
    operation; i.e., utilities; and services such as janitorial, guard,
    grounds maintenance; and operation and maintenance of heating,
    ventilation, and air-conditioning (HVAC) systems.
        The GSA Rent-Related Services account includes recurring
    reimbursable services provided by GSA that are over and above the
    normal eight hours that GSA covers in its rent charges. Services
    included are security systems, guard services, and HVAC beyond the
    standard level funded by GSA.
        The GSA Building Delegation account provides recurring services and
    one-time repairs to operate and maintain buildings delegated to FDA by
    GSA for management of day-to-day operations above GSA's standard level.
    Services include utilities and all recurring services for building
    operation, such as janitorial, guard, grounds maintenance, and
    operation and maintenance of HVAC systems.
                                   increases
    Other rent and rent related costs--+$1.65 million
        For fiscal year 1999, FDA is requesting an increase of $1.65
    million for rent related costs. The fiscal year 1998 to fiscal year
    1999 increase represents a full year of rent and utilities for new
    space at the Christopher Columbus Center in Baltimore, MD. as well as
    other increased costs for full year utilities and service contracts
    including operation and maintenance, janitorial, guards service, and
    grounds maintenance of FDA facilities.
        Question. Please provide a detailed listing of the specific
    expenses included in the $27.505 million requested for rent and related
    activities for fiscal year 1999, by account (i.e., commercial rent and
    related services, GSA rent-related services, and GSA building
    delegation services), as compared to fiscal year 1998.
        Answer. We are happy to provide the Committee with the information
    detailing the specific expenses included in the $27.505 million for the
    rent and related activities for fiscal year 1999 compared to fiscal
    year 1998.
        [The information follows:]

           RENT AND RELATED SERVICES FISCAL YEARS 1998 and 1999 PLANS
                            [In thousands of dollars]
    ------------------------------------------------------------------------
                                                            Estimates
                                                   -------------------------
                Account/type of service             Fiscal year  Fiscal year
                                                        1998         1999
    ------------------------------------------------------------------------
                    COMMERCIAL R&R

    Commercial rent:
        Chicago (IITRI)...........................          556  ...........
        Dallas (Bryan Street).....................          300          325
        Los Angeles (Pico Blvd.)..................          930          950
        Lenex, KS (OCI)...........................          126          140
        San Diego (OCI)...........................          217          225
        Jersey City NJ (OCI)......................          350          370
        Calverton MD (OCI)........................          165          180
        Bethesda (NLRC)...........................        2,245        2,327
        Rockville (Wilkins Ave.)..................          416      ( \1\ )
        Baltimore (Columbus Center)...............  ...........          420
                                                   -------------------------
          Subtotal, Commercial Rent...............        5,305        4,937
                                                   =========================
          Subtotal, related services for above            1,188        1,933
           buildings \2\..........................
                                                   =========================
    FDA-owned facilities: \2\
        MOD I.....................................        3,950        4,500
        Beltsville Research Facility..............           65           70
        San Juan..................................          425          600
        WEAC......................................           25           30
                                                   -------------------------
          Subtotal, FDA-owned facilities..........        4,465        5,200
                                                   =========================
          Total, Commercial R&R...................       10,958       12,070
                                                   =========================
                 GSA RENT-RELATED \3\

    Headquarters..................................        5,424        5,586
    Field.........................................        2,521        2,597
                                                   -------------------------
          Total, GSA rent-related.................        7,945        8,183
                                                   =========================
              GSA BUILDING DELEGATION \4\

    Atlanta (Annexes I and II)....................      \5\ 510      \6\ 562
    FB-8..........................................        3,880        4,051
    12709 Twinbrook...............................           60           63
    12720 Twinbrook...............................           85           90
    12721 Twinbrook...............................           82           86
    1901 Chapman..................................           35      ( \7\ )
    MOD II........................................        2,300        2,400
                                                   -------------------------
          Total, GSA building delegation..........        6,952        7,252
                                                   =========================
          Total, FDA rent and related services....       25,855       27,505
    ------------------------------------------------------------------------
    \1\ Space vacated during fiscal year 1997; fiscal year 1998 costs are
      thru the decommissioning period.
    \2\ Utilities and service contracts (i.e., O&M, grounds, guards,
      janitorial services).
    \3\ Overtime, utilities, guard and cleaning services not covered in GSA
      lease.
    \4\ Utilities and service contracts (i.e., O&M, grounds, guards, and
      janitorial services above GSA-funded standard level).
    \5\ Includes FDA funds for Atlanta Annex II for above-standard level for
      three-fourths of fiscal year.
    \6\ Includes FDA funds for Atlanta Annex II for above-standard level for
      full fiscal year.
    \7\ Space will be vacated in fiscal year 1998.

                   fiscal year 1998 operating plan reductions
        Question. For fiscal year 1998, FDA is reducing funding for ``low
    priority'' foods program work, including activities related to cosmetic
    products, applied research on the full range of potentially hazardous
    substances which may be found in foods, and compliance monitoring of
    domestic food processors and imported food products. In addition, FDA
    will not be able to devote additional staff to work on food and color
    additive petitions. What impact will the reduction in resources devoted
    to the chemical safety of foods have on food safety?
        Answer. As stated in FDA's fiscal year 1998 Operating Plan
    submitted to Congress, the Agency is reducing funding for lower
    priority work. Within the Foods Program, the Chemical Safety of Foods
    area absorbed part of the Agency's reduction in base resources. The
    following three projects under Chemical Safety of Foods received those
    resource reductions: (1) Chemotherapeutic Agents in Domestic and Import
    Aquaculture Products; (2) Domestic and Import Pesticide Programs; and
    (3) Food and Color Additive Petition Reviews.
        Chemotherapeutic Agents in Domestic and Import Aquaculture Products
    is a program aimed at detecting unapproved drug compounds in
    aquaculture or farm-raised fish. In 1994, FDA detected several samples
    with banned drugs but fortunately has failed to detect the drugs within
    the past three years. While FDA's Center for Veterinary Medicine will
    continue its research on new detection methods, for the Foods Program,
    this activity will be reevaluated in fiscal year 1999 to determine any
    negative impacts from the resource reduction. As for the Domestic and
    Import Pesticide Program, FDA projects a 12 percent decrease in the
    number of pesticide samples as a result of reduced resources. For Food
    and Color Additive Petition Reviews, the reassignment of additional
    staff to work on food and color additive petition review has
    contributed significantly to gains made in fiscal years 1996 and 1997
    to reduce the inventory of pending petitions. While the inability to
    continue to devote additional staff to this effort will make it harder
    to maintain this level of progress and it may take longer than
    originally planned to entirely eliminate petition backlogs, we have
    instituted procedures to increase efficiency and are still making
    gains. We have attempted to make these reductions in such a way as to
    minimize the impact on food safety.
        Question. What will the reduction of additional staffing devoted to
    work on food and color additive petitions have on the progress FDA has
    made in reducing the backlog of work in this area? What impact will
    this have on the time for reviews?
        Answer. The reassignment of additional staff to work on food and
    color additive petition review contributed significantly to the gains
    made in fiscal years 1996 and 1997 in reducing the inventory of pending
    petitions. For example, at the end of fiscal year 1997, the inventory
    stood at 214 versus 242 at the end of fiscal year 1996 and 295 at mid-
    fiscal year 1995). While the inability to continue to devote additional
    staff to this effort will make it harder to maintain this progress and
    it may take longer than originally planned to entirely eliminate
    petition backlogs, we have instituted procedures to increase efficiency
    and are still making gains. For example, in fiscal year 1999, FDA
    intends to meet its goal of reviewing 30 percent of its food additive
    petitions within one year.
        Question. Slower device review times below the fiscal year 1997
    baselines was one of the impacts cited by FDA to result from the
    reductions made in its operating plan. What are the fiscal year 1997
    baseline levels, and what reductions do you anticipate will result in
    fiscal year 1998?
        Answer. The improvements and changes resulting from the
    implementation of the FDA Modernization Act and ongoing reengineering
    efforts have significantly improved FDA's level of productivity in the
    device review area in fiscal year 1997. During fiscal year 1998, FDA's
    Device program is facing the challenge of implementing the requirements
    of the FDA Modernization Act with reduced program resources. We hope to
    maintain our productivity at the fiscal year 1997 level but we realize
    that some decline in performance may occur during this transition
    period. Our strategy is to concentrate resources on higher risk, higher
    impact products or work areas where they are likely to have the
    greatest effect on the public health. I will be happy to provide for
    the record the fiscal year 1997 baseline levels for 510(k)
    applications, PMA applications, and PMA supplements. The baseline
    levels for PMA's and PMA supplements are estimates since insufficient
    time has elapsed to calculate actual measurements.
        [The information follows:]
        Fiscal year 1997 baseline estimates for PMA's and PMA supplements:
    Complete 50 percent of PMA first actions within 180 days; and complete
    78 percent of PMA supplement first actions within 180 days.
        Fiscal year 1997 baseline for 510(k) applications: Complete 98
    percent of 510(k) first action within 90 days; and complete 64 percent
    of 510(k) final action within 90 days.
                            buildings and facilities
        Question. FDA recently reprogrammed $10.4 million of its buildings
    and facilities funding from lower priority projects to complete
    construction of Phase II of the Arkansas Regional Laboratory. The
    fiscal year 1999 request does not include funds for Phase III of the
    project. When will this funding be required and what is the projected
    requirement for Phase III of the project?
        Answer. $13.35 million would be needed in fiscal year 1999 to
    construct Phase III and complete the Arkansas Regional Laboratory. Due
    to competing issues with a higher priority to the FDA mission, within
    both the Salaries and Expenses and the Buildings and Facilities
    Appropriations, the request was not included in the President's Budget.
    The $13.35 million is the firm figure based on the exercise of a fixed
    price contract option to include Phase III in the current ARL
    construction contract to the current construction contractor by
    December 31, 1998. If this unfunded option is not exercised in fiscal
    year 1999, Phase III may have to be repriced which may affect the cost
    and may affect the schedule. It will likely escalate the price due to
    the contractor having to re-mobilize the appropriate crafts, or a new
    contractor having to mobilize altogether. If this unfunded option is
    exercised in fiscal year 1999, there may be the opportunity to realize
    some savings. In addition, Phase III could be completed on the original
    schedule of December 1999, which is the same time as Phase II.
        Question. What requirements of FDA's field laboratory consolidation
    plan have been accomplished, and what future requirements remain?
    Please give project, cost and year scheduled.
        Answer. I would be happy to provide that information for the
    record.
        [The information follows:]

                                STATUS OF ORA FIELD LABORATORY CONSOLIDATION--MARCH 1998
    ----------------------------------------------------------------------------------------------------------------
                                                                                                Year         Year
                 Location/action type                          Construction cost             completed     planned
    ----------------------------------------------------------------------------------------------------------------
    Seattle, Expansion............................  N/A--GSA Lease........................         1996  ...........
    Buffalo, Lab closure..........................  N/A...................................         1996  ...........
    Chicago, Lab closure..........................  N/A...................................         1996  ...........
    Philadelphia, Expansion.......................  N/A--GSA Owned........................         1997  ...........
    WEAC, Restructure.............................  N/A...................................         1997  ...........
    Cincinnati, Restructure.......................  N/A...................................         1997  ...........
    New Orleans, Lab closure......................  N/A...................................         1998  ...........
    Atlanta, Expansion............................  N/A--GSA Lease........................         1998  ...........
    San Juan, Lab renovation......................  $1.6 M................................  ...........         1998
    New York, New facility........................  N/A--GSA Lease........................  ...........         1999
    Arkansas, New facility........................  $37.9 M \1\...........................  ...........         1999
    Los Angeles, New facility.....................  $38.5 M...............................  ...........         2000
    Baltimore, Lab closure........................  N/A...................................  ...........         1999
    Detroit, Lab closure..........................  N/A...................................  ...........         2000
    Dallas, Lab closure...........................  N/A...................................  ...........         2000
    Minneapolis, Lab closure......................  N/A...................................  ...........         2000
    Denver, Lab closure...........................  N/A...................................  ...........         2010
    Kansas City, Lab closure......................  N/A...................................  ...........         2014
    San Francisco, Lab closure....................  N/A...................................  ...........         2014
    ----------------------------------------------------------------------------------------------------------------
    Note.--Facilities provided by GSA are funded through Agency annual rent payments to GSA. The costs identified
      above only reflect construction expenses funded under the FDA Buildings and Facilities appropriation, and not
      related cost (i.e. employee and equipment transfers) which are funded via FDA's Salaries and Expenses
      appropriation.

    \1\ Phase III of the project is unfunded, estimated cost is $13.4 M.

                       the fda modernization act of 1997
        Question. Are any additional resources included in the fiscal year
    1999 budget request, aside from increased PDUFA collections, to fulfill
    requirements the FDA Modernization Act enacted into law at the end of
    last year?
        Answer. No additional resources have been requested in the fiscal
    year 1999 budget request. Currently FDA is developing more than 40
    regulations and guidance documents specified in the FDA Modernization
    Act within our current resources. After the issuance of these
    documents, additional resources to implement and fulfill requirements
    of the FDA Modernization Act will be addressed in future budget
    requests.
        Question. Please list the activities, and resources, both in
    dollars and staff years, required by FDA to carry out its new
    responsibilities under the FDA Modernization Act of 1997. In addition,
    indicate the fiscal year the Committee can expect these additional
    resources to be requested.
        Answer. The Agency is currently preparing over 40 regulations,
    federal register and guidance documents which are included in the FDA
    Modernization Act. This effort is being undertaken within current
    resources and is expected to cost more than $10 million. Several
    additional provisions of the FDA Modernization Act require FDA to
    submit reports to Congress which evaluate the costs of certain
    provisions. After completing the implementing regulations and federal
    register documents, FDA will prepare the reports and cost estimates as
    specified in the Act. We hope that the fiscal year 2000 budget will
    address any additional resources the Agency will need to undertake new
    responsibilities under the FDA Modernization Act.
        Question. The Pre-Market Notification provisions of the FDA
    Modernization Act of 1997 will expedite introduction of advanced food
    packaging materials while assuring protection of public health. The Act
    conditions this new pre-market notification system on an appropriation
    of $1.5 million for the six months the system will operate in fiscal
    year 1999 and at least $3 million annually thereafter. Is the $1.5
    million for this system to operate included in FDA's fiscal year 1999
    request? If not, why?
        Answer. No increase was included in the fiscal year 1999 request,
    as we were still reviewing the impact of this program. We are in the
    process of completing our report, as required by the FDA Modernization
    Act, which will provide our estimate as to the costs of this program.
        Question. What is the fiscal year 1998 base level of resources in
    dollars and staff years in each of the Human Drugs and Biologics
    programs required to sustain the base level of resources required for
    FDA to utilize PDUFA fees? What are these levels for fiscal years 1999,
    2000, and 2001?
        Answer. The Agency devoted resources of $232,249,000 in fiscal year
    1997 to the Process for the Review of Human Drug Applications, of
    which, $84,289,000 came from fees and $147,960,000 from appropriated
    dollars. The FDA Modernization Act mandates that the amount that came
    from appropriations in fiscal year 1997 be the base level that must
    come from FDA appropriations in each of the subsequent years. It does
    not specify how much must be spent in either the Human Drugs or
    Biologics programs.
        The amount of base resources for the subsequent years are adjusted
    for inflation based on the lower of either the Consumer Price Index or
    the total of discretionary budget provided for programs in the domestic
    category. Therefore, the amounts for fiscal years' 1999, 2000, and 2001
    cannot be projected at this time.
                             animal drug approvals
        Question. Dr. Friedman, you indicate the prepared statement you
    submitted to the Committee that the Center for Veterinary Medicine is
    ``reengineering the drug approval process.'' Would you please explain
    how the process is being revised or changed.
        Answer. FDA is in the process of implementing the Animal Drug
    Availability Act of 1996--ADAA--and policies that will enable faster
    approval of new animal drugs. The Center for Veterinary Medicine at FDA
    has been working closely with animal drug manufacturers, producers and
    veterinarians to design a new and more flexible animal drug approval
    process that reduces the time and cost necessary for meeting the
    requirements. Congress enacted the ADAA on October 9, 1996. The purpose
    of the ADAA is to facilitate the approval and marketing of new animal
    drugs and medicated feeds. In furtherance of this purpose, the ADAA
    redefined substantial evidence, i.e., the standard by which a new
    animal drug is determined to be effective. FDA was directed to, and
    has, proposed a further definition of substantial evidence (62 FR
    59830). The proposed changes would give FDA greater flexibility to make
    case-specific determinations regarding the number and types of studies
    that will provide, in an efficient manner, substantial evidence that a
    new animal drug is effective. Additionally, in response to the
    President's reinventing government initiatives announced in the
    President's National Performance Review, ``Reinventing the Regulation
    of Animal Drugs,'' May 1996, FDA announced its intent to implement
    policies that will enable the faster approval of new animal drugs. FDA
    has found that direct review of new animal drug submissions by
    reviewers with specialized technical expertise and phased review of
    technical sections of new animal drug applications enable faster
    approval of new animal drugs because technical sections are submitted
    and reviewed as they are completed rather then the sponsor waiting
    until all sections are completed and submitting them together. FDA has
    implemented policies to allow for the direct and phased review of
    applications and intends to modify the regulations governing
    investigational use new animal drugs and new animal drugs to describe
    direct and phased review. FDA also intends to issue a proposed
    regulation to describe how new animal drug applicants may request a
    presubmission conference to discuss investigational or new animal drug
    application requirements. While the ADAA added a statutory entitlement
    to a presubmission conference, FDA's Center for Veterinary Medicine had
    already been encouraging sponsors of NADA's to participate in
    conferences with FDA to discuss in detail what studies are necessary to
    demonstrate the safety and effectiveness of a new animal drug. In its
    experience with these informal conferences, FDA and industry found
    that, as a result of direct communication during the development and
    review of new animal drugs, industry conducted fewer unnecessary
    studies and there were fewer delays in the review process.
                            office of generic drugs
        Question. In response to language included in the Statement of the
    Managers accompanying the Conference Report on H.R. 2160, the fiscal
    year 1998 Agriculture, Rural Development, and Related Agencies
    Appropriations Act, the FDA operating plan includes an increase from
    the fiscal year 1998 level for the Office of Generic Drugs. Funding for
    the Office of Generic Drugs for fiscal year 1998 will be $9,693,000, as
    compared to the fiscal year 1997 level of $8,991,000, an increase of
    $702,0000. Is this correct?
        Answer. Yes, the Office of Generic Drugs was given an increase of
    $702,000 for fiscal year 1998, over the fiscal year 1997 level, as
    reflected in FDA's fiscal year 1998 Operating Plan.
        Question. How is FDA allocating the additional funds provided for
    the Office of Generic Drugs for fiscal year 1998?
        Answer. The Office of Generic Drugs will spend most of the fiscal
    year 1998 funding increase on payroll expenses for additional review
    activities. The remaining funds will be expended on operating expenses.
    These expenses include spending for things such as laboratory and
    computer equipment, travel, training, and day-to-day operating costs.
        Question. What was the staffing level (FTE's) for the Office of
    Generic Drugs for fiscal year 1997? What will the staffing (FTE) level
    for the Office be for fiscal year 1998? What is the fiscal year 1999
    budget request level?
        Answer. The ceiling for the Office of Generic Drugs was 127 FTE's
    in fiscal year 1997 and is at 132 FTE's for fiscal year 1998. No
    decision has been made to date on the staffing level for fiscal year
    1999, but the current estimate for fiscal year 1999 is the same as
    fiscal year 1998.
        Question. How many full-time equivalent (FTE) positions would have
    to be added to the Office of Generic Drugs fiscal year 1998 staffing
    level to enable the Office to meet FDA's statutory requirement to take
    final action on Abbreviated New Drug Applications (ANDA's) within six
    months?
        Answer. The Office of Generic Drugs estimates that it would need
    approximately 75 additional FTE to review the majority of applications
    within 180 days. There will always be a few applications that cannot be
    reviewed within 180 days due to complicated scientific issues or other
    barriers outside the direct control of the Office of Generic Drugs. In
    addition, other parts of the Food and Drug Administration that support
    the generic drug review program will need additional FTE, such as the
    Office of Regulatory Affairs and Office of Compliance. Furthermore, the
    Office of Generic Drugs' and possibly other supporting FDA components'
    budgets would need to be proportionately increased to support the extra
    FTE, with increases to cover costs associated with support costs such
    as computers and training. The projection of approximately 75
    additional FTE is based on a November 1996 report entitled: ``Generic
    Drug User Fee Proposal Questions & Answers,'' but updated to reflect
    the increase in submissions of ANDA's.
        Question. What was the backlog of generic drug applications as of
    the end of fiscal year 1997 and as of January 1, 1998? Please provide
    the total number of ANDA's pending before the FDA as well as the number
    pending for more than six months?
        Answer. At the end of fiscal year 1997, there were 515 pending
    ANDA's, including 106 pending for more than six months. On December 31,
    1997, there were 588 pending ANDA's, including 100 pending for more
    than six months.
        Question. What were the mean and median review times for new drug
    applications (NDA's), ANDA's and ANDA supplements in fiscal year 1997?
    What have they been in fiscal year 1998 to date?
        Answer. It is important to note that review time is different from
    approval time. Review time is the time that the agency takes to review,
    that is, to take a final action on, an application. The time for
    approval is the sum of the time for FDA review plus the time for the
    sponsor to respond to any deficiencies noted in the review if the
    application is not approved the first time it is submitted.
        Either an approval or disapproval of an ANDA is considered by FDA
    to be a final action. The Agency makes every attempt to meet the
    requirement to approve or disapprove an application within 180 days;
    however, for a number of reasons it is not always possible to do so.
    After receiving a disapproval action, manufacturers frequently resubmit
    applications that address the deficiencies indicated in the disapproval
    action.
        As we mentioned earlier, approval times reflect both time with the
    agency reviewing applications as well as time with the sponsor or
    applicant responding to deficiencies noted by FDA reviewers. The time
    spent in FDA on an ANDA is measured by ``review cycles''. A cycle
    starts when an application is filed by FDA and ends when the agency
    issues an ``action letter''. Generally these letters communicate to the
    sponsor that their application is approved or not. If not approved, the
    sponsor is provided with the reasons why and has an opportunity to
    submit information needed to address these deficiencies. When this
    information is received a new cycle begins.
        The Office of Generic Drugs does not calculate yearly review cycle
    times, but can provide monthly calculations. Traditionally, the month
    of September has been used to report review times. Regarding the NDA
    information we will provide, the data reported include all approvals
    during the fiscal year 1997 and 1998, pre-PDUFA as well as any
    applications submitted in a PDUFA cohort.
        [The information follows:]

                 FISCAL YEAR 1997 REVIEW TIMES (SEPTEMBER 1997)
                                [Time in months]
    ------------------------------------------------------------------------
                                                        Mean        Median
    ------------------------------------------------------------------------
    ANDA's........................................          5.9          5.4
    ANDA supplements \1\..........................          n/a          5.2
    NDA's (124 drugs).............................         16.0         15.0

           Fiscal Year 1998 Year to Date Review times (February 1998)

    ANDA's........................................          6.2          6.1
    ANDA supplements \1\..........................          n/a          4.4
    NDA's (55 drugs, through 2/28/98).............         14.3         12.0
    ------------------------------------------------------------------------
    \1\ Original and major amendments to supplements.

                                  blood safety
        Question. How does FDA collaborate with the Centers for Disease
    Control (CDC) in investigating CDC-reported incidents of possible
    transmission of an infectious disease in its efforts to identify
    problems with blood products?
        Answer. The FDA has extensive interactions with its sister agencies
    of the Public Health Service or PHS, the CDC and NIH, on blood safety
    issues at all levels of the agencies. The FDA collaborates with the CDC
    to ensure a rapid response to any possible transmission of infectious
    disease. The CDC participates in product investigations by conducting
    epidemiologic studies or assisting with scientific analysis.
        Recent examples include Centeon Albuminar in which CDC provided
    epidemiologic assistance in determining cases of individuals affected
    by bacterially contaminated product. Another example concerned Alpha
    Factor VIII and Factor IX in which the CDC provided epidemiologic and
    laboratory assistance in investigating the transmission of Hepatitis A
    virus from these clotting factors. CDC is currently assisting the FDA
    in an investigation of allergic reactions associated with specially
    filtered (leukoreduced) blood products.
        The NIH and CDC routinely share information from large scale
    surveillance studies on blood safety issues such as the Retroviruses
    Epidemiology in Donors Study (REDS), the Transfusion Safety Study
    (TSS), and the Transfusion Transmitted Viruses Study (TTV).
        The Department has raised blood safety to the highest level. As you
    are aware, Dr. Satcher has been appointed as the Assistant Secretary
    for Health, as well as serving as the Surgeon General, and also serves
    as the Blood Safety Director. Coordination of the response of the PHS
    agencies occurs at the level of the Blood Safety Committee chaired by
    the Blood Safety Director and consisting of the Director of the NIH,
    the CDC, and the Commissioner of Food and Drugs.
        The NIH, CDC and FDA also serve as ex-officio members of the
    Advisory Committee on Blood Safety and Availability. The Advisory
    Committee has considered Hepatitis C virus (HCV) lookback notification
    and policy related to risk of Creutzfeldt-Jakob Disease (CJD), since
    its first meeting in April 1997. In August 1997, the Committee issued
    recommendations for the implementation of HCV lookback notification.
    The Secretary accepted these recommendations in January 1998, and the
    Department is in the process of implementing HCV lookback measures.
        CDC and NIH representatives now serve as voting members of the
    Blood Products Advisory Committee which provides scientific advise to
    the FDA on a variety of issues including product approvals. NIH and CDC
    employees also serve on the Transmissible Spongiform Encephalopathies--
    TSE--Advisory Committee which advises FDA on TSE issues including their
    possible impact on blood and blood products. NIH and CDC
    representatives participate in the Interagency Working Group on Blood
    Safety and Availability which hold monthly teleconferences to discuss
    issues affecting blood safety.
        The CDC has also created a position of Assistant Director for Blood
    Safety to facilitate interactions on these issues. Together, these
    efforts ensure that CDC and NIH have input at the highest levels of the
    FDA and the Department.
        Question. Does the investigation process differ if an adverse event
    is discovered by FDA or by CDC? Are FDA's decision steps related to
    product withdrawal or recall the same?
        Answer. The FDA and CDC may become aware of adverse events by many
    different mechanisms because the FDA focuses on regulated products
    while CDC focuses on surveillance and epidemiological investigations.
    Adverse events may be reported through either the FDA's Medwatch
    system, the CDC surveillance systems or as reports from consumers. Once
    an adverse event is discovered, the FDA and CDC work together to
    safeguard the public by rapidly investigating the cause of the adverse
    event, alerting the manufacturer and the public. FDA and CDC have
    reciprocal arrangements regarding emergency contacts and utilize
    standing cooperative procedures for sharing information and managing
    investigations.
        The FDA may initiate an investigation at both the administering
    facility and the manufacturer of the product. CDC may be called upon to
    assist the FDA in epidemiologic and scientific investigations.
        FDA's decision steps related to product withdrawal or recall are
    the same regardless of whether the event is discovered by the FDA or by
    the CDC. FDA's decision steps in the classification of these types of
    situations is similar. The end points may, however, be different. For
    example, a manufacturer may voluntarily withdraw product from the
    market at any time. If the presence of the product in the market place
    represents a violation of the Federal Food, Drug, and Cosmetic Act or
    the Public Health Service Act and the FDA would pursue legal action
    (e.g. seizure), the withdrawal may be formally classified by the FDA as
    a ``recall''. If the FDA does not believe that the underlying
    violations or deficiencies relating to the product are actionable
    violations, the withdrawal action may be formally classified by the FDA
    as a ``Market withdrawal''. For recall classifications, a health hazard
    evaluation is performed and the recall is classified as Class I, II, or
    III based on the potential risks and hazards, if any, associated with
    use or exposure to the product.
        Investigation processes for FDA and CDC differ in that FDA has a
    focus on regulated products and the public health associated with the
    use of those products while CDC is principally concerned with
    epidemiological investigations and surveillance relating to
    transmission or suspected transmission of diseases which also
    contribute to public health decisions. FDA and CDC work closely
    together when investigations focus on broad public health issues
    involving the potential spread of infectious agents.
        Investigational processes and directions may differ based upon the
    source of the information concerning an adverse event. For example, if
    a regulated product is suspected as having caused an unexpected or
    serious adverse event, FDA may initiate an inspection at both the
    administering facility and the manufacturer of the product in question.
    Since CDC has extensive epidemiological investigational experience, FDA
    would conduct a joint review in situations where the facts surrounding
    a disease transmission do not clearly implicate a specific product and
    require an extensive epidemiological investigation.
        Question. Last year, the Committee directed FDA to move forward in
    convening a working group to develop a system to notify patients of
    adverse events. As a result of this action, I understand that a
    voluntary patient notification system has been proposed by blood
    product manufacturers. What progress has been made in implementing this
    voluntary notification system?
        Answer. The voluntary notification system came about following a
    PHS-sponsored meeting on notification of withdrawals and recalls that
    occurred in November 1996. Since that time, the FDA has met with
    consumer groups and industry representatives on numerous occasions to
    help formulate the elements of this voluntary system.
        The International Plasma Products Industry Association, IPPIA, has
    formulated a proposal to implement a voluntary notification system,
    that will employ a single third-party to act as the repository and
    distributor of information. The IPPIA projects that the notification
    system will be operational in June 1998.
        Question. What steps does FDA intend to take to ensure this system
    is appropriately implemented?
        Answer. FDA is considering drafting a regulation that will require
    adequate record keeping and an effective mechanism to identify and
    notify product custodians in the event there is a potential for the
    exposure to a communicable disease. Delivery system participants will
    be required to establish and maintain mechanisms for notification of
    the product custodian, which in some cases, may include the patient or
    the patient's legal guardian.
        FDA continues to support better notification of consumers about
    withdrawals and recalls through a number of means, including improved
    labeling of products. Proposed improvements include the use of lot-
    number tear-offs to make it easier to track lot numbers, and the
    printing of the third-party telephone number on the product to permit
    easy access to enrollment in the notification system. The FDA continues
    to meet with consumer groups and industry to discuss these issues.
        Question. Once established, is there a mechanism for FDA oversight
    of the patient notification system?
        Answer. FDA regards the notification system as a component of the
    recall plan of a manufacturer, and thus, the system would fall under
    FDA's regulatory purview. Any information a firm disseminates through
    the national notification system will be part of its recall procedures,
    and will be reviewed by the FDA on that basis. Importantly, while FDA
    does have a policy of reviewing the recall strategy of manufacturers,
    recalls are reviewed at different levels depending on several factors.
    The depth of review has resource implications, especially if multiple
    systems are in place. FDA prioritizes its resources by the level of
    health risk. Any auditing for effectiveness during a recall would be
    governed by FDA's existing procedures for effectiveness checks.
        Question. How will manufacturers be held accountable for notifying
    patients of possible contamination of blood products?
        Answer. FDA agrees that the voluntary national notification
    proposal by a third party is a good idea, but not in lieu of patient
    notification by the product consignees. During a recall, the FDA is
    also concerned with product retrieval, which is not a primary objective
    of the voluntary plan. The proposal addresses patient notification but
    not product withdrawal or retrieval. A manufacturer's participation in
    the voluntary patient notification system will not fulfill all of a
    manufacturer's responsibility regarding product recall. FDA is
    considering a regulation requiring a notification mechanism of a
    manufacturer's failure to follow the regulation which could result in
    regulatory action. FDA would conduct inspections to oversee the
    implementation of the regulation.
        Question. What FDA resource commitments has FDA made to this
    voluntary notification system?
        Answer. The voluntary notification system came about following a
    PHS-sponsored meeting on notification of withdrawals and recalls that
    occurred in November 1996. Since that time, the FDA has met with
    consumer groups and industry representatives on numerous occasions to
    help formulate the elements of this voluntary system. The FDA continues
    to meet with consumer groups and industry to discuss these issues. FDA
    continues to support better consumer notification about withdrawals and
    recalls through a number of means. CBER posts notices of plasma-
    derivative product recalls and withdrawals on its WebPage. FDA is
    considering publication of a proposed regulation which would require
    adequate record keeping and an effective mechanism to identify and
    notify product custodians in the event there is a potential for the
    exposure to a communicable disease. This proposed regulation would be
    disseminated for notice and comment before becoming final. Resources
    for these activities have been identified within a larger plan to
    address current concerns related to blood safety.
        The International Plasma Products Industry Association (IPPIA) has
    formulated a proposal to implement a voluntary notification system,
    that will employ a single third-party to act as the repository and
    distributor of information. The IPPIA projects that the notification
    system will be operational in June 1998.
                      medical glove protein and/or powder
        Question. FDA reportedly has under consideration a rule setting a
    protein limit of 1200 micrograms per medical glove, and a powder limit
    of 120 milligrams per glove. Is there a scientific basis upon which to
    determine these standards? If so, what is that basis? Or, are these
    standards simply based on FDA's evaluation that medical glove
    manufacturers will be able to achieve them?
        Answer. These limits are based on the scientific principle of dose-
    response, i.e., less protein and less powder will reduce adverse
    effects, and they are also based on FDA evaluation that medical glove
    manufacturers will be able to achieve these limits.
        Question. The implementation of any standard for glove protein and/
    or powder would seem to depend heavily on the methods used to measure
    protein or powder. What methods are available to measure these things,
    and what if anything needs to be done to improve, refine, or
    standardize these methods? Has the FDA worked with ASTM or other
    voluntary standards organization to arrive at reliable measurement
    techniques?
        Answer. The method recommended for measuring protein levels is the
    American Society for Testing and Materials (ASTM) D 5712 Standard.
    FDA's Center for Devices and Radiological Health is currently
    evaluating the use of the ASTM D 6124 Standard for measuring glove
    powder levels.
        Question. In setting protein and/or powder limits for medical
    gloves, what measures has FDA taken, or does it intend to take, to
    ensure that its regulations do not cause shortages of medical gloves?
        Answer. FDA has requested ASTM to develop a standard for the
    maximum level of water-soluble protein on natural rubber latex medical
    gloves, and the maximum allowable level of glove powder on medical
    gloves. This effort is ongoing and FDA is actively participating. This
    effort in cooperation with the manufacturer members of ASTM was
    undertaken to ensure that the proposed regulation will not cause
    shortages of medical gloves.
    fda study of the third national health and nutrition examination survey
                                (nhanes) samples
        Question. In its September 1997 Medical Glove Powder report, FDA
    indicated that its CDRH Epidemiology Team was conducting a study of the
    seroprevalence of natural latex-specific IgE antibodies among
    participants in the Third National Health & Nutrition Examination
    Survey (NHANES III). What is the status of FDA's study? Over what time
    period were blood samples in this study collected?
        Answer. FDA's CDRH, in conjunction with FDA's Center for Biologics
    Evaluation and Research, CBER, sponsored testing of blood samples from
    the Phase II , 1991-1994, of the National Health and Nutrition
    Examination Survey III for seroprevalence of natural latex-specific IgE
    antibodies. The CDRH Epidemiology Branch is awaiting the results of
    this testing, which is still in progress. Upon receipt of the complete
    testing results, the CDRH Epidemiology Branch will analyze the data,
    using the demographic information and population weights supplied by
    the National Center for Health Statistics, the agency conducting NHANES
    III.
        Question. In studying IgE seroprevalence among NHANES III
    participants, what assay(s) did the CDRH Epidemiology team use? Also,
    what method or cutoff level(s) did the Epidemiology Team use to
    classify individual results as reflecting or not reflecting latex
    sensitivity? (For example, did the Epidemiology Team use a result of
    0.35 International Units per milliliter (0.35 IU/ml) on the AlaSTAT
    Latex-Specific IgE Allergen assay as a cutoff point for latex
    sensitivity?) And what was the reason for using this cutoff?
        Answer. The AlaSTAT Assay is being used to test the NHANES III
    Phase II blood samples. The Epidemiology Team will receive the results
    expressed in International Units per milliliter (IU/ml), rather than as
    ``positive'' or ``negative.'' Therefore, the CDRH Epidemiology Branch
    will be able to examine the data using a variety of cut points, and
    determine which, if any, correlate with other variables available in
    the NHANES III data set.
                     government performance and results act
        Question. How are the agency's annual performance goals linked to
    the agency's mission, strategic goals, and program activities in its
    budget request?
        Answer. The Agency's annual performance goals are aligned with FDA-
    wide strategic goals and strategies, which in turn, support the
    Agency's mission. The basic elements of FDA's mission are to promote
    the public health by timely review of regulated products prior to
    marketing; protecting the public health by ensuring the safety and
    effectiveness of products on the market; and coordinating agency
    efforts with external partners and stakeholders. FDA's strategic goals
    and strategies directly support each element of the mission statement.
    Each performance goal in the Performance Plan, in turn, is tied to an
    Agency strategy. Those connections are identified in the descriptive
    material supporting the performance goal statements.
        The performance goals in the plan are also organized by FDA's major
    program activities in the budget, for example foods, drugs, biologics,
    or one of the other major program areas. Within each program activity,
    performance goals are grouped into clusters, with program resources
    broken out for each cluster.
        Question. Could you describe the process used to link your
    performance goals to your budget activities? What difficulties, if any,
    did you encounter, and what lessons did you learn?
        Answer. The process used to link performance goals to budget
    activities involved program managers, planners and budget
    representatives from each Agency center, their field counterparts, and
    non-center headquarters analysts. The process contained several steps.
    First, program managers and planners in each center identified clusters
    of performance goals that supported each major strategic direction for
    the center. FDA identified resource totals for each budget activity. We
    are defining a budget activity as a program identified in the budget,
    for example human drugs, foods, and so forth. Resources associated with
    a program consist of the resources allocated to a product center, such
    as human drugs, plus the resources assigned to regulate that product
    area in FDA's field organization. Center officials then apportioned the
    resource total for each budget activity, or program, to each cluster of
    performance goals within the program, based on an estimate of
    expenditures necessary to achieve the performance goals. We then
    reconciled program resources identified in the budget with those
    identified in the performance plan.
        The challenge associated with this new way of organizing resources,
    by strategic direction, was that it was different from the traditional
    ``project'' classification. FDA's current accounting system keeps track
    of resources below the program level by these projects. Thus, resources
    were crosswalked from an input-oriented project and accounting system
    to a results-oriented performance system. These crosswalks were
    accomplished by developing reasonable estimates rather than through
    empirical record-keeping.
        The major lesson learned was that performance goals could still be
    linked to the existing budget structure while being arrayed differently
    for strategic and performance purposes. We are still in the process of
    determining the extent to which budget and performance systems should
    be integrated. The degree of integration depends, at least in part, on
    the preferences expressed by HHS, OMB, and Congress.
        Question. Does the agency's Performance Plan link performance
    measures to its budget? Does each account have performance measures?
        Answer. Yes, the performance goals in the performance plan are
    directly linked to the budget. There are goals for each program area in
    the budget and the clusters of goals within program areas are tied to
    the resources requested for that program. The budget justification uses
    performance goals in justifying the budget request. With respect to the
    second part of your question, if by ``account'' you mean the FDA
    appropriation, the answer is yes. The appropriation is a more aggregate
    category than the program, or budget activity. Thus, performance
    measures for the FDA account, or appropriation, would be the sum of
    performance measures for all of FDA's programs.
        Question. To what extent does your performance planning structure
    differ from the account and activity structure in your budget
    justification?
        Answer. The performance planning structure uses the same programs
    as the budget, for example Foods, Human Drugs, Biologics, Animal Drugs
    and Feeds, Devices, National Center for Toxicological Research, and
    Tobacco. Earlier we discussed how the performance planning and budget
    structure differ below the program level.
        Question. Do you plan to propose any changes to your account
    structure for fiscal year 2000?
        Answer. We are currently in the process of evaluating whether to
    change portions of our account structure, to provide the most helpful
    information to the Committee. We would be happy to keep the Committee
    apprised of any proposed changes as they are developed.
        Question. How were performance measures chosen?
        Answer. First, we would like to clarify how FDA uses the term
    performance measure. FDA identifies a performance measure as one
    element of a performance goal. The performance measure is the yardstick
    that is used to identify levels of desired and actual performance. The
    performance goal is a statement that includes the performance measure
    plus the target level and time frame that the manager selects as an
    intended result, and by which he/she manages. To illustrate,
    ``percentage of priority drugs reviewed within one year of receipt''
    would be a performance measure. The total performance goal would read:
    ``Complete review on 90 percent of all high priority drugs received in
    fiscal year 1999, within one year of receipt.''
        FDA used a process to choose performance goals, which includes the
    selection of both measure, target level and time frame.
        FDA initiated this process by issuing guidance on the development
    of performance goals and supporting documentation. This guidance was
    based on directives issued by OMB and the Department of Health and
    Human Services. Each line component of the Agency submitted performance
    goal candidates. Over 250 performance goals were submitted by the
    Centers. The goals were screened based on specific criteria, condensing
    the initial list of goals to the 64 performance goals contained in the
    Agency Performance Plan. We are happy to provide this criteria for the
    record.
        [The information follows:]
                         fda performance goal criteria
        Did the goal address a high public health priority?
        Was there substantial stakeholder concern and interest--for
    example, the Administration, Congress, consumers, industry?
        Did the goal address a specific legislative mandate--for example,
    the Prescription Drug User Fee Act?
        Was the goal either outcome-oriented or would it position the
    agency to measure and produce outcomes in the future?
        Was the goal associated with a program area in which substantial
    budget increases were being requested?
        Question. How did the agency balance the cost of data collection
    and verification with the need for reliable and valid performance data?
        Answer. FDA used the primary criterion of significant potential
    public health risk to determine in which areas it was justifiable to
    expend and request resources for collection and validation of important
    data. Two notable illustrations are in the area of food safety and
    imports. Both areas are of major concern to the public. The Agency has
    devoted considerable resources in the import area to establish an
    import monitoring system, in cooperation with the U.S. Customs Service.
    As a result of this effort, the Agency now has in place an automated
    screening system which permits the rapid approval of imports from
    sources that historically have ``clean bills of health.'' This system
    also allows the Agency to quickly target suspected shipments for closer
    laboratory examination. FDA's performance plan contains a goal that
    will ensure that at least 55 percent of safe import entries are
    released for entry within 15 minutes.
        Food safety is a second illustration of a high public health
    priority for which large expenditures for establishing of effective
    data collection systems is warranted. FDA performance goals for fiscal
    year 1999 address the need to work cooperatively with other federal
    agencies in developing baseline surveillance data on food borne
    illnesses; and on adverse events associated with dietary supplements,
    infant formulas, and medical foods.
        In other instances, the establishment of valid and reliable data
    systems in the premarket review areas has been supported by
    stakeholders, such as the regulated drugs and biologics industry in the
    form of user fees. Industry is willing to contribute funding for these
    systems because they are dependent upon accurate data to gauge FDA's
    progress in prompt review decisions.
        Question. Does your plan include performance measures for which
    reliable data are not likely to be available in time for your first
    performance report in March 2000?
        Answer. Our goal is to have reliable data available for all
    performance goals, performance measures, target levels and time frames,
    by March 2000. The performance goals that are at greatest risk for not
    having reliable data are those areas in which the Agency is partnering
    with other agencies and are taking new approaches to protecting the
    public health. For areas such as seafood HACCP, where the industry is
    still in the process of adapting this new hazard control approach, some
    time may be needed to develop baselines that are sufficiently stable to
    use as a basis for predicting future performance. Also, some programs
    will need to focus on process improvement goals. These are goals that
    lay the foundation for systems to collect data and/or develop
    appropriate measures. Once these systems are operating, then the
    program will have data and the appropriate metrics to measure
    performance that is more closely related to outcomes.
        Question. What are the key performance goals from your fiscal year
    1999 Annual Performance Plan that you recommend this subcommittee use
    to track program results?
        Answer. All of the goals in FDA's fiscal year 1999 Performance Plan
    represent Agency commitments that FDA will strive for. The Committee
    may be particularly interested in tracking specifically identified
    goals that lend themselves to quantification, and are associated with
    program areas of particular current Congressional interest. We will be
    happy to provide a listing of these goals for the record.
        [The information follows:]
                selected fda performance goals fiscal year 1999
    PDUFA (Prescription Drug User Fee Act)
        Review and act on 90 percent of standard new drug applications
    (NDA's) filed within 12 months after receipt (30 percent within 10
    months of receipt); and priority applications within six months.
        Review and act on 90 percent of complete NDA applications
    resubmitted following receipt of a non-approval letter, within six
    months after resubmission date.
        Review and act upon 60 percent of fileable original generic drug
    applications within six months after submission date.
        Review and act upon 90 percent of standard efficacy supplements
    within 12 months (30 percent within 10 months of receipt) and priority
    efficacy supplements filed within six months of receipt.
        Review and act upon 90 percent of manufacturing supplements within
    six months and act on 30 percent of manufacturing supplements requiring
    prior approval within four months.
    Food safety
        By 12/30/99, 50 percent of the seafood industry will be operating
    preventive controls for safety as evidenced by functioning, appropriate
    HACCP systems.
        By the end of fiscal year 1999, enhance the safety of the nation's
    food supply by achieving adoption of the Food Code by 25 percent of the
    states.
    Tobacco
        Enter into contracts with all 50 states (depending on their
    willingness) to conduct an average of 42,000 unannounced compliance
    checks each month of retail establishments that sell tobacco products.
    Imports
        Increase the percentage of safe imports screened within 15 minutes
    to 55 percent.
    Mammography
        Have at least 97 percent of mammography centers meet key inspection
    standards, with less than 3 percent of facilities with Level 1
    (serious) inspection problems.
    Important new medical devices
        Complete 50 percent of Premarket Approval applications (PMA's)
    within 180 days.
        Question. In developing your Annual Performance Plan, what efforts
    did your agency undertake to ensure that the goals in the plan include
    a significant number of outcome measures?
        Answer. FDA used several approaches to focus on outcome-oriented
    performance goals. In anticipation of preparing the fiscal year 1999
    Annual Performance Plan, we trained over 600 of our managers, planners
    and field staff in GPRA and performance management principles. FDA's
    GPRA training and the fiscal year 1999 Performance Plan guidance
    described the differences between input goals, activity goals, output
    goals and outcome goals. We are also encouraging the use of `process
    improvement' performance goals, such as establishing important data
    systems, or developing appropriate partnering arrangements. These goals
    are important as transition mechanisms which position our agency to be
    more effective in both measuring and producing outcomes in cooperation
    with external partners. FDA is also encouraging system analyses of
    agency programs and their relationships with their environment to
    explain and predict outcomes more effectively. These analyses help to
    explain the relationships among components of the system. To
    illustrate, in the food safety area, we are examining linkages among
    research, surveillance efforts, educational interventions and
    enforcement actions. These relationships are first understood in
    conceptual terms. As systems understanding develops further, hopefully
    empirical relationships can be established among these components to
    aid in predicting and then committing to outcomes.
        During the development of the Annual Performance Plan, FDA used its
    network of program liaisons to provide technical assistance and support
    to organizational components in developing outcome-oriented performance
    goals. This assistance ranged from reinforcing performance planning
    principles; discussing performance measurement issues; establishing
    rational linkages between process improvement goals, output goals and
    desired outcomes; and providing feedback on performance information
    developed. Through an iterative process, the Agency program managers
    and planners selected the most important and most outcome-oriented
    performance goals for inclusion in the Annual Performance Plan.
        Question. Do you believe your program managers understand the
    difference between goals that measure workload (output) and goals that
    measure effectiveness (outcome)?
        Answer. Yes. As a result of extensive GPRA training and application
    of performance management principles, FDA's program managers are
    shifting their emphasis away from managing activities and toward
    managing results. For example, the primary objective of the President's
    Food Safety Initiative is to reduce foodborne illness. FDA managers are
    collaborating with USDA, CDC and EPA and state and local health and
    agricultural agencies in this effort.
        The use of the Compliance Achievement Reward System (CARS) provides
    another example of how the development of a performance-based personal
    reward system has been used to foster change toward an outcome-oriented
    culture in the Agency's compliance program. This results-oriented
    computer data system captures efficient and effective compliance
    achievements that focus on impacts and outcomes. This reporting system
    is helping to create a change in FDA's mind set from only ``policing''
    the industry to a willingness to openly communicate and work with those
    industries willing to work with FDA. Credit is given to employees who
    achieve compliance efficiently with regulated industry. Employees used
    to be rewarded for the number of enforcement and administrative actions
    taken. Now they are interacting with industry more through individual
    meetings, training, workshops, and grassroots meetings to listen to
    concerns.
        Nevertheless, we continue to face several challenges that limit our
    ability to establish measurable outcome oriented performance goals.
    First, a major barrier to establishing outcome-oriented performance
    goals is that most desirable health outcomes of FDA action, reduced
    morbidity and mortality, results from the efforts of multiple actors,
    including the regulated industry, other federal agencies, health
    professionals and consumers. As we approach ultimate outcomes, FDA's
    singular influence increasingly wanes and it becomes increasingly
    difficult to establish a clear connection between FDA's action and some
    ultimate health outcomes. Moreover, we are necessarily dependent on
    purchasing or obtaining data from external partners who are responsible
    for collecting and guaranteeing the quality of health outcomes data. In
    many cases, outcome data are not only expensive, they are simply not
    available.
        Second, many of our existing data systems were designed to measure
    activities but provide neither relevant baselines required to develop
    results-oriented performance goals that are within our control nor to
    track the progress made toward achieving such performance goals. Third,
    although we have addressed this issue by including process improvement
    goals aimed at developing the appropriate measurement systems, their
    development often requires a substantial investment of resources and,
    in some cases, performance data will not be immediately available.
        Question. What are some examples of customer satisfaction measures
    that you intend to use? Please include examples of both internal and
    external customers.
        Answer. FDA is concerned about customer satisfaction for all of our
    varied customer groups. We recently completed a survey of customers
    including consumers, health professionals, state governments and
    industry. Survey results were analyzed and incorporated into goal
    setting for FDA programs. Since the Performance Plan is concise and
    focused externally, only a fraction of the customer service goals FDA
    has adopted were included in the fiscal year 1999 Performance Plan. FDA
    is working to incorporate more input from customers in its program
    management and the Agency has worked with OMB to develop a ``generic''
    customer service survey initiative that will expedite FDA's conduct of
    customer surveys in the future. We are happy to provide some examples
    of customer-focused goals for the record.
        [The information follows:]
                selected examples of fda customer-focused goals
        By the end of fiscal year 1999, complete reviews of 30 percent of
    food and color additive petitions within 30 days.
        By the end of fiscal year 1999, increase to at least 77 percent the
    proportion of people aged 18 and over who use food labels to make
    nutritious food selections.
        Review and act on 90 percent of standard new drug applications and
    Product License Applications/Biologics License Applications filed
    within 12 months after receipt--30 percent within 10 months of
    receipt--and priority applications within six months.
        FDA will continue to improve the legibility and clarity of over the
    counter (OTC) drug labels, and improve the consumer's ability to read
    and understand important warnings and usage directions.
        At least 97 percent of mammography centers meet key inspection
    standards, with less than 3 percent of facilities with Level I serious
    inspection problems.
        Question. How were the measurable goals of your fiscal year 1999
    Annual Performance Plan used to develop your fiscal year 1999 budget?
        Answer. The Agency's measurable goals, performance goals, provided
    a basis for estimating resources required to fulfill the Agency's
    performance obligations. For example, in the area of prescription
    drugs, FDA negotiated performance goals with industry stakeholders. The
    budget was derived from the specific performance commitments
    negotiated. Similarly, for Seafood HACCP, a goal was set to bring the
    seafood industry into compliance. FDA determined the number of
    inspections and the technical assistance required to achieve the
    desired level of compliance, and these estimates served as a basis for
    requesting additional funds to hire new staff for the seafood
    inspection program.
        In other instances, such as the President's Food Safety Initiative
    and the Tobacco Initiative, the public health rationale and pressing
    need for a change in strategic emphasis was sufficiently strong to
    result in the development of a new initiative and the appropriation of
    additional resources. The strategic intent of these important
    initiatives set the directional context that guided the development of
    annual performance goals.
        Question. If a proposed budget number is changed, up or down, by
    this committee, will you be able to indicate to us the likely impact
    the change would have on the level of program performance and the
    achievement of various goals?
        Answer. Yes, as we gain experience in implementing GPRA, we
    continue to improve our ability to evaluate the impact of changes in
    funding level on our programs and our ability to achieve the
    performance commitments outlined in the Annual Performance Plan. In
    some instances, changes in funding level may require an increase or
    decrease in program efforts and target level of performance or the
    development of new performance goals to fulfill new performance
    expectations. In other instances, reductions in funding level and
    performance expectations may require us to re-evaluate our priorities
    and program expectations.
        Over the past few years, FDA has practiced several strategies for
    operating with reduced resources in spite of an increasing workload.
    These strategies, which have sometimes been used in combination, have
    included reducing program efforts without significantly changing the
    program approach, refocusing program efforts to target the highest
    priority health risks and to implement interventions that yield the
    greatest potential health benefits, and maximizing our limited
    resources by re-examining and redefining the role we play in protecting
    public health vis a vis other federal, state and local and
    international government agencies, third parties, industry, and other
    nongovernmental institutions. Some of those strategic changes have led
    us to modify some of our activity measures. However, changes in
    approach will not change the agency's desire to improve health
    outcomes.
        Question. Do you have the technological capability of measuring and
    reporting program performance throughout the year on a regular basis,
    so that the agency can be properly managed to achieve the desired
    results?
        Answer. Yes, the agency has a variety of data systems which can
    provide information on program performance needed by management. The
    agency plans to monitor performance on the fiscal year 1999 performance
    goals on a regular basis. As part of the required GPRA verification and
    validation process, the agency has initiated a system to ensure that
    performance data provided by its programs are accurate. This program
    has three basic components, (1) training workshops for program managers
    to learn the essential aspects of performance measurement; (2) a
    comprehensive checklist for verifying and validating performance
    information used to establish and monitor progress toward each goal;
    and (3) assistance in applying performance data as an effective
    management reporting tool. This process will ensure that the necessary
    data is both available and reliable to report on each fiscal year 1999
    performance goal and will progressively enhance the Agency's ability to
    achieve and measure meaningful results.
        Question. The Government Performance and Results Act requires that
    your agency's Annual Performance Plan establish performance goals to
    define the level of performance to be achieved by each program activity
    set forth in your budget. Many agencies have indicated that their
    present budget account structure makes it difficult to link dollars to
    results in a clear and meaningful way. Have you faced such difficulty?
        Answer. The present budget account structure has not made it
    difficult to link dollars to results. In the performance plan, we
    linked dollars to our major program categories and more specifically,
    to groups of related performance goals, which we call performance goal
    clusters. The program dollars required to carry out the strategic
    intent of our programs were linked to the goal clusters.
        Question. Would the linkages be clearer if your budget account
    structure were modified?
        Answer. We do not know the answer to your question at this time,
    but we are studying the situation. Specifically, we are examining ways
    of improving alignment of the traditional budget account structure to
    which Congressional Appropriations Committees are accustomed and a
    structure required by the Government Performance and Results Act (GPRA)
    that links resources with results-oriented performance goals. The first
    step in this process is to develop a crosswalk between our budget
    account structure and the results-oriented performance goal clusters.
    Once we better understand the linkages between these two structures, we
    will be in a better position to evaluate the budget account structure
    to determine if it should be changed to better reflect performance as
    required by GPRA. Whether Congress and our other stakeholders want us
    to eliminate the existing budget structure which is recognizable
    remains unclear. We will continue to keep the Committee informed of any
    changes.
        Question. If so, how would you propose to modify it and why do you
    believe such modification would be more useful both to your agency and
    to this committee than the present structure?
        Answer. We are currently exploring possible changes in our account
    structure, but are not far enough along to have a meaningful dialogue
    with the Committee. We fully intend to work with the Committee as we
    move forward in developing any proposed changes.
        Question. How would such modification strengthen accountability for
    program performance in the use of budgeted dollars?
        Answer. We are not yet sure that modification of the budget
    structure is the most appropriate answer to strengthening
    accountability for program performance. However, any mechanism which
    establishes a stronger link between budgeted dollars and planned
    performance will allow program managers and resource allocators to gain
    a better understanding of their return on investments. It is entirely
    possible that such mechanisms could be informative crosswalks between
    budget and performance structures. It should be noted that budget
    structures, performance structures, and integrating mechanisms are only
    as effective as the validity and reliability of the information
    contained in those structures. It does little good to show which
    dollars are `chasing' which performance goals if a solid relationship
    between resources and performance hasn't yet been established.
        Question. Does your fiscal year 1999 performance plan--briefly or
    by reference to your strategic plan--identify any external factors that
    could influence goal achievement?
        Answer. Our Performance Plan does briefly address some of the
    external factors that effect both goal achievement and the choice of
    strategies necessary to respond to the external factors. Prior to
    developing performance goals for fiscal year 1999, each program
    identified key environmental factors that affect their ability to carry
    out the strategic intent of their program. Because each of our programs
    are so diverse, each had to address the individual factors affecting
    their particular programs as they developed performance goals.
        Question. If so, what steps have you identified to prepare,
    anticipate and plan for such influences?
        Answer. The Foods program, for example, has identified changes in
    physiological microorganisms, changes in the food supply and
    distribution, hazardous dietary supplements as some of the external
    factors to which they must respond. They respond by developing
    appropriate strategies and leveraging resources to address these
    factors. One of the external factors that is common to several of FDA
    programs is an increased workload. This factor has lead to the
    increased participation in Federal, state, international, and industry
    partnerships to develop the most efficient and effective ways to
    protect the public health. Partnerships in themselves are an external
    factor because without full and continued participation in agreements,
    the desired outcome of the partnership is compromised.
        Question. What impact might external factors have on your resource
    estimates?
        Answer. Unexpected shifts or developments of new factors could
    ultimately affect resource estimates. For example, response to
    emergency situations; changes in consumer consumption; and incomplete
    partnerships agreements would require FDA to reprogram resources to
    respond to meet the need.
        Question. Through the development of the Performance Plan, has the
    agency identified overlapping functions or program duplication? If so,
    does the Performance Plan identify the overlap or duplication?
        Answer. Through the development of the performance plan FDA has
    taken steps toward identifying areas of overlap and coordination with
    other federal agencies and nongovernmental institutions. This in turn,
    has led to significant coordination to avoid duplication of effort.
        The Food Safety Initiatives provides a good illustration of how a
    total network can create synergies to produce system outcomes. We have
    included in the performance plans descriptions of how each of these
    initiatives is being implemented through partnerships and close
    coordination among multiple federal agencies, international, state and
    local governments, industry and consumer groups. FDA is working closely
    and cooperatively with its partners to reduce the incidence of food
    borne illnesses.
        In developing the President's Food Safety Initiative, the functions
    of all the participating agencies were examined and great care was
    taken to avoid duplication, both among and within the participating
    federal agencies, and to ensure that the activities of the
    participating agencies were coordinated. FDA is closely coordinating
    with other agencies in the area of Food Safety education, research and
    risk assessment. For example, FDA and USDA's Agricultural Research
    Service have coordinated their research efforts and have jointly
    developed research strategies. A risk assessment consortium has been
    formed at the Joint Institute for Food Safety and Nutrition (JIFSAN)
    which allows members to learn from the work of other agencies and build
    on each others efforts. Coordination of agency efforts in the area of
    food safety education is expected to encourage the communication of
    common messages and thus improve the ability of all cooperating
    agencies to achieve the shared goal of reduce the risk of microbial
    contamination in food and reducing the occurrence of food borne
    illnesses.
        During the development of the fiscal year 1999 Performance Plan, we
    used a combination of data from FDA's Field Data System and data from
    USDA's National Agricultural Statistics surveys to develop a
    performance goal of increasing the percentage of fruit and vegetables
    produced using good agricultural practices guidance for reducing
    microbial contamination. FDA and USDA are currently collaborating in
    the development of follow up surveys that will allow both FDA and USDA
    to measure the effect of their joint efforts. FDA is engaged in similar
    data sharing partnerships with other agencies involved in the Food
    Safety Initiative, including the CDC and Food Safety Inspection Service
    (FSIS), and other USDA agencies.
        FDA will continue to examine the relationships between its own
    efforts and those of cooperating organizations. The interactions among
    institutions is essential in order to address complex health challenges
    in areas such as tobacco, imported products and mammography. The
    current climate of outcome-oriented performance management reinforces
    the need to identify synergies as well as areas of overlap so that we
    can launch cost-effective consumer protection initiatives.
        Question. Future funding decisions will take into consideration
    actual performance compared to expected or target performance. Given
    that: To what extent are your performance measures sufficiently mature
    to allow for these kinds of uses?
        Answer. In some cases, our performance measures are sufficiently
    mature for use as a basis for funding decisions. An example of a
    ``mature'' indicator is provided by the PDUFA goals that measure the
    timeliness of FDA application review, such as ``review and act on 90
    percent of standard new drug applications within 12 months of
    receipt.'' However, the fiscal year 1999 planning process revealed a
    need for certain new performance measures. In some of those cases, FDA
    is developing or refining data systems, such as the adverse event
    reporting system, to collect the necessary information. A goal for
    fiscal year 1999 is to implement the Adverse Event Reporting System for
    the electronic receipt and review of adverse drug event reports. FDA
    has a similar goal in the device adverse event reporting area. In other
    cases, FDA has decided to partner with other state or Federal agencies
    to share data. FDA is sharing data for goals such as to increase the
    percentage of domestic produce produced consistent with Good
    Agricultural Practices to reduce microbial contamination. We will be
    determining the baseline and using data from USDA's compliance data
    systems and their Fruit and Vegetable Chemical Use Surveys. In other
    areas, including seafood HACCP compliance, FDA coordinates its
    inspection efforts with states, so we must also integrate compliance
    data between FDA and all contracted states. FDA continues to explore
    potential partnerships with other institutions and creative solutions
    to address the issue of data compatibility.
        FDA is firmly committed to developing credible data for our
    performance measures, not only for Congressional use, but for our own
    priority setting, internal management, and budgeting decisions. We are
    emphasizing verification and validation of performance data in our
    planning and budgeting activities, and managers are enforcing this
    focus by using performance measure data in analysis and decision
    making.
        Question. Are there any factors, such as inexperience in making
    estimates for certain activities or lack of data, that might affect the
    accuracy of resource estimates?
        Answer. Several factors affect accuracy of resource estimates.
    First, would be lack of empirical data in areas where new strategies
    have been formulated. If the approach is new, no baseline exists to
    determine the relationship between resource expenditures and either
    activities or results. Another major factor is the great expense in
    collecting data in areas where we are trying to estimate resources
    necessary to achieve outcome-oriented performance goals. In many cases,
    outcome data bases simply don't yet exist. A third factor is the
    expense associated with conducting studies that will allow us to
    establish a valid and reliable relationship between resources and
    results. The Agency would have to overcome each of these barriers in
    order to accurately estimate resources necessary to achieve specific
    outcome-oriented performance goals.
        Question. Based on your fiscal year 1999 performance plan, do you
    see any need for any substantive revisions in your strategic plan
    issued on September 30, 1997?
        Answer. The Department submitted a department-wide strategic plan
    in lieu of having each operational division do so in order to meet the
    requirements of GPRA.
                                     ______

                     Questions Submitted by Senator Specter
        Question. I understand that FDA officials recently toured mushroom
    growing and processing facilities in the People's Republic of China. I
    would appreciate a full report of the findings of this trip. Does FDA
    have any plans to change the automatic detention and lot-by-lot release
    program currently operating for mushroom products imported from China?
        Answer. FDA recently completed a series of evaluation trips to the
    People's Republic of China (PRC). The purpose of the trips was to
    evaluate the progress made by the PRC mushroom industry, in conjunction
    with their government authorities and private consultants, in
    addressing the problem of Staph enterotoxin in canned mushrooms. The
    evaluation trips were designed to look at mushroom processing from the
    grower through post-processing handling.
        FDA is currently in the process of reviewing the trip reports and
    will prepare an evaluation of the findings. FDA intends to use the
    findings from our recent evaluation trips to determine if the current
    lot-by-lot release program for canned mushrooms should be maintained as
    it is currently, amended or discontinued. No decision on this question
    has yet been made and will not be until the evaluation of the trips is
    completed. We will share our evaluation with your office when it is
    available.
        Question. Please provide my office with any monthly statistics the
    FDA has for the past year regarding the number of lots of processed
    mushrooms and kilograms represented by those lots from the People's
    Republic of China that have requested clearance and/or been cleared for
    import into the United States under the lot by lot program.
        Answer. The results of our record review regarding imported canned
    mushrooms from the People's Republic of China under the Lot-By-Lot
    Release Program for the past year as of March 31, 1998, are 3,527 lots
    and 38,837,561 kilograms. FDA did not make any seizures of mushrooms
    from the Chinese factories due to contamination by Staphylococcus
    aureus enterotoxin. Monthly statistics are not currently available, but
    we would be glad to work with you on obtaining that information.
                  pharmaceutical benefit management companies
        Question. Pharmaceutical Benefit Companies are engaged by health
    plans to interact with pharmaceutical manufacturers and health care
    providers in order to find safe and effective therapies, ensure
    consumer safety, and coordinate information services.
        What prompted the FDA to issue the January 5 draft guideline on
    ``Medical Product Promotion by Healthcare Organizations or Pharmacy
    Benefit Management Companies''? What agency analyses were undertaken to
    prompt formal action on the issues addressed by the guidance? What were
    the methodologies used in those analyses?
        Answer. FDA has been considering issues related to the promotion of
    medical products in a managed care environment since 1994. In 1994, the
    Agency met individually with four medical product sponsors to discuss
    regulatory issues in light of their newly established relationships
    with Pharmacy Benefit Management Companies, PBM's. Since that time, the
    Agency has continued its information gathering efforts. These efforts
    have included our participation in programs, meetings and workshops.
    These activities permitted FDA to work with many managed care experts
    to review several studies and to comment on reports from other
    government agencies. In addition, we have participated in meetings with
    many of our stakeholders, including members of the pharmaceutical
    industry, health professional groups and consumer organizations.
        On October 19 and 20, 1995, FDA held a public hearing on
    ``Pharmaceutical Marketing and Information Exchange in Managed Care
    Environments.'' The purpose of the hearing was to solicit information
    and views concerning the potential impact of changing organizational
    structures and information dissemination channels in the managed care
    setting on the Agency's responsibilities to regulate drug marketing and
    promotion. FDA heard testimony from 26 individuals and received an
    additional 38 comments to the hearing docket.
        Since the hearing, the agency has continued its dialogue with
    representatives from the public and private sectors, including
    representatives from the pharmaceutical industry. The pharmaceutical
    industry representatives have asked that FDA maintain ``a level playing
    field'' for all medical product sponsors with respect to the regulation
    of their promotional activities. Since one concern that has been raised
    about this issue is drug switching, FDA has, in addition, sent a letter
    to its ``MedWatch partners'' asking that they disseminate a letter
    describing FDA's concerns about possible risks that may be associated
    with the switching of a patient from one product to another, usually
    within the same therapeutic class and asking that reports of any
    adverse events be submitted to FDA. The Agency has evaluated these
    reports and has placed its findings in the docket for the January 5,
    1998 draft guidance. In light of FDA's concern about promotional
    activities that may create a public health risk, and consistent with
    the information that had been gathered over the years, the Agency
    determined that the issuance of a draft guidance would be the
    appropriate next step.
        Question. What is the role and jurisdiction of the FDA in
    connection with health care actors outside the realm of the drug
    companies it currently regulates? What is the specific jurisdiction of
    the FDA in issuing this guidance?
        Answer. Under the Food, Drug and Cosmetic Act, FDA has
    responsibility for regulating the labeling and, in many cases, the
    advertising of medical products. FDA's determination that medical
    product sponsors are responsible, under certain circumstances, for
    promotional activities performed by health care organizations/PBM's on
    their behalf is consistent with long standing agency policy and finds
    support in the Act, regulations and legal precedent. The introductory
    phrase of section 301 of the Act provides that the ``causing'' of a
    prohibited act, as well as the act itself, is prohibited. In addition,
    21 C.F.R. Sec. 1.1(a) provides that the provisions of regulations
    promulgated under the Act, ``with respect to the doing of any act shall
    be applicable also to the causing of such act to be done.'' FDA is
    simply saying that medical product sponsors, that is, the holders of
    new drug applications, must be accountable for their promotional
    activities whether these activities are undertaken as direct marketing
    or indirectly through a PBM.
        This broad theory of liability, which is based on FDA's
    responsibility to protect the public health, has been upheld in several
    FDA enforcement actions. Additional support is found in the law of
    agency, doctrine of respondent superior.
        Question. Why did the FDA proceed on this issue through a guidance
    as opposed to a rulemaking?
        Answer. FDA determined that a guidance was appropriate because the
    agency was not creating new requirements, but was, instead, providing
    an interpretation of existing statutes and regulations. Consistent with
    the Agency's Good Guidance Practices, this Level One guidance document
    was issued in draft with a request for public input.
                            office of generic drugs
        Question. Last year, the Senate Appropriations Committee inserted
    report language making it clear that the FDA has a statutory obligation
    to take final agency action within 6 months in regard to generic drug
    approvals. In the fiscal year 1999 Budget Justification submitted to
    Congress in February, the FDA states ``an action letter is issued for
    approximately 50 percent of the applications within the 180-day
    statutory period.'' Does the FDA consider an action letter final agency
    action?
        Answer. Yes, unless the applicant requests an opportunity for a
    hearing on the question of whether there are grounds for denying
    approval of the ANDA. Generally, an action letter communicates to a
    sponsor that its abbreviated new drug application, ANDA, is approved or
    not approved. If not approved, the sponsor is provided with the
    reasons/deficiencies. However, the sponsor can pursue approval by
    responding to the deficiencies by providing the necessary information.
    This response is called an amendment and restarts the statutory
    obligation for an agency action within 180 days. The 180 day median
    value is calculated for original submissions and major amendments only.
    For ``minor'' deficiencies, the median review time is approximately 60
    days. Many of our letters are for minor deficiencies.
        Question. As you may know, last year I expressed support for
    increased funding for the Office of Generic Drugs. In preparation for
    the conference to reconcile the Senate and House fiscal year 1998
    Agriculture Appropriations Bill, I wrote Senator Cochran in support of
    the additional $1 million contained in the House Bill. The Conference
    Report (Public Law 105-86) included a fiscal year 1998 Operating Plan
    to Congress. The Operating Plan submitted to Congress at the start of
    the year provided the Office of Generic Drugs with a funding increase
    of at least $400,000. Please explain why the FDA decided against
    allocating the Office of Generic Drugs the additional $1 million and
    how the $400,000 figure was determined.
        Answer. In developing an fiscal year 1998 operating plan for the
    Agency, FDA took into account the direction in the Conference Report on
    FDA's fiscal year 1998 Appropriation, which stated ``The conference
    agreement includes an increase for the Office of Generic Drugs''. Using
    fiscal year 1997 operating and payroll obligations of $8.9 million in
    the Office of Generic Drugs as a starting point, the full cost of the
    fiscal year 1998 pay raise was added along with an increase to the
    operating budget, for an increase of $702,000 for the Office. The
    increase in funding will assist the Office of Generic Drugs' efforts
    towards accelerated approval times.
        The Office of Generic Drugs is an integral part of the generic drug
    review process and represents a portion of the total resources for the
    generic drug program. The total obligations for the generic drug review
    process are shown in the Congressional Budgets on the ``Distribution of
    Resources'' table, in the Human Drugs program line ``Generic Drug
    Evaluation,'' page 122 of the fiscal year 1999 Justification of
    Estimates for Appropriations Committees.
        We will be happy to provide funding information for the total
    generic drug program.
        [The information follows:]

                                           GENERIC DRUG PROGRAM FUNDING LEVELS
    ----------------------------------------------------------------------------------------------------------------
                                      Fiscal year 1997 actual   Fiscal year 1998 estimate  Fiscal year 1999 estimate
                                    --------------------------------------------------------------------------------
                                         Amount         FTE         Amount         FTE         Amount         FTE
    ----------------------------------------------------------------------------------------------------------------
    Generic drug evaluation........     $34,183,000        351     $34,883,000        351     $34,883,000        351
    ----------------------------------------------------------------------------------------------------------------

        Question. I have been contacted by a constituent who has Hereditary
    Angioedema, a rare blood disease. I understand that the medication C1-
    Inhibitor has shown promise in stopping acute attacks of this disease.
    What is the testing status of this drug and when is it expected to be
    approved for use?
        Answer. The FDA may neither confirm nor deny the receipt of
    applications for unapproved products.
        The following information is taken from a National Institute on
    Allergy and Infectious Diseases, NIAID, release dated September 1996.
    Hereditary angioedema, HAE, is caused by a defect in the gene that
    encodes the C1 inhibitor protein, an important regulator of a group of
    immune system enzymes known collectively as complement. Affected
    individuals produce either insufficient or dysfunctional C1 inhibitor.
    The resulting deregulation of complement in these individuals leads to
    episodes of swelling, typically in the extremities, face, larynx, and
    abdomen.
        Many people with HAE currently use androgens, compounds derived
    from male sex hormones, to reduce the frequency and severity of
    swelling attacks. These drugs, however, are ineffective in some
    patients, and unsafe for children and pregnant women. More than a
    decade ago, researchers led by Michael M. Frank, M.D., then chief of
    the NIAID's Laboratory of Clinical Investigation, LCI, showed that C1
    inhibitor protein extracted from donated human blood could ease
    patient's swelling during acute episodes of HAE. This experimental
    treatment, however, was associated with a risk for transmission of
    viral blood contaminants such as HIV and hepatitis. Other researchers
    subsequently showed that prolonged exposure to heat and high pressure
    could inactivate blood-borne viruses. In a current study, Dr. Frank and
    his colleagues in the LCI and at Children's Hospital in Boston used C1
    inhibitor that had been sterilized through these procedures.
        In the treatment study, the researchers gave either C1 inhibitor or
    placebo to HAE patients after episodes of swelling had begun. On
    average, patients receiving C1 inhibitor felt relief of their symptoms
    55 minutes after infusion, more than 10 times sooner than patients in
    the placebo group. The treatment was particularly effective for
    reducing swelling of the larynx and abdomen. The researchers reported
    that C1 inhibitor caused no immediate or short-term harmful side
    effects. In addition, after four years of follow-up, no evidence of HIV
    or hepatitis infection was found in any of the study participants.
                                     ______

                      Questions Submitted by Senator Bond
                        st. louis fda drug analysis lab
        Question. The fiscal year 1998 Agriculture appropriations bill
    specifically stated that ``none of the funds made available to the Food
    and Drug Administration by this Act shall be used to close or relocate
    the Food and Drug Administration Division of Drug Analysis in St.
    Louis, Missouri.''
        Is the FDA following the intent of this law? How do you explain the
    fact that since Dr. Janet Woodcock became Director of the Center for
    Drug Evaluation and Research (CDER), the St. Louis lab has not been
    allowed to hire replacements for individuals who leave, and that if any
    new person is hired, he or she would be hired for the Laurel, MD
    laboratory?
        Is the FDA circumventing the intent of the law?
        Answer. Per the appropriations bill language, no fiscal year 1998
    funds are being used by FDA to close or relocate the Division of
    Testing and Applied Analytical Development. FDA will maintain its
    analytical operations at the DTAAD laboratory in St. Louis.
        In order to meet the challenges of budget reductions and to direct
    limited resources to priority objectives and goals, the FDA has
    reviewed its various programs to determine where streamlining is
    feasible. The entire Office of Testing and Research, OTR, of which the
    Division of Testing and Applied Analytical Development is a part, has
    absorbed resource reductions, both in dollars and numbers of employees,
    FTE, over the last several years. The reductions in FTE have limited
    the entire OTR's ability to replace employees, and limited dollars have
    dictated the need to evaluate programs further.
        In addition, work demands have changed significantly with regard to
    testing requirements. Many requirements for testing drugs have been
    reduced or eliminated in the last few years. Under the Food and Drug
    Administration Modernization Act of 1997, FDA has reduced testing
    requirements for antibiotics and eliminated testing requirements for
    insulin. FDA is currently evaluating duplicative testing requirements
    in other areas. All of these resource-saving initiatives are being done
    in an effort to meet streamlining needs and direct FDA resources to the
    highest priority needs.
        Question. The St. Louis FDA lab has been in St. Louis since 1909
    and is the premier laboratory in CDER and is recognized world-wide for
    its outstanding capabilities and collaborative efforts. If the FDA
    continues in weakening the St. Louis lab by refusing to allow it to
    maintain its ability to function as a viable laboratory, isn't the FDA
    defiantly contradicting the fiscal year 1998 appropriations language?
        Answer. It is our intent to comply not only with the letter of your
    direction, but with the intent. We will not use any fiscal year 1998
    funds to close or relocate the Division of Testing and Applied
    Analytical Development. FDA will continue to maintain its analytical
    operations at the DTAAD laboratory in St. Louis.
        Laboratory testing requirements have changed significantly in the
    last few years. The Food and Drug Administration Modernization Act of
    1997 eliminated the requirement to test insulin and reduced antibiotic
    testing requirements. These changes, coupled with streamlining
    initiatives agency-wide, have required a redirection of our research
    and testing programs, wherever the location. All the resource saving
    initiatives are being done to support the need to streamline the
    Agency, while maintaining our core scientific capability.
                  fda regulation of health care organizations
        Question. What was the impetus for the FDA in developing a draft
    guidance on ``Medical Product Promotion by Healthcare Organizations or
    Pharmacy Benefit Management Companies'' which was published earlier
    this year?
        Answer. As the health care environment has changed in recent years,
    there have also been changes in the marketing and promotion of drug
    products. On January 5, 1998, the FDA published a Federal Register
    notice announcing the availability of a draft guidance concerning
    promotional practices by pharmacy benefits management companies (PBM)
    and similar enterprises that are owned or influenced by the sponsors of
    medical products. Concerns about drug switching and other potentially
    harmful promotional practices have come to light as a result of several
    in-depth analyses of PBM involvement in medical decision making
    conducted by the FDA, the Health Care Finance Administration, and the
    Department of Health and Human Service's Office of Inspector General.
        Question. Why did the agency opt to undertake this initiative as a
    guidance, which has no public comment period, instead of the rule
    making process?
        Answer. FDA published a document entitled ``Good Guidance
    Practices,'' which was announced in the Federal Register on February
    27, 1997, in a notice entitled ``The Food and Drug Administration's
    Development, Issuance, and Use of Guidance Documents.'' This document
    explains that the purposes of guidance documents are to first provide
    assistance to the regulated industry by clarifying requirements that
    have been imposed by Congress or issued in regulations by FDA and by
    explaining how industry may comply with those statutory and regulatory
    requirements. The second purpose of guidance documents is to provide
    specific review and enforcement approaches to help ensure that FDA's
    employees implement the agency's mandate in an effective, fair, and
    consistent manner. The document entitled ``Guidance for Industry:
    Promoting Medical Products in a Changing Healthcare Environment; I.
    Medical Product Promotion by Healthcare Organizations or Pharmacy
    Benefits Management Companies, PBM's,'' draft was posted on the FDA
    website on January 5, 1998. There was a 90-day comment period on the
    draft guidance, which ended on April 6, 1998. We received approximately
    200 comments. We are reviewing and considering these comments carefully
    as we prepare to write final guidance.
                                     ______

                     Questions Submitted by Senator Gorton
        Question. Could you expand on FDA's plan to inspect growing
    conditions (farms) overseas in order to further the President's Food
    Safety Initiative? Does the FDA expect that foreign countries would
    like to establish a similar program to inspect U.S. farms?
        Answer. We do not anticipate regular inspections. FDA will become
    involved in visiting growers only when there is an identified outbreak
    of foodborne illness that is traced back to a specific farm.
        Foreign governments, regulatory agencies, and industry currently
    send inspectors to the U.S. to inspect a variety of manufacturers,
    including many drug, device, and food processing facilities, for a
    variety of regulatory and trade reasons. Many other countries currently
    send inspectors to the U.S. to confirm compliance with fresh fruit and
    produce requirement involving grades, size, chemical usage, among
    others. With or without a U.S. program of inspection of farms in
    foreign countries, we expect that our trading partners may wish to, and
    will, visit U.S. farms and food production facilities.
        Question. What does FDA intend to do with the additional $100
    million requested for the youth and tobacco project?
        Answer. The $100 million increase will be apportioned as follows--
    $51 million for increased enforcement activities; $25 million for
    increased outreach activities; and $24 million for new product
    regulation activities.
                                     ______

                    Questions Submitted by Senator McConnell
                                    tobacco
        Question. The FDA has requested $134 million for tobacco in fiscal
    year 1999. The money for this increased funding would come from the
    proposed tobacco settlement, which may not pass Congress this year. If
    it is not passed, where will FDA get money for tobacco? What programs
    within the agency will be cut to provide money for the tobacco
    initiative?
        Answer. Reducing the availability and appeal of tobacco products to
    children and teenagers is an enormous undertaking with the potential
    for immense public health benefits. As a result, the Agency's
    activities in this regard are a high priority for FDA and are a central
    component of the Administration's Youth Tobacco Prevention Initiative.
    If the funds are not fully appropriated for the tobacco initiative, the
    Agency will have to make some difficult choices with respect to this
    and other important programs it administers. Funding reductions in
    other programs would seriously impair FDA's ability to carry out all of
    its significant functions.
        Question. How much money do you propose be spent in FDA on tobacco-
    education activities? How much money will be spent in all of HHS on
    tobacco education activities? What will the education entail?
        Answer. The overall budget for FDA's tobacco education activities
    for fiscal year 1999 is $35 million. However, HHS does not separately
    track tobacco education activities for each of the agencies. In fiscal
    year 1999, the Agency will design a multi-media advertising campaign
    including radio, print, and billboard advertisements and place these
    ads in major media markets in every state with which FDA contracts to
    conduct compliance checks. We will also develop a comprehensive
    retailer education program which includes a retailer kit containing in-
    store signs, tent cards, fact sheets, counter mats and other materials;
    a letter to retailers in each state updating them on the status of
    compliance checks in their state; a series of reminder postcards that
    can be posted in the store for customers and clerks to see; trade
    advertisements in retailer publications; and a toll-free hotline that
    retailers can call to request additional materials and ask questions.
    FDA will continue to have exhibits at major conferences representing
    state and local health officials, public health organizations, and
    consumer and retailer organizations educating these audiences about the
    new tobacco rule.
        Question. How much money is spent in both FDA and HHS on education
    activities for encouraging breast examinations and yearly pap smears?
        Answer. Because FDA has responsibility for implementation of the
    Mammography Quality Standards Act (MQSA), our educational efforts for
    breast health have been mainly in promoting the use of mammography.
    While many of the agency outreach efforts involve educating health
    professionals about MQSA, FDA has conducted some activities to
    encourage breast health among consumers. The agency's accomplishments
    are listed below.
        [The information follows:]
        Entered into an Interagency Agreement for $25,000 with the Agency
    for Health Care Policy and Research to produce the consumer brochure
    ``Things to Know about Quality Mammograms'';
      --Spent $5,000 for buttons stating ``Quality Mammography Saves
            Lives!'';
      --Spent $129,000 to initiate and implement a hotline so that any
            woman in the country could find an FDA-certified mammography
            facility. The hotline was promoted through the media and a
            campaign by the First Lady to promote mammography;
      --Spent $11,000 to develop speakers kits on MQSA;
      --Developed a Breast Implant Update packet for consumers; and
      --Sent a letter to Ann Landers about the importance of mammography in
            early detection of breast cancer.
        In addition to these accomplishments, FDA routinely conducts the
    following activities which require little funding:
      --exhibit and present at meetings for consumers;
      --share the database of certified facilities with the National Cancer
            Institute;
      --conduct voluntary patient notification activities when facilities
            practice poor quality mammography. This involves focus testing
            notification letters to patients and physicians, developing
            patient notification packages to help facilities develop the
            letters, and a follow-up study to evaluate the effectiveness of
            the notification;
      --distribute the ``Mammography Matters'' publication to consumers as
            well as health professionals;
      --distribute letters to approximately 500 breast cancer advocacy and
            national health organizations on issues such as the consumer
            aspects of the final MQSA regulations; and
      --develop a reprint on mammography and the final regulations which
            will be distributed throughout FDA and by the Consumer
            Information Center in Pueblo, CO.
        Question. How much money is spent in both FDA and HHS on education
    activities for encouraging the consumption of folic acid for women in
    their child-bearing years?
        Answer. Over the past several years, FDA has been instrumental in
    providing education about the association between folic acid and
    reduced risk of neural tube defect-affected births to the audiences
    most in need of up-to-date, accurate information: consumers, healthcare
    professionals, and industry. This is accomplished through contacts with
    these groups, providing educational materials, and working with
    professional organizations to assure that the latest science is
    translated into information easily used by consumers. The Agency has
    ongoing, direct contact with individuals from these groups to answer
    their questions. It routinely provides them materials such as press
    releases, the Backgrounder, an issue of FDA Consumer magazine featuring
    folic acid articles, copies of regulations, and the FDA Folate Poster.
    The Agency also participates in cooperative work to communicate the
    health message. The Agency uses an internet outreach and education
    program to make information more easily accessible. Other folic acid
    outreach and education activities are conducted through the FDA
    Consumer Education Staff, Public Affairs Specialists located in
    District Offices around the country, and both the FDA and HHS Offices
    of Women's Health. Those activities include presentations to consumer
    groups including adolescents and adults, and to health professionals
    and nutrition education and food safety groups. FDA, in collaboration
    with CDC and the March of Dimes Birth Defects Foundation held a public
    meeting on August 6, 1997, focused on partnering with outside groups in
    an effort to disseminate the folic acid health message as widely as
    possible. I would be happy to provide, for the record, a list of the
    specific activities the Agency has produced and disseminated. Because
    these activities have occurred over a number of years and are a part of
    larger day-to-day program activities, such as consumer information, or
    dietary supplement work, it is not possible to identify specific
    funding devoted to each of these education efforts.
        [The information follows:]
                 fda materials related to folic acid education
      --FDA Consumer magazine featuring folic acid:
          Inside back cover, ``Think Folate Now''
          Folic acid article ``How Folate can Help Prevent Birth Defects''
          Birth defects article
      --Article for FDA Medical Bulletin
      --Article on folic acid for North American Precis--wire service to
            10,000 newspapers nationwide
      --Consumer group contacts: ``Dear Consumer'' letters and packets
      --``Dear Editor'' letters
      --``Dear Health Professional'' letters and contacts with professional
            associations.
        Question. How much money is spent in both FDA and HHS on education
    activities for identifying the signs of diabetes and treating the
    disease?
        Answer. FDA currently has no ongoing educational activities
    regarding diabetes.
        I support focusing food regulatory activities on matters of food
    safety. This focus, however, has the effect of placing economic and
    quality regulatory issues as relatively lower priorities. Nevertheless,
    I am concerned that if there are regulatory requirements that FDA will
    not enforce, then those requirements should be repealed. Otherwise,
    unscrupulous operators can violate those requirements with impunity to
    the competitive disadvantage of law abiding businesses.
        I understand that there are industry self policing efforts with
    attempt to address these economic and quality regulatory issues in an
    informal manner. For example, the olive oil association has a program
    that identifies economic adulteration of olive oil, such as
    substituting other edible oils or misrepresenting the quality of the
    olive oil.
        Question. Does FDA policy support active cooperation with industry
    self policing programs? Using the olive oil program, as well as other
    examples that you feel are appropriate, please report on apparent
    violations referred to you agency and what action was taken by FDA.
        Answer. FDA has long encouraged industry self compliance activities
    that promote adherence to legal requirements. Activities such as the
    American Institute of Baking food labeling seminars; the container
    integrity program of the National Food Processors Association and the
    defects in spice program of the American Spice Trade Association are
    important programs that promote industry awareness and compliance with
    food safety and other requirements. FDA also has partnership agreements
    with industry and trade associations such as the California Dried Fruit
    Association.
        In 1995, as part of the Administration's ``Reinventing Government''
    initiative, FDA conducted a page-by-page review of agency regulations.
    As a result, a number of regulations were revoked and proposals were
    made to revoke others. On August 12, 1997, a final rule was published
    to revoke certain regulations relating to food and cosmetic labeling.
        The activities of concerned consumers, industry and associations
    have long been an important part of our surveillance activities.
    However, some of the information we received from these sources is not
    current and may not be suitable for regulatory consideration, i.e.,
    analytical data may not reflect adequate sample sizes, utilize official
    analytical methods or the chain of custody is inadequate. Nevertheless,
    these reports are evaluated with appropriate follow-up assigned based
    on timing, strength of the evidence, available resources and competing
    priorities. During the past year, we have not taken regulatory action
    based on these sources of information. However, during the past few
    years we have successfully taken action against adulterated orange
    juice, honey and syrup products based on part on information from
    industry, consumer or state officials.
                                     ______

                      Question Submitted by Senator Burns
                           medical product promotion
        Question. The Food and Drug Administration recently published a
    ``Draft Guidance for Industry: Medical Product Promotion by Healthcare
    Organizations of Pharmacy Benefits Management Companies (PBM's).'' As I
    understand the draft guidance, it seeks to clarify the FDA's position
    on promotional activities of pharmaceuticals by PBM's which are
    subsidiaries of product sponsors or promote products on behalf of the
    sponsors. I certainly support the FDA's goal of ensuring that
    promotional activities follow applicable laws and regulations. It has
    been brought to my attention, however, that the guidance could
    inadvertently restrict the dissemination of comparative information
    about pharmaceuticals to consumers in Montana. I look forward to a
    written response from FDA addressing this concern. I note that it is
    not addressed in the draft guidance notice published in the Federal
    Register on January 5, 1998.
        Answer. Because the document is a draft and comments are still
    being reviewed, I cannot say what will be in the finalized guidance,
    but we do appreciate your concern. The final guidance will be developed
    after careful consideration of these comments, including the concerns
    regarding comparative information about pharmaceuticals that were
    mentioned by your constituents in Montana.
                                     ______

                     Questions Submitted by Senator Bumpers
                  food safety initiative--haccp/sound science
        Question. In late 1997, FDA began implementation of HACCP for
    seafood and you have now stated your intention to develop HACCP rules
    for fresh fruit and vegetable juices. In January of this year, FSIS
    began implementing HACCP for meat and poultry operations and already,
    the industry is finding parts of the HACCP rules problematic. For
    example, I have been recently told that an FSIS HACCP rule is going to
    require an additional use of two gallons of water per bird for poultry
    processing which will result in tremendously burdensome challenges for
    many rural community water discharge facilities. Since implementation
    of HACCP for seafood, have you encountered any special problems in
    working with industry? If so, what?
        Answer. HACCP is a system of preventive controls for safety that
    involve, for each processor, developing an understanding of both the
    food safety hazards that are reasonably likely to occur for the
    products being processed and the controls that are available to the
    processor to minimize or eliminate the hazards. On a day-to-day basis,
    a processor's core HACCP activities are monitoring key processing
    points to ensure that they are operating in a manner that produces a
    safe product and recording the results of that monitoring.
        To help processors understand these concepts and activities, FDA
    participated in the development of low-cost training for industry in
    HACCP principles and their application to seafood. This course has been
    attended by several thousand individuals nationwide. The Agency also
    developed guidance for processors, the ``Fish and Fishery Products
    Hazards and Controls Guide,'' which provides advice on hazards that are
    reasonably likely to occur in various situations and on controls that
    are known to exist for those hazards. This Guide also includes a
    simple, fill-in-the-blank HACCP plan and instructions on how to
    complete it.
        Even with the training and the guidelines, the Agency has long
    recognized that the development of HACCP systems in many processing
    plants will involve trial and error. Thus, it has always been the
    agency's expectation that the first round of inspections after the
    December, 1998, effective date of the HACCP program would uncover
    numerous systems in need of improvement. This is turning out to be the
    case, but is not regarded as a special problem at this stage of
    implementation. As planned, FDA's inspections are focusing on
    evaluating HACCP systems and providing feedback to the firms on aspects
    of their systems that need improvement. During the first round,
    regulatory action is only to be initiated when, in addition to HACCP
    system deficiencies, the products themselves contain contaminants or
    are in imminent danger of becoming contaminated. If the feedback from
    the first inspections does not result in significant, industry-wide
    improvements during the second round of inspections, FDA would likely
    regard such a situation as a special problem.
        Question. Do you have current authority to expand HACCP to fruit
    and vegetable juice processing?
        Answer. Yes. The legal basis for mandating HACCP systems for juice
    processing is the same as that for seafood. Thus, the Food and Drug
    Administration proposed to issue HACCP regulations for fruit and
    vegetable juice processing under various sections of the Federal Food,
    Drug and Cosmetic Act, including, most significantly, sections
    402(a)(1) and (a)(4) and 701(a) of the act (21 U.S.C. 342(a)(1) and
    (a)(4) and 371(a)). Section 402(a)(1) of the act states that a food is
    adulterated if it bears or contains any poisonous or deleterious
    substance that may render the food injurious to health. Section
    402(a)(4) states that a food is adulterated if it has been prepared,
    packed, or held under insanitary conditions whereby it may have been
    contaminated with filth, or whereby it may have been rendered injurious
    to health. Section 701(a) of the act authorizes the agency to adopt
    regulations for the efficient enforcement of the act.
        As noted in the final rule mandating HACCP for fish and fishery
    products (60 Federal Register 65096), the Act provides a broad
    statutory framework for Federal regulation to ensure human food will
    not be injurious to health and to prevent commerce in adulterated
    foods. Recent outbreaks of foodborne illness as a result of consumption
    of contaminated juice have raised concerns about the safety of juice.
    Given these concerns and its responsibility under the act, FDA has
    determined that it is appropriate to propose to require that processors
    incorporate certain basic food safety control measures into juice
    production.
        Question. Please explain in detail the manner in which FDA
    incorporates the best science available in developing HACCP rules?
        Answer. In developing HACCP regulations, FDA relies on advice from
    the National Advisory Committee on Microbiological Criteria for Foods--
    NACMCF--as well as data and information from the food industry, FDA
    scientists, and scientists in other fields from academia, government
    and trade associations. Because HACCP rules are established through
    notice/comment rulemaking, all interested persons have the opportunity
    to submit relevant information, including high quality scientific
    information, to the agency in comments on the proposed rule. FDA also
    reviews the most up-to-date scientific documents from the peer-reviewed
    literature in identifying hazards, control measures, and critical
    limits, and uses advice from the NACMCF as the basis for developing
    HACCP rules.
        The NACMCF, an advisory committee of peer-acknowledged leading
    scientists to advise on specific health-related science-based issues,
    has published three documents on HACCP. The latest revision provides
    better clarity, science, and harmonization with international HACCP
    guidance, and was released in August, 1997. The USDA and FDA HACCP
    rules are based on the seven principles of HACCP, as defined by the
    NACMCF, and are fundamentally the same. The proposed HACCP juice rule
    is also consistent with these existing HACCP regulations and the
    underlying science upon which HACCP is based.
        In developing the proposed rule for juice, FDA held public
    scientific meetings to address science and health related issues
    relevant to the production, processing and consumption of juice. Top
    scientists from academia, government, the food industry and trade
    organizations; public health officials from the Centers for Disease
    Control and Prevention and states; and interested members of the public
    attended, providing the latest evidence, concerns, and solutions, both
    at the meeting and in written comments. FDA scientists used these
    comments, as well as comments on the HACCP ANPR from August 1994, FDA
    research and surveillance data, pilot program experience, and
    information from the peer-reviewed scientific literature, in developing
    the proposed rule.
        Question. How does FDA resolve disagreements within the scientific
    community regarding the development of what is proper under HACCP?
        Answer. Hazard Analysis Critical Control Point--HACCP--is a
    preventative system for producing safe food. FDA's HACCP regulations
    are not proscriptive in that they do not identify specific hazards, or
    require specific control measures or critical limits that industry must
    apply. Rather, HACCP places responsibility on industry to determine the
    specific hazards that apply to their products and processes, and
    measures to control these hazards. It is the industry's responsibility
    to provide scientific data and principles to substantiate a HACCP plan.
        During the developmental stages of HACCP rules, the Agency works
    with the scientific community and the industry to jointly determine
    what to include in a HACCP rule, such as through the voluntary HACCP
    Pilot Program, and through public scientific meetings. Through the
    HACCP Pilot Program, for example, FDA is working cooperatively with
    processors, trade associations, and state regulatory agencies. Where
    there are disagreements, such as in the results of hazard analysis or
    the determination of critical control points, scientific data are
    presented to resolve the problem.
        FDA also comments on its HACCP proposals from the scientific
    community and others, through the rule-making process. FDA used the
    comments received on the ANPR, and those received on the proposed rule
    for seafood to develop the final seafood HACCP rule. The same process
    is planned for HACCP for juice. The proposed seafood HACCP rule was
    available for public and scientific comment during ``Town Meetings.''
    FDA held a public forum on juice in December of 1996, that was used in
    developing a proposed rule.
        Question. What mechanisms are in place for industry to challenge a
    science-based rule relating to the implementation of HACCP for seafood
    or any similar regulation under your jurisdiction?
        Answer. FDA recognizes, and has long advised the industry, that no
    two HACCP systems need be identical. HACCP systems can be unique to
    each processing operation. FDA does not dictate in advance what a HACCP
    system must look like for any given processor. Individual flexibility
    is one of the key aspects of HACCP and is essential to the success of
    the overall program. That is one reason why the seafood HACCP
    regulations are short and relatively general. The regulations
    essentially require that processors establish HACCP systems that honor
    seven internationally recognized principles of HACCP, such as hazard
    analysis, developing ``critical control points,'' and monitoring those
    critical control points to make sure that they are operating as they
    should, but leave the details to processors.
        To help processors determine how to apply those principles to their
    situations, FDA has issued guidelines, the ``Fish and Fishery Products
    Hazards and Controls Guide,'' that provide advice on hazards and
    controls for those hazards. Processors are advised not to follow FDA's
    advice blindly, however, but to determine whether that advice is
    appropriate for them. While FDA's inspectors will initially compare
    each processor's HACCP system to the advice in the guidelines,
    processors are free to choose alternative approaches so long as their
    HACCP systems provide a level of safety that is equivalent to that
    provided in the guidelines' approach. Moreover, processors are free to
    challenge the scientific validity of the approach taken in the
    guidelines. The appeals process for guidance is set forth in the agency
    Good Guidance Practices at 62 Federal Register 89 69-70, February 27,
    1997. FDA is always interested in learning about better ways to ensure
    safety and in making improvements in its own guidelines. In developing
    alternatives to the guidelines or challenging their validity,
    processors should be able to establish the scientific validity of their
    systems for the agency to evaluate.
                         premarket notification program
        Question. The Food and Drug Modernization Act of 1997 created a new
    Pre-Market Notification Program which would accelerate the approval
    time of certain materials such as new food-contact packaging materials
    that are important to firms in my state. This program is supposed to
    take effect April 1, 1999, and I understand it is estimated to cost
    $1.5 million in fiscal year 1999 and $3 million in subsequent years. I
    also understand FDA is required by the Act to report to Congress by
    April 1, 1998 (tomorrow) on updated estimates for this program. When
    can we expect to receive the report that is due tomorrow?
        Answer. We have a draft document that is now being circulated
    within the Agency for clearance. We plan to submit this report to the
    Department for their review shortly. With support from the Department,
    we are trying to expedite the process as much as possible. However,
    assembling this initial report and ensuring the soundness of the
    estimate did take longer than anticipated. We expect that the report
    will be submitted shortly.
        Question. Can you provide information regarding the currently
    estimated costs of this program?
        Answer. At this time, the report is still under development. Once
    the report is finalized we will be able to provide our estimate of the
    costs of the program.
        Question. Do you believe it will be operational by April 1, 1999?
        Answer. The section of the Food and Drug Modernization Act that
    established the premarket notification program for food contact
    substances provides that this program will operate only if, in a given
    year, certain conditions are met. That is, that an appropriation equal
    to or exceeding a defined amount is made for carrying out the premarket
    notification program, and that the Secretary certifies, in essence that
    the amount appropriated for the Center for Food Safety and Applied
    Nutrition is not less than that appropriated for fiscal year 1997,
    exclusive of new programs.
        At this time, we cannot say whether the conditions specified in the
    statute for operation of the premarket notification program will be
    met. However, only if the statutory conditions are met, would the
    program be operational on April 1, 1999.
        Question. Have you heard from the regulated industry regarding this
    program and if so, what is their response to it?
        Answer. Prior to enactment of the FDA Modernization Act, agency
    personnel discussed the premarket notification system with industry
    representatives who strongly favored the establishment of such a system
    and even supported industry-funded user fees to ensure that the program
    would be adequately supported. It is our understanding that the
    regulated industry continues to favor an adequately supported premarket
    notification program for food contact substances.
                                  irradiation
        Question. Last December, FDA approved irradiation of meat products
    including fresh and frozen beef, lamb, and pork. FDA had similarly
    approved irradiation for poultry products in 1992. What is your view on
    consumer confidence relating to irradiated foods?
        Answer. A survey conducted for FDA in the 1980's showed a small
    proportion of the population very interested in obtaining irradiated
    foods, a similar proportion opposed, and the majority being willing to
    consider such products and deciding on the merits. The only real test,
    however, is to see whether consumers buy such products when available.
    At this time, very little product has been available to consumers but,
    where consumers had the opportunity to purchase such foods and had
    received educational materials allowing an informed decision, they have
    been receptive. With greater awareness of the risks from foodborne
    organisms, we believe many consumers would be interested in irradiated
    foods depending on the price, taste, and perceived benefits.
        Question. What percentage of poultry products have been subjected
    to irradiation since 1992?
        Answer. As far as we are aware, only a very small percentage.
    USDA's Food Safety and Inspection Service would have better information
    of amount based on their management of the poultry inspection program.
        Question. What indications are there that the meat industries will
    be using irradiation as a food safety procedure in the near-term?
        Answer. While we know of interest, we have no information on who,
    if anyone, will actually use the process. Also, at this time, there is
    still a need for the Food Safety and Inspection Service to amend its
    regulations regarding meat processing before meat may be irradiated
    legally. As with poultry, FSIS may be in a better position to gauge
    industry interest because, in such cases, a meat irradiation facility
    would become a meat processing facility subject to FSIS regulation.
        Question. Outside the United States, how is irradiation viewed by
    consumers?
        Answer. We have no information on that question. We know that the
    amount of food irradiated outside the U.S. is generally small but have
    no information about consumer preferences.
        Question. How much, if any, irradiated food product is imported
    into the United States?
        Answer. Essentially none. There is very little irradiated food in
    commerce, in the U.S. or abroad.
                            protections for industry
        Question. No one questions the need to move forward with reliable
    food safety requirements. Industry and consumers alike know that the
    highest levels of food safety are in the interests of them both.
    However, sometimes in an effort to react quickly, government overreacts
    in ways later found more harmful than necessary. The effect of the Alar
    scare several years ago to the apple industry in the Pacific Northwest
    and the more recent forced sale of Hudson Foods are cases in point.
    What steps is FDA taking to ensure that while doing everything possible
    to protect consumers from unsafe food, governmental overreaching does
    not occur in ways overly harmful to industries or individual companies?
        Answer. In these days of mass media coverage of news events, there
    may be little FDA can do to protect industry from adverse publicity.
    However, FDA has issued a complete guideline for industry to follow to
    be prepared for emergencies such as product recall. This guideline is
    published at 21 CFR Part 7. Basically this guideline explains how the
    industry can be prudent in making such emergencies as recalls as lest
    disruptive to the firms operations as possible. These are: (1) prepare
    and maintain a contingency plan for emergencies; (2) use sufficient
    coding of products to make possible lot identification and to
    facilitate effective recall of violative lots; and (3) maintain product
    distribution records necessary to facilitate location of the product
    being recalled.
        Utilizing this system, the expeditious handling of a recall or
    other emergency can and does show to consumers that the firm takes its
    responsibilities to consumers seriously. This approach also allows the
    recall to be completed quickly and reduces media exposure.
                           international food safety
        Question. Food markets have become global and various new strains
    of bacteria move more quickly from one region to another than ever
    before. In addition, the modernization of food processing itself poses
    special problems for food safety. Explain the role of FDA in
    investigating the rise in harmful bacteria, especially as it relates to
    food products.
        Answer. FDA regulates food products except for meat, processed egg
    products, and poultry. FDA for many years has had a robust research and
    testing program geared to microbial contamination of food products,
    especially canned foods and seafoods. With the recent increase in
    reported outbreaks associated with fresh produce and other foods, FDA
    and USDA contacted CDC to initiate a nationwide active surveillance
    program, now called FoodNet, to actively collect foodborne outbreak
    information from physicians and hospital surveys. These FoodNet
    sentinel sites, which will number eight in 1998, cover nearly the
    entire USA and provide statistical foodborne illness information for
    FDA and USDA to monitor and institute intervention strategies to limit
    the scope of an outbreak. Likewise, FDA or USDA would then conduct
    traceback investigations to determine the exact food source or
    microorganism. FDA and USDA have recently linked with CDC's DNA
    fingerprint network in order to specifically link/de-link
    geographically diverse outbreaks.
        FDA, in cooperation with other federal and academic institutions,
    conducts microbial and risk assessment research on the microbial
    ecology, intervention strategies, method development, risk assessment
    models, and sampling strategies, to provide the scientific data and
    information necessary to successfully prevent, minimize or intervene
    microbial contamination. This scientific research is critically
    important to develop food safety systems and guidance for emerging and
    evolving microbial pathogens.
        FDA is a leader in the scientific investigation of foodborne
    pathogens and this expertise proves essential in crafting sound public
    policy to ensuring the safety of the food supply. With ever-increasing
    and global food supply, we must devote greater attention and efforts,
    however, to new strains and new pathogen commodity combinations.
    Likewise, pathogens are evolving so that traditional prevention
    techniques are less effective, such as acid environment, hence we must
    understand those mechanisms so that new intervention strategies may be
    developed, such as ozone and irradiation.
        Question. Explain your view on the influence of modernization of
    the food system as a contributor of food-borne illness.
        Answer. The modernization of the food system influences both the
    development and spread of foodborne illness. Only a few years ago most
    food available to consumers was produced and sold locally. Today, the
    food industry has evolved from many, small local producers and
    manufacturers into a few large producers that ship products across the
    country and around the world. This means that a single contaminated
    product has the potential to be distributed thousands of miles and to
    cause contamination. Moreover, food products may become contaminated at
    any point in the lengthy journey between producer and grocery.
        Consumers are demanding products with convenience and that have
    organoleptic properties closer to ``fresh.'' This requires the use of
    minimal processing and packaging technologies and more complex
    processes to assure the same level of protection that traditional
    thermal methods, such as canning and pasteurization, deliver. Further,
    there are several other causes. Among these are consumer preferences
    for undercooked products and convenience foods, increased dining out,
    and more on-site food processing. Also the population particularly
    vulnerable to foodborne disease has been growing in size; today more
    than 30 million people are at high risk from foodborne infection. These
    include the elderly, the very young, pregnant women, and the
    immunocompromised by diseases such as HIV/AIDS or by drugs such as
    those used by organ transplant recipients and cancer patients.
        The modernization of the food supply also applies to animal
    production practices. The use of antimicrobial agents in animal
    production has facilitated confinement housing and allowed higher
    densities of animals to be maintained. Unless properly managed, food
    animals being reared in crowded conditions have ample opportunities to
    transmit infections. The resulting poor performance or disease
    increases the use of therapeutic, prophylactic and growth-promotant
    antimicrobial agents. Even if well managed, the increased density of
    livestock or poultry with similar risk profiles in intensive rearing
    operations requires an aggressive approach to disease control, which
    can lead to heavy prophylactic and therapeutic antimicrobial use. If
    such operations are not well managed, heavy antimicrobial use may
    become a management crutch.
        For these reasons, the use of preventive systems, such as Hazard
    Analysis and Critical Control Point procedures, during food production
    and distribution becomes imperative in reducing the risk of
    contaminated products reaching consumers.
        Question. Describe the manner in which FDA is working with foreign
    countries to help ensure food safety for all consumers.
        Answer. FDA has a long history of international leadership and
    cooperation on food safety through direct contacts with foreign
    governments and industry as well as through international organizations
    such as the World Health Organization, Panamerican Health Organization,
    and the Codex Alimentarius Commission, which establishes international
    standards.
        Through these numerous avenues, FDA has promoted or established
    standards which are consistent with the U.S. level of protection. With
    the President's Food Safety Initiative we have convened an
    international working group comprised of the State Department, U.S.
    Trade Representative and USDA/Foreign Agriculture Service to map out a
    technical assistance program to reach foreign countries and producers.
    Furthermore, we have made numerous speeches and presentations at
    scientific, intergovernmental meetings to discuss FSI and, more
    specifically, the Fresh Produce Initiative goals and objectives. We
    established a website to further disseminate information, regulations
    such as HACCP, and guidelines generated to ensure improved food safety.
    Currently, we have proposed, ``Draft Guidelines to Minimize Microbial
    Contaminations for Fresh Fruits and Vegetables,'' and proposed Juice
    HACCP regulations. The internet is a powerful tool in sharing
    information and informing foreign countries and enterprises.
        With the funding included in the President's fiscal year 1999
    Budget request, we plan to hire additional staff to conduct foreign
    country visits to provide scientific and technical assistance in
    cooperation with our USDA/FAS and APHIS colleagues to actively promote
    good agricultural practices and food safety regulations.
                                    tobacco
        Question. In 1997, FDA's regulation on youth tobacco became
    effective and ten states, including Arkansas, were chosen for a pilot
    project to determine the level of enforcement of rules prohibiting the
    sale of tobacco products to anyone younger that 18 years of age.
    Additional funds for this purpose were included in the fiscal year 1998
    appropriations bill to extend this activity to any state wishing to
    participate. How many states have chosen to participate?
        Answer. Thus far, 28 states have submitted proposals for funding in
    fiscal year 1998. Of these, 4 are for extensions of the original 10
    contracts signed last year. There are 7 contracts with new states that
    have been signed or will shortly be signed. Seventeen additional
    proposals are currently being negotiated.
        Question. If any states declined, what were the reasons?
        Answer. No states have formally declined to submit a proposal. The
    agency expects the remaining proposals to be submitted over the next
    two to three months.
        Question. In what ways were these federal funds not simply
    replacement of state funds that would have been otherwise available for
    enforcement?
        Answer. Funds available to the states to enforce the FDA rule
    cannot be used to enforce state laws. They can only be used to enforce
    the FDA regulation. Thus, the federal funds cannot be used to replace
    any existing state funds that would have otherwise been available for
    enforcement.
        Question. The fiscal year 1999 budget request includes an increase
    of $100 million for tobacco-related activities. What steps is the
    Administration taking to ensure that of any revenues available through
    a ``tobacco settlement'', enough will be made available to this
    subcommittee to fund the FDA activities related to tobacco?
        Answer. The Administration will work closely with Congress to
    ensure the appropriate distribution of any funds that are generated
    from the passage of comprehensive tobacco legislation.
        Question. Please provide an outline of the extent to which specific
    activities will be included in the $100 million increase.
        Answer. Of the requested $100 million increase, $51 million will be
    used to increase enforcement activities; $25 million will be used to
    increase outreach activities; and $24 million will be used for new
    product regulation activities.
        Question. Since the fiscal year 1999 budget contains several
    proposed user fees, why were user fees not proposed to fund the FDA
    tobacco activities?
        Answer. The Administration's budget request for fiscal year 1999
    includes funding for FDA's tobacco program, and other domestic policy
    priorities, that would be generated from the passage of comprehensive
    tobacco legislation. A key element of this legislation is raising the
    cost of cigarettes. The revenues raised are essentially indirect user
    fees.
        Question. A large part of the $100 million increase is for
    education, media, directed mailings, and other activities designed to
    dissuade young Americans from using tobacco products. What levels of
    funding are currently being used for this purpose by other governmental
    entities (including state and local governments) and various non-
    profits such as the American Cancer Society?
        Answer. The overall objective of FDA's tobacco program is to reduce
    the number of young people who use tobacco. Nevertheless, that is not
    the primary objective of the outreach activities the Agency will
    conduct with increased funding in fiscal year 1999. The goal of FDA's
    outreach efforts is to increase retailer compliance with the
    regulations that went into effect in February 1997 that prohibit the
    sale of cigarettes and smokeless tobacco products to minors. The Agency
    is unaware of the precise level of funding currently being used by
    private and public organizations to dissuade young people from using
    tobacco products and whether any of that funding is directed to
    retailer compliance.
        Question. What tangible evidence exists to document the effect of
    educational and communication efforts in reducing teen smoking?
        Answer. The following evidence exists on the effect of educational
    and communication efforts to help reduce teen smoking.
        [The information follows:]
        DHHS, ``Preventing Tobacco Use Among Young People: A Report of the
    Surgeon General,'' 1994, stated, based upon a review of the evidence,
    that ``a nationwide well-funded antismoking campaign could effectively
    counter the effects of cigarette advertising in its currently permitted
    media forms.'' (see also, for a similar recommendation, Institute of
    Medicine, ``Growing Up Tobacco Free: Preventing Nicotine Addiction in
    Children and Youths,'' 1994.)
        From July 1, 1967 to December 31, 1970, the Federal Communications
    Commission, as part of the ``Fairness Doctrine,'' required antismoking
    messages on television and radio to counter industry advertising.
    During that time, per capita cigarette consumption declined 7 percent,
    from 4,280 in 1967 to 3,985 in 1970 (6.2 percent was attributable to
    the messages). A study of adolescents found that their smoking rates
    declined during that period.
        In an effort to reduce cigarette consumption, the Greek government
    launched an antismoking campaign including television and radio
    counter-advertising as well as a community-based print education
    campaign that lasted for two years of the government's effort. During
    this two year period, the annual increase in smoking rates dropped to
    zero. When the campaign ended, the annual increase rose to 6 percent.
        Researchers, in Vermont, tested the effect of mass-media and school
    health education programs. Students exposed to both school and media
    interventions were 35 percent less likely to have smoked in the past
    week than students exposed only to the school program, and this
    preventive effect persisted for at least 2 years following the
    completion of the intervention program. The decrease occurred even in
    students who were considered to be at slightly higher risk of becoming
    smokers because of demographic considerations.
        In California, the Department of Health Services conducted a $26
    million multi-year media anti-smoking campaign. One evaluation found
    that the campaign directly influenced 7 percent (33,000) of
    Californians to quit smoking in 1990-1991, and contributed to the
    quitting of another 173,000. The program also resulted in high levels
    of awareness among young people and may have contributed to stopping
    the rise in teen smoking that had been occurring in California before
    the campaign.
                                    medguide
        Question. Last year, FDA launched the MedGuide program as a way to
    give consumers better information about possible side effects of
    medications and other possible dangers from the misuse of medicine. Can
    you document any results of this program?
        Answer. In 1995, the FDA proposed a regulation that was intended to
    encourage the development and distribution of patient-directed
    medication information that would be easily understood, comprehensive,
    specific, non-promotional in tone and content, and scientifically
    accurate. Following publication of this proposal, Congress directed the
    Secretary of DHHS to convene a committee of diverse private-sector
    interest groups to develop a voluntary, long-range, comprehensive
    action plan to fulfill the goals specified in the Congressional
    mandate. These goals are to ensure that useful written prescription
    medication information would be distributed to 75 percent of patients
    receiving new prescriptions by the year 2000, and 95 percent by the
    year 2006. The plan aimed to improve patients' understanding of the
    prescription drugs they take and reduce the misuse of such medications
    which FDA has estimated costs the public in excess of $20 billion
    annually. Assisted by The Keystone Center, a nationally recognized,
    non-profit public policy mediating organization, a 34-member steering
    committee representing the pharmaceutical industry, pharmacists,
    physicians, consumer and patient advocacy groups, patient drug
    information data base companies and other interested groups
    participated in developing the plan. On January 14, 1997, DHHS
    Secretary Donna E. Shalala accepted the action plan developed by the
    collaborative steering committee.
        Public Law 104-180 called for an evaluation of the private sector's
    achievement of the goals of the plan in the year 2000. In addition, the
    action plan itself called for the development of mechanisms for
    periodic evaluation of the voluntary program. We are aware of at least
    one segment of the private sector that is conducting small-scale
    evaluations of patient medication information distributed by various
    information vendors for certain drug classes, and one specific
    information vendor's evaluation of certain of its leaflets. There may
    be other evaluations ongoing of which we are unaware.
        In 2000, FDA plans to conduct an evaluation of both the
    distribution and quality, that is, ``usefulness,'' of a sample of
    medication information sheets given to patients with their new
    prescriptions. In addition, FDA intends to conduct an interim
    assessment of the private sector's progress toward meeting the goals to
    allow for any necessary adjustments in time for the critical year 2000
    evaluation. FDA has obtained funding, and is in the process of
    obtaining OMB clearance, for one component of this evaluation: the
    general distribution of patient medication information. However, this
    study cannot evaluate the quality or usefulness of the information as
    defined by the action plan. FDA is seeking funding to conduct this
    critical component of a full interim evaluation. FDA has not yet
    collected any documented results because the action plan is only in its
    first year of implementation.
        We believe we can best aid the ongoing private sector efforts to
    reach the congressionally-mandated goals by providing well-documented,
    objective, non-partisan evaluations of progress.
        FDA is in the process of finalizing a rule to require FDA-approved
    labeling for patients, or ``Medication Guides,'' only for a few rare
    products each year that are determined to pose a serious and
    significant public health concern requiring immediate distribution of
    FDA-approved patient labeling.
        Question. Has there been a reduction in hospitalizations due to
    accidental misuse of medications?
        Answer. As we discussed earlier, Public Law 104-180 called for an
    evaluation of the private sector's achievement of the goals of the plan
    in the year 2000. The action plan also called for the development of
    mechanisms for periodic evaluation of the voluntary program. FDA has
    not yet collected any documented results because the action plan is
    only in its first year of implementation.
        Question. To what extent is MedGuide used in the marketing of
    medications?
        Answer. FDA has not conducted a rigorous evaluation of the use of
    patient medication information in the marketing of medications.
    However, we have observed, again in a non-rigorous manner, an increase
    in the number of manufacturers who are submitting draft patient
    labeling for various new drug approvals. We believe that there are
    concerns on the part of the manufacturers about liability brought on by
    increased consumer-directed advertising. It appears there is a desire
    from industry to make more extensive use of information that is more
    easily understood by patients or consumers to fulfill the requirement
    that advertisements contain information ``in brief summary'' concerning
    the risks associated with the advertised product.
        Question. Is there any way to document the extent to which
    consumers actually read and use the information available through
    MedGuide?
        Answer. Protocols could perhaps be designed to assess the actual
    use by patients of patient-directed medication information, but these
    would be expensive to conduct.
                                   user fees
        Question. Again this year, FDA is proposing unauthorized user fees
    ($128 million) as part of the budget submission. As always, this puts
    extreme budgetary pressure on this subcommittee since authorization of
    user fees is not within our proper jurisdiction and can, in fact, be
    challenged by the House Ways and Means Committee. With limited, and
    often reduced, allocations to our subcommittee, the assumption of user
    fees serves only to place all programs under our jurisdiction at risk.
        What steps has FDA or the Administration taken to work with the
    authorizing committees to enact these user fees?
        Answer. FDA, in concert with HHS and OMB, prepared user fee
    legislation for the new fees proposed in the fiscal year 1999
    President's Budget, which was submitted to the President of the Senate
    and Speaker of the House on March 13, 1998. To date, there have been no
    hearings with the authorizing committees or with affected industries on
    this specific proposal. We do look forward to working with Congress to
    authorize the fees. In order for FDA to maintain its current level of
    consumers' health protection, it is important that the full program
    level in the President's budget be appropriated.
        Question. How soon could they be collected if enacted?
        Answer. As the proposed legislation moves through Congress, the
    Administration will make every effort to expedite collections once
    enactment occur. This would include extensive negotiations with
    industry to ensure a palatable fee structure similar to that which
    occurred with PDUFA. At this time, it would be difficult to provide an
    exact timetable of events.
        Question. If this subcommittee chose to make certain FDA activities
    conditioned on the authorization and collection of up to $128 million
    in new user fees, which FDA activities would you suggest we postpone
    until these fees are collected?
        Answer. The authorization and collection of the new proposed user
    fees is intended to support FDA's traditional activities of premarket
    review and postmarket assurance for foods, drugs, biologics, animal
    drugs, and medical devices. Delays in collecting these user fees would
    prolong the review process, extend approval times, and seriously impede
    our ability to meet statutory deadlines in these program areas. Under
    the Administration's plan, user fees would be in place at the start of
    the fiscal year so that no disruption of activities would occur.
                           fda lab consolidation/nctr
        Question. In fiscal year 1998, funds were provided to complete
    Phase II of the Arkansas Regional Lab (ARL) at Jefferson, Arkansas on
    the campus of NCTR. The ARL is an important component of FDA's overall
    lab consolidation. In fact, consolidation should now be underway with
    certain FDA lab function being transferred to the ARL in the near
    future. I note that the fiscal year 1999 budget request does not
    include funding for Phase III of the ARL. Phase III is the final phase
    of construction for the ARL and I understand it is critical for the
    efficient execution of FDA's lab consolidation plan. Can you explain
    why Phase III was not included in the budget request?
        Answer. Due to competing issues with a higher priority to the FDA
    mission, within both the Salaries and Expenses and the Buildings and
    Facilities Appropriations, the request was not included in the
    President's Budget.
        Question. Was Phase III included in the fiscal year 1999 budget
    recommendations of FDA to HHS or to OMB?
        Answer. FDA requested funding for the construction of Phase III of
    the Arkansas Regional Lab (ARL) in the Preliminary Budget Submission to
    DHHS but this request was not included in the Justification of Budget
    Estimates to OMB.
        Question. Please provide an update on all FDA lab consolidation
    activities with special detail given to the consolidation of activities
    at ARL.
        Answer. For the record, I would be happy to provide a listing of
    impacted field locations, with a description of the impact on that
    location under the FDA field laboratory consolidation. Laboratory
    personnel in each closing laboratory either have been or will be
    offered relocation expenses to move to the new site along with their
    work. Under the plan, other district office functions and staff would
    remain in place. This includes a complement of inspectors, consumer
    safety officers, consumer affairs officers, and administrative staff at
    each location where laboratories were to be phased out. Only the
    laboratory staffs would be affected by the plan.
        [The information follows:]
           status of fda field laboratory consolidations--march 1998
        Arkansas Regional Laboratory (ARL) (NCTR at Jefferson, AR)--Planned
    as a multi-purpose laboratory. ARL assumed many of the laboratory/
    analytical functions performed by the Chicago District laboratory,
    which closed on July 1, 1997. ORA will occupy renovated, temporary
    space until completion of the ARL facility in 1999. The ARL will also
    assume the analytical and laboratory functions and personnel from the
    Dallas, Minneapolis, and Detroit laboratories when these facilities
    close in 2000, except for Detroit's human drug functions and the
    Medical Devices program work from Minneapolis.
        Baltimore--The laboratory closes in 1999. The Human Drug functions
    will go to Philadelphia and Medical Devices program in-vitro
    diagnostics will go to WEAC. All other programs move to the Southeast
    Regional Laboratory (SRL) in Atlanta, except for the present DOD shelf
    life work which will move to Philadelphia and San Juan.
        Buffalo--The laboratory closed in October 1996. All analytical
    laboratory functions were transferred to the Northeast Regional
    Laboratory (NERL), Brooklyn, New York.
        Chicago--The laboratory closed on July 1, 1997. Most analytical/
    laboratory work was transferred to the ARL at NCTR. The remaining work
    moved to Minneapolis and the Kansas City laboratory.
        Cincinnati--The analytical functions were terminated on June 30,
    1997. The human drug functions were assigned to Philadelphia; all other
    work went to the SRL in Atlanta. The National Forensic Chemistry Center
    (NFCC) will remain in Cincinnati and the new facility is scheduled for
    completion and occupancy in the summer 1998.
        Dallas--The laboratory will close in 2000. All analytical /
    laboratory functions will be transferred to the ARL.
        Denver--The laboratory is scheduled to close in 2010. Analytical
    resource distribution will be reassessed annually. Functions will be
    transferred to the ARL.
        Detroit--The laboratory will close in 2000. Human drug work will
    move to Philadelphia; DOD shelf life functions will be split between
    Philadelphia and San Juan laboratories. The remaining analytical and
    laboratory programs will be reassigned to the ARL.
        Kansas City--Planned for closure in 2014. Analytical resource
    distribution will be reassessed yearly. Functions will be reassigned to
    the ARL.
        Los Angeles--Planned as a multi-purpose facility. FDA has acquired
    10 acres of land on the campus of the University of California at
    Irvine. Architectural and engineering design efforts are underway and
    receipt of the final design is scheduled for July 1998. Funding for
    construction has not been secured and the lease for the existing lab
    expires in March 2000. The new facility project is comprised of three
    construction phases. Phase I is the core and shell at an estimated cost
    of $16.5 M; the second phase is the fit-out of the laboratory at an
    estimated $16.5 M and phase III consists of the fit-out of the office
    space which is estimated at $5.5 M. The construction cost estimate is
    based on an fiscal year 1999 contract award. When the new lab is
    completed, Seattle's current drug functions are scheduled to move to
    Los Angeles and seafood functions would transfer to Seattle.
        Minneapolis--The laboratory will close in 2000. All analytical
    functions will transfer to the ARL except for Medical Devices related
    work which will be transferred to WEAC.
        New Orleans--The laboratory closed on February 28, 1998. The human
    drug program moved to the San Juan laboratory; all other analytical/
    laboratory programs were transferred to the SRL in Atlanta.
        Northeast Regional Laboratory (NERL) (New York)--Planned as a
    multi-purpose laboratory. A site for replacement space for the present
    Northeast Region, District and Regional Laboratory has been negotiated
    and secured at the York College in Jamaica, Queens. A lease has been
    signed by GSA for FDA and construction is underway. FDA occupancy is
    scheduled between December 1999 and Spring 2000.
        Philadelphia--Planned as a drug specialty laboratory. The current
    laboratory facility was renovated and expanded by 8,000 square feet to
    accommodate the additional drug functions inherited from other
    laboratories. The additional laboratory space was completed and
    occupied in September 1997.
        San Francisco--The laboratory will close upon lease expiration in
    2014. Analytical functions will be reassessed yearly.
        San Juan--Planned as a drug specialty laboratory. All other
    analytical work has been reassigned to the SRL in Atlanta. Renovations
    are underway to convert the laboratory to specialty drug analysis space
    and are scheduled for completion by August 1998.
        Seattle--One of five planned multi-purpose laboratories. FDA
    expanded the laboratory by 5,000 square feet in 1996. Analytical
    programs, including an animal facility, are now operational and Seattle
    will receive seafood analytical program work from Los Angeles and
    transfer their human drug programs when the new Los Angeles laboratory
    is completed.
        Southeast Regional Laboratory (SRL) (Atlanta, GA)--Planned as a
    multi-purpose laboratory. A 42,000 net square feet laboratory expansion
    project was completed in December 1997 and the new space is occupied
    and in use.
        Winchester Engineering & Analytical Center (WEAC) (Winchester,
    MA)--Planned as a specialty laboratory for radio nuclides/radio
    pharmaceuticals and engineering functions for medical devices. Human
    drug analytical and validation work was transferred to Philadelphia
    during 1997 and all other analytical functions were moved to the
    Northeast Regional Laboratory as of June 1997.
        Question. What effect on FDA lab consolidation will the failure or
    delay in constructing Phase III have?
        Answer. Phases I and II provide only laboratory space and offices
    for the analysts and management of the lab. There is no space for
    support personnel or functions in the first two phases. Phase III is an
    integral part of the Arkansas Regional Lab project. Phase III
    construction is comprised of finishing ARL exterior areas which will
    allow for a more complete integration of the ARL functions with the
    National Center for Toxicological Research or NCTR. The functions to be
    expanded and shared include such support as Financial Management,
    Procurement, General Administration, Computer Operations and related
    activities. All of the planned space for these functions is included in
    Phase III of the ARL project. Phase III calls for renovation of
    available space at NCTR to provide the administrative space necessary
    to support the ARL and NCTR science functions which is crucial for the
    maximum efficiency of the programs. If funding for Phase III is not
    available, makeshift space will have to be provided to accommodate the
    expanded service and support functions. Using makeshift space will
    reduce the effectiveness of the entire concept of field lab
    streamlining and severely hinder FDA's ability to provide adequate
    space to house the common support elements.
        Question. What are the current cost and time estimates for
    completing Phase III?
        Answer. The current estimated construction cost of the Phase III
    portion of the project is $13.35 million. The estimated cost is based
    on the exercise of a fixed price contract option to include Phase III
    in the current ARL construction contract to the current construction
    contractor by December 31, 1998. Based upon this option date, Phase III
    would be completed, along with Phases I & II, in December 1999. If
    Phase III is not awarded by December 31, 1998, Phase III will have to
    be repriced which will affect the cost and may affect the schedule.
                                     ______

                     Questions Submitted by Senator Harkin
                       biologics evaluation and research
        Question. The Administration's fiscal year 1999 budget for the Food
    and Drug Administration includes several new and expanded initiatives.
    However, it is my understanding that some of the basic FDA programs,
    such as the Center for Biologics Evaluation and Research (CBER) have
    recently experienced substantial program reductions--I am told 40-50
    percent. Is this correct? Does the fiscal year 1999 budget address this
    shortfall, and how does it do so?
        Answer. The Prescription Drug User Fee Act provides that fees are
    to be used to finance a portion of the costs associated with the
    premarket review of drug applications. Fees can only be collected and
    made available to cover increases in the costs for the process to
    review human drug applications. PDUFA is designed to assure that user
    fees collected under the Act are indeed additional resources for FDA to
    expedite the review of new drug applications.
        Under the Prescription Drug User Fee Act of 1992, certain
    regulatory research activities were supported by user-fee funding. The
    Agency and the industry negotiated that user-fee funding will no longer
    support any regulatory research activities under the Prescription Drug
    User Fee reauthorization. The intent is to devote user-fee resources to
    application review and information systems. The CBER will phase out its
    user-fee research FTE by the year 2000. Although user fees will no
    longer be available to fund research, CBER will maintain a reduced,
    high quality research program.
        The one-third reduction is to the CBER research staff, not total
    Center staff. The reduction will be phased over three years. At the end
    of this phase out, CBER will have 79 fewer FTE devoted to research, and
    no research FTE will be supported by user fees. About half of those 79
    FTE will be redirected to application review.
        FDA's budget request to Congress for fiscal year 1998 included $820
    million for salaries and expenses for the agency's base level of
    activities in fiscal year 1997, as well as selected program increases.
    In final action on FDA's appropriations for fiscal year 1998, Congress
    included an allocation of $24 million for FDA's role in the President's
    Food Safety Initiative and an increase of $29 million for the Agency's
    initiative to reduce underage use of tobacco products. Since the final
    appropriation of $857 million for FDA's salaries and expenses
    represented additional funding of only $37 million for $53 million in
    new program activities, it required the Agency to absorb a $16 million
    reduction to base activities. FDA was required, therefore, to
    reevaluate the funding needs of its base programs.
        FDA has conducted a thorough review of its major program areas to
    determine where and how reductions could be taken in the current fiscal
    year to fund new initiatives and pay increased salary and other
    increased costs. The Agency is determined to fully fund the Food Safety
    Initiative and the Tobacco Initiative at the program levels requested
    and appropriated. FDA's plans are described in the operating plan
    submitted to the Committee in January.
        As shown in the operating plan, CBER's salaries and expenses
    resources for fiscal year 1998 are $96,279,000 and 875 FTE, compared to
    fiscal year 1997 actuals of $96,256,000 and 861 FTE. The CBER programs
    are not incurring a disproportionate share of the Agency's reductions.
    The impact of these reductions on CBER programs will primarily be in
    the following areas: FDA's work on two action steps of an adult
    vaccination plan focusing on the recommendations of a 1994 National
    Vaccine Advisory Committee Report on adult immunization and adult
    immunization goals and performance measures will be delayed; funding
    for information systems to track the progress of applications,
    specifically, the blood logging and tracking system will be reduced;
    and the review times for non-user-fee applications such as blood and
    source plasma applications may increase.
        The fiscal year 1999 request will fund CBER activities at
    approximately the same level as in fiscal year 1998. It should also be
    noted that the fiscal year 1998 operating level reflects an increase of
    10 FTE in the field biologics program for increased efforts aimed at
    ensuring the safety of the blood supply.
        Question. Dr. Friedman, it is my understanding that some of the
    most exciting innovations in medical research and drug development will
    occur in the coming decade as we travel further into the age of
    molecular medicine we have now entered. I am informed that these
    innovative products are likely to need to be reviewed by the Center for
    Biologics Evaluation and Research. What are the consequences for the
    future if we do not provide adequate resources to stabilize the Center
    for Biologics Evaluation and Research today?
        Answer. In the area of biologics, examples of the vast new product
    types for which there is not prior history or base of knowledge to draw
    upon include the following: DNA vaccines, gene therapy vectors,
    manipulated tissues, xenotransplants, and non-red blood cell oxygen
    carriers. Meeting the tighter review time frames and performance
    benchmarks required under the Prescription Drug User Fee Act, or PDUFA,
    requires scientists at the cutting edge of their fields. This
    requirement is best achieved by having the researcher, who is currently
    practicing his or her specialty, directly involved in the review of
    product applications. Thus, there must be an environment which will
    attract and retain highly qualified researchers who are willing to
    commit some portion of their time to the regulatory process.
        The ability to recognize and anticipate problems before they
    happen, as well as to respond quickly to crises, requires a cohort of
    scientists who have active laboratory programs and hands-on regulatory
    experience. Even with the reductions that have been necessary in fiscal
    year 1998 in CBER programs, we believe CBER retains a wide range of
    excellent scientists who can bring laboratory experience to bear on
    regulatory decisions.
                     fda youth tobacco initiative questions
        Question. I just want to make it clear for the record that the FDA
    tobacco initiative that is in the budget, the $134 million, is separate
    from the tobacco settlement and from comprehensive tobacco legislation.
    In other words, FDA intends to carry out this initiative and can do so
    even if Congress does not pass an omnibus tobacco bill--provided you
    have the funding. Is that correct?
        Answer. The budget request for FDA's tobacco program for fiscal
    year 1999 is based upon $134 million being made available to FDA for
    these activities. These resources are needed to fully enforce the
    Agency's tobacco rule.
        Question. There is a compelling need for a comprehensive approach
    to reduce teen smoking along the lines of the comprehensive regulation
    issued by FDA in August of 1996--to reduce both access to and demand
    for tobacco among youths. We do not yet have fully in place a
    comprehensive program: it is my understanding that FDA's advertising
    restrictions have not yet gone into effect. However, a crucial part of
    the FDA initiative is in effect--setting a national minimum age for
    sales of tobacco and requiring photo I.D. checks. What is the
    contribution to public health of expanded funding just for carrying out
    FDA's youth access restrictions, particularly the minimum age and photo
    I.D. rules?
        Answer. The two access restrictions that are in place today,
    dealing with age and photo ID, are just one part of a comprehensive set
    of access and advertising provisions in FDA's final rule. It is the
    Administration's stated goal that a 50 percent reduction in youth
    smoking can be achieved when the Agency's final rule has been fully in
    effect for seven years. It is critical to expand the funding for
    enforcement of the age and photo ID provisions. In fiscal year 1998,
    compliance checks will be performed in less than half of the retail
    outlets that sell cigarettes and smokeless tobacco products in the
    United States. Expanded funding for these enforcement activities in
    fiscal year 1999 will help ensure that retailers do not sell tobacco
    products to minors. This is a vital first step towards accomplishing
    the objectives of the comprehensive program envisioned under FDA's
    final rule.
                       fda's arrangements with the states
        Question. Why is FDA entering contracts with the states instead of
    using its own personnel for the enforcement activities?
        Answer. There are at least 500,000 tobacco retailers in the United
    States. FDA's limited field inspectional resources simply do not allow
    the Agency to enforce the tobacco rule by itself. Joint enforcement
    efforts with the states, using a training, commissioning, and
    contracting process similar to the tobacco program, have worked quite
    successfully for mammography, retail food, and dairy farm inspections.
        Question. What type of arrangements does FDA have with the states
    and how is FDA working with the states?
        Answer. FDA has established a close and collaborative working
    relationship with the states to jointly enforce the tobacco rule. For
    fiscal year 1998, states submit proposals to FDA to conduct compliance
    checks under contract to the Agency. Proposals are based upon a
    Statement of Work drafted by FDA and sent to each state last November.
    State and local officials are trained and commissioned to conduct the
    compliance checks after each contract is negotiated and awarded.
    Throughout the entire process the FDA tobacco team works very closely
    with the Agency's state partners.
        Question. What support does FDA provide to the states? Does
    enforcement of the FDA minimum age and photo I.D. check rules impose
    new burdens on the states?
        Answer. FDA provides extensive support to its state partners. In
    addition to the training and commissioning that each state receives,
    any issue or question that arises is addressed by the tobacco team
    working in close contact with the state making the inquiry. There are
    no new burdens imposed on the states by virtue of their participation
    in the FDA tobacco effort because FDA reimburses the states for their
    expenses under the negotiated terms of the contract each state signs
    with the Agency.
        Question. Please tell the Committee a little more about what FDA
    will be able to achieve with the additional funding requested for the
    tobacco initiative for fiscal year 1999. I assume the additional
    funding will allow additional compliance checks, but also more
    education of retailers and of the public. How many retail
    establishments are you expecting to reach? How many visits a year do
    you expect to conduct for an establishment? And what will the budget
    request fund in the way of education and outreach?
        Answer. In fiscal year 1998, FDA is focusing most of its outreach
    efforts on retailer information, continuing its provision of brochures
    and Question and Answer pamphlets for retailers as well as maintaining
    a toll-free hotline telephone number for retailers to call to request
    materials and a WEBsite with similar information. Further, as each new
    state contracts with FDA to undertake compliance checks, the Agency
    sends mailing to all retailers in the state to alert them that
    compliance checks will soon begin in their state. In addition, the
    Agency has developed and has begun distribution of in-store materials
    to all retailers answering potential questions, and reminding them of
    their responsibilities under the rule, and assisting them in
    compliance; and has begun placing a modest level of advertising in a
    major market within states in which contracted compliance checks are
    being conducted.
        In fiscal year 1999, the Agency will design a multi-media
    advertising campaign including radio, print, and billboard
    advertisements and place these ads in major media markets in every
    state with which FDA contracts to conduct compliance checks. It will
    also develop a comprehensive retailer education program which includes
    a retailer kit containing in-store signs, tent cards, fact sheets,
    counter mats and other materials; a letter to retailers in each state
    updating them on the status of compliance checks in their state; a
    series of reminder postcards that can be posted in the store for
    customers and clerks to see; trade advertisements in retailer
    publications; and a toll-free hotline that retailers can call to
    request additional materials and ask questions. It will continue to
    have exhibits at major conferences representing state and local health
    officials, public health organizations, and consumer and retailer
    organizations educating these audiences about the new tobacco rule.
        On the enforcement side, in fiscal year 1998, the Agency is
    attempting to establish contractual relationships with each state and
    territory to conduct compliance checks of retail outlets that sell
    tobacco products. FDA is asking each state to attempt to conduct a
    minimum of 375 inspections per month. In fiscal year 1999, the Agency
    plans to commission state officials in all 50 states to perform
    unannounced inspections of over 500,000 retail establishments to
    determine if retailers are complying with the law. It will send warning
    letters to first violators and seek civil money penalties from those
    found violating the law multiple times. Finally, it will develop an
    enforcement strategy for national chains.
        Question. I want to examine more closely questions about the
    impacts on retailers of enforcing the minimum age and photo I.D. rules.
    What are you doing to help retailers comply with the requirements so
    they do not get sanctioned by FDA?
        Answer. The Agency has created an extensive program of outreach to
    tobacco retailers to ensure that they comply with the new tobacco rule.
    We fully described the details of this effort earlier. We will provide
    a full set of all the materials the Agency sends to retailers under
    separate cover.
        Question. Can you walk us through the enforcement process? What
    happens for successive violations? What are the levels of penalties?
        Answer. A retailer that sells a tobacco product to a minor during
    an FDA compliance check receives a written warning from FDA for a first
    violation. Escalating monetary penalties are imposed starting with a
    second violation. The fine for a second violation is $250; $1,500 for a
    third violation; $5,000 for a fourth violation; and $10,000 for a fifth
    violation. Retailers are provided an opportunity to contest the
    penalties FDA seeks to impose, including the right to request a hearing
    before an administrative law judge.
        Question. How much time between compliance checks? Could a retailer
    be subjected to multiple penalties without having time to correct the
    problem in the store, for example, through multiple compliance checks
    and penalties in one day?
        Answer. There is no fixed period of time between compliance checks.
    Typically, a follow-up compliance check in an outlet that previously
    sold to a minor will occur within three months of the prior inspection.
    Multiple FDA compliance checks in the same store on the same day will
    not occur.
        Question. Can you describe for the Committee the difference between
    this FDA initiative and the Synar Amendment rules relating to the
    Substance Abuse and Mental Health Administration block grants? How are
    the programs different and why is FDA's initiative needed in addition
    to the Synar regulations?
        Answer. The FDA and Synar programs complement each other. SAMHSA
    administers the Synar program, which conditions the receipt of
    substance abuse and mental health block grants on demonstrated tobacco
    control activities at the state level. The Synar program requires the
    states to monitor retailer sales to minors. By contrast, FDA has begun
    to enforce a mandatory federal regulation that prohibits the sale of
    cigarettes and smokeless tobacco products to minors.
        The FDA access restrictions are just one part of a comprehensive
    agency regulation which, when fully in effect, will restrict the
    availability and the appeal of tobacco products to minors. The key
    difference is that SAMHSA measures compliance with tobacco control, and
    FDA enforces a comprehensive regulation.
                                     ______

                      Questions Submitted by Senator Byrd
                          safety of imported food act
        Question. Chairman Cochran, Senator Bumpers, members of the
    Subcommittee, and Lead Deputy Commissioner, Dr. Michael A. Friedman, I
    am pleased to be here today to review the Food and Drug
    Administration's (FDA) programs. The FDA is the responsible federal
    agency for carrying out policy that protects the health of the nation
    against impure and unsafe foods, drugs, and cosmetics, as well as other
    potential hazards. While the FDA's mission is broad in scope, I will
    limit my questions to the safety of imported food, the Office of
    Generic Drugs, and the Food Packaging Pre-Market Notification System.
        One of the rewards that this nation enjoys as a result of its
    prosperity is the virtual smorgasbord of foods available to every
    consumer. However, this smorgasbord has the potential to become the
    literal poison pill, with outbreaks of foodborne illnesses raising
    alarming questions about the safety of the U.S. food supply. Not only
    are Americans getting sick from eating contaminated food, but an
    estimated 9,000 deaths occur annually in this country as a result of
    foodborne illnesses.
        To ensure the safety of imported fruits and vegetables, and other
    imported food, I cosponsored S. 1707, the Safety of Imported Food Act.
    S. 1707 would provide the FDA with new authority that would allow the
    agency to prevent the importation of foreign goods grown and processed
    under conditions that do not meet U.S. food safety standards. These
    conditions include everyday production and processing practices, where
    microbial contamination can occur--and where it often begins. In brief,
    S. 1707 would greatly enhance the FDA's ability to identify potential
    food safety hazards before people get sick.
        Would you please provide answers to the following questions: since
    the FDA already has the authority to detain products offered for
    import, why does the FDA need the authority provided under S. 1707?
        Answer. Current law provides FDA with authority to refuse entry if,
    after inspection or testing of imported products at the border, or as a
    result of other information, the Agency finds that the food appears to
    be unsafe or otherwise violates U.S. law. Experience has shown,
    however, that inspection and testing of products at the border may not
    be sufficient in all cases to ensure the safety of food products. In
    addition, it may be necessary to identify and inspect the source of
    potential contamination to ensure that products offered for sale in the
    United States meet domestic food safety requirements or otherwise
    achieve the level of protection required. FDA currently has such
    authority but only with respect to domestic production.
        This new provision adds to the Federal Food, Drug, and Cosmetic
    Act, FD&C Act, a principle that has been reaffirmed in the World Trade
    Organization, WTO, agreements on food safety. This agreement recognizes
    the right of signatory countries to set the level of protection each
    country deems appropriate for the health and safety of its citizens,
    and to exclude imported foods that do not meet their domestic food
    safety requirements or otherwise achieve the appropriate level of
    protection. The FD&C Act currently does not explicitly include this
    concept.
        Question. What would be the effect of S. 1707 on FDA's existing
    authority over imported food?
        Answer. Current law provides FDA with authority to refuse entry if,
    after inspection or testing of imported products at the border or as a
    result of other information, the Agency finds that the food appears to
    be unsafe or otherwise violates U.S. law. S. 1707 would give FDA the
    authority to evaluate the food safety systems, conditions, or measures
    in which an imported food was prepared, packed or held; if such
    conditions, systems, or measures do not meet U.S. requirements or
    otherwise achieve the U.S. level of protection, a food may be deemed
    adulterated and denied entry.
        This new provision adds to the Federal Food, Drug, and Cosmetic Act
    (FD&C Act) a principle that has been reaffirmed in the World Trade
    Organization, WTO, agreements on food safety. This agreement recognizes
    the right of signatory countries to set the level of protection each
    country deems appropriate for the health and safety of its citizens,
    and to exclude imported foods that do not meet their domestic food
    safety requirements or otherwise achieve the appropriate level of
    protection. The FD&C Act currently does not explicitly include this
    concept. The effect of S. 1707 would be to provide the authority needed
    to ensure that all imported food products meet the U.S. level of
    protection and also is consistent with rights and obligations under
    international trade agreements, and would provide FDA with another
    effective enforcement tool.
        Question. Does this legislation conflict with U.S. obligations as a
    member of the World Trade Organization (WTO)?
        Answer. S. 1707 is consistent and will not conflict in any way with
    U.S. obligations as a member of the World Trade Organization, WTO.
    Rather, S. 1707 is consistent with the right recognized in one of the
    WTO agreements, the Agreement on Sanitary and Phytoganitary Measures,
    that each member nation has the right to maintain its appropriate level
    of protection. The purpose of S. 1707 is not to restrict trade but to
    assure that U.S. consumers are as protected from harmful imports as
    they are from harmful domestic products. Current law provides FDA with
    authority to refuse entry if, after inspection or testing of imported
    products at the border or as a result of other information, the Agency
    finds that the food appears to be unsafe or otherwise violates U.S.
    law. Experience has shown, however, that inspection and testing of
    products at the border may not be sufficient in all cases to ensure the
    safety of food products.
        Question. I note that the President's budget proposes the inclusion
    of approximately $25 million in the FDA's fiscal year 1999 budget to
    provide the necessary resources to implement the goals of S. 1707. If
    these funds are provided in the fiscal year 1999 Agriculture
    Appropriations Bill, what progress will the agency be able to make in
    implementing the authority provided under S. 1707 in fiscal year 1999?
        Answer. The funding included in the fiscal year 1999 budget request
    would provide, among other things, better assurances that domestic and
    imported fresh fruits and vegetables are safe. However, this funding is
    not dependent upon passage of the legislation. The funding and the
    legislation are inter-related but not interdependent. Passage of the
    legislation would provide FDA with a powerful tool toward improving the
    safety of imports, but the activities planned with the proposed funding
    can move forward even without enactment, as the legislation is budget
    neutral.
                            office of generic drugs
        Question. Mr. Chairman, I am also interested in the FDA's Office of
    Generic Drugs (OGD). The generic drug industry, including Mylan
    Laboratories, Inc., headquartered in West Virginia, has alerted me that
    consumers and all purchasers of pharmaceutical products, including the
    federal government, could realize substantial savings if the FDA
    adhered to its statutory deadline for the OGD to review generic drug
    applications, known as Abbreviated New Drug Applications (ANDA), within
    180 days.
        I understand that a backlog of pending generic drug applications
    continues in the OGD. Why is the FDA exceeding the statutory
    requirement that ANDA's receive final agency action in six months?
        Answer. The agency makes every attempt to meet the 180 day generic
    drug application review requirement; however, for a number of reasons
    it is not always possible to do so.
        FDA considers either an approval or disapproval be a final action
    on any Abbreviated New Drug Application (ANDA). After receiving a
    disapproval action, manufacturers frequently resubmit applications that
    address the deficiencies indicated in the disapproval action.
        Approval times reflect both time with the agency reviewing
    applications as well as time with the sponsor or applicant responding
    to deficiencies noted by FDA reviewers. The time spent in FDA is
    measured by ``review cycles''. A cycle starts when an application is
    filed by FDA and ends when the agency issues an ``action letter.''
    Generally these letters communicate to the sponsor that their
    application is approved or not. If not approved, the sponsor is
    provided with the reasons why and has an opportunity to submit
    information needed to address these deficiencies. When this information
    is received a new cycle begins.
        Generally, approval time is comprised of multiple ``review
    cycles,'' as well as time between cycles when the applicant is
    responding to FDA's comments. However, there have been applications
    approved after the first ``review cycle.'' However, we believe there
    are some primary factors that impact our ability to review ANDA's
    within 180 days.
        First of all, the number of employees assigned to the Office of
    Generic Drugs has remained fairly constant while the number of original
    ANDA submissions has increased over 40 percent since 1994.
        Secondly, the activities of the Office of Generic Drugs (OGD) are
    entirely funded through appropriated funds. This means that OGD
    receives no additional funding from industry under the Prescription
    Drug User Fee Act (PDUFA) to support the hiring of additional staff.
    Therefore, resources are based on traditional appropriations and cannot
    rely upon additional resources made available through PDUFA.
        Lastly, included on the review clock are times that the Food and
    Drug Administration need to determine if the manufacturing site(s) are
    in compliance with current good manufacturing practices (cGMP's) and
    time for statistical and clinical consult.
        Question. Please provide a list of ANDA's that are currently being
    delayed because of an outstanding scientific or regulatory
    bioequivalence issue.
        Answer. The types of drug products that may take longer to review
    are nonsystemically absorbed drug products that require more extensive
    bioequivalence testing methodology and others that raise especially
    complex scientific issues. Information regarding whether an ANDA is
    undergoing review by the agency is proprietary information, and is
    generally not disclosable. FDA can only disclose this information to
    Congress in response to an authorized request from the Committee
    Chairman.
        Question. Please provide the names, or the types of products, as
    well as the mean time of the applications pending before FDA.
        Answer. As mentioned earlier, we may not disclose the specifics of
    the pending ANDA's without an authorized request from the Committee
    Chair. However, the types of drug products that may take longer to
    review are nonsystemically absorbed drug products that require more
    extensive bioequivalence testing methodology and others that raise
    especially complex scientific issues.
        The Office of Generic Drugs does not routinely monitor the mean
    time of pending applications. However, at the end of fiscal year 1997,
    there were 515 pending ANDA's, including 106 pending for more than six
    months. Overdue applications are ANDA's that have been pending more
    than 180 days.
        Question. How many of the outstanding issues on scientific or
    regulatory bioequivalence were raised by citizen petitions?
        Answer. The Agency receives numerous Citizen Petitions and other
    challenges each year regarding scientific or regulatory bioequivalence
    issues. There are approximately a dozen of these Petitions and other
    challenges currently being evaluated by the Office of Generic Drugs
    (OGD). Each Petition and challenge is carefully reviewed and responded
    to, and any related ANDA's are carefully evaluated based on the issues
    raised in the Petition. However, as we discussed earlier, the Office of
    Generic Drugs (OGD) is not allowed to specifically discuss ANDA's
    pending before the Agency.
        Question. The FDA reported to industry last year that a program was
    initiated in fiscal year 1996 to release bioequivalence protocols and
    protocol reviews to the public. Has this program reduced OGD's protocol
    workload and resulted in more time for work on reviews?
        Answer. The inception of the initiative to publicly release
    bioequivalence protocol reviews resulted in OGD's issuance of 40
    protocols to date, 34 of which were issued in fiscal year 1997. This
    initiative has reduced the total number of protocols received by the
    Office from 153 in fiscal year 1995 to 60 in fiscal year 1997.
    Consequently, OGD's bioequivalence reviewers and support staff now have
    more time to devote to the review of ANDA's.
                         premarket notification system
        Question. With regard to the Premarket Notification (PMN) System,
    the PMN provisions of the FDA Modernization Act of 1997 are intended to
    expedite introduction of advance food packaging materials while
    assuring the protection of public health. PMN has a significant impact
    on the Kanawha Valley Union Carbide plant in West Virginia, and I have
    the following questions. The FDA reform legislation that Congress
    enacted last year included a streamlined regulatory process for
    approving food contact materials. It appears that this agreement was a
    substantial factor in securing passage of section 309 of the new law.
    Am I correct that industry and the FDA were in agreement on the basic
    concept of this pre-market notification plan for food contact
    substances?
        Answer. Yes, prior to enactment of the FDA Modernization Act,
    agency personnel discussed the elements of a premarket notification
    system for food contact substances with industry representatives, and
    it is correct that the Agency is in agreement with the basic concept.
    However, FDA's agreement to the program was explicitly conditioned on
    its receiving adequate funding through user fees; however, that portion
    of the program was not enacted.
        Question. The language of the new statute requires that the FDA
    report to Congress by April 1, 1998, on the estimated cost for carrying
    out the food contact substance notification program. How far along is
    the Agency in preparing this report?
        Answer. We have a draft document that is now being circulated
    within the Agency for clearance. We plan to submit this report to the
    Department for their review shortly. With support from the Department,
    we are trying to expedite the process as much as possible. However,
    assembling this initial report and ensuring the soundness of the
    estimate took longer than anticipated.
        Question. On the basis of this evaluation, do you believe the
    Agency will indeed need additional funding to implement the food-
    contact substances notification program as originally expected by the
    House and Senate Conference Committee Members for the FDA reform
    legislation?
        Answer. No increase was included in the fiscal year 1999 request,
    as we were still reviewing the impact of this program. We are in the
    process of completing our report, as required by the FDA Modernization
    Act, which will provide our estimate as to the costs of this program.
        This concludes my questions, Mr. Chairman, and I look forward to
    working with you, the Ranking Member, and other Subcommittee members in
    conjunction with the Lead Deputy Commissioner, on these important
    issues confronting the FDA.
                                     ______

                      Questions Submitted by Senator Leahy
                                 generic drugs
        Question. The Administration's fiscal year 1999 budget
    justification document indicates that $34,883,000 and 351 Full Time
    Equivalents (FTE's) were devoted to FDA's generic drug program in
    fiscal year 1998. I understand that approximately $8,500,000 and 127
    FTE's were allocated specifically to the Office of Generic Drugs (OGD)
    for fiscal year 1998. Where do the other 224 FTE's work and how does
    the FDA spend the remaining $26,383,000? Please provide the specific
    FDA offices outside the OGD that will receive fiscal year 1998 generic
    drug program monies, detailing the dollar amount and FTE number for
    each recipient office.
        Answer. Of the 351 FTE providing support to the Generic Drugs
    program, 127 are located within the Office of Generic Drugs; 105 are
    elsewhere within the Center for Drug Evaluation; and 119 are located in
    the Office of Regulatory Affairs. The cost of the support provided by
    these offices are spent on salaries and operating expenses. We are
    happy to provide the breakout of support for the Generic Drugs program
    within the Center for Drug Evaluation for the record.
        [The information follows:]

    ------------------------------------------------------------------------
                                                                 Estimated
                        Office                        FTE          costs
    ------------------------------------------------------------------------
    Office of Center Director....................          7        $824,000
    Office of Management.........................          7         925,000
    Office of Information Technology.............          8         942,000
    Office of Training & Comm....................          8         942,000
    Office of Compliance.........................         26       3,062,000
    Office of Review Management..................         26       3,062,000
    Office of Pharm. Science \1\.................         23       2,710,000
                                                  --------------------------
          Total..................................        105      12,367,000
    ------------------------------------------------------------------------
    \1\ Excludes Office of Generic Drugs.

    Dollars are rounded.

        Since publication of the 1999 budget justification document, the
    Office of Generic Drugs staff has increased from 127 to 133 for fiscal
    year 1998. The FDA Operating Plan also estimates the funding level for
    the Office at $9,693,000.
        Question. I am concerned about the backlog of pending applications
    for Abbreviated New Drug Approvals. According to the generic drug
    industry, about half of all drug prescriptions are filled with generic
    versions of the prescribed drug, and a generic typically enters the
    market 30 percent below the brand price. Within a couple of years, the
    generic industry predicts that the generic drug price may decline to 60
    to 70 percent of the brand price. Long delays in an Abbreviated New
    Drug Application costs consumers and the government millions of
    dollars. I know that FDA has been trying to reduce the backlog of
    Abbreviated New Drug Applications. I would like to know what steps FDA
    is taking to continue making progress against the backlog.
        Answer. The Office of Generic Drugs (OGD) defines backlog as being
    all applications pending review. This includes applications that are
    pending less than 180 days, and application pending greater than 180
    days or called ``overdue'' applications. At the end of fiscal year
    1997, there were 515 pending ANDA's, including 106 pending for more
    than six months. Either approval or disapproval of an ANDA is
    considered by FDA to be a final action. We make every attempt to meet
    this requirement; however, for a number of reasons it is not always
    possible to do so. After receiving a disapproval action, manufacturers
    frequently resubmit applications that address the deficiencies
    indicated in the disapproval action.
        Of the 515 applications pending at the end of fiscal year 1997, 106
    were overdue.
        FDA has specific initiatives with the goal to reduce the backlog
    and decrease overall time to approval.
        OGD has begun sending the review comments and/or deficiencies to
    applicants via facsimile. Prior to communicating via facsimile, all
    deficiencies were sent through the U.S. mail. Communicating
    deficiencies by facsimile can save several days in each review cycle.
    Additionally, for most minor issues, applicants are able to submit
    their responses via facsimile. If a fax response is received from an
    applicant within 30 days, the reviewer will then complete review of
    that application. Previously, responses to minor amendments were placed
    in a queue and reviewed within 60 days. Based on the reason for the
    deficiency, a small number of minor amendments continue to be placed in
    a queue for review. The Office believes that this new procedure has
    improved communications with applicants and has helped to reduce
    overall time to approval.
        The Office has been working with firms to facilitate the electronic
    submission of data (ESD) used to support bioequivalence studies. This
    is also referred to as the bioequivalence/bioavailability database. The
    ESD format contains the core information from a bioequivalence study
    and allows raw data to be accessed for further analysis. Reviewers can
    compile a review by using efficient word processing tools and query
    functions to expedite the review process. In addition, ESD allows
    reviewers to instantly check individual data without manually searching
    pages of hardcopy data. These functions save review time and improve
    the quality of reviews. Nine electronic submissions have been received
    to date for this program, with four during fiscal year 1997. Also, OGD
    has begun accepting submissions of similar chemistry, manufacturing and
    controls data for beta testing. It is anticipated that this electronic
    submission will also provide a more efficient means of review.
        Also, OGD initiated a process of providing pen and ink changes to
    proposed labeling rather than preparation of a detailed narrative
    letter. This reduces the time required for drafting and finalizing
    letters, and provides for a faster labeling review process.
        The Office continues to utilize overtime for the reviewers in a
    effort to help reduce cycle times and improve approval times.
        The Office has hired a Medical Officer to facilitate timely review
    of ANDA's with bioequivalence studies with clinical endpoints. In the
    past, these complicated studies were consulted to Medical Officers in
    the Office of Review Management (ORM) for review. Responses to these
    consults were often delayed due to Prescription Drug User Fee Act
    (PDUFA) priorities in ORM. Evaluation of these studies by an OGD
    Medical Officer has permitted more timely completion of the review
    process.
        The Office also initiated a procedure to contact applicants that
    undergo two or more major deficiency cycles. Applicants are requested
    to contact OGD for discussion or clarification regarding the
    deficiencies. If OGD is not contacted, the Office will call the
    applicant within 30 days to see if any further discussion, or perhaps a
    meeting, is necessary. OGD is attempting to provide guidance to
    applicants and reduce or eliminate additional review cycle, thus moving
    applications to approval more quickly.
        The Office issued a Manual of Policies and Procedures entitled:
    ``Procedure for Public Release of Bioequivalence Protocols and
    Reviews.'' Firms frequently submit proposed bioequivalence protocols to
    OGD. Often these are duplicates of already submitted and reviewed
    protocols. In order to decrease the burden of reviewing several
    protocols for the same drug product, OGD is now making available copies
    of acceptable protocols and related review comments. OGD believes that
    by utilizing completed review comments, firms will need to submit fewer
    protocols, freeing time for reviewer evaluation of applications.
        Since the inception of the initiative to publicly release
    bioequivalence protocol reviews, 40 protocols have been issued to date,
    34 of which were issued in fiscal year 1997. Making these protocols
    publicly available reduced the total number of protocols received by
    the Office from 153 in fiscal year 1995 to 60 in fiscal year 1997,
    since multiple protocols for the same drug no longer require individual
    review. This initiative has also reduced the need to develop
    Biopharmaceutic Guidances to the same extent as before. These guidances
    are now developed only for drugs products with special/unique
    bioequivalence issues.
        The Office has identified and started development of several
    Biopharmaceutic Guidances for drugs products with special/unique
    bioequivalence issues predicted to be the subject of multiple generic
    drug application submissions during the next few years. It is
    anticipated that this proactive guidance program will reduce the review
    time for the selected drug products, thus reducing the number of
    overdue applications. One revised guidance was issued in fiscal year
    1997. Eleven others are being developed and are expected to be issued
    in fiscal year 1998.
        Chemistry review branches with a significant actual or predicted
    backlog have been reassigning reviews in accordance with Office
    procedures to other branches with lower workloads in an effort to
    reduce the number of overdue applications and supplemental
    applications.
        The Office implemented a policy on ``Substitution of an Alternate
    Source of the New Drug Substance in Unapproved Abbreviated
    Applications.'' Previously, if a generic drug application was otherwise
    approvable with the exception of an unsatisfactory current good
    manufacturing practice (cGMP) inspection for the primary new drug
    substance (NDS) supplier used to manufacture the exhibit/bioequivalence
    batch, it would not be approved until those cGMP issues were resolved.
    In order to qualify an acceptable alternate source, a new exhibit batch
    based on the alternate source would be needed. Additionally, a
    bioequivalence study would be required, depending on dosage form to
    support use of the alternate source. For unapproved applications OGD
    now allows substitution of an alternate source of the NDS based on
    assurance that the specifications and test data are essentially the
    same as those of the original source used in the exhibit batch and
    bioequivalence study if required, provided that the original source
    would have been acceptable except for cGMP issues. Generally, a new in
    vivo bioequivalence study will not be required for the alternate
    exhibit batch, but it will be necessary to provide comparative
    dissolution data depending on the dosage form of the proposed product.
    This new policy should reduce approval times in certain situations.
        In addition, to facilitate streamlining, improve review and
    approval times, and increase communication with applicants, OGD will
    continue to issue letters to the generic drug industry and hold
    meetings with the three generic drug trade associations: the Generic
    Pharmaceutical Industry Association (GPIA), the National Association of
    Pharmaceutical Manufacturers (NAPM), and the National Pharmaceutical
    Association (NPA).
        We do not believe, however, that the number of pending applications
    is likely to be reduced substantially, due to two factors. As
    previously stated, OGD has established a facsimile program for
    communicating deficiencies to applicants. If the applicants respond to
    the minor deficiencies within 30 days, the OGD reviewers will then
    complete review of the applications rather than issuing a deficiency
    letter that closes the review cycle. This program has significantly
    contributed to the reduction in approval times, but does increase the
    number of pending ANDA's (including overdues) as the reviews are kept
    in pending status until the firms respond and the reviewers complete
    their reviews. Traditionally, the process just described was conducted
    in two shorter cycles which reduced the number of overdue applications
    but increased the overall time to approval. The other factor is that
    the number of original applications submitted to OGD has increased from
    300 ANDA's received in fiscal year 1991 to 462 ANDA's received in
    fiscal year 1997. Staffing has remained relatively constant during this
    period.
        As we mentioned earlier, review cycles comprise FDA's portion of
    overall approval times. The reduction in the number of cycles has
    subsequently resulted in reduced overall approval times. We will
    provide this information for the record.
        [The information follows:]

                                 APPROVAL TIMES
                                   [In months]
    ------------------------------------------------------------------------
                      Fiscal year                      Median        Mean
    ------------------------------------------------------------------------
    1995..........................................         28.2         35.3
    1996..........................................         24.7         33.2
    1997..........................................         19.6         25.6
    ------------------------------------------------------------------------

        The reduction in review cycles and overall approval times enabled
    FDA to continue the increasing yearly approval trend for abbreviated
    applications.

                                                                Total ANDA's
            Fiscal year                                             approved
    1991..............................................................   141
    1992..............................................................   239
    1993..............................................................   215
    1994..............................................................   255
    1995..............................................................   288
    1996..............................................................   340
    1997..............................................................   404

        Question. How many FTE's are currently assigned to review generic
    drug applications?
        Answer. As of April 1, 1998, 133 FTE have been assigned to OGD.
        Question. How many FTE's would be needed to meet FDA's statutory
    requirement to approve generic drug applications within 180 days?
        Answer. The statutory requirement is to review generic drug
    applications within 180 days. A review may result in an approval or not
    approval action.
        However, provided there is a steady submission rate of original
    ANDA's, the Office estimates that it will need approximately 75
    additional FTE to review the majority of applications within 180 days.
    There will always be a few applications that cannot be reviewed within
    180 days due to complicated scientific issues or other barriers outside
    the direct control of OGD. In addition to these FTE, other parts of the
    Food and Drug Administration that support the generic drug review
    program will need additional FTE, such as the Office of Regulatory
    Affairs and the Office of Compliance.
        Question. I have been informed that the report to the President on
    food safety showed that FDA was in ``critical condition'' with respect
    to its food safety inspection functions, and that the agency regulates
    53,000 plants and has an average inspection frequency of once every 10
    years. Are food plants currently required to register? If not, how does
    the agency know who to regulate? Would registration of food processors
    help the agency to conduct more frequent food safety inspections?
        Answer. Food plants are not required by law to register with the
    FDA. The only exceptions are producers of Acidified and Low Acid Canned
    foods, which are required to register and file scheduled processes with
    the Agency, and Infant Formula producers which are required to notify
    the Agency prior to initial product marketing or major changes in
    formulation.
        The Agency maintains an inventory of food processing establishments
    that are subject to our jurisdiction. This inventory is maintained in a
    variety of ways to include reviewing industry data bases, such as Booz-
    Allen and Hamilton directories, reviewing product labels, and
    following-up to industry/consumer complaints and inquires.
        Requiring food processors to register with the Agency may provide
    FDA with more complete and up-to-date information on firms that go out
    of business or begin food production. However, such a system will
    require the allocation of additional resources both for the maintenance
    of the system as well as the verification of the accuracy of data in
    the system. We believe that given other priorities for scarce
    resources, the current inventory maintained by the Agency provides a
    reasonably accurate database of food producers in the U.S.
        Question. I have been informed that the FTE's dedicated for food
    safety inspections average only about 17 inspections per year. Why so
    few? What can be done to increase the effectiveness of the inspection
    program?
        Answer. While it is true that the number of food inspections per
    investigator per year, now at 17, has been steadily declining for the
    last few years, there are a number of factors that impact this
    situation. FDA Consumer Safety Officers, also called CSO's, or
    inspectors, are employed to engage in a variety of consumer protection
    and enforcement activities. While inspections and sample collections
    are the most frequently mentioned and easily counted output activities,
    investigational personnel historically do many other tasks and have
    taken on additional responsibilities consistent with reinvention
    initiatives that while they are not output measures as such, are
    important to the outcome goal of a safe food supply.
        First, the kind of inspections conducted by FDA investigators has
    changed over the years. Because of changes in the food supply with more
    ready-to-eat foods and increased pathogens, FDA conducts fewer
    sanitation inspections and more microbiological inspections. These
    microbiological inspections take longer to conduct and, when combined
    with constant turnover in Consumer Safety Officers, have a negative
    impact on the number of inspections per CSO per year.
        Moreover, CSO's conduct activities under at least 14 established
    categories, only one of which is factory inspections. Besides
    inspections, Consumer Safety Officers perform such tasks as sample
    collections, audit checks, recall follow-ups, and provide training and
    technical assistance. For example, food safety checks of establishments
    made after a natural disaster are not reported as inspections but
    rather investigations, as are epidemiological trace backs after a food
    borne illness outbreak, for example lettuce contaminated with E-coli.
    Consumer complaint follow-up, and incidents associated with food
    allergens also consume FDA investigator time, none of which is
    associated with output measures and all of which take away from time to
    conduct inspections. FDA Consumer Safety Officers are not assigned to
    inspect individual plants in a local duty station day after day as are
    some inspectors in other agencies. Rather, FDA investigators travel
    great distances to inspect a wide variety of food processing plants.
        Food safety inspections are also performed by state authorities
    under contract to FDA and in partnership with FDA. As such, FDA
    investigators provide assistance, training and oversight to these food
    safety activities. While these activities are not output measures and
    not routinely reported as inspectional time, they do leverage FDA
    inspection resources in the foods area. In recent years, as the number
    of field management and support personnel has declined, more
    investigator time has had to be devoted to industry assistance in the
    form of meetings and presentations, training of industry employees, and
    pre-operational process reviews that provide manufacturing guidance to
    company officials to better enable them to comply with FDA regulations.
        All of the preceding are examples of activities that FDA Consumer
    Safety Officers must do besides conduct inspections. While most are not
    output oriented, all are important in assuring consumer protection and
    a safe food supply. Nonetheless, we believe there are a number of areas
    that can be examined and modified or re-engineered to provide our
    investigators more time to conduct inspections and thereby increase the
    total number of inspections conducted in a year. For example, we plan
    to initiate efforts to shorten in-plant times by conducting more
    directed inspections of certain products or processes and increased
    monitoring of in-plant time by supervisors. We will also review the
    requirements of written inspection reports for non-violative
    establishment inspections, and increase our use of abbreviated
    inspection reports or checklists. We will also look for innovative ways
    to collect food samples rather than relying on our investigators.
        Question. Last year, the Committee supported increased funding for
    FDA to implement the President's Food Safety Initiative. I have been
    informed that a portion of that money, $8 million was dedicated to
    hiring 80 new seafood safety inspectors to help with the implementation
    of the new HACCP program. Why does each food safety inspector cost
    $100,000?
        Answer. The $8 million of Food Safety Initiative, or FSI, funds for
    fiscal year 1998 are supporting more FDA field activities than just the
    payroll and benefits costs of 80 investigators. The average salary and
    benefits per inspector is estimated at $70,000, for a total of about
    $5.6 million. In addition to salaries and benefits, these funds support
    the costs of training and outfitting these new FTE with equipment. FSI
    funds also pay inspectional travel costs, the costs of purchasing
    products that the agency wishes to sample, packing and shipping samples
    to laboratories, as well as the costs for analyzing samples and
    identifying pathogens, if any are found. The inspection activities
    supported include implementing the HACCP regulations, and applying
    HACCP principles to retail food service operations. These funds are
    also supporting Federal/State Partnerships to ensure consistency in
    HACCP techniques, enhanced coordination, and communication between the
    FDA and the State regulators.
        Question. I have been informed that the FDA implemented a new
    program to improve the safety of seafood products last December. How is
    the agency enforcing the program for our trading partners?
        Answer. FDA has a three-part strategy for enforcement of the
    seafood HACCP program. We plan to continue FDA's traditional sampling
    program at ports of entry; inspect importers to verify that they are
    meeting their obligations under the seafood HACCP program; and develop
    HACCP-based equivalence agreements with U.S. trading partners that are
    found to meet the U.S. level of protection for seafood safety.
        Importers would have an obligation to take ``affirmative steps'' to
    ensure that the products they are importing meet U.S. HACCP
    requirements. Importers must keep records of their affirmative steps.
    Inspections of importers have begun. FDA has scheduled over 1,500
    audits of paperworks for imported seafood products for the first year.
    Under the FDA seafood HACCP program, importers will be able to meet
    their affirmative steps obligations by importing from countries with
    which FDA has an equivalence agreement for seafood. FDA will never have
    the resources to inspect the many thousands of foreign processors that
    ship to the U.S. from over 135 countries. Where equivalence is
    determined to exist, the foreign government performs the inspections
    and FDA verifies that the government's regulatory system achieves the
    U.S. level of protection. FDA has received inquiries from over 30
    countries seeking equivalence determinations. The determination process
    is rigorous and can take at least a year per country. FDA expects the
    first determinations of equivalence to occur this year.
        Question. How did FDA reach the conclusion that the seafood HACCP
    systems could operate without any laboratory verification to ensure
    that the plans are operating effectively?
        Answer. The seafood HACCP regulations do not mandate laboratory
    verification but they do list it as an option. There are several
    reasons for this policy. FDA's seafood HACCP program is designed to
    rely on preventive measures that have been scientifically determined to
    work. It is well established, for example, that pathogens can be
    destroyed by cooking at specific temperatures for specific times. If a
    HACCP system that involves cooking is able to consistently maintain the
    scientifically established temperature and time, the outcome is
    essentially assured. The original creators of HACCP used this concept
    of scientifically established preventive controls to replace expensive
    end-product testing as a means of determining whether a food is safe.
        FDA's Fish and Fishery Products Hazards and Controls Guide is
    essentially a compendium of scientifically established preventive
    measures. Processors are free to take measures other than those
    recommended in the Guide, but they must be able to demonstrate that
    their measures are equivalent from a safety standpoint. This
    demonstration may well involve laboratory verification. It is worth
    noting that the Guide is receiving international recognition. For
    example, the Canadian seafood regulatory program has informally adopted
    it and it is being translated into other languages for use in a number
    of countries.
        FDA was persuaded by the comments received on the seafood HACCP
    proposal, such as those from the American Society for Microbiology,
    that end-product testing has limited value in measuring the success of
    a HACCP system. A considerable amount of testing beyond what can
    reasonably be required, would be needed to verify a HACCP system with
    anything approaching full confidence.
        Nonetheless, FDA continues to take samples as part of its overall
    verification strategy for seafood HACCP. It continues to take ``for
    cause'' samples as warranted, and also now takes ``HACCP verification''
    samples under certain circumstances to determine the relationship
    between compliant HACCP systems and safe products. Additionally, the
    Seafood HACCP Regulation does require other forms of verification,
    including, record review, calibration of process control instruments,
    and periodic reassessment of the hazard analysis and HACCP plan.
        Question. Does FDA have any plans to make their HACCP programs
    consistent with the one developed by USDA for use on meat and poultry
    products?
        Answer. At its core, HACCP involves the application of seven
    internationally recognized principles that collectively provide for a
    system of preventive controls for food safety. Both FDA and USDA HACCP
    regulations require the seven principles with only minor variations. In
    that respect, the programs are highly consistent. Those differences in
    detail that do exist are essentially attributable to differences in
    circumstance, such as the nature of the industry, or the nature of the
    inspection program.
        Beyond that, there are differences in implementation and in program
    design outside of the basic seven principles of HACCP that are due to
    differences in the nature of the hazards and the controls for those
    hazards. For example, the majority of seafood is harvested from wild
    fish populations while the majority of meat and poultry is obtained
    from a more controlled and crowded farm environment. The regulatory
    strategy for seafood will inevitably be different in this regard than
    that for beef and poultry. These differences should not be interpreted
    as inconsistencies between programs. For the same reason, it should be
    expected that there will be differences in detail between the FDA
    seafood HACCP program and future FDA HACCP programs for other
    commodities.
        Question. Has the rate of imported food products increased in the
    last few years?
        Answer. Yes, the rate of imported food entries has doubled over the
    past seven years, and based on recent trends, we expect at least a 30
    percent increase in imported foods by 2002. FDA focuses its examination
    of import entries on products that have a history of violations, or
    which have a high potential for pathogen contamination, or which are
    epidemiologically associated with illness. As international trade in
    food increases, and FDA's resources have been reduced, FDA's
    examination of imported foods has declined from an estimated 8 percent
    in fiscal year 1992 to less than 5 percent in fiscal year 1997. Based
    on FDA data, in fiscal year 1997 there were over 2.5 million ``entry
    lines'' of FDA regulated foods imported into the U.S.--an entry can
    contain several different ``lines'' of distinct products that must be
    evaluated separately--and processed through its automated system for
    imports, OASIS, or the Operational and Administrative System for Import
    Support. This does not include a substantial number of informal food
    entries valued at $1,250, which is to be raised to $2,000 effective
    July 2, 1998, or less that may not be processed through OASIS. As food
    entry lines have dramatically increased, and FDA resources have
    declined, the number of entries examined by FDA has declined
    substantially. It is clear that the increase in imported food products
    has made maintaining an effective import inspection and sampling
    program more difficult.
        Question. What impact has this had on your import inspection
    program?
        Answer. Prior to the development of FDA's import system, OASIS, FDA
    did not have an automated system for accurately determining the number
    of import entry lines it reviewed and relied on U.S. Census data.
    ``Entry lines'' is a more realistic way of determining the volume of
    imports which FDA must evaluate. Since each entry could contain more
    than one ``line'' of FDA regulated foods--on average each formal entry
    contains 1.7 lines--the number of entries underestimates the challenge
    posed in maintaining an effective import inspection system.
        The increase in imported food products has had an effect in several
    areas on our import inspection program. For example, as international
    trade increases, and emerging pathogens, sometimes unique to particular
    environmental niches not normally found in the U.S., become associated
    with foods, our ability to rapidly develop effective detection
    methodology has been increasingly challenged. Food safety research is
    critically needed to develop the means to identify and characterize
    more rapidly and accurately foodborne hazards, to provide the tools for
    regulatory enforcement, and to develop effective interventions that can
    be used as appropriate to prevent hazards at each step from production
    to consumption.
        The President's Food Safety Initiatives include a focus on imported
    products. This will address many of the deficiencies in FDA's current
    import program by directing resources toward the source and point of
    origin of foreign produce.
        FDA, along with USDA, and EPA, is working directly with many
    foreign countries to enhance the food production system and regulatory
    oversight infrastructure of these countries to better ensure that
    exports meet U.S. standards. The U.S. provides technical assistance to
    help correct deficiencies in production practices or foreign monitoring
    and enforcement programs. In addition, the U.S. serves in leadership
    positions in international food safety standard-setting organizations.
        In response to the increase in imported products, FDA also plans to
    expand the number of mutual recognition agreements, also called MRA's,
    with trading partners and will continue to review and evaluate ways to
    increase coverage of imports.

                             Conclusion of Hearings

        Senator Cochran. That concludes the hearings. The
    subcommittee will recess and reconvene at the call of the
    Chair.
        [Whereupon, at 12:08 p.m., Tuesday, March 31, 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 1999

                                  ----------

                                           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
    1999 budget request. Those statements follow:]
                           DEPARTMENT OF AGRICULTURE
                          Departmental Administration
     Prepared Statement of Pearlie S. Reed, Acting Assistant Secretary for
                                 Administration
        Mr. Chairman and Members of the Subcommittee, I am pleased to
    report on current accomplishments and present the 1999 budget request
    for Departmental Administration, Agriculture Buildings and Facilities,
    and Hazardous Waste Management. The 1999 budget request for
    Departmental Administration affects each of USDA's staff offices, and
    will provide the level of support and accountability required to ensure
    that all USDA employees treat co-workers and customers fairly and
    equitably and with dignity and respect. Over the paste twelve months,
    we have set the stage for being able to make this assurance.
                       major civil rights accomplishments
        I will provide you with copies of the one year implementation
    report, ``Civil Rights at the United States Department of Agriculture:
    One Year of Change'' which outlines in detail the implementation status
    of the February 1997 Civil Rights Action Team (CRAT) Report. We have
    started to implement 90 of the recommendations. Today, I would like to
    note some of the highlights of this report.
        Since January 1, 1997, USDA has settled or closed 224 of the 1,088
    program discrimination complaints in the backlog, including some cases
    which dated back to the mid-1980's, and has closed another 5 cases
    filed since then. The current program complaint backlog will be
    completely eliminated in fiscal year 1998. New complaints received by
    the Department will be brought to the point of adjudication within 180
    days of their filing.
        USDA re-established the program complaints investigation unit in
    the Office of Civil Rights. The unit is working with the Department of
    Justice, the White House and the Federal Courts in an effort to resolve
    the class action suit filed by the Black farmers late last summer.
        Of the 2,091 employee complaints that were active on January 1,
    1997, nearly half--905--have been resolved, and we have closed another
    10 cases filed since then.
        USDA has established a new position within the Office of the
    General Counsel--the Associate General Counsel for Civil Rights--to
    provide additional legal resources needed to assist with resolution of
    future program and employee complaints in accordance with civil rights
    laws.
        Agency Heads are being rated each quarter on their civil rights
    accomplishments by the Assistant Secretary for Administration. All
    managers and employees from the Subcabinet to the field level will be
    held accountable for civil rights. Allegations of reprisal and abuses
    of power by USDA employees will be immediately investigated, and where
    the allegation appears meritorious, the official will be removed from
    managerial duties pending full investigation. Disciplinary action will
    be taken against any manager found guilty of reappraisals against any
    USDA employee or customer.
        In April 1997, USDA halted all pending foreclosures of USDA farm
    loans until a review of each case could be made. An independent review
    team in Washington, D.C. reviewed 3,148 pending foreclosures. We halted
    actions in 116 cases, pending investigations of possible civil rights
    violations. USDA has now directed each state to appoint a diverse Civil
    Rights Independent Review group, representative of the state's
    population, to review each case and future cases to determine if
    discrimination or inequitable treatment contributed to the failure of
    each farming operation.
        On August 22, 1997, the Office of Outreach was established to
    provide Department-wide leadership and coordination to assure that all
    eligible customers have access to USDA programs and services and to
    administer the Socially Disadvantaged Farmers Outreach Program.
    Authorized by Section 2501 of the Food, Agriculture, Conservation, and
    Trade Act of 1990, the program is designed to assist socially
    disadvantaged farmers and ranchers to participate in USDA programs and
    be successful in their operations by providing outreach and technical
    assistance. The 1999 budget proposal would provide $10 million for this
    program in direct funds, an increase of $7 million, rather than
    continuing to rely upon additional funding from the Fund For Rural
    America.
        A 30-member National Commission on Small Farms has made
    recommendations to Secretary Glickman for a national strategy for small
    farms and ranches that will help ensure economic viability and address
    the rapid decline in the numbers of minority farmers and ranchers. The
    Deputy Secretary will head a task force to implement the Commission's
    recommendations.
        USDA has instituted new human resources management hiring,
    retention, promotion, and training policies for employees to help
    prevent workplace conflicts, disputes, and problems before they occur.
    A new Conflict Management Unit has been designed to address conflict
    early and pro-actively. Managers will be held accountable for managing
    workplace conflict. The goal is to address workplace disputes before
    they become disciplinary actions, grievances or EEO complaints.
        These reforms will benefit both customers and employees in reduced
    conflict, a more productive workplace, better morale and working
    relationships, more effective programs, better management, better
    service to customers and employees, increased productivity and more
    efficient operations throughout USDA.
        Several legislative proposals were introduced by Congress last year
    to effect legislative changes needed to implement some of the CRAT
    Report recommendations. Most of the issues were addressed by
    Congresswoman Eva Clayton of North Carolina in her legislation, H.R.
    2185. The Department is working on a legislative proposal for civil
    rights initiatives that would modernize the Farm Service Agency state
    and county committee system, improve access to credit, reconstitute the
    lease back/buy back programs, and help ensure equity in funding for
    minority-serving educational institutions.
                      sustaining the civil rights changes
        Now, I want to tell you about our 1999 budget request. The policy,
    oversight, and program changes in USDA's civil rights arena cannot be
    sustained unless they are vigorously supported with adequate resources.
    The President's 1999 budget request calls for the largest increase in
    civil rights funding in two decades to carry out the CRAT
    recommendations as well as the recommendations of the National
    Commission on Small Farms which support our civil rights agenda. In
    total, USDA is requesting about $250 million for civil rights-related
    activities that would increase farm ownership and operating loans;
    increase loans and grants to construct housing for the Nation's farm
    workers; support an integrated research, extension, and education
    competitive grants program for new technology adoption and transfer to
    small farms; eliminate disparities in funding and enhance the
    Department's efforts with institutions of higher education that are
    primarily devoted to the needs of minority students; and improve
    outreach and technical assistance to socially disadvantaged farmers and
    ranchers through a substantial increase in the Section 2501 outreach
    program.
        Departmental Administration staff office activities will account
    for nearly $18 million of USDA's 1999 civil rights initiative. These
    funds will support additional staffing to improve personnel services
    and assistance to USDA agencies, including ethics compliance; improve
    outreach to USDA customers including support for the new USDA Office of
    Outreach that will ensure that all customers, especially under-served
    populations, have full access to USDA programs and services; enhance
    management-employee relations that support early resolution of employee
    grievances and conflicts within USDA; and ensure that a backlog of new
    program complaints does not develop because we are doing nothing to
    prevent new instances of discrimination.
        The increased funding will be used to improve civil rights
    personnel oversight, training and services to USDA agencies to correct
    management and program practices that resulted in the Department's past
    poor civil rights performance. The funds would also be used for
    outreach to USDA customers, institutions and businesses. They would
    support outreach to under-served farmers and ranchers; increase
    opportunities for small and disadvantaged businesses to participate in
    USDA contract and program activities; and accelerate outreach to 1890
    and 1994 Institutions and Hispanic-serving institutions by providing
    the opportunity to convey excess federal property to them. A conflict
    prevention and resolution unit will be established to prevent
    management-employee relations from reaching complaint status that will
    negatively impact USDA services and internal operations.
                         other 1999 budget initiatives
        A portion of the increased funds will be used to establish a Health
    Unit for USDA employees at the new Beltsville complex, and to support
    the Secretary's breast-feeding mothers initiative for nursing mothers
    at Headquarters and Beltsville by providing adequate space, furnishings
    and medical supervision. An increase for the Office of Administrative
    Law Judges will be used to hire an additional law judge to meet
    projected workload requirements. Finally, $1.9 million of the proposed
    increase is needed for ongoing Departmental Administration activities
    that were reduced by more than 20 percent in the 1998 appropriation. A
    permanent funding reduction of this magnitude cannot be absorbed
    without a reduction-in-force to meet the payroll, and will reduce
    services to a caretaker role. It is important to keep in mind that
    these activities provide basic support essential for the new civil
    rights initiatives proposed in the Departmental Administration budget.
                  fiscal year 1998 supplemental budget request
        The President has proposed a $4.8 million fiscal year 1998
    supplemental to ensure that the high priority activities supporting the
    CRAT report's recommendations and the administrative support units
    which make these reforms happen can be sustained in fiscal year 1998.
    Of this amount, $2.4 million will be used to accelerate by six months
    implementation of the Departmental Administration CRAT recommendations
    proposed to be fully implemented in fiscal year 1999; $500,000 will be
    used to establish a no year fund for a new Civil Rights Advisory
    Committee; and $1.9 million will be used to partially restore the civil
    rights related operating base of Departmental Administration activities
    which were reduced in the 1998 appropriation to fully establish the
    program complaints investigations unit. This supplemental request will
    be offset by proposed rescissions in ten USDA agencies.
            agriculture buildings and facilities and rental payments
        The 1999 Budget request for Agriculture Buildings and Facilities
    and Rental Payments of $155,689,000 is a net increase of $24,711,000
    above the adjusted 1998 level. This increase includes an increase of
    $9,564,000 for rental payments to GSA and $18,505,000 for the
    continuation of the USDA Strategic Space Plan which is based on
    projected reductions in staff levels. These increases are partially
    offset by a decrease in operations and maintenance of current
    facilities and by a one-time reduction in relocation expenses.
                           usda strategic space plan
        I would like to thank the Congress for its past support and ask for
    your continued support of our efforts to reduce costs associated with
    housing our employees. Through the long term Strategic Space Plan, we
    will consolidate USDA Headquarters into two Government-owned locations
    which will provide modern and safe facilities and enhance USDA
    operations. This plan consists of two major projects--the Beltsville
    Office Facility and the modernization of the South Building. In fiscal
    year 1998, the funding level for the plan is $5 million. In fiscal year
    1999, we are requesting an increase of $18.5 million for a total of
    $23.5 million to continue the South Building modernization including
    the construction of Phase 2, wing 4, and related costs for design of
    Phase 3. In the fiscal year 1998 request, the Administration proposed a
    one-time reduction from $23.5 million to $5.0 million to ensure that
    the budget and program operations were coordinated and so that program
    funds were requested when they were actually needed. The fiscal year
    1999 request represents a restoration of funding for the strategic plan
    to the fiscal year 1997 level.
        The Beltsville Office Facility, now substantially completed, is
    located on Government-owned land at the Beltsville Agricultural
    Research Center in Maryland. This facility has been designed as a low-
    rise campus of four buildings with 350,000 gross square feet capable of
    housing up to 1,500 employees. Construction of the Beltsville Office
    Facility was begun in June 1996 by Tompkins Construction. As of January
    1998, the buildings are being occupied. Work is continuing to fit out
    and occupy the new space. The agencies selected to house some of their
    staff in the facility include the Office of the Inspector General, the
    Agricultural Research Service, the Food Safety and Inspection Service,
    the Natural Resources Conservation Service and some Departmental
    Administration staff.
        The 61 year old Agriculture South Building, which is eligible for
    listing on the National Register of Historic Places, is in dire need of
    repair and renovation to make it safe, efficient and functional. The
    required renovation work includes fire protection systems; abatement of
    hazardous materials such as asbestos, PCB light fixtures and lead
    paint; replacement of old, inefficient heating ventilation and air-
    conditioning systems; improved accommodations for disabled persons; and
    accommodation of modern office telecommunications systems. The current
    plan is to modernize the building in eight primary phases and to
    consolidate USDA agencies into the modernized areas as each
    construction phase is completed.
        We are now making great progress on the modernization of the South
    Building. The first phase, which includes reconstruction of Wing 3, is
    about to begin. The design for Phase 2 is underway, and a construction
    contract is planned to be awarded in fiscal year 1999 if our fiscal
    year 1999 budget is approved. By the end of the South Building
    modernization project, USDA Headquarters offices will be consolidated
    into two government-owned locations, the Beltsville facility and the
    downtown Headquarters Complex. This will reduce our reliance on leased
    space, which will result in considerable savings.
                      buildings operations and maintenance
        We are requesting a net decrease of $658,000 for Buildings
    Operations and Maintenance in fiscal year 1999. The request includes an
    increase of $667,000 and three full-time staff and associated costs to
    provide operations at the new Beltsville Office Facility for a full
    year; an increase of $450,000 to fund contract price increases
    determined by the Department of Labor, the Fair Labor Standards Act and
    the Service Contracts Act; and an increase of $216,000 for pay cost and
    related retirement costs. These increases are offset by decreases of
    $1,000,000 for one-time security upgrades identified in the Department
    of Justice assessment of vulnerability in U.S. Federal office buildings
    and funded in 1998, and $991,000 for operating reductions.
                           hazardous waste management
        The safe disposal of hazardous waste is a challenge we must meet.
    We are now paying the cost of cleanups associated with environmental
    problems caused by past disposal at our facilities including primarily
    the activities of others on lands under the jurisdiction, custody, or
    control of USDA. Of some 38,000 abandoned and inactive mines, mainly on
    Forest Service lands, we currently estimate 1,700 could require
    environmental cleanup. Up to 120 inactive or abandoned landfills are
    closing or are undergoing evaluation for cleanup. In addition, there
    are USDA Commodity Credit Corporation leased grain storage facilities
    in communities throughout the mid-west where fumigants may have
    contaminated the ground water. USDA is investigating drinking water
    wells in these communities to determine whether actions need to be
    taken to ensure safe drinking water supplies. Kansas and Nebraska, the
    U.S. Environmental Protection Agency, and the Commodity Credit
    Corporation are currently working on 42 sites, and have identified an
    additional 30 sites that may need cleanup. The Department requests
    $15,700,000 for the central Hazardous Waste Management Program under
    the Comprehensive Environmental Response Compensation and Liability Act
    and the Resource Conservation and Recovery Act. Funding from this
    appropriation is allocated to agencies based on priority needs and made
    available until expended. The funds will facilitate the cleanup of
    abandoned mines and landfills, identify and clean up drinking water
    sources, and support other agency cleanup efforts throughout the
    Department on a small fraction of sites needing action.
                                   conclusion
        This concludes my statement, Mr. Chairman.

                           Farm Credit Administration
    Prepared Statement of Marsha Pyle Martin, Chairman and Chief Executive
                                    Officer
        Mr. Chairman, Members of the Subcommittee, I am Marsha Martin,
    Chairman of the Board and Chief Executive Officer of the Farm Credit
    Administration (FCA/Agency). I will highlight FCA's accomplishments
    during the past year, report briefly on the condition of the Farm
    Credit System, and present our fiscal year 1999 budget request.
                   mission of the farm credit administration
        The FCA is charged with a highly challenging, increasingly complex
    mission: to promote a safe and sound, competitive Farm Credit System
    (System) by creating an environment that enables System institutions to
    serve rural America as a dependable source of credit and financial
    services within the authorities established by Congress. We take this
    mission seriously, and it is one we take great pride in fulfilling. In
    support of this mission, we operate under a dynamic, and recently
    revitalized, strategic plan which focuses our efforts at accomplishing
    two major goals.
        Our first major goal is to supervise risk in the System for the
    benefit of stakeholders.
        Our second major goal is to maximize opportunities for the System
    to provide competitive and dependable services to agriculture and rural
    America.
        Within our strategic plan we have developed several comprehensive
    objectives and specific actions, each crafted, and continuously
    refined, to ensure these goals are met. Embedded throughout our plan is
    our commitment to improve customer service, effect clear and candid
    communication, produce quality products, and ensure sound financial
    institutions thrive to better serve agriculture. This commitment is the
    foundation of my operating philosophy for the Agency, and, I hope, Mr.
    Chairman, our commitment comes through loud and clearly today in this
    proposal to fund the critically important job FCA performs in
    regulating the Farm Credit System.
                        fiscal year 1997 accomplishments
        During fiscal year 1997, FCA continued to reduce costs, streamline
    operations, improve communication, and lessen regulatory burden. These
    successes reflect our efforts to improve operational efficiency and
    strengthen communication with our constituencies. I believe we
    continued to clearly demonstrate our commitment to effectiveness and
    cost efficiency this past year as we reduced Agency full-time
    equivalents (FTE's) from 361 to 319, established a new organizational
    structure and leadership team, reorganized several offices to better
    fulfill our mission, reduced a level of management by eliminating the
    regional offices within the Office of Examination (OE), and closed two
    field offices. We also continued to exercise effective controls over
    Agency spending, as our overall obligations were $2.5 million less than
    budgeted for in fiscal year 1997.
        I particularly am proud of the fact that we were able to accomplish
    significant improvement without compromising our ability to oversee the
    safety and soundness of System institutions. Meeting the needs of our
    customers, without compromising safety and soundness, will always be
    our central focus and our greatest challenge. This delicate balance
    requires regulatory approaches which we have become quite adept at
    accomplishing.
        Mr. Chairman, if I may, let me briefly share with you some more
    specifics on our accomplishments during fiscal year 1997.
                        examination process improvements
        We place a high priority on developing increasingly efficient and
    innovative examination programs that not only ensure our evaluation
    requirements are met, but also result in minimal disruption to the
    vital business activities of our customers. Our examinations are
    conducted according to risk-based examination principles whereby we
    deploy resources based on the level of risk present in an institution's
    operation. This risk is continuously evaluated and proactively
    addressed. When appropriate, off-site examinations are conducted on
    lower risk institutions. Also, beginning with fiscal year 1997, we
    implemented an 18-month examination cycle for institutions that meet
    specific thresholds for asset size, operations and performance.
    Combined, off-site examinations and the 18-month examination cycle
    allow us to efficiently use Agency resources and concentrate our
    examination presence in higher risk institutions.
        During fiscal year 1997, we further enhanced our electronic access
    to System information systems and developed a standard method to
    electronically warehouse critical examination and System information.
    These accomplishments resulted in greater efficiencies through the use
    of improved electronic workflow methods. Presently, we are developing a
    uniform methodology to identify and respond to deteriorating
    performance trends in System institutions. While we are confident we
    have accurately identified current risk, we must remain vigilant so we
    can respond vigorously, with timely and appropriate action, to any
    warning clouds looming on the horizon that could mushroom into a
    systemic problem.
                             enhanced communication
        In an effort to further improve communication with our
    constituencies, the FCA Board continued to hold annual information
    meetings with board chairmen and chief executive officers of System
    institutions. These highly productive meetings provide an opportunity
    for essential two-way communication on important topics ranging from
    the Agency's internal operations to current regulatory issues. FCA
    Board members and executives also visited System institutions and other
    agricultural organizations to keep in touch with grass roots level
    issues. These contacts provide us additional insight into how to direct
    our operations in a more responsive, customer-oriented manner. Also
    last year, the Agency revised and reissued one of its widely utilized
    publications, The Director's Role: Farm Credit System Institutions.
    This publication is used by many System institutions as the cornerstone
    for their director training programs.
                       annual performance plan completed
        Another major accomplishment this year was development of our first
    Annual Performance Plan in accordance with good business practices and
    the Government Performance and Results Act of 1993. Our plan depicts
    how the FCA will implement initiatives detailed in the strategic plan
    and includes specific performance criteria that communicate clearly
    what we intend to do and how we will measure the effectiveness of our
    performance. The plan identifies the following four key outcomes from
    Agency operations:
      --Effective Risk Identification and Corrective Action;
      --Effective Regulation and Public Policy;
      --Effective and Efficient Agency Administration; and
      --Effective External Relationships.
        These outcomes link directly to the FCA's mission, functions, and
    strategic goals and provide a thorough and balanced system of
    performance measures to assess the Agency's ultimate effectiveness in
    ensuring the safe and sound operation of the System. The performance
    measurement system incorporates individual criteria for each FCA office
    that rolls up to support the overall Agency-level measures. This will
    ensure that the Agency as a whole is pulling together toward the same
    goals.
                             year 2000 preparedness
        The most pervasive technological change that will take place over
    the next several years will involve the efforts of FCA and Farm Credit
    institutions to ensure computer systems correctly interpret dates
    associated with the Year 2000. While the parameters of the problem can
    be stated simply, its scope is vast, and fixing it may be enormously
    time consuming. Problems associated with Year 2000 preparations pose
    potentially serious safety and soundness concerns because there is zero
    tolerance for late delivery or project failure.
        The Agency views Year 2000 preparations with great seriousness, and
    we have placed a high priority on remediation of the problem by
    requiring each System institution to develop an action plan that will
    ensure business continuity for critical systems when the next
    millennium begins. Presently, we are analyzing each System institution
    to accurately assess what degree of exposure exists as a result of the
    millennium date change. This assessment will enable us to identify high
    risk System institutions early enough so that appropriate corrective
    action can be implemented.
        In respect to our internal operations, the FCA Board last month
    approved a plan that details how the Agency will assess Year 2000
    potential problems, including a comprehensive process to become Year
    2000 compliant. Over the past three years, we completed implementation
    of a network operating system that is warranted as Year 2000 compliant.
    Throughout the process, our programmers have taken the required steps
    to accommodate the millennium change for the custom applications that
    run on the new system. This year we will run the final tests needed to
    assure ourselves and others that systems and applications will
    transition to the next century without adverse impact on their
    availability, integrity, or confidentiality. We are confident that all
    our systems will pass the testing process.
                      client/server migration implemented
        We have moved aggressively toward full implementation of a client/
    server computer architecture as the foundation for applying technology
    to improve Agency operations. This technology permits easier access to,
    and use of, information needed to accomplish our mission. It will
    enable us to streamline the examination process, enhance efficiency and
    effectiveness, and share information more quickly among headquarters
    and field staff.
                          regulatory burden minimized
        The FCA Board has legal authority to establish policy and interpret
    the Farm Credit Act to ensure System institutions comply with the law
    and operate in a safe and sound manner. Our objective is to promulgate
    only those regulations needed to implement the law or achieve safety
    and soundness goals while minimizing regulatory burden on the
    institutions we regulate. Fiscal year 1997 was an active regulatory
    year for the Agency in which we clarified safety and soundness
    requirements in several areas. We also eliminated, or proposed for
    elimination, several Agency prior-approval requirements and deleted
    several obsolete regulatory provisions identified through public
    comment or internal Agency review. On a continuing basis, staff provide
    recommendations to address unnecessary policies, regulations,
    bookletters, and other forms of guidance.
        Currently, we are clarifying Agency requirements and expectations
    in the System's young, beginning, and small (YBS) farmer program.
    Available data indicates that the System provided nearly $6 billion of
    credit to almost 113,000 farmers categorized as young, beginning, and
    small during 1996. This is about 13 percent of total System loan volume
    and about 19 percent of their total number of loans. While the numbers
    are impressive, as the complexities of farming multiply and the capital
    requirements to enter farming escalate, the Agency must ensure the
    System's commitment to fund the next generation of farmers does not
    falter. Presently, Agency staff are drafting a FCA Board policy
    statement on providing service to YBS farmers to enhance existing
    System programs and safely ensure credit is available. Additionally, we
    are reviewing the continued appropriateness of current definitions and
    will revise reporting requirements for the YBS farmer program to ensure
    reporting is consistent with how other financial entities report their
    data.
                               lawsuit dismissed
        Recently, the Independent Bankers Association of America and the
    American Bankers Association lawsuit challenging the authority of the
    FCA Board to revise the 25-year-old rules under which System
    institutions make loans to eligible borrowers was dismissed by the
    United States District Court for the District of Columbia (Court). In
    dismissing the suit, the Court noted that the Agency had adopted the
    new customer regulations in a thoughtful, reasoned manner, taking care
    to consider the concerns of the affected parties during the notice and
    comment period. The customer rule, coupled with new capital standards
    we established for System institutions, may be our most significant
    accomplishments of the decade. Together, they ensure strong financial
    standards and a continuing, competitive source of credit for
    agriculture and rural America.
        We are extremely disappointed that the bankers' associations
    decided to appeal the Court's ruling. We consider it unfortunate they
    have chosen to expend more resources to challenge such a strongly
    stated Court opinion on this matter.
                      condition of the farm credit system
        FCA activities ensure System institutions exercise safe and sound
    banking practices and that they comply with the law and regulations. We
    are proud of our performance in carrying out the Agency's activities,
    and we are satisfied with the continued progress the System has made in
    strengthening its financial condition and improving its operational
    practices.
        Mr. Chairman, I am pleased to report that the Farm Credit System
    continues to operate on a safe and sound basis with further improvement
    noted in all key financial and operational areas. During 1997, its
    earnings reached $1.3 billion, a slight improvement above 1996 results.
    System capital increased to $11.6 billion at the end of 1997 and
    represented 14.8 percent of total assets. Total capital was 14.1
    percent of total assets at yearend 1996. The quality of System assets
    also continued to improve. Nonperforming assets decreased by $115
    million during the year and comprised only 1.4 percent of total loans
    and other property owned at the end of 1997. Overall loan volume
    climbed by $2.3 billion during the year.
        The strengthened financial condition of the System is further
    reflected by improved CAMEL ratings--the Agency's evaluation of an
    institution's capital, asset quality, management, earnings, and
    liquidity. With a number 1 being the best rating, the percentage of
    System institutions rated 3, 4, or 5 dropped from 26 percent at the end
    of 1993 to only 2 percent on December 31, 1997. The number of System
    institutions under enforcement action also declined substantially, from
    49 at yearend 1993, to 5 at yearend 1997. These 5 institutions
    accounted for less than 4 percent of the System's total assets, as
    compared with nearly 40 percent of the System's total assets at yearend
    1993.
                   federal agricultural mortgage corporation
        FCA has oversight responsibility for the Federal Agricultural
    Mortgage Corporation (Farmer Mac). After becoming profitable for the
    first time in 1996, Farmer Mac recorded a net profit of $4.6 million
    for the year ended 1997. Farmer Mac also had a successful stock
    subscription, increasing its capital to nearly double the $25 million
    required by law. Although these are encouraging signs, we recognize
    that additional growth in Farmer Mac's core business is needed for it
    to become a key factor in agricultural finance.
        During 1997, FCA implemented provisions of the Farm Credit System
    Reform Act of 1996 (Reform Act) by approving final regulations to
    govern a Farmer Mac conservatorship or receivership and began work on
    risk-based capital standards, as required by the Reform Act. Also, in
    coordination with the Treasury Department, FCA monitors the operations
    and the financial condition of Farmer Mac and provides periodic and
    timely reports to Congress.
                        fiscal year 1999 budget request
        Mr. Chairman, we are very proud of our accomplishments as the
    safety and soundness regulator of the Farm Credit System and of our
    ability to contain costs while fulfilling our mission. I assure you,
    Mr. Chairman, during fiscal year 1999 we will continue with our
    commitment to effectiveness and cost-efficiency, and we will regularly
    review how further progress can be made in meeting this objective.
        Mr. Chairman, before I present the budget request, I respectfully
    bring to the Committee's attention that FCA's administrative expenses
    are paid for by the Farm Credit System institutions FCA regulates. FCA
    does not receive a Federal appropriation, but instead is funded through
    annual assessments of System institutions. I would also point out that
    FCA has not requested a budget increase in the prior four years. In
    fiscal year 1995, our budget request remained the same as it was for
    1994. In the three fiscal years following 1995, our budget request
    averaged a 5 percent reduction from each previous year for a total
    reduction of nearly 15 percent since 1995.
        For fiscal year 1999, I propose a budget of $35.8 million. This is
    a $1.4 million increase, or about 4 percent, above the $34.4 million
    requested for fiscal year 1998 operations. Most of the increase is for
    salary and benefits for the FCA staff. In addition, our plan calls for
    7 additional examiners in the field.
        Our fiscal year 1999 budget request supports a staffing level of
    318 FTE's. This proposed staffing level will maintain a ratio of 4.3
    staff per billion dollars of System average earning assets and give FCA
    the right mix of positions and skills to implement our strategic plan
    and accomplish the Agency's mission. Please note, Mr. Chairman, the
    proposed FTE level remains substantially below the Office of Management
    and Budget's established target of 408 FTE's by fiscal year 1999 for
    FCA, and represents nearly a 30 percent reduction from the 450 FTE's we
    were authorized for fiscal year 1993.
        Mr. Chairman, we welcome any questions the Subcommittee might have.

                           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 1999 budget request for
    the National Appeals Division.
                                  introduction
        The National Appeals Division (NAD) was established by the
    Secretary's reorganization Act of 1994. The Act consolidated the
    appellate functions and staffs of several USDA agencies to provide for
    hearings of appeals from adverse agency decisions, and review of appeal
    determinations by a director. NAD appeals currently involve program
    decisions of the Farm Service Agency, Risk Management Agency, Natural
    Resources Conservation Service, Rural Business-Cooperative Service,
    Rural Housing Service, and Rural Utilities Service. NAD is
    headquartered in Alexandria, Virginia, and has regional offices located
    in Indianapolis, Indiana; Memphis, Tennessee; and Lakewood, Colorado.
    NAD's staff of 130 includes over seventy hearing officers nation-wide.
                                    mission
        Our mission is to correctly determine appeals arising from the
    program operations of assigned agencies. That is, our mission is to
    issue timely and accurate determinations that recognize the rights of
    program participants and promote the lawful operations of agency
    programs. Our mission supports the USDA Strategic Plan Goals 1.1,
    Enhance the economic safety net for farmers and ranchers, 1.3; Provide
    access to capital and credit to enhance the ability of rural
    communities to develop, grow, and invest in projects to expand economic
    opportunities and improve the quality of life for farm and rural
    residents; and 3.1, Promote sustainable production of food and fiber
    products while maintaining a quality environment and strong natural
    resource base.
                        fiscal year 1999 budget request
        NAD is requesting $13,297,000 in direct appropriations for fiscal
    year 1999. This request represents an increase of $1,579,000 over the
    fiscal year 1998 appropriation. The increase is comprised of $271,000
    for pay costs, $24,000 for an increase in Agency contributions for
    employees covered under the Civil Retirement system, and the remainder
    for two initiatives. The first initiative is completing the development
    and implementation of a nationwide Management Information System (MIS)
    ($695,000), which conforms to Year 2000 requirements and replaces a
    system which only supported the former FmHA National Appeals Staff
    operations. During fiscal year 1998, NAD began work on phase one of the
    MIS, which is the development and implementation of a case tracking
    system. This system is designed to provide information on all case
    activity such as the number of requests for a hearing, the type of case
    being adjudicated, length of time being adjudicated, and the
    disposition of appeal determinations on review. It is critical to NAD
    to be able to track an appeal as it proceeds because of legislative
    time frames. This one-time increase will provide the necessary funding
    for system development and training to complete phase two of the MIS,
    which is an administrative system. The administrative system is
    designed to provide information to aid management in accomplishing the
    goals and objectives stated within our Strategic and Annual Performance
    plans, and to enhance the delivery of NAD services to program
    participants. Reliable information on appeal rights, as well as public
    access to historical records of prior NAD decisions are service
    enhancements we intend to accomplish. The enhancements specifically
    impact farming communities, agribusiness, and the general public. The
    purpose of this initiative is to capture relevant financial and non-
    financial information for use in analyzing the efficiency,
    effectiveness, and results of NAD operations, and to disseminate
    information to the public regarding NAD's appeal process and how to
    participate in it.
        The second initiative is for training ($589,000). The operating
    environment for NAD is dynamic because of the wide range of programs
    subject to NAD adjudication, and the changes in such programs which
    give rise to new and complex issues. NAD hearing officers issue
    decisions arising from agency programs that include; administrative
    off-sets pursuant to the debt collection laws; drought and disaster
    assistance; farm ownership loans; home ownership; conservation reserve
    programs; emergency loans; environmental programs under the
    ``swampbuster'' law; production flexibility contracts; rural rental
    housing loans; and multi-family housing projects among others. In order
    to make fair and equitable determinations, NAD hearing and review
    officers must possess not only a broad, in-depth knowledge of many
    program areas, but be aware of USDA policies, administration, ethics,
    and civil rights. It is critical that NAD maintains a well trained work
    force because the decisions NAD issues directly affect the quality of
    life for farm communities and other rural areas as well as the nation's
    environment, and directly impact the operation of agency programs.
    Decisions that are factually accurate and complete, legally correct,
    and rendered in a timely manner provide results that enable appellants
    to fully and fairly participate in agricultural programs which are
    efficiently and effectively managed. Continuous training and
    development is essential to providing the public competent and fair
    service which recognizes the rights of program participants and
    promotes the lawful operation of USDA programs. We expect these
    initiatives to improve the quality of service provided to rural and
    farm communities throughout the United States, as well as our customers
    within the federal government from Congress, to agencies within USDA.
                                   conclusion
        Our mission is statutorily specific, but it is filled with complex
    challenges arising out of changing laws and policies. The opportunity
    that NAD makes available to the public is an opportunity for a review
    of an adverse decision made by a USDA agency, before an impartial
    hearing officer, and if requested, the opportunity for a review of the
    hearing officer's decision. Simply put, if a participant in one of
    USDA's programs is denied benefits by a USDA agency, that person has
    the right to have the denial reviewed by an impartial hearing officer.
    Further, there is a right to have the hearing officer's decision
    reviewed by the Director of NAD. The appeals process in NAD is a cost
    effective service for program participants to have their adverse
    decision adjudicated in a timely manner without incurring a lengthy,
    costly judicial proceeding. The initiatives in NAD's fiscal year 1999
    budget will ensure that NAD meets its mission requirements in a more
    efficient and effective manner. They provide the necessary groundwork
    for accomplishing USDA strategic goals as well as the goals and
    objectives outlined in NAD's strategic and annual performance plan.
    More importantly, these initiatives provide farmers, ranchers,
    cooperatives, agencies, and other groups with an avenue to a fair and
    equitable adjudicative process. More detailed information regarding
    these budget initiatives is contained within our Explanatory Statement.
    That concludes my statement, and I am looking forward to working with
    the Committee on the 1999 National Appeals Division budget.

                         Office of the Chief Economist
              Prepared Statement of Keith Collins, Chief Economist
        This statement discusses the functions and fiscal year 1999 budget
    request of the Office of the Chief Economist.
        OCE is a small staff of analysts located in Washington, D.C.,
    although a weather office staffed by one person will begin operation
    during 1998 in Mississippi. OCE reports directly to the Secretary of
    Agriculture and 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 also coordinates
    several activities that cut across USDA mission areas, including
    sustainable development and agricultural labor.
        OCE has 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.
    Examples of key activities during the past year are:
        Supporting agency program and policy decisions.--OCE works with
    other agencies to assess program options and guide effective
    Departmental decisionmaking with respect to key program provisions. For
    example, OCE participated in a task force convened by the Secretary to
    develop the rules and selection procedures for the Conservation Reserve
    Program as authorized by the 1996 Farm Bill. OCE has participated in
    the process to determine maximum permitted rental rates, evaluate bids,
    and assess the impacts of accepted acreage on commodity markets.
        OCE has been deeply involved in coordinating analysis of a variety
    of dairy issues. OCE led USDA's monitoring effort on the Northeast
    Interstate Dairy Compact. OCE also chaired USDA's Interagency Dairy
    Analysis Team which coordinated the analysis of the Agricultural
    Marketing Service's proposed rule for Federal Milk Marketing Order
    consolidation and reform. This analysis led to significant changes in
    the options presented for public comment.
        OCE continues to assist the Animal and Plant Health Inspection
    Service--APHIS--in verifying compensation claims for producers,
    handlers and others adversely affected by the Federal quarantine
    established for the eradication of Karnal Bunt.
        OCE developed and analyzed models of the Standard Reinsurance
    Agreement (SRA) to assist the Risk Management Agency--RMA--in their
    1998 SRA negotiations with the crop insurance industry. The models were
    used to analyze the budget implications and industry rates of return of
    various reinsurance proposals, including reinsurance for catastrophic
    and revenue products.
        OCE coordinated Departmental analysis of the proposed settlement
    between tobacco companies and State Attorneys' General. The analysis
    examined the effects of the settlement on tobacco leaf production and
    producer income.
        OCE continued to play a major role in the Department's efforts to
    understand and address structural issues. Follow-up activities
    continued with respect to the Secretary's Advisory Committee on
    Concentration in Agriculture, with a series of programmatic changes
    developed and expected to be announced during the first half of 1998.
    OCE participated in the advisory team that assisted the Grain
    Inspection, Packers and Stockyards Administration in its efforts to
    reorganize in order to more effectively conduct market review and
    investigations on uncompetitive practices and the effects of market
    structural changes.
        Agricultural Market Analyses.--The 1997/98 marketing years for
    commodities have witnessed a continuing adjustment to the record and
    near-record prices for many commodities during the prior year. OCE
    briefed the Secretary many times on the market developments, including
    the large increase in meat supplies, low pork prices and lower-than-
    expected beef prices; the initial decline and then recovery in milk
    prices during 1997; and the large 1997-crop production increases and
    reduced prices, particularly for wheat.
        OCE helped organize a Departmental team to assess the effects on
    agriculture and rural areas of the currency devaluations occurring
    during 1997 in southeast Asia and in South Korea. These analyses were
    used to keep the Secretary up to date and support USDA forecasts for
    total agricultural exports and commodity forecasts reported in the
    World Agricultural Supply and Demand Estimates report.
        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 on the
    consequences of estate and capital gains taxes for producers and on
    price and income variability facing producers under the new farm bill.
    In late 1997, OCE also testified on economic outlook for agriculture.
    In addition, the Chief Economist frequently appeared before Congress
    with the Secretary, Deputy Secretary or others on issues ranging from
    the USDA budget, dairy issues, trade and climate change.
        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, since late 1997, OCE
    has increasingly coordinated the Department's response to requested
    information on the effects of global climate change. OCE represented
    the Department in the development of the National Ambient Air Quality
    Standards issues during 1997. OCE chairs the Capper-Volstead Committee
    which responds to requests related to permissible activities of
    cooperatives. OCE responded to many requests for rapid analysis of
    issues such as the effects of El Nino; the rail mergers and performance
    of the rail industry; monitoring of the Northeast Dairy Compact; and
    the dairy options pilot program.
        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 represents the
    Department on the United Nations Methyl Bromide Task Force. OCE also
    participated in the proposal reviews for the Fund for Rural America and
    provides staff support to the Secretary's Special Assistant for Trade.
        Regulatory Review and Clearance.--The immediate office staff
    reviews and clears regulatory impact analyses of USDA regulations.
    During fiscal year 1997, OCE reviewed and cleared approximately 40
    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
    rulemaking efforts this past year ranged from the Federal milk
    marketing order reform to organic certification, Argentine beef
    imports, the livestock disaster program, peanuts, tobacco, Karnal bunt
    and the WIC program.
        Agricultural Labor.--OCE fulfills the statutory mandate to consult
    with the Attorney General and the Department of Labor--DOL--with
    respect to the H-2A temporary agricultural worker program. OCE also
    consults with DOL, the Environmental Protection Agency, and the
    Immigration and Naturalization Service on other issues affecting
    agricultural workers. OCE staff was active with the agricultural worker
    issues of USDA's Civil Rights Implementation Team and has been
    assisting a consortium of California organizations in developing a
    Welfare-To-Farm work initiative.
        Sustainable Development.--OCE coordinates sustainable development
    activities within USDA. This is done chiefly through USDA's Council on
    Sustainable Development, chaired by the Director of Sustainable
    Development, which develops, coordinates, and integrates the principles
    of sustainable development into policies and programs across all
    mission areas of the Department. During the past year, the Council has
    focused on removing credit and crop insurance obstacles hindering use
    of sustainable development practices and identifying sustainable
    development research needs. The Director advises the State Department,
    Foreign Agricultural Service--FAS--and others on sustainable
    development issues for negotiations, treaty formulation and
    implementation, and trade discussions. The Director led the USDA
    delegation to the meetings of the United Nations' Commission on
    Sustainable Development, which is now focusing on irrigated land
    resources for the year 2000 meetings. The Director participated with
    FAS in preparing for meetings on sustainability for the Summit of the
    Americas and development of the U.S. Action Plan on Food Security, the
    follow-up to the World Food Summit. The Director serves as liaison to
    the President's Council on Sustainable Development (PCSD) and helped
    organize the September 1997 meeting with the city of Tulsa, Oklahoma
    and the Kerr Center for Sustainable Agriculture, which dealt with water
    quality in the Tulsa watershed. The Director also serves with the
    PCSD's Metropolitan and Rural Strategies Task Force.
                     world agricultural outlook board--waob
        The WAOB prepares world agricultural and weather assessments and
    coordinates USDA's work related to agricultural outlook, projections,
    weather, and remote sensing. The Board, with a staff of twenty-five,
    issues a monthly publication known as the World Agricultural Supply and
    Demand Estimates report and oversees long-term USDA forecasts required
    for preparation of the Federal budget. The Board also operates and
    manages the Joint Agricultural Weather Facility--JAWF--in cooperation
    with the National Oceanic and Atmospheric Administration--NOAA, and is
    home to the Department's Chief Meteorologist. In addition, it provides
    technical assistance and coordination for USDA's remote sensing
    activities.
        Coordinating USDA Economic Forecasts.--The WAOB plays a critical
    role in assuring that the Department's commodity information system
    responds to today's rapidly changing world. The Board's mission is to
    ensure that USDA's intelligence on domestic and foreign agricultural
    developments is timely, accurate, and objective, and to speed the flow
    of that information to producers, consumers, and policy makers.
        One of WAOB's primary functions is to coordinate and review all
    USDA forecasts and analyses of foreign and domestic commodity supply
    and demand conditions. USDA's Interagency Commodity Estimates
    Committees are chaired by staff of the WAOB. The purpose of these
    committees is to assure that sound information from domestic and
    international sources is fully integrated into the analytical process
    and that USDA's economic forecasts are objective, thorough, and
    consistent. The committees, with representatives from the Economic
    Research Service, Farm Service Agency, Foreign Agricultural Service,
    Agricultural Marketing Service, and WAOB, are responsible for
    developing official estimates of supply, utilization, and prices and
    reviewing economic reports issued by USDA agencies. In fiscal year
    1997, the Board reviewed and approved for release approximately 200
    such reports.
        Each month, the WAOB publishes the World Agricultural Supply and
    Demand Estimates (WASDE) report, which forecasts production, trade,
    utilization, prices, and stocks. Coverage includes U.S. and world
    grains, oilseeds, and cotton and U.S. livestock and poultry products
    and sugar. Release is simultaneous with the U.S. Crop Production
    report. WASDE is internationally viewed as a benchmark for agriculture
    and provides timely knowledge of world commodity markets that is
    increasingly critical to our export-led farm economy. Equally
    important, the WASDE report gives early warning of changing crop
    production and supply prospects in the United States and in other
    countries.
        Oversight of Long-Term USDA Commodity Projections.--WAOB chairs the
    Department's Interagency Agricultural Projections Committee that
    oversees preparation of long-term projections for farm commodities, the
    U.S. agricultural economy, and world agricultural trade. The Economic
    Research Service has the lead role in preparation of the projections.
    WAOB's role is to ensure a strong multi-agency effort and sound
    analytical procedures for the projections. The projections are used for
    a variety of analytic and mandated functions of the Department, such as
    preparing the USDA portion of the President's budget. These
    ``baseline'' projections provide an objective, rigorous, and thorough
    view of the likely path of the farm sector over the long term.
        The most recent set, Agricultural Baseline Projections to 2007, was
    publicly released in February 1998 at the Department's annual
    Agricultural Outlook Forum. The projections indicate that the economic
    crisis in Asia will have a limited negative impact on the longer term
    positive trends in world food consumption and agricultural trade. The
    projections also point to favorable long-term trends in U.S. farm
    prices and income.
        The annual USDA Agricultural Outlook Forum, conducted under OCE's
    leadership, is a public meeting on farm, food, and trade prospects. To
    provide a stronger programmatic foundation for the Forum, the Chief
    Economist invited the Agricultural Marketing Service, Animal and Plant
    Health Inspection Service, Grain Inspection, Packers and Stockyards
    Administration, Natural Resources Conservation Service, and Risk
    Management Agency to participate as co-sponsors in 1998. Per-agency
    participation costs were reduced and the event is now enriched with
    expertise on risk management, marketing, grain inspection, plant and
    animal health, and soil and water conservation.
        Outlook Forum 1998, the seventy-fourth annual meeting, took place
    in late February 1998. Attendance, topping 1,000, was the highest in
    recent years. The program featured a spectrum of issues affecting the
    future of agriculture, discussed from many vantage points. In addition
    to near-term and long-range agricultural prospects, topics ranged from
    new organic food standards to the impacts of biotechnology and
    environmental regulation. Speakers were drawn from farming,
    agribusiness, environmental groups, government, and academia. Extensive
    media coverage and posting of speeches on the Internet shortly after
    the Forum ensured the timely dissemination of information presented.
        Monitoring Weather Impacts on Agriculture.--USDA places a high
    priority on incorporating weather-based assessments into all analyses.
    The focal point for this activity is the Joint Agricultural Weather
    Facility (JAWF). JAWF staff continually monitor global weather and
    assess its probable impact on agricultural output. JAWF briefings,
    reports, and special alerts are key inputs to the development of USDA
    crop yield estimates for both competitor and customer countries. JAWF
    weather assessments are made available to the public through the Weekly
    Weather and Crop Bulletin, the WAOB home page, and the news media.
        During the 1996/97 winter and early spring months, unusually heavy
    snow cover raised concerns about U.S. spring planting conditions. JAWF
    staff cautioned that such conditions would not necessarily cause long
    planting delays by showing that 1969, an analog year, experienced a
    similar pre-season weather but turned out ``normal.'' During the
    winter, high precipitation and flood potential in the pacific Northwest
    and California were closely tracked. To assess the probably impact of a
    freeze episode which occurred in Mid-January, JAWF analysts assembled
    data from sources along the Gulf Coast and in southern Florida. These
    alternate sources were needed because of data losses associated with
    budget cuts at the National Weather Service.
        The Chief Meteorologist and the JAWF staff briefed government
    officials and media on the agricultural impacts of spring floods in the
    upper Mississippi River basin. WAOB's Remote Sensing Coordinator
    obtained imagery of spring flooding along the Red River in North Dakota
    and Minnesota and along the Ohio and Mississippi River. Through an
    arrangement with the National Imagery and Mapping Agency and Radarsat,
    WAOB enabled the Natural Resources Conservation Service, Agricultural
    Research Service, Foreign Agricultural Service, Forest Service and
    National Agricultural Statistics Service to obtain a complete set of
    flood imagery for free, a substantial cost savings to the Department.
        Disseminating USDA Numbers to the Public.--As commodity prices are
    affected less by Government programs and more by market forces, the
    need for objective and current market information is becoming
    especially critical. The WAOB recognizes the need for rapid information
    dissemination and strives to place the WASDE report Weekly Weather and
    Crop Bulletin in the hands of farmers and other users as quickly as
    possible. The goal is to provide simultaneous access at a minimum cost
    to all market participants.
        During fiscal year 1997, WAOB began posting the market-sensitive
    World Agricultural Supply and Demand Estimates on its home page within
    minutes of release, replacing the Department's expiring Computerized
    Information Dissemination System (CIDS) as the locus of first release.
    Most of the Weekly Weather and Crop Bulletin also is posted each week.
        WAOB continues to be a key participant in the management of the
    USDA Economics and Statistics System, a website for periodicals and
    data bases maintained by Cornell University. In 1997, this site was
    selected as a ``Best Library-Related Web Site'' by Library Hi Tech
    magazine. Free e-mail subscriptions to crop reports are a popular
    feature of the site. The number of e-mail subscriptions to the WASDE
    report continued to increase in fiscal year 1997. WAOB and other
    partner agencies met with Cornell University staff in December 1997 to
    plan future enhancements to the site.
        Technical Cooperation with China.--As part of an agreement between
    China's State Statistical Bureau and USDA's Foreign Agricultural
    Service, WAOB took part in technical exchanges that are yielding
    important analytical benefits. China requested USDA's assistance as the
    country prepared to execute a comprehensive agricultural census during
    1997. A USDA team visited Beijing under leadership of the WAOB
    Chairperson to explain the Department's agricultural sampling
    techniques and present seminars on near-term and long-term agricultural
    prospects. In two return visits, Chinese analysts shared their first
    commodity balance sheets for rice and cotton, prepared with help from
    the WAOB. The balance sheets provided critical new data for evaluating
    USDA's estimates for China.
        Understanding TCK Smut.--WAOB meteorologists continued to work with
    Agricultural Research Service scientists to develop a scientifically-
    based response to China's concerns that TCK smut from imported grain
    will spread dwarf bunt disease in China's winter wheat. USDA's position
    is that meteorological conditions in China will not support significant
    spread of the fungus.
        Information Exchange with South Africa.--WAOB took part in an
    initiative with South Africa to share weather technologies and data.
    Getting better data from South Africa is important because of its role
    in world corn trade. A meteorologist of the WAOB's JAWF provided
    support at a Binational Commission ministerial meeting in Capetown. He
    also accompanied a team of South African scientists to observe
    Oklahoma's ``Mesonet'' weather data system, which is under
    consideration as an adaptable model for South Africa, and took part in
    a return visit to South Africa in February 1998.
        Planning Assistance for Colombia.--At the invitation of the
    Government of Colombia and Institute for Inter-American Cooperation on
    Agriculture, WAOB participated in a two-day agricultural seminar in
    Cali, Colombia entitled, ``Visions for Future and Long-Term Planning.''
    The WAOB Chairperson presented USDA's long-term baseline projections to
    an audience of 250 Colombian agricultural leaders.
        Restoring Farm Weather Data.--Recent termination of specialized
    agricultural weather services by the National Weather Service (NWS) has
    created a gap in weather data needed by agriculture. WAOB has been
    leading USDA efforts to revitalize plans for a National Agricultural
    Weather Information System, which was initially authorized in the 1990
    Farm Bill. In fiscal year 1997, alternatives were developed to achieve
    cooperation with NWS and the private sector and link with existing
    local agricultural data collection networks.
        Southeast Meteorological Position Established.--WAOB obtained
    approval to establish a meteorological position co-located at the
    Cooperative State Research, Education, and Extension Service site in
    Stoneville, Mississippi, recently vacated by the National Weather
    Service. The new position will be dedicated to collecting
    meteorological data in the Southeast and marks the first step in
    development of a USDA National Agricultural Weather Observing Network.
        Interagency Initiatives.--WAOB's Chief Meteorologist represented
    the Department in a number of climatic activities, including liaison to
    the Office of the Federal Coordinator for Meteorology and the World
    Meteorological Organization. The Chief Meteorologist supported USDA's
    Deputy Secretary in his role as co-chair of the Western Drought
    Coordination Council, a cooperative project with the Western Governors
    Association. In fiscal year 1997, the Chief Meteorologist helped
    organize the Council's first meeting in Albuquerque, New Mexico.
        The JAWF worked closely with the National Water and Climate Center
    of USDA's NRCS and with NOAA Regional Climate Centers on a Unified
    Climate Access Network to provide on-line access to weather and climate
    data from a variety of sources. At the request of the World
    Meteorological Organization, JAWF staff prepared a training course on
    agricultural data management procedures. Plans are afoot for JAWF staff
    to present the course to WMO member countries. JAWF has also begun to
    put updated sections of its popular handbook Major World Crop Areas and
    Climatic Profiles on the Internet, and is working with the U.N. Food
    and Agriculture Organization to develop an expanded CD-Rom version
    using geographic information system (GIS) technology.
        Weather Data Receiver Upgraded.--The National Weather Service now
    requires recipients of its data, including the JAWF, to install
    compatible hardware and software or purchase NWS data elsewhere at
    substantially greater cost. The Office of the Chief Economist obtained
    Departmental approval to install a suitable receiving site in Kansas
    City, Missouri. Once operational, a customized stream of real-time
    meteorological data will be downloaded and made available to all USDA
    end-users, free of charge.
        Remote Sensing Activities.--As the chair of the Department's Remote
    Sensing Coordination Committee (RSCC), WAOB coordinated revision of a
    draft Memorandum of Understanding between USDA and the National
    Aeronautics and Space Administration (NASA), which was signed by the
    Secretary in February 1998. WAOB arranged for more than 20 briefings of
    the RSCC on technical and space program issues. WAOB established a
    remote sensing web page to enable customers and clients to access all
    USDA remote sensing offices and selected imagery products. At present,
    WAOB is coordinating USDA inputs for a proposed NASA research
    announcement on agricultural remote sensing. Also, WAOB is coordinating
    a study being conducted by the Office of Science and Technology Policy
    to identify potential agency requirements for remote sensing data from
    commercial sources.
        1890 Institution Partnership.--WAOB strengthened its relationship
    with the University of Maryland at the Eastern Shore (UMES), an 1890
    institution. WAOB employed two UMES students as interns. One found
    permanent employment with a USDA statistical agency and the second
    worked on a application of GIS technology, a burgeoning field. WAOB
    conducted an agricultural career seminar for preregistered UMES
    students (high school seniors) to introduce them to the work of USDA
    and opportunities in agriculture.
          office of risk assessment and cost-benefit analyses--oracba
        The principal task of ORACBA, with a staff of five, is to promote
    effective and efficient USDA regulation of hazards to human health,
    human safety and the environment. This is accomplished by bringing
    science and management together in policy and regulatory development.
    By statute, ORACBA is required to ensure that the analysis supporting a
    major rule proposed by USDA includes a risk assessment and a cost-
    benefit analysis for mitigation measures that are performed
    consistently, and use reasonably obtainable and sound scientific,
    technical, economic, and other data. ORACBA serves as a focus in USDA
    for developing new methods and approaches to risk assessment for
    agriculture related hazards. To accomplish this, ORACBA works with USDA
    agencies in coordinating analyses supporting major regulations.
        Supporting and Expanding USDA Risk Assessment Capabilities.--ORACBA
    programs for training, information resources, analytical support, and
    peer review are the primary means for integrating science-based risk
    assessment and regulatory impact analysis. For example, ORACBA sponsors
    two interagency work groups to coordinate these activities. One, for
    food safety issues, is the Interagency Food Risk Assessment Group (I-
    FRAG). The other, for ecological and conservation issues, is the
    Ecological Risk Assessment Work Group (ERAWG). Both groups are actively
    carrying out research on methods and application of methods to hazards
    managed by USDA. The groups include representatives for every pertinent
    USDA unit as well as members from other government agencies and
    industry associations.
        ORACBA continues to sponsor monthly seminars, the Risk Forum, which
    brings in notable speakers for discussion of technical and scientific
    issues relating to food safety, human health and ecological risk
    assessment. The ORACBA Newsletter continues to provide an outlet for
    further discussion of risk assessment issues within USDA. Circulation
    for hard copies has reached 850; all newsletters available through the
    Internet.
        ORACBA continues to support an interagency Fellowship program
    between USDA and FDA, sponsored through the American Association for
    the Advancement of Science. This expands our government ties to the
    research community to stimulate research in critical areas where USDA
    and FDA programs affect human health, safety, or the environment. Two
    scientists from the Agricultural Research Service work with ORACBA to
    assess food safety risks and examine risk assessment and management for
    USDA's conservation programs.
        ORACBA has joined the Joint Institute for Food Safety and Nutrition
    (JIFSAN) in the development and establishment of a curriculum in risk
    analysis. The curriculum will be taught at JIFSAN as summer institutes,
    at University of Maryland for semester courses, and at the USDA
    Graduate School as short courses. Other colleges and universities will
    also have access to these materials, allowing them to offer courses on
    their own campus. Tuskegee University is working with USDA and JIFSAN
    in developing these course materials.
        Conducting Reviews and Supporting Risk Assessments.--ORACBA has
    reviewed a number of risk assessments and related activities, both from
    within USDA and through its role in interdepartmental review. For
    example, ORACBA provided support and technical assistance to FSIS
    during the dioxin in chicken episode. ORACBA's input helped develop a
    policy which protected consumers while helping identify the dixoins as
    from a natural source. ORACBA has worked with the Animal and Plant
    Health Inspection Service to develop a policy for animal health
    regionalization regulations and will review all risk assessments for
    imports brought in under the rule. ORACBA has also advised on the
    recently proposed organic rule, the Animal Feeding Operation Strategy
    Working Group under the Vice President's Clean Water Action Plan, the
    President's Initiative on Fruit and Vegetable Safety, EPA's report to
    Congress on mercury in fish, and the interagency development of a plan
    to assess the risk of illness due to salmonella in eggs.
                        fiscal year 1999 budget request
        For fiscal year 1999, OCE is requesting $6,173,000 in direct
    appropriations. This request represents a net increase of $1,125,000
    over the fiscal year 1998 adjusted base. The proposed budget includes
    an increase of $131,000 for the annualization of the fiscal year 1998
    pay raise and the anticipated fiscal year 1999 pay raise, an increase
    of $32,000 for retirement costs, a decrease of $38,000 to achieve the
    Streamlining Level in support of the President's Executive Order and
    $1,000,000 are for the following items.
        (1) A net increase of $219,000 for Modernization of Weather and
    Climate Data Acquisition.--This consists of a decrease of $525,000
    included in the fiscal year 1998 budget for a one-time equipment
    purchase for NOAAPORT telecommunications equipment which was installed
    at a central USDA location to serve as a hub for interagency access to
    the National Weather Service (NWS) data and products. This was the
    first phase of a multi-year modernization initiative.
        The increase items include an increase of $410,000 and two staff
    years for the Modernization of Weather and Climate Data Acquisition.
    The expected outcome is expanded access for USDA to weather and climate
    data needed to accomplish USDA's administrative responsibilities and
    Congressional mandates related to the impact of weather and climate on
    agriculture and the national forests. The NWS is implementing a multi-
    billion dollar modernization and restructuring initiative which
    includes the adoption of state-of-the-art communications technologies.
    The collection, dissemination, and quality control of weather and
    climatic data will be accomplished on AWIPS/NOAAPORT equipment, which
    was installed during fiscal year 1998. The next phase of modernization
    will be to provide staffing and pre-Advanced Weather and Information
    Processing System (AWIPS) equipment at strategic sites. The increase
    will provide for the purchase of hardware and software necessary to
    fully implement operational sites, telecommunications and maintenance,
    as well as the hiring of two staff years. The staff will be tasked with
    managing the system, hardware and software, maintaining the integrity
    of the data network, and utilizing an AWIPS compatible Geographical
    Information System package to ensure near real time availability of the
    data at all operational sites. The acquisition of AWIPS technology will
    also provide USDA with a link to the Unified Climate Access Network
    (UCAN), an information delivery system which provides complete and
    efficient access to all weather data sources in the United States.
    Through UCAN, a wide variety of climate applications that are essential
    to USDA will become more readily accessible to weather and climate
    analysts in both the public and private sectors.
        (2) An increase of $334,000 and four staff years for the National
    Agricultural Weather Observing Network (NAWON).--As a result of the
    full implementation of NAWON, an infrastructure will be created to
    rapidly deliver local level weather and climate data for agricultural
    areas to public and private sector users. The data could then be used
    for a broad range of analytical purposes. NAWON will link different
    agricultural weather data collection networks already in existence,
    such as the NWS volunteer ``Cooperative Observer'' (COOP) network
    around the Nation; the State and university operated networks such as
    the Oklahoma Mesonet and the High Plains Automated Weather Station
    (AWS) Network; and the USDA operated networks such as the NRCS SNOTEL
    (SNOpack TELemetry) and FS RAWS (Remote Automated Weather Station)
    networks. Some new sites in major agricultural areas will also be
    established. The effort would be a full partnership between the Federal
    and State agencies, extension specialists, agricultural research
    scientists, university researchers and the private sector.
        This is the second year of implementation of this initiative. The
    focus in fiscal year 1999 will be to reestablish access to data that
    has previously been collected through the COOP program and to establish
    new data collection sites in key agricultural areas. As part of the
    restructuring and modernization, NWS has announced plans to eliminate
    about three-fourths of the active 12,000 COOP sites. USDA staff will be
    placed in strategic locations around the Nation to assist state
    climatologists, Regional Climate Centers, and COOP observers in
    preserving an accurate and reliable network for agricultural weather
    data. Without access to basic weather and climate data for agricultural
    areas, the accuracy of their advisories and forecasts is compromised.
    In addition, both public and private sector analysis and decisions
    concerning agricultural commodity trade and markets, fire weather
    management, forest management, ecosystem conservation, assessments of
    crop conditions and yield potential, and responses to natural disasters
    affecting agriculture, all depend on the availability of this data.
        (3) An increase of $255,000 and two staff years for support for the
    World Agricultural Outlook Board.--This funding would be used to
    support two additional agricultural economists. These analysts would be
    assigned lead responsibility for analyzing selected oilseeds and
    grains, while providing needed statistical and computer support to the
    senior analysts for these commodities. A primary mission of the World
    Agricultural Outlook Board (WAOB) is to produce the Department's highly
    market-sensitive World Agricultural Supply and Demand Estimates Report.
    The Board was designed to be a small staff, consisting of only 25
    FTE's, including staff supporting all weather and climate activities.
    The commodity marketing analysis core of the Board is comprised of the
    Chairperson and six senior level agricultural economists, each of which
    chairs an Interagency Commodity Estimates Committee (ICEC) for a major
    commodity group, i.e., wheat and feed grains, rice, oilseeds,
    livestock, cotton, and specialty crops. The membership of each ICEC
    includes representatives from other USDA agencies which contribute
    relevant information and expertise to the analytical process. As
    originally conceived, the Board was to function primarily as a
    coordinating body with strong resident analytical capability.
        As commodity expertise within the Department has eroded due to
    agency budget reductions and reallocations, the Board's role has
    gradually shifted from interagency coordination, as originally
    intended, to one of primary responsibility for the situation and
    outlook products released by the Department. Increasingly, industry
    requests for current market intelligence are being deflected to the
    Board from participating agencies. At the same time, support provided
    to the Board such as data collection, quality control, and data entry,
    have, in many cases, been withdrawn or curtailed by participating
    agencies. The ICEC chairpersons now have difficulties filling
    information voids and providing the in-depth analyses needed to
    generate the quality commodity situation and outlook assessments for
    which the Department is renowned worldwide. ICEC chairpersons are
    working under enormous pressure, and analytic underpinning of USDA
    forecasts is deteriorating. Four years ago, the Deputy Chairperson
    position was lost to downsizing and reorganization and the six senior
    level ICEC chairpersons function with no backup or in-house analytical
    or statistical support.
        While numerous factors have caused agencies within the Department
    to cut support for commodity situation and outlook work, public and
    private sector demands for objective and unbiased analyses have
    increased sharply. With the passage of the 1996 Farm Bill, risks
    associated with agricultural enterprises have increased. Marketing
    alternatives to manage risk have become more, not less important. To
    serve its constituency, the Department must not abandon its long-
    standing tradition of providing the highest quality unbiased market
    information possible. However, at this time, the WAOB is barely able to
    maintain the current forecast and projection program and is not likely
    to be able to do so in the future without additional resources.
        This initiative would help maintain OCE's capability of improving
    the U.S. agricultural economy by facilitating efficient price discovery
    in agricultural markets by coordinating the release of comprehensive,
    consistent, reliable, timely and objective USDA estimates, forecasts,
    and projections of commodity supply, demand, and prices.
        (4) An increase of $78,000 to support a Risk Assessment Fellows
    Program.--The Office of Risk Assessment and Cost-Benefit Analysis
    (ORACBA) undertakes a limited number of efforts to develop partnerships
    in agricultural risk analysis activities. Experience over the past
    years has proven one of the most valuable efforts to bringing
    outstanding young scientists to work at USDA for one year. During
    fiscal year 1998, ORACBA participated with the American Association for
    the Advancement of Science (AAAS) and the Food Safety and Inspection
    Service to fund a limited number of fellows who contributed importantly
    to food and animal risk analysis projects. During fiscal year 1999, an
    increase in risk analysis related to food safety and international
    trade in animal products is expected. The annual increase of $78,000
    would allow an additional fellow to participate in this young
    scientist's program and provide temporary assistance in addressing the
    risk analysis program needs. ORACBA would also conduct an outreach
    program with universities to promote risk analysis research in support
    of USDA program needs. This initiative supports the achievement of
    OCE's strategic goal to ensure regulations affecting the public are
    based on sound, objective and appropriate economic and risk analyses.
        (5) An increase of $98,000 for ORACBA to support the President's
    Food Safety Initiative.--The President's Food Safety Initiative cites
    six critical elements for a comprehensive and more effectively
    coordinated nationwide program to improve the safety of the food supply
    and, thereby reduce the possibility that consumers will suffer the
    adverse health and economic consequences of foodborne infections. One
    of these elements is the development of improved risk assessment
    methods for foodborne pathogens. Risk assessment methods help
    characterize risks to human health of foodborne hazards and help
    regulators make decisions to ensure effective and efficient
    interventions for improving public health. This increase would fund
    activities in the Office of Risk Assessment and Cost Benefit Analysis
    to support the improvement of risk assessment methods for foodborne
    pathogens.
        The first of these activities is Peer Review--review by independent
    scientists and risk assessors of key risk-based methods, programs, and
    activities for the purpose of making improvements. For example, a risk
    assessment model is currently under development in USDA through
    ORACBA's Interagency Food Risk Assessment Group (IFRAG) to consider
    microbial risks to beef products from farm to table. It is expected
    that this model will be widely useful in Government and industry for
    risk-based evaluation of procedures and processes important in beef
    production and processing. This model will become part of the risk
    assessment capability for the National Food Safety Initiative, as well
    as support efforts in international trade of food commodities. Another
    example concerns FSIS' use of risk analysis to revise the residue
    testing program. The program will develop a risk-based system for
    allocation of inspection and testing resources to assure the safety of
    red meat. Since the current USDA system for residue evaluation has been
    criticized by international trade groups, it is important that the
    system under development have peer review to assure adequacy of the
    proposed program to support domestic needs and export activities.
        The increase would also be used to fund activities to develop
    greater expertise in risk assessment research related to food safety
    issues, and to assure trained and competent analysts are available to
    complete risk analyses, both within and outside USDA. Overall, these
    activities will benefit USDA food safety programs, help develop the
    analytical capabilities of USDA staff, and enlarge the number of
    trained professionals involved in food safety risk analysis. This
    budget initiative also supports the achievement of OCE's strategic goal
    to ensure regulations affecting the public are based on sound,
    objective, and appropriate economic and risk analyses.
        (5) An increase of $350,000 for the Commission on 21st Century
    Production Agriculture.--The Commission on 21st Century Production
    Agriculture authorized by the Federal Agricultural Improvement and
    Reform Act of 1996 (Farm Bill), was created to make farm program policy
    recommendations to Congress regarding future farm legislation beyond
    the year 2001. The Commission is comprised of three members appointed
    by the President and eight members appointed by the Chairmen of the
    Senate and House Agricultural Committees.
        The Commission is to conduct a comprehensive review and assessment
    of the success of production flexibility contracts in supporting the
    viability of U.S. farming; assess the economic risks to farms
    delineated by size; assess the changes in farmland values as a result
    of the 1996 Farm Bill; assess the extent to which regulatory relief and
    tax relief for agricultural producers is implemented; and assess the
    effects of trade embargoes, international trade agreements and export
    programs on U.S. agriculture; assess the likely effect of transferring
    peanut quotas across State lines; assess the personnel and
    infrastructure requirements of the Department of Agriculture necessary
    to support the future relationship of the Federal Government with
    production agriculture and make specific legislative recommendations to
    the Congress in this regard.

                     Office of the Chief Financial Officer
         Prepared Statement of Sally Thompson, Chief Financial Officer
        Mr. Chairman and members of the Subcommittee, it is a pleasure to
    appear before you today as we present the President's budget proposal
    for fiscal year 1999 for the Office of the Chief Financial Officer--
    OCFO--and the Department's Working Capital Fund. I would like to
    introduce Ted David, the Deputy Chief Financial Officer, Steve
    Dewhurst, the Department's Budget Officer, and Constance Gillam, my
    budget officer.
        Mr. Chairman, the OCFO administers its programs and activities, as
    required by the CFO Act of 1990, and delegated by the Secretary of
    Agriculture, to provide financial management leadership and service to
    support program delivery in USDA. As important examples, we develop
    financial management systems policies that promote complete, reliable,
    timely and consistent information from financial systems; provide
    policy guidance and oversight of the Department's internal controls and
    management accountability programs, to ensure adequate controls over
    Department assets; coordinate implementation of the Government
    Performance and Results Act--Results Act--in USDA, including strategic
    planning and performance measurement; and provide budget support for
    Departmental Offices and the Office of the Secretary. In addition, the
    CFO is responsible for leadership of USDA's National Finance Center.
                    progress in financial management in usda
        I'd like to share with the Committee today the progress OCFO has
    made in strengthening financial management in USDA as well as our
    current plans for further improvements in financial management in USDA.
    Our plans are based on the following four major strategic goals for
    OCFO which have been identified in USDA's Strategic Plan:
      --Ensure the provision of timely and reliable financial management
            information, advice, and counsel to support informed decision
            making by USDA policy and program personnel.
      --Ensure accountability for assets and resources entrusted to the
            Department.
      --Provide coordination, compliance, and monitoring services to USDA
            agencies for specified financial management and related
            legislation, regulations, and administration policy.
      --Develop and maintain administrative and financial management
            information processing systems at the National Finance Center
            that are responsive to user and customer needs. It should be
            noted that this particular goal is financed through the
            Departmental Working Capital Fund but is under the direction
            and guidance of the Office the Chief Financial Officer.
        We are committed to these Strategic Goals. Our Annual Performance
    Plan and budget request for fiscal year 1999, which are directly linked
    to these goals, are designed to ensure that USDA's policy and program
    officials have the financial information they need to deliver quality,
    low cost programs and services to the American public.
              financial management information advice and counsel
        In today's Government environment, unless policy and program
    officials have accurate, timely, reliable, consistent, and accessible
    financial information, they cannot adequately assess the effectiveness
    and efficiency of their programs, as required by the Government
    Performance and Results Act (GPRA) and by good management practice. In
    recognition of this need, OCFO has defined the need to provide quality
    information in a timely fashion as a major strategic goal and devoted
    significant resources toward its accomplishment.
        As part of our Annual Performance Plan, we have identified four
    performance goals for fiscal year 1999 to achieve the strategic goal of
    providing financial management information and advice to policy and
    program officials. The first performance goal is the continued
    implementation of the single integrated financial management
    information system to modernize financial systems through the multi-
    year Financial Information Systems Vision and Strategy (FISVIS)
    project.
        We already have made significant progress in implementing FISVIS.
    For example, we have developed a single set of financial standards and
    definitions for USDA that are consistent with Governmentwide standards
    and requirements. This in itself is a major achievement considering
    several years ago there were different financial standards for each
    USDA agency, with a single account code having many different
    definitions. We are also progressing in implementing the Foundation
    Financial Information System (FFIS), using Commercial Off-the-Shelf
    software. Toward that end, we have converted the appropriation accounts
    of OCFO and three organizational units in the Forest Service to the
    FFIS system. We have also developed a tool kit that will simplify
    future implementations of smaller agencies to the new systems. Further,
    the Farm Service Agency is well on its way to implementing the new
    system. By fiscal year 1999, we plan to implement the remainder of the
    Forest Service. We will implement other USDA agencies beginning in
    fiscal year 2000 and plan for complete implementation by the beginning
    of fiscal year 2001. Of equal importance, we will ensure Year 2000
    (Y2K) compliance for our financial systems long before the inevitable
    deadline of January 1, 2000.
        While USDA has had major achievements in implementing our single
    integrated financial information system, our progress has not been as
    rapid as planned. We have encountered some of the difficulties inherent
    in the implementation of complex financial systems. We are working with
    the Chief Information Officer to assess current status and, if
    necessary, to modify our project approach. I believe, however, we are
    well on our way to implementing a new single integrated financial
    information system which will enable program policy and management
    personnel to fulfill their responsibilities.
        As part of implementing the single integrated financial information
    system, OCFO is responsible for ensuring that other financial systems
    and the financial portions of the mixed systems developed by USDA
    agencies are in compliance with Departmental standards. We are also
    working with the Office of the Chief Information Officer to ensure that
    all financial systems in USDA will be Y2K compliant before we enter the
    new millennium.
        Our second major performance goal is to achieve an unqualified
    opinion on USDA's financial statements. An unqualified opinion is
    required by legislation, such as the Government Management Reform Act.
    More importantly, an unqualified opinion on the financial statements
    provides assurance to our users and customers that the financial
    systems which underlie those financial statements are sound and
    generate consistent, reliable, and useful information. OCFO is
    continuing to make significant progress in achieving that goal.
    Implementation of FFIS is expected to be a key factor in our success.
    In addition, the Forest Service financial health project, upgrading of
    our credit reform accounting policies and improving the quality of
    information received from our State partners are all significant
    factors in our ability to achieve an unqualified opinion. Our strategic
    and performance plans call for achieving an unqualified opinion on
    USDA's fiscal year 1999 consolidated financial statements as verified
    by the OIG audit opinion which we will receive in fiscal year 2000.
        A third performance goal is to fully implement cost accounting
    systems and methodologies in USDA. Accurate, reliable, consistent cost
    data at the lowest organizational level are essential for good
    financial management. We want to ensure that sound cost principles are
    applied consistently throughout USDA. With improved cost data, we can
    generate credible information on the cost of services, products,
    outputs, and outcomes as required by the Results Act as well as for
    day-to-day decision making. In fiscal year 1998, our consolidated
    financial statements will show the full costs of major USDA programs.
    In fiscal year 1999, cost accounting standards will be implemented at
    lower levels of the organization. In fiscal year 1999, USDA will meet
    the requirements of the CFO Act, to review all fees and other charges
    every 2 years for compliance with cost accounting and other standards
    by reviewing 50 percent of its fees, annually.
        Our fourth performance goal is to provide financial management
    advice, counsel and technical expertise to USDA policy and program
    personnel. This is, perhaps, one of the most important services that we
    offer and one of the most difficult to measure. We have chosen to use
    customer satisfaction as our measure of performance. The timeliness and
    quality of the advice and assistance we provide will be assessed and
    validated by a customer service survey. The baseline will be
    established during fiscal year 1998. Action plans to improve
    performance will be implemented and incremental improvement achieved in
    fiscal year 1999 as validated by a follow-up survey.
           accountability for assets and resources entrusted to usda
        Our second strategic goal is to ensure accountability for assets
    and resources entrusted to USDA. The Department is responsible for
    approximately $136 billion of taxpayer assets. It is critical that we
    demonstrate our accountability for those resources and that we are
    indeed good stewards of the public's funds.
        Our first performance goal in demonstrating accountability is to
    achieve incremental progress on ensuring effective management controls
    throughout USDA and timely completion of corrective action plans. The
    adequacy of management controls is primarily determined by two
    processes: internal reviews by management as reported in the Federal
    Managers Fiscal Integrity Act (FMFIA) and audits by the Office of
    Inspector General. I am proud to report that for the first time in 7
    years, USDA has provided reasonable assurance that, taken as a whole,
    the Department is in compliance with the management accountability and
    control provisions (Section 2) of FMFIA. We are still not able to
    report compliance with the financial systems provisions of the Act
    (Section 4); however, our current efforts to improve our financial
    systems will enable us to achieve such conformance.
        During fiscal year 1999, we will focus on the remaining corrective
    actions for Section 2 material weaknesses and resolve the Section 4
    nonconformances. Our performance goal is to achieve full compliance
    with FMFIA for fiscal year 1999.
        Our second accountability performance goal is to publish an
    Accountability Report for fiscal year 1999. The new Accountability
    Report will combine into one document the FMFIA Report, the Secretary's
    Management Report to Congress, the consolidated financial statements,
    the Prompt Pay Report, and others, so that Congress may get an overall
    view of accountability for those assets entrusted to the Department. We
    plan to issue our first Accountability Report for fiscal year 1999.
        In addition, as part of this strategic goal, we plan to improve the
    quality of the budget and related services which we provide to Working
    Capital Fund activities and to client agencies. These services assist
    client agencies in determining and justifying resource needs,
    allocating resources, and reporting on the utilization of those
    resources. In fiscal year 1999, we will continue to improve the
    timeliness, accuracy, responsiveness and reliability of these services,
    including implementation of new tools and techniques to improve the
    efficiency and effectiveness of our operations.
                      departmentwide policy and oversight
        OCFO's third strategic goal is to provide coordination, compliance,
    and monitoring services to USDA agencies for specified financial
    management and related legislation, regulations, and administration
    policy. In this role, OCFO establishes departmentwide policies,
    provides expert advice, coordinates systems development, and monitors
    agency performance to ensure that policies are implemented in
    accordance in Department and Governmentwide requirements. These policy
    and oversight services enable us to ensure compliance with the GPRA,
    the Debt Collection Improvement Act (DCIA), the Cash Management
    Improvement Act (CMIA), Prompt Pay Legislation, Credit Reform Act, and
    other legislation. In addition, OCFO provides similar services for
    other fiscal requirements, including travel policy, federal assistance,
    asset management, and other fiscal matters.
        During fiscal year 1999, we will continue to provide expert
    assistance, consultation, and oversight in these areas; however, we
    will accord a high priority to the following activities:
        Government Performance and Results Act.--Fiscal year 1999 is the
    first year for which Annual Performance Plans are ``in effect'' for all
    USDA agencies and the first year for which an Annual Performance Report
    is required. OCFO will assist agencies in identifying and developing
    performance information, develop the form of the Performance Report
    itself and prepare the Performance Report. While the Report will be for
    fiscal year 1999, by law it is to be submitted by March 2000. In
    addition, we will continue to provide technical assistance and support
    to USDA agencies, as they institutionalize strategic and performance
    planning in their organizations.
        Debt Collection Improvement Act.--During fiscal year 1998,
    significant portions of DCIA will be implemented, including those
    portions relating to administrative offset and cross-servicing. During
    fiscal year 1999 we will continue offset and cross-servicing activities
    and implement the requirements for electronic funds transfer (EFT)
    which are to be put in place by January 1, 1999. Other aspects of the
    Act will be implemented based on Treasury guidance. We will also
    monitor agency achievement of delinquent debt reduction goals and, as
    with GPRA, continue to provide technical assistance to USDA agencies on
    overall improvement of our credit programs.
        Implementation of new credit card programs.--In early fiscal 1999
    the General Services Administration will put into effect new credit
    card programs available to USDA and other Federal agencies. These new
    programs provide significant flexibility to USDA to use one or more of
    the vendors on the approved list. We will work with USDA agencies to
    implement that combination of credit card programs which is most
    advantageous for USDA program officials.
        New travel systems.--We will, with USDA agencies, begin to develop
    a new travel system, taking advantage of new legislation and advanced
    technology.
        Other.--USDA agencies have identified specific goals for reduction
    in delinquent debts, on-time payment under the Prompt Payment Act, use
    of advanced methods for payments and cash collections and other
    operating performance indicators. We will monitor achievement of those
    goals as well.
        Since much of the guidance, coordination, and oversight is provided
    through consultation with USDA officials on travel, grants, cash, debt,
    and other fiscal policies, we will strive to improve the quality and
    timeliness of our service and will measure the success of our efforts
    through use of customer surveys.
                        fiscal year 1999 budget request
        Our fiscal year 1999 budget request of $4,562,000 is an increase of
    $279,000 and 2 staff years over our fiscal year 1998 appropriation. The
    increase covers additional personnel costs of $123,000 for pay costs
    and $35,000 for the Civil Service Retirement System. The remaining
    $121,000 and 2 staff years are needed to develop cost-related
    performance information. This increase supports two of our strategic
    goals financial management information, advice and counsel, and
    Departmentwide policy and oversight with specific focus on implementing
    GPRA. We will provide leadership throughout USDA to develop cost
    management systems and information and to identify suitable cost-
    related measures to be used to measure the cost of achieving mission
    areas' and agencies' strategic and performance goals.
                 working capital fund--national finance center
        Mr. Chairman, I would like to conclude with a brief overview of our
    major initiative for the largest activity financed by the Working
    Capital Fund the National Finance Center. While the Fund finances 22
    activities, most of those are managed by the Assistant Secretary for
    Administration and Chief Information Officer. They can speak in greater
    detail about their WCF-funded activities. Since the NFC is under my
    administration, I will focus my comments on NFC initiatives.
        During fiscal year 1998, one of the major activities at the
    National Finance Center is to assure that all of our systems are
    compliant with Year 2000 requirements. Thus, we are devoting
    significant effort this year to modify and test computer systems code.
    In the process, we are eliminating a number of computer programs which
    are no longer necessary and are renovating those systems which will be
    used in the new millennium. Our current plan is to renovate all code in
    fiscal year 1998 and to continue our testing throughout fiscal year
    1998 and early fiscal year 1999. NFC will be Y2K compliant on or before
    the target date established by the Office of Management and Budget and
    the USDA Chief Information Officer.
        We have allocated significant NFC resources to assure that we can
    achieve Y2K compliance, as we continue to modernize and upgrade some of
    our major systems in fiscal year 1998 and fiscal year 1999. The
    objectives of these modernization efforts are to reduce the cost of NFC
    services to our client agencies and to reduce the costs of
    administrative activities by our client agencies. These modernization
    efforts include:
      --The implementation of the Foundation Financial Information System
            (FFIS) discussed previously, an integral part of the
            Department's ability to provide financial information to
            program and policy personnel.
      --Modernization and enhancements to the payroll system. This will
            reduce the costs of NFC services and enable our client agencies
            to reduce their costs of processing personnel and payroll
            actions.
      --The implementation of a new purchase card management system which
            will significantly reduce the costs of small purchases of our
            customer agencies.
      --Ongoing efforts to develop a procurement management system, working
            closely with the Assistant Secretary for Administration and the
            procurement community. Continued compliance with the technical
            infrastructure requirements of the Chief Information Officer.
      --Achievement of Level 2 of the Capability Maturity Model which will
            enable us to develop systems more effectively and efficiently.
      --Implementation of methods to reduce the volume of paper sent to our
            clients so as to reduce NFC and client costs.
        In addition, we are continuing to actively market NFC services to
    other Federal agencies. We continue to obtain new clients, particularly
    for the payroll/personnel system, for example, the Capitol Police--
    Senate--and we anticipate that our modernized systems will result in
    additional cross service business.
        NFC cannot achieve these ambitious goals without the participation
    and support of our customer agencies inside and outside USDA. That
    support comes with an obligation to us to reduce costs wherever the
    opportunity presents itself. An example will illustrate the point. As I
    mentioned, we are devoting significant effort to assuring that our
    systems are Y2K compliant. To do this, we have not asked for additional
    resources from our client agencies. Instead we have reallocated
    resources within the Center to ensure that Y2K costs are absorbed
    within the resources available to NFC. This means we have suspended
    certain of our maintenance activities and that some agency specific
    requests for work cannot be accommodated this year. Given the similar
    difficulties our agency partners are experiencing in achieving Y2K
    compliance, we believe that our customers understand our strategy and
    appreciate our efforts to hold down costs. We will continue to ensure
    that cost increases are fully justified and that agencies are informed
    of increases and involved in decisions that affect their budgets.
        Mr. Chairman, the National Finance Center has become a benchmark
    against which other providers of financial and administrative services
    are measured. The initiatives identified here today will enable NFC to
    continue to serve as a benchmark well into the future.
        I appreciate the opportunity to meet with you this afternoon and
    will be pleased to answer any questions the committee has.
                              Biographical Sketch
                                 sally thompson
        Sally Thompson served as the State Treasurer of Kansas. First
    elected in 1990, Thompson won reelection in 1994. Thompson resigned as
    State Treasurer to become the Chief Financial Officer for the U.S.
    Department of Agriculture. As Treasurer, Thompson managed a staff of 54
    employees with an annual budget of more than $90 million. During her
    tenure as State Treasurer, Thompson initiated a complete overhaul of
    the agency, which consisted of a $5 billion municipal bond portfolio
    and cash management services of $11 billion annually.
        Thompson's efforts to reform the State's investment laws have
    earned Kansas $700 million in interest income since 1992. Thompson
    served on the Pooled Money Investment Board (PMIB), the entity that
    directs the State's investment policies. Thompson also developed the
    Municipal Investment Pool, an investment alternative for local
    governmental entities that has earned participants more than $150
    million combined in interest income since 1993. In addition, Thompson
    updated the State's unclaimed property laws, returning $13 million in
    unclaimed property to its rightful owners. The program includes the
    Kansas Cash Connection, a portable computer database that contains more
    than 300,000 records of unclaimed property. Thompson also served as a
    trustee on the Kansas Public Employees Retirement System Board (KPERS)
    and was a member of the Surety Bonds and Insurance Committee.
        Active in treasury issues at the National level, Thompson served as
    Secretary/Treasurer of the National Association of State Treasurers.
    She is a past chair of the National State Debt Management Network and
    served as treasurer of the Midwest Association of State Treasurers as
    well as a member of the Executive Committee for the Council of State
    Governments.
        Before entering public life, Thompson spent 20 years in the private
    sector, Thompson served as President and Chief Operating Officer of
    Shawnee Federal Savings in Topeka. Prior to that position, she worked
    as Vice President of Business Planning and Development for the United
    Banks of Denver. A certified public accountant, Thompson began her
    career as a financial manager at Touchc Ross, a multinational
    accounting firm.
        Thompson combined her professional experiences with community
    involvement. She has served on the boards of the Topeka YWCA,
    Everywoman's Resource Center, Downtown Topeka and the Topeka Chamber of
    Commerce. Thompson also graduated from the Leadership Kansas,
    Leadership Topeka and the Council of State Governments' Toll Fellowship
    programs.
        Thompson graduated magna cum laude from the University of Colorado,
    Boulder, with a bachelors degree in business, accounting and finance. A
    nontraditional college student, Thompson graduated at the age of 35.
    She has three children and three grandchildren. A longtime Topeka
    resident, she now resides in Arlington, Virginia.

                    Office of the Chief Information Officer
     Prepared Statement of Anne F. Thomson Reed, Chief Information Officer
                                  introduction
        Mr. Chairman, Senator Bumpers, members of the Subcommittee: thank
    you for inviting me here today. I will submit my testimony for the
    record and also offer a few remarks.
        I am honored to have been chosen by Secretary Glickman to serve as
    Chief Information Officer of USDA, and to lead the Department's efforts
    in implementing, developing and maintaining applications of new
    technologies which will cut waste, serve USDA's customers more
    efficiently, and open new opportunities for farmers, families, and
    rural communities.
        I am proud to work for Secretary Glickman whose leadership and
    commitment has transformed USDA into a vibrant, vital force for the
    American people and their communities. With the strong bi-partisan
    support and cooperation of the Congress, USDA is stronger, abler,
    leaner and more cohesive, which will better serve our nation.
        Though USDA has turned the corner on a new path of efficiency and
    quality program delivery, we still face many challenges, such as
    assuring Year 2000 compliance and in the area of implementing new
    technologies. We recognize that these challenges come at a time when
    the federal government has fewer and fewer resources. And we realize
    that creativity, innovation, and hard work are needed to assure that we
    stretch every dollar in our budget.
        President Clinton has laid out a balanced budget plan that works to
    aid families, strengthen education, and promote the expansion of
    economic opportunities, which is welcomed news for all Americans. The
    benefits of a balanced budget will show themselves in continued
    economic growth and prosperity. A strong national economy is critical
    to a strong farm economy and critical to the mission of USDA. Secretary
    Glickman has worked long and hard with the White House to lay out a
    vision for USDA, and the President's budget seeks to fund and promote
    these priorities: Expanding opportunities for family farmers and rural
    communities; Making a major commitment to food safety and to fighting
    hunger in America; Providing wide stewardship of our natural resources;
    and Protecting the integrity of USDA programs.
        Within each of these priorities lies the need for the expanded use
    and integration of new technological applications, whether it be faster
    program delivery to small farmers, new PC's and Internet access for
    rural grade schools, computerized testing to assure food safety, or new
    telecommunications vehicles and further system integration which create
    greater long-term savings and efficiencies for USDA. Implementing new
    information technology will turn these visions into reality.
                 usda information technology budget highlights
        The 1999 total budget request for information technology at the
    Department is $1.2 billion. This includes the Department and all of its
    agencies. This total includes approximately $327 million for
    acquisitions, including equipment and software; $236 million for
    commercial support services for operations and maintenance; $31 million
    for supplies; $447 million for inter-governmental payments, such as
    grants to states and FTS 2000 services; $280 million in personnel
    costs; and $75 million in other services, including non-FTS 2000 voice
    and data communications. Offsetting these costs are collections from
    non-USDA agencies of approximately $146 million.
        By targeting our efforts to promote these priorities, it is our
    hope that all USDA customers and employees will benefit. I look forward
    to working closely with you and your staffs on this task in the days to
    come. Let me begin to discuss our challenges in more detail.
                              systems integration
        The Department is making real headway in its efforts to integrate
    systems and expand the application of new technologies. Over the past
    year, USDA has reduced the unnecessary paperwork burden on the public
    by 30 percent, exceeding the President's goal of 25 percent; more than
    40 percent of USDA's 1,320 mission critical systems are already Year
    2000 compliant and the remaining systems are projected to be completed
    by no later than March 1999; and USDA won three Government Technology
    Achievement Awards. This past year saw the National Resources
    Conservation Service's (NRCS) flood management system, Rural Housing
    Services' (RHS) Dedicated Loan Origination and Servicing System, and
    the Agricultural Research Service's (ARS) computerized irrigation
    system all come away with this prestigious recognition.
        In addition, other USDA infrastructure investments in 1999 include
    an estimated $27 million to ensure that every USDA system and
    application is year 2000 compliant. A proposed $67 million for the
    Common Computer Environment (CCE), a USDA Service Center Implementation
    project, will provide a single computing platform for USDA's Service
    Centers, which deliver farm and housing loans, conservation assistance,
    and other programs in America's rural communities. Also, the Forest
    Service seeks to invest $143 million in Project 615, a continuing
    effort which provides geographic information, telecommunications, and
    hardware and software infrastructure in support of program delivery
    throughout the country. The Animal & Plant Health Inspection Service's
    Integrated Systems Acquisition Project (ISAP) will provide a common
    electronic mail system allowing for a more efficient communications
    environment. ISAP implementation is underway or planned for key APHIS
    science centers, regional and field offices. The fiscal year 1999
    planned investment is $6.7 million.
        Other USDA agency proposed technology expenditures include $8.1
    million for the Dedicated Loan Origination and Servicing System, a
    Rural Development program which provides centralized escrow and
    servicing of housing loans made by USDA in rural communities.
    Approximately $14.3 million has been requested by the Food Safety &
    Inspection Service for information technology to facilitate the
    implementation of the Pathogen Reduction/Hazard Analysis and Critical
    Control Point System (HACCP)--a science based food safety system, and
    to support field restructuring.
             office of the chief information officer budget request
        This proposed funding for OCIO will facilitate continuing efforts
    to integrate USDA technological programs and services, and assure that
    USDA Information Technology (IT) resources are expended wisely. The
    fiscal year 1999 Office of the Chief Information Officer budget request
    totals $7,222,000, an increase of $1,671,000 and 6 staff-years over the
    1998 level of $5,551,000.
        Within this increase, $500,000 and 6 staff-years are requested to
    support Information Technology Capital Planning and Investment Control
    programs. The Clinger-Cohen Act of 1996 and the Office of Management
    and Budget Circular A-11 Part 3 require USDA to intensify its review
    and analysis of information technology systems as capital assets.
    Numerous internal (IG) and external (GAO) audits and studies in recent
    years have found the Department's Information Technology management and
    acquisition systems to be lacking, and criticized the deployment of
    these IT assets. There is a clear and critical need for a centralized,
    Departmentwide approach to capital planning and investment control for
    USDA's IT assets. The Secretary and I have responded with a moratorium
    on IT acquisitions and begun to build the decision making structures,
    policies, and support systems for a USDA IT Capital Planning process.
    An Executive Information Technology Investment Review Board (EITIRB)
    was established in 1996, and efforts are underway to support this
    Board, but much more needs to be done from both a policy and a
    practical aspect to provide needed information to the Board on capital
    planning, life-cycle cost analyses, and risk assessment for IT
    investments. Work has begun in this area with two efforts underway to
    accomplish the development of a model capital planning and investment
    control (CPIC) process and a case study of how a USDA agency uses the
    model to document and operate the process. This effort is jointly
    funded with the Department of Energy and the National Performance
    Review. After the results of the study and the model are determined,
    the tools developed as part of the model will be made available to the
    agencies.
        The design and implementation of a USDA-wide capital planning and
    investment control program and supporting automated information system
    is a multi-year effort requiring an infusion of resources to OCIO for a
    permanent, ongoing program management staff. As the process is used
    across USDA, skilled staff will be needed to perform and review
    benefit-cost, return on investment, and other detailed analyses in
    order to reduce as far as practicable the risk of failure in the
    development, deployment, and operation of USDA information technology
    systems. The necessary skills are beyond those of current staff and
    will be of particular importance in providing support to the EITIRB.
    Revised management processes need to be established, training on the
    use of the planning and tracking tools for CPIC provided, and project
    management systems set up to report accurate cost, schedule and
    performance data. The resources requested will allow us to successfully
    carry out the process.
        The greatest portion of the 1999 funding increase is $1,000,000 for
    continued development of the USDA Technical Architecture, including
    technical standards, business data, and telecommunications, and for
    contractor expertise for the Department's Earned Value Management
    System to track and account for the cost, schedule, and performance of
    information technology projects, and to provide valid, timely audit
    data for management. Contractor expertise is required to assess the
    completeness of the USDA Information System Technical Architecture
    (ISTA) against accepted industry standards, which takes into account
    the multiple layers of an information systems architecture, including
    basic scope and purpose, enterprise or business model (design of the
    business and how its entities and processes interact), system model
    (the data elements and functions that represent the business entities
    and processes for the information system), the technology model (the
    adaptation of the system model to detailed technologies), and the
    detailed description of the system. The ISTA model will provide a
    framework for USDA agencies to migrate their existing technology base
    to the new architecture, resulting in an increased level of
    interoperability and data sharing. The architecture is the vehicle for
    applications used by one agency to interoperate with applications used
    by another agency. OCIO needs contractor skills and modeling
    capabilities to achieve this important work. It will cost less to
    manage and operate under this single ISTA than it will for each agency
    to manage their own unique component.
        Development and use of an Earned Value Management System (EVMS)
    will improve the management of information technology projects in terms
    of cost, schedule, and performance. The Earned Value Management concept
    requires the integration of a program or project's technical, cost, and
    scheduling requirements into a comprehensive performance management
    baseline against which progress is assessed. EVMS analyzes the added,
    earned value that IT resource investments bring to program delivery and
    provides a common framework for communicating program status to
    managers for informed decision-making. EVMS will improve accounting for
    IT projects expenditures, fostering better management decision-making
    on the investment of the Department's IT resources and will correct a
    material weakness in many USDA control systems. EVMS will improve
    management of information technology project scheduling, prevent cost
    overruns and slippages, and generate performance data needed to support
    the CPIC process. My office needs contractor expertise to benefit from
    the contractor's often first hand experience with other agencies and
    firms' best practices. Provision of these resources will strengthen our
    ability and flexibility to meet USDA's IT challenges successfully and
    without costly failures.
                               cio plan of action
        The appropriate application of information technology is critical
    to the Department's ability to deliver programs and services to the
    public. We have invested many resources in technology to improve
    government accountability and to transform program delivery through the
    use of modern business practices. Secretary Glickman has challenged the
    Department to significantly strengthen our corporate management of
    technology so that information can be more readily shared across
    organizational lines, assuring that investment decisions are based on
    sound business principles.
        This plan of action is firmly based on the requirements of the
    Clinger-Cohen Act coupled with the business needs of USDA to improve
    service to our customers. The Act has guided our actions through the
    capital planning and investment control process. This pathway directed
    our portfolio investment policies and the creation of a technology
    architecture over the past year. Our plans may initially appear
    ambitious, but they are necessary, and USDA is up to the task of
    applying these management principles to all IT capital investments.
        Today, we are building on the foundation which we have worked
    arduously to create. The activities of my office are structured around
    five critical objectives:
      --Assure that mission-critical systems are Year 2000 compliant;
      --Implement a single information technology infrastructure and
            supporting organization for the Farm and Foreign Agricultural
            Services agencies, the Rural Development agencies, and the
            Natural Resources Conservation Service;
      --Improve the Department-wide management of telecommunications;
      --Develop policies and procedures for implementing the provisions of
            the Clinger-Cohen Act through strengthening the capital
            planning process, instituting an information technology program
            review and evaluation strategy, refining the enterprise-wide
            architecture, providing for business process reengineering and
            developing work force planning capacity; and
      --Build a strong management team and develop strategies for improving
            the corporate management of USDA's information infrastructure.
        These objectives support the Department's strategic plan for
    information technology, establish clear milestones for achievement, and
    identify responsible parties.
                               year 2000 strategy
        The Department is taking a strong management approach to
    effectively respond to the challenges of Year 2000 remediation. USDA
    has begun implementation of a strategy to assure that the Department's
    systems and operations are compliant. The Department is also working to
    raise awareness in the communities which we serve, to assure that they
    do not suffer prolonged interruption in services or incur hazards to
    public health and safety. During the past year USDA has:
      --Made OCIO, in particular the Year 2000 Program Executive and
            myself, responsible for planning, oversight, and evaluation of
            the USDA's efforts to achieve Year 2000 compliance. The Under
            and Assistant Secretaries and Agency Directors have been given
            the programmatic, budgetary, managerial, and technical
            responsibility for ensuring that USDA's mission-critical
            systems nationwide are Year 2000 compliant by March 1999 in
            their respective areas.
      --Appointed a senior executive in each agency area to address the
            Year 2000 issue. For purposes of Year 2000 remediation, this
            designee reports directly to the Agency Administrator, and is
            charged with establishing a Year 2000 project team. In order to
            establish accountability, Year 2000 remediation is a critical
            element in the performance standards of the executive sponsors.
      --Issued a procurement moratorium requiring CIO approval of any IT
            procurement over $25,000. Under this moratorium, purchases will
            only be approved on an emergency basis or when the acquisition
            is directly related to Year 2000 remediation. I have sole
            signatory authority under the moratorium, which will remain in
            place throughout fiscal years 1998 and 1999 to assure that the
            Year 2000 is the Department's information technology priority.
        OCIO has begun to reach out to USDA customers--corporations,
    farmers, non-profits, and rural communities--to increase awareness
    about the need to address the integrity of their technological
    applications in regards to the Year 2000 problem.
      --I was an active participant in agricultural industry forums that
            have addressed the Year 2000 issue and have discussed
            compliance issues with agricultural manufacturers.
      --USDA initiated an effort to raise Year 2000 awareness across rural
            America. The OCIO, REE, FSA, and RD mission areas are
            increasing their contact with partners and constituents in the
            state and local sector, including the National Association of
            Counties, the National Governors Association, and the National
            Association of State Universities and Land Grant Colleges.
      --I have actively participated in government-wide initiatives to work
            with the states on Year 2000 compliance.
        The OCIO has identified more than 8,000 external data exchanges
    with states and other entities. Approximately 95 percent of the
    exchanges have been assessed for Year 2000 compliance with 58 percent
    already compliant. In addition, USDA has undertaken a comprehensive
    inventory of all network and telecommunications equipment and software.
    More than 3,700 network routers have been specifically identified, and
    several hundred will require software upgrades in order to be Year 2000
    compliant.
        The Department currently estimates the total cost of becoming Year
    2000 compliant to be $120 million. This includes costs beginning in
    fiscal year 1996 and continuing through the Year 2000.
            administrative convergence/service center implementation
        Over the past several years, we have been addressing the difficult
    challenge of modernizing and streamlining delivery of program services
    at the county level. The consolidation and collocation of the county
    offices is nearing completion. By the end of this year, we will have
    reduced the number of county office locations from 3,700 to fewer than
    2,600 USDA Service Centers. The Secretary's vision is that any USDA
    customer of the county based agencies, FSA, NRCS, RD, can go to any
    USDA Service Center to conduct business. Furthermore, the continued
    implementation of modern integrated technology will allow many
    customers to do some business from their homes.
        The first phase of modernizing the technology infrastructure is the
    deployment of an integrated telecommunications system for both voice
    and data. This system will link these agencies within the Service
    Centers as well as with other offices, thereby enabling the sharing of
    equipment and information as we achieve a Common Computing Environment
    (CCE). Deployment of the telecommunications systems will be completed
    by the end of the year.
        Interagency Business Process Reengineering initiatives are moving
    forward to define improved and more integrated ways of delivering USDA
    programs to customers. The results of these efforts provide the
    framework and requirements for technology improvements. We are
    initially testing these business and technology improvements in a
    laboratory environment, then moving to field pilots, beginning in
    April. We anticipate beginning the acquisition of parts of the
    technology infrastructure in late fiscal year 1998 and continuing with
    acquisition and deployment of the new infrastructure over the next four
    years.
        A related initiative is the decision to consolidate administrative
    and information technology staffs of the county based agencies into one
    unit as part of the Secretary's administrative convergence strategy.
    These consolidations will bring about immediate efficiencies and
    savings that will rapidly increase as we build and deploy our
    integrated technology systems and dispose of our legacy systems.
        My office has oversight responsibility; however, direct
    responsibility for managing Service Center initiatives rests with the
    Agency Administrators. Last year, I established an oversight unit with
    Senior Executive leadership to manage this responsibility. This staff
    works continuously with the agencies, Service Center Implementation
    Team, and other policy officials to facilitate and monitor progress on
    these initiatives. Outside, independent resources are also used
    regularly to identify the need for modifications and for mid-course
    corrections. Through these efforts, and the moratorium, USDA has
    dramatically changed its approach to managing modernization efforts.
                               telecommunications
        In the last year, I have taken significant steps to change
    telecommunications management practices at USDA. When reviewing the
    process previously used to order telecommunications equipment, I
    learned that 300 people had procurement authority and many had not been
    adequately trained. Furthermore, there were not adequate mechanisms to
    allow for the sharing of information and resources.
        Today, only 17 people have authority to order equipment. They
    receive training quarterly, and they have access to a database of
    information that allows for more efficient decision-making. Through
    these and a series of specific cost reduction initiatives, we have
    saved several million dollars over the past year.
        Now, USDA is continuing to focus its efforts on establishing a
    telecommunications environment which optimizes improvements in mission
    performance while minimizing program operational costs. USDA is doing
    so through three major initiatives: The Telecommunications Enterprise
    Network, the Telecommunications Ordering, Billing and Inventory System
    (TOBI), and a comprehensive review and update of telecommunications and
    security policies. The Telecommunications Enterprise Network will
    eliminate further proliferation of agency private, wide-area data
    networks, and capitalizes immediately on savings from efficiencies.
    Measures are in-place today which permit USDA to stabilize its current
    telecommunications environment. A key example is the establishment and
    certification of Telecommunications Mission Area Control Officers who
    manage mission area and agency needs centrally while identifying and
    implementing planning which optimizes consolidation and cost avoidance
    opportunities from a broader corporate perspective. The Network plan
    will also allow for a national infrastructure to be constructed and
    managed under the authority of the USDA CIO, as a corporate enterprise
    asset allowing greater planning and system integration between the
    various USDA agencies significantly reducing costs and speeding program
    delivery.
        The TOBI system integrates the recently reengineered administrative
    processes with an automated management information system, allowing for
    greater control and accounting of USDA telecommunications acquisitions.
        The third major telecommunications initiative encompasses a
    comprehensive review and update of the existing telecommunications and
    security policies. Policy development and implementation are imperative
    to ensure that the Department moves in a uniform direction, standards
    are applied consistently, information and resource sharing
    opportunities are maximized, and cost reductions are realized. Policy
    revisions are needed to address the changing environment resulting from
    enactment of the Clinger-Cohen Act, the proliferation of new
    technologies such as Internet and Intranets, and the increasing number
    of network security threats. A strong security program is our first
    line of defense against increased threats and vulnerabilities. My staff
    has greatly increased coordination on security efforts with all USDA
    agencies--sharing information and raising awareness at all working
    levels.
                            clinger-cohen compliance
                    capital planning and investment controls
        New processes have been implemented for approving capital
    investments in IT. USDA adopted procedures recommended in the OMB
    Capital Programming Guide. The Executive Information Technology
    Investment Review Board met to review and endorse the fiscal years
    1998-99 investment portfolio. As we move forward, we will strengthen
    the analytical support provided to these senior policy decisions. My
    office established a capital planning and investment control (CPIC)
    process for implementing the Clinger-Cohen Act. Concurrently with this
    process development, we are participating in a joint development effort
    with the Department of Energy and the National Performance Review to
    implement an information system which will assist us in this
    management. This project is named the Information Technology Investment
    Portfolio System (I-TIPS). I-TIPS will provide USDA managers with ready
    and shared access to a variety of up-to-date information about
    individual IT initiatives as well as their entire IT investment
    portfolio. I-TIPS is a World-Wide-Web application that requires only an
    Internet connection and a browser to access.
        I am happy to report that there is wide interest for I-TIPS in the
    federal community, with many agencies already committed to I-TIPS
    installations including: Energy, Justice, Labor, and HUD. Both the
    General Accounting Office and the Office of Management and Budget have
    reviewed I-TIPS and firmly support its use as a management tool to help
    agencies monitor their IT investments. USDA plans to use this system
    this budget year for our analysis of agency IT investment initiatives
    and Department level decision-making for our entire IT portfolio.
            independent verification and validation efforts (iv & v)
        My office embarked on an independent verification and validation
    program in 1996. We recognize that non-partisan analyses and
    observations are needed at various points in the life cycle of a
    program to identify deficiencies before systems are built. Our IV&V
    program targets major information technology initiatives and has
    several objectives: Assess the quality of plans and management
    strategies; assess how well systems address customer needs; and verify
    that every system is well-designed and meets all USDA specifications.
        Several IV&V tasks already completed include the review of the
    management and plans for the installation of telecommunications
    facilities in the field service centers, analysis of the technical
    alternatives and business case for the future computing environment at
    the service centers, an analysis of the Department's developing
    information technology architecture, and an analysis of the
    requirements of the Department-wide financial information system.
        We expect to continue to employ the IV&V concept as part of our IT
    management strategy. Unlike in the past, we want to make sure that all
    future technology expansion is part of a cohesive and integrated
    planning process. We want to ensure that it works right the first time,
    and that USDA and the American taxpayer get what was paid for.
                        information systems architecture
        A rapidly changing information intense environment demands new
    approaches, particularly in the way the Department deploys technology
    to meet its business information needs. USDA recognizes that
    effectiveness can be achieved and economies gained through coalescence
    of business activities and information technology resources. Under my
    leadership, USDA has developed the Information Systems Technical
    Architecture (ISTA) to meet these immediate and future needs. The ISTA
    will be one of the mechanisms used to strategically manage information
    and information technology resources at USDA. The ISTA will evolve
    through continuous assessment of USDA's business needs, modern
    management practices, and technology advancements.
        As I indicated earlier, the USDA ISTA was reviewed by an outside
    contractor under the IV&V Program to evaluate the existing ISTA against
    an accepted architecture methodology and make recommendations regarding
    the integration, implementation, and management of the architecture.
    While the IV&V findings were generally positive regarding USDA's first
    effort, there are several recommendations that we will incorporate. My
    office is currently examining the plan to ensure that USDA is taking a
    highly pragmatic and cost-effective approach to architecture design and
    implementation. In this regard, OCIO will leverage existing agency
    projects by identifying best practices in the various architectural
    components. We will also establish a configuration management board,
    standards criteria, and a program management staff. The ISTA is linked
    to the Capital Planning and Investment Control process and is a
    required input for the selection phase and for the implementation of
    the Information Technology Investment Portfolio System (I-TIPS).
                         usda technological work force
        As this Committee is all too aware, current Bureau of Labor
    Statistics' projections show a major shortage of information technology
    workers in the fields of computer engineering, computer sciences and
    computer programming. We have anecdotal evidence that this is becoming
    a problem at USDA. We have many talented individuals, and that is well
    known to the corporate sector.
        To address this work force crisis, I have recently designated a
    staff member to oversee USDA's IT workforce planning and development
    efforts. I am also working within USDA and in conjunction with the CIO
    Council to develop recruitment and retention strategies to ensure that
    USDA's information technology systems are competently managed and
    operated in the years to come.
                           cio management strategies
        Every successful organization has strong and effective leadership
    at its highest levels. With the continued support of Secretary Glickman
    and Deputy Secretary Rominger over the past year, great strides have
    been made toward building a competent management team within my office,
    and a credible, business-like information technology program for the
    Department. One of my earliest appointments was a Senior Executive to
    provide oversight of Service Center Implementation activities. In May
    1997, a Deputy CIO was named to create a strong management focus on all
    USDA IT matters. The executive team includes an Associate CIO for
    Policy, the Director of the NITC, and a Senior Policy Advisor for Year
    2000 remediation. A search will soon begin for a telecommunications
    executive to fill a recent vacancy. Each of these executives has
    demonstrated an understanding of USDA business and customer service
    requirements and the role of information technology in supporting these
    requirements. All have demonstrated their leadership, energy,
    communications, and technical skills.
        As the team evolved, we have been unified in our vision and focus
    for managing USDA's information technology resources from a corporate
    perspective. My in-house expertise has been further leveraged through
    the development of strong partnerships with USDA agency Chief
    Information Officers and counterparts in other federal organizations.
    Recognizing that we face common goals of increasing performance while
    meeting the challenges of reduced staffs, shrinking budgets, and
    greater time constraints, these partnerships have demonstrated synergy
    in developing new approaches and solutions to shared problems.
        In addition, through benchmarking and other opportunities, I have
    sought the advice of corporate CIO's who manage large and complex
    organizations. This advice has proved instrumental as we have
    established new IT governance strategies.
        Also as part of OCIO's management strategies implementation
    process, we recently completed the development of our comprehensive
    reorganization plan, of disparate USDA IT elements, into a strong
    corporate program agency to meet the challenge of providing the right
    mix for leadership and program delivery for USDA information
    technology.
                fiscal year 1998 management investment strategy
        Deputy Secretary Rominger issued the USDA IT investments moratorium
    on November 12, 1996. The initial purpose of the moratorium was to
    restrict USDA agencies from purchasing IT resources until improvements
    were fully implemented which control our management of IT resources. To
    assure that agencies focused on correcting Year 2000 issues before
    initiating new IT projects, the moratorium rules were revised to apply
    to any IT acquisitions of over $25,000. Agencies now receive a
    moratorium waiver from my office only for true emergencies and Year
    2000 remediation actions.
        Through the moratorium, the Department has been able to ensure that
    USDA agencies are focusing on the Year 2000 problem and carefully
    evaluating their IT needs in conjunction with their partner agencies,
    allowing for more coordination and cooperation.
                               concluding remarks
        As with most other CIO's, my top priority for the coming year is
    Year 2000. In addition to priorities associated with Service Center/
    Administrative Convergence, Clinger-Cohen implementation, and
    telecommunications, there are significant issues to address with legacy
    systems, security, inter-operability, electronic commerce, management
    of change, skilled labor shortages, and exploding technology. There is
    a growing awareness that improved corporate management of USDA's
    information infrastructures can only occur when leadership and the
    right mix of business, management, and technical skills are present.
    With my current team in place, I believe I am positioned at the highest
    level of my organization to meet current and future challenges.
        The historic balanced budget which President Clinton has introduced
    provides a framework to meet the many technology challenges that we
    face, in a way that is good for USDA and good for America. Over the
    past year, USDA has made great strides in righting past wrongs and
    redirecting our technological goals. Aside from our internal systems
    usage, USDA has taken technology to deliver our programs to the
    public--quicker and more efficiently. We instituted the HACCP program
    to make food safer for America's families. The Electronic Bid Entry
    System (EBES) is creating more business opportunities for the
    commodities industry and our nation's businesses. The USDA telemedicine
    loan and grants programs are bringing the latest medical innovations
    into rural communities across the nation. And the Forest Service,
    through Project 615, is using technology to improve our stewardship of
    America's precious natural resources and public lands.
        There is still more to accomplish--more challenges ahead of us. And
    we must stay focused on addressing these challenges. We must continue
    to take action on reconciling our internal Year 2000 problems, while at
    the same time reaching out to our broad constituencies in rural America
    and the agriculture industry to make them aware of the threat to their
    systems and their health and safety. We must address the IT work force
    shortage, to ensure that USDA will have the expertise in the future to
    continue to deliver services and address the needs of both the
    Department's staff and the public. And most importantly, we must
    continue to work together to prove to the American people that we can
    meet these challenges in a creative, competent, common-sense manner.
        Over the past year, I have had the privilege of working with this
    sub-committee in a positive way to meet these challenges. I look
    forward to working with all of you in the months to come to build on
    this relationship and meet our mutual needs and objectives as we head
    into a new century. I expect to be able to report tangible results on
    these initiatives at next year's hearings. Thank you.

                            Office of Communications
         Prepared Statement of Tom Amontree, Director of Communications
        Mr. Chairman and members of the Subcommittee, I am pleased to
    discuss the fiscal year 1999 request for the Department of
    Agriculture's Office of Communications--OC.
        When in 1862, Congress wrote the law establishing what is now the
    U.S. Department of Agriculture, it said the Department's ``general
    designs and duties shall be to acquire and to diffuse among the people
    of the United States useful information on subjects connected with
    agriculture in the most general and comprehensive sense of the word.''
    The Office of Communications coordinates the implementation of that
    original mandate.
        The Office of Communications coordinates communications with the
    public about USDA's programs, functions, and initiatives, providing
    information to the customers and constituency groups who depend on the
    Department's services for their well-being. It also coordinates the
    communications activities of USDA's seven mission areas, and provides
    leadership for communications within the Department to USDA's
    employees.
        In keeping with President Clinton's balanced budget plan, this
    office continues to streamline its operations. For fiscal year 1999, we
    will have 120 staff years, 30 less than in fiscal year 1993. At the
    same time, we are adopting new technologies to meet the increased
    demands for information. Using the Internet's world wide web, radio,
    television and teleconference facilities, we are able to ensure that
    the millions of Americans whose lives are affected by USDA's programs
    receive the latest and most complete information.
        The Office of Communications' 5-year strategic plan includes the
    following goals:
      --Increase the general public's awareness of USDA policies, programs
            and initiatives, with particular attention to reaching
            traditionally underserved communities.
      --Using the latest and most efficient communications technology,
            methods and standards, improve access to and distribution of
            USDA information to news media, constituent groups, and
            individual customers.
      --Improve communications with USDA employees by leading and
            coordinating internal USDA communications.
      --Continue development of an efficient and effective results-
            oriented, public affairs community within USDA that provides
            high-quality customer service.
      --Foster civil rights and diversity throughout USDA's public affairs
            community and its communications products and services.
        To accomplish these goals, we will continue to take an active part
    in policy and program management discussions, coordinating the public
    communication of USDA initiatives. We will continue to provide
    centralized operations for the production, review, and distribution of
    USDA messages to its customers and the general public, and we will
    monitor and evaluate the results of these communications.
        The Office of Communications will continue to acquire and instruct
    staff in using the most effective and efficient communications
    technology, methods, and standards in carrying out communications
    plans.
        The Department values its employees as good Government
    ``ambassadors'' who need to be kept informed. The Office of
    Communications intends to improve communications with USDA employees,
    especially those away from headquarters. We will help employees
    understand USDA's general goals and policy priorities, to become more
    familiar with USDA programs and services, and to understand
    initiatives, especially cross-cutting ones, and how they relate to each
    employee's specific job duties.
        OC is also working hard to ensure compliance with Government
    Performance and Results Act. We will be working to update USDA
    regulations and guidelines for communications; conducting regular
    training sessions for USDA communications staffs about using
    communication technologies and processes to enhance public service;
    fostering accountability for communications management performance
    throughout USDA; and continuing to work to create a more efficient,
    effective and centralized Office of Communications.
        The Office of Communications will also provide equal opportunity
    for employment and promote an atmosphere that values individual
    differences. We will continue to provide equal opportunity for
    contracting goods and services. We will increase availability of USDA
    information to underserved communities and geographic areas to ensure
    equal opportunity in USDA's outreach efforts, and will continue to
    develop universally accessible information products.
                        fiscal year 1999 budget request
        The Office of Communications is requesting a budget of $8,319,000.
    This is a net increase of $181,000 over our fiscal year 1998 current
    estimate. The net increase covers additional personnel costs of
    $195,000 for pay costs, and $51,000 for the Civil Service Retirement
    System; a decrease of $100,000 based on the approval of two buyouts;
    and an increase of $35,000 for an initiative to improve communications
    to underserved groups. This effort is directly related to OC's
    Strategic Plan management initiative to improve efforts to reach groups
    that are working with small and limited resource producers in
    underserved communities and geographic areas, and to improve their
    understanding of USDA programs and initiatives. It would also increase
    awareness among USDA stakeholders and consumers about such important
    issues as food safety.
        This concludes my statement, Mr. Chairman. I will be pleased to
    respond to any questions.

                         Office of the General Counsel
         Prepared Statement of Charles R. Rawls, Acting General Counsel
                                  introduction
        Mr. Chairman and members of the Subcommittee, I am pleased to have
    this opportunity to present our fiscal year 1999 budget request and to
    also provide you with an overview of our agency to include some of the
    current activities and issues facing the Department.
                                    mission
        The Office of the General Counsel (OGC) is the law office for the
    Department. As an independent, central agency within the Department,
    OGC provides all legal services necessary to support the programs and
    activities of USDA. OGC provides legal advice and services to the
    Secretary of Agriculture and other officials of the Department of
    Agriculture with respect to all USDA programs and activities.
                                  organization
        OGC's services are provided through 12 Divisions in Washington and
    18 field locations. The headquarters for OGC is located in Washington,
    D.C. The Office is directed by a General Counsel, a Deputy General
    Counsel, six Associate General Counsels, and a Director for
    Administration and Resource Management. The attorneys located in
    headquarters are generally grouped in relation to the agency or
    agencies served. Our field structure consists of five regional offices,
    each headed by a Regional Attorney, and 13 branch offices. The field
    offices typically provide legal services to USDA officials in regional,
    State, or local offices.
        Our full staffing levels are approximately 242 attorneys and 108
    support staff, including 17 paralegals, in the Washington, D.C.
    headquarters and field locations. Approximately half of our personnel
    are located in the field.
                        fiscal year 1999 budget request
        For fiscal year 1999, OGC is requesting $30,446,000 in direct
    appropriations. This request represents an increase of $1,922,000 over
    the fiscal year 1998 appropriation. Of this amount, $683,000 is for the
    anticipated pay raise, which is needed to maintain staff so that
    existing levels of mission efforts may continue. OGC is requesting
    $219,000 to cover the increase in Federal agency contributions for
    employees covered under the Civil Service Retirement System.
        OGC has made substantial improvements in the automated data
    processing (ADP) computing environment, upgrading both its hardware and
    software as well as making substantial improvements to the OGC
    communication network. In order to continue to implement a centralized
    work tracking system for correspondence, document and opinion
    archiving, as well as database management for a variety of OGC work
    items, an increase of $100,000 is necessary.
        OGC is also requesting an increase of $250,000 to support and
    maintain current staffing needs because the demand for legal services
    by agencies within USDA has not diminished. This increase will enable
    OGC to meet its strategic objective of providing effective legal
    services in a timely and responsive manner to support USDA activities.
        Also included in this request, is an increase of $670,000, which
    includes a $235,000 supplemental ($470,000 on an annualized basis) for
    civil rights. In accordance with the recommendation of the USDA Civil
    Rights Action Team (CRAT), a separate Civil Rights Division in OGC was
    established, headed by an Associate General Counsel, reporting directly
    to me. For the Associate General Counsel for Civil Rights and CRD to be
    effective in effectuating their mission, additional resources are
    sorely needed. The additional funding requested for the Civil Rights
    Division will ensure that the Department can meet its civil rights
    reform goals without limiting OGC in other important mission areas. The
    new Division must expand on with the work performed last year by the
    General Law Division--assisting in carrying out the CRAT
    recommendations, reviewing program discrimination cases, and assisting
    the Office of Civil Rights in processing decisions in civil rights
    complaints brought by USDA customers and employees. With the high
    priority placed by the Secretary on ensuring that the civil rights laws
    are vigorously enforced, the Civil Rights Division will be working
    side-by-side with the Office of Civil Rights, and the rest of the
    Department, to make sure that this key objective is met.
                         current activities and issues
        There are several areas of our current work that I would like to
    highlight to demonstrate how OGC serves the Department. During the past
    year, OGC has supported the activities of the Foreign Agricultural
    Service (FAS) in numerous areas. Pursuit of the benefits and
    enforcement of the commitments of the Uruguay Round Agreements on
    Agriculture and on the Application of Sanitary and Phytosanitary
    Measures (SPS Agreement) continues to be of paramount concern to FAS
    and OGC.
        Accordingly, OGC played a leading role in the victory of the United
    States in the World Trade Organization (WTO) dispute on the European
    Union's (EU) import ban on meat produced with the use of growth-
    promotant hormones. During the EU appeal of the initial panel result,
    OGC played an instrumental role in formulating and coordinating the
    United States strategy and submissions. The WTO Appellate Body ruled in
    favor of the United States, finding the ban not consistent with the
    EU's obligations under the SPS Agreement. OGC will continue active
    involvement in the development and application of the effort necessary
    to compel the EU to fulfill its international obligations.
        WTO litigation is increasingly a priority area for OGC. The United
    States has recently invoked the dispute settlement process within the
    WTO in several agricultural matters, and OGC has played a leading role
    in all of them:
        (1) Philippines--Administration of tariff-rate quotas for pork and
    poultry meat. The efforts of OGC were a significant factor in the
    development of a Memorandum of Understanding with the Philippines that
    is expected to lead to significantly improved access in that market for
    U.S. pork and poultry meat exports;
        (2) Japan--Requirements to re-establish the efficacy of quarantine
    treatments for pests on a varietal basis. This issue is of particular
    importance to apple, nectarine, cherry, walnut, and other stone fruit
    exports;
        (3) Canada--Access for U.S. fluid milk and cream and Canadian
    export subsidies through application of milk class price-pooling; and
        (4) European Communities--Export subsidies on processed cheese
    manufactured under inward-processing arrangements.
        In efforts to realize the benefits of the Uruguay Round Agreements
    other than through litigation, during the past year the United States
    and the EU resolved many of the difficult outstanding issues that had
    precluded an equivalency agreement on veterinary inspection matters.
    Due in large part to the efforts of OGC, the text of the agreement has
    now been finalized, but a few implementation issues remain. OGC will
    continue to be actively involved in the effort to achieve a signed
    agreement.
        OGC also has provided valuable drafting assistance in connection
    with the ongoing negotiation of a veterinary biologics annex to the
    recently concluded Mutual Recognition Agreement between the United
    States and the EU. Agreement on a veterinary biologics annex would
    allow the United States and the EU to accept imports of veterinary
    biologics from one another on the basis of a mutual recognition of the
    efficacy of one another's regulatory systems.
        After two years of negotiations in which the United States played a
    significant role, the United Nations Food and Agriculture Organization
    Conference adopted a revised text of the International Plant Protection
    Convention (IPPC). A primary objective of the revisions was to
    strengthen the ability of the IPPC members to develop phytosanitary
    standards as envisioned in the SPS Agreement. OGC was a principal
    participant in the review of iterations of draft text and other
    documents and also participated in the interagency group. These efforts
    ultimately led to United States support of adoption of the revised
    text.
        OGC also continues its active involvement in other FAS program
    areas. OGC continues to provide extensive legal advice in the
    rejuvenated export credit guarantee program, as well as in the
    development of the supplier credit guarantee program, the facilities
    guarantee program, and the emerging markets program. During this past
    year, OGC has also become more actively and directly involved in
    efforts to reduce the necessity and enhance collection of admiralty
    claims arising from damaged or distressed cargo shipped in connection
    with title III of Public Law 83-480.
        Attorneys from OGC have provided significant assistance with
    respect to commodity, disaster and conservation programs.
    Implementation of the provisions of the Federal Agriculture Improvement
    and Reform Act of 1996 (the 1996 Act) authorizing Production
    Flexibility Contracts (PFC) has resulted in numerous requests for OGC
    assistance to resolve such issues as those involving the division of
    program payments between landowners and tenants and the succession-in-
    interest by new owners and tenants to existing program contracts. In
    addition to routine requests for assistance, implementation of the
    peanut poundage quota provisions of the 1996 Act has resulted in the
    filing of two major lawsuits against the Government.
        The administration of the revised Conservation Reserve Program
    (CRP) required a major devotion of OGC resources to develop new CRP
    regulations and contracts as a result of the enactment of the 1996 Act.
    These efforts included: the resolution of unintended conflicts between
    PFC provisions of the 1996 Act, the CRP provisions of the Food Security
    Act of 1985, and the tobacco and peanut program provisions of the
    Agricultural Act of 1938 in a manner that provided enhanced
    opportunities for participation in the CRP by tobacco and peanut
    producers without remedial legislation; development of agreements for
    administration of the Conservation Reserve Enhancement Program portion
    of CRP, including the drafting of the agreement between the State of
    Maryland and the Commodity Credit Corporation concerning the protection
    of the Chesapeake Bay; and the provision of daily assistance on CRP
    matters as a result of the conduct of the 15th and 16th CRP enrollments
    which involve several hundred thousand contracts and approximately 24
    million acres.
        OGC attorneys have been working with the Office of the United
    States Attorney for the Eastern District of North Carolina, the Farm
    Service Agency (FSA) and the Office of Inspector General (OIG) to bring
    approximately 40 criminal cases, 40 civil false claim cases, and
    numerous administrative cases as the result of an extensive OIG
    investigation of the 1990-1992 activities of more than 100 tobacco
    warehouse operators and dealers in North Carolina.
        Working with FSA officials, OGC attorneys provided expeditious
    assistance in the development of the various livestock emergency feed
    assistance programs implemented as a result of severe winter blizzard
    conditions. Similarly, OGC attorneys were significantly involved in the
    development of program regulations for the Tree Assistance Program and
    the Livestock Indemnity Programs authorized by Congress in 1997.
        OGC attorneys are substantially involved in providing legal
    services related to the continuing changes in the Department's crop
    insurance program, especially the review of private insurance company
    initiatives including crop revenue coverage; nonprocurement suspension
    and debarment issues; the development of new crop insurance programs
    and amendments to old ones. OGC has been particularly involved in the
    development of the risk management education initiative and the Dairy
    Option Pilot Program.
        The enactment of welfare reform legislation in 1996 has continued
    to raise many legal issues. The implementation of the alien provisions
    and the provisions restricting the eligibility of persons convicted of
    trading in controlled substances generated substantial Constitutional
    challenges. OGC attorneys are also working closely with the Food and
    Nutrition Service (FNS) in connection with the implementation of the
    Debt Collection Act of 1996 and to enhance food stamp program
    efficiency and integrity through implementation of electronic benefit
    transfer systems. Debarment and suspension activities continue with OGC
    attorneys assisting FNS in taking actions to protect the federal
    government and the public with respect to over 200 dairy companies and
    individuals convicted of bid rigging on school milk contracts.
        In trade practices, we are continuing to give assistance and
    counsel to the Secretary on issues of concentration in agriculture and
    the continuing response of the Department to recommendations of the
    Advisory Committee on Agricultural Concentration. We are continuing to
    pursue administrative enforcement against the nation's largest packer
    on allegations that the packer gave an undue or unreasonable preference
    to certain feedlots in the procurement of cattle, and that case is now
    before the Department's Judicial Officer for decision. We are working
    with agency personnel on a number of investigations into procurement
    and other trade practices in areas of production where there are high
    levels of concentration, and on investigations and enforcement actions
    involving allegations of false or misleading statements or
    representations in the marketing of agricultural products.
        The last year has been an especially busy year for OGC as it
    relates to work for the food safety mission area. We dedicated
    substantial resources to the Food Safety and Inspection Service (FSIS)
    in connection with the implementation of the new requirements for
    standard sanitation operating procedures in all inspected
    establishments. We also assisted FSIS in the related redraft of its
    existing sanitation regulations and the promulgation of a proposed rule
    that would eliminate most ``command and control'' rules and replace
    them with a streamlined set of performance standards for sanitation.
    Additionally, we provided daily support to FSIS as it prepared for the
    January 1998 implementation of the Hazard Analysis/Critical Control
    Points (HACCP) inspection procedures in the largest FSIS-inspected
    establishments. Our work on HACCP implementation and compliance issues
    can be expected to increase over the next two years as the ``small'',
    and then the ``very small'' plants are brought under the HACCP
    requirements.
        Enforcement matters under the meat and poultry inspection laws have
    continued to require extensive legal support, and in the coming year,
    we will be working closely with FSIS to publish final rules of practice
    governing enforcement actions under the HACCP, microbiological testing,
    and pathogen reduction regulations.
        Finally, we spent considerable time with FSIS on the development of
    a legislative proposal to enhance the Department's food safety
    enforcement authorities under the meat and poultry inspection laws, and
    a proposal involving the interstate shipment of meat and poultry from
    state-inspected plants.
        We worked closely with the Animal and Plant Health Inspection
    Service (APHIS) by assisting in the implementation of our WTO
    obligation to regionalize our regulatory requirements governing the
    importation of animals and animal products. This past year, for
    example, regulations allowing the importation of beef from Argentina,
    and pork from Sonora, Mexico, were promulgated. In addition, a
    comprehensive policy statement and complementary rule changes were
    adopted establishing the regulatory structure APHIS will use to review
    and act on requests for regionalization, and how it will use risk
    assessment methodology to arrive at proposed safeguards to prevent the
    introduction of communicable diseases of livestock and poultry.
        We have also been heavily involved in defending a lawsuit filed by
    five environmental groups challenging APHIS regulations governing the
    importation of logs, lumber, and other unmanufactured wood products. In
    June of 1997, the court found for the Department on most issues, but
    nonetheless enjoined APHIS from issuing new permits for the importation
    of certain temperate wood products until a supplemental environment
    impact statement (EIS) is prepared and regulations based on it are
    promulgated. We worked assiduously with APHIS to see that the draft
    supplemental EIS, which was published in December 1997, meets the
    requirements of the court's order. We anticipate that the final
    supplemental EIS will be published before a scheduled status conference
    on May 15, 1998.
        In 1997, after lengthy court proceedings, we settled a $34 million
    lawsuit filed by the State of Florida arising out of the 1984 to 1986
    citrus canker eradication program. The settlement stipulated that the
    funds paid to Florida in settlement of all claims would be used
    exclusively in the current program to eradicate the most recent citrus
    canker infection in Florida. We also worked closely with APHIS on its
    regulatory measures to eradicate a large infestation of Mediterranean
    fruit flies in Florida discovered in May of 1997. We have also assisted
    in the development and promulgation of an array of quarantines and
    regulations throughout the U.S., including the refinement of the Karnal
    bunt (Kb) regulatory measures and the issuance of regulations providing
    for compensation for those affected by the Kb outbreak.
        There continue to be very significant developments in connection
    with marketing order regulations and litigation. The issuance of two
    voluminous and complex regulations concerning organic food labelling,
    and the reform of milk marketing orders required extensive legal
    involvement and assistance. In the litigation arena, we provided
    counsel and assistance in successfully applying the Supreme Court
    decision in Wileman Bros. et al. v. Glickman to challenges under both
    marketing orders and free-standing research and promotion programs as
    well as defending the appeal of the Northeast Interstate Dairy Compact
    case.
        In the area of animal welfare, we successfully litigated numerous
    significant cases, including a case involving the death of a circus
    elephant. The circus operator's license as an exhibitor under the
    Animal Welfare Act was permanently revoked and he was assessed a civil
    penalty of $200,000, the highest civil penalty ever assessed in an
    Animal Welfare Act case. We also took actions against several research
    facilities to require that they provide humane care to animals used for
    research. We assisted in developing the strategic plan for the Horse
    Protection Act program. The plan will give the Tennessee walking horse
    industry an enhanced role in the enforcement of the Horse Protection
    Act through the USDA authorized inspection system.
        OGC also provides legal services to agencies which manage some of
    America's largest lending portfolios. The ongoing implementation of
    centralized processing (CSC) for Rural Housing loans uses substantial
    legal resources. OGC continues to be heavily involved in debt
    collection and foreclosure work with many cases going back to the
    emergency loan programs of the 1970's and 1980's. Implementation of the
    Debt Collection Improvement Act of 1996 and the flexibility gradually
    being made available under the Rural Community Advancement Program of
    the 1996 Act also requires substantial legal resources.
        The Secretary is committed to regulatory reform. We continue to
    work with Department officials to implement the President's regulatory
    reform package. This is a significant undertaking as we work with
    agencies throughout USDA to reduce regulatory burdens, eliminate
    obsolete or unnecessary regulatory requirements, and streamline
    regulation, particularly in the areas of rural, farm and utility
    lending. This year we look for a substantial push in this area from the
    Rural Utilities Service (RUS), Farm Service Agency (FSA), Rural
    Business-Cooperative Service (RBS), and Rural Housing Service (RHS).
        OGC provided considerable assistance to the Rural Utilities Service
    (RUS) on a range of matters related to the changing electric and
    telecommunications industries. In particular, the introduction of
    competition in the electric industry has resulted in increased demand
    for legal services by RUS on a number of key electric program matters.
    For example, OGC has provided legal services in connection with the
    restructuring of borrowers' power supply arrangements through mergers,
    alliances, and other types of reorganizations and through the
    renegotiation of borrowers' power supply contracts. OGC has also
    dedicated substantial resources to the negotiation and drafting of new
    security arrangements for some large power supply borrowers. These
    arrangements, patterned after indentures used in the private sector,
    will provide borrowers with more flexibility in operating in the new
    competitive environment while facilitating access to private market
    financing.
        As a result of the Telecommunications Act of 1996, which introduced
    deregulation and competition to the telecommunications industry, the
    RUS telecommunications programs is facing a wide range of issues and
    concerns requiring legal services. These include issues of loan
    purposes, loan security and borrower structure as well as the impact of
    FCC orders implementing the Telecommunications Act on RUS borrowers and
    program interests. RUS for the first time made distance learning and
    telemedicine (DLT) loans in addition to its DLT grants. Legal
    assistance is required both in the promulgation of new regulations
    implementing the DLT program and in developing the documents for these
    loans and grants. One cannot underestimate the legal resources which
    will be required by the movement to deregulate in the rural electric
    and telephone area.
        In the natural resources area, we have been involved in a number of
    extremely significant undertakings concerning national forest
    management and soil conservation programs. We have provided assistance
    nationally to the Natural Resources Conservation Service in
    implementing a number of conservation programs including the
    Environmental Quality Improvement Program (EQIP), the Wetlands Reserve
    Program (WRP), the Farmland Protection Program, the Conservation Farm
    Option and Emergency Watershed Protection.
        Management of our National Forests is a subject of intense debate
    and litigation, with a great deal of legal work generated by the impact
    of new scientific information on ongoing Forest Service projects and
    commitments. Such legal questions include challenges regarding the
    nature of forest planning in the Circuit Courts of Appeal and in the
    Supreme Court (Ohio Forestry Association v. Sierra Club), the
    relationship of the Endangered Species Act to the forest planning
    process and revisions of the first generation of forest plans.
        Further, we are defending against numerous timber sale claims
    arising from legally created delays and contract modifications to
    protect the habitat of endangered species. We also successfully
    defended challenges in several places in the West by local governments
    and individuals under the so called ``County Supremacy'' movement
    disputing federal ownership or jurisdiction over public lands.
        We have also devoted substantial resources to other legislative and
    regulatory initiatives, such as land exchanges, Clean Water Act
    questions, water adjudications, relicensing of hydro projects, grazing
    reform, reauthorization of the Endangered Species Act, the Safe
    Drinking Water Act and the Comprehensive Environmental Response,
    Compensation, and Liability Act (CERCLA). OGC also provided the Forest
    Service with support in the administration of the National Forest lands
    as they are affected by the complex statutes related to mineral
    exploration.
        In addition, we regularly provide advice on compliance and
    litigation arising under the pollution control laws. Most frequently,
    pollution control issues involve abandoned and inactive mines and
    landfills on federal lands, the use and storage of agricultural
    chemicals, and management of hazardous waste at agricultural research
    facilities. We have worked with other federal resource management
    agencies on implementation of executive authority under CERCLA to
    address cleanup of hazardous substances affecting federal resources.
        As the Administration and the Congress continue their efforts to
    re-invent the Federal government, and as the Department takes its own
    initiatives to make its delivery of services more efficient,
    streamlined, and customer friendly, we anticipate greater demands in
    the general law area. These range from providing legal services
    regarding personnel and labor matters; increased legal services as we
    implement the Electronic Freedom of Information Act, debt collection
    initiatives, and Year 2000 compliance; and legal support for creative
    approaches of doing more with less through mechanisms such as
    partnering.
        Agency implementation of new administrative offset procedures
    pursuant to the Debt Collection Improvement Act of 1996 have triggered
    numerous appeals to the National Appeals Division (NAD) and resulting
    legal questions regarding the intersection of the offset process and
    the NAD appeal process. Last year, the U.S. Court of Appeals for the
    Eighth Circuit held that the Administrative Procedure Act and the Equal
    Access to Justice Act apply to NAD proceedings, thus allowing recovery
    of legal fees incurred by appellants in NAD proceedings.
        With regard to the procurement of property and services, the
    Clinger-Cohen Act of 1996 mandated many changes that address source
    selection procedures in negotiated procurements; the acquisition of
    commercial items; and the acquisition, use, and disposal of information
    technology by the Federal Government. In particular, the general law
    division will continue to devote substantial resources to assist the
    Chief Information Officer created by the Act in fulfilling her duties
    both under the Act, and under separate Secretarial mandates, to improve
    information technology management in the Department.
        Also with regard to procurement, the most recent revision of the
    General Accounting Office (GAO) protest rules has resulted in the
    general law area, providing more and an enhanced level of legal
    representation of USDA agencies in protests before GAO. This includes
    the provision of legal representation to the Forest Service in all
    Forest Service GAO protests.
        OGC continues to provide legal services to the Alternative
    Agricultural Research and Commercialization Corporation regarding the
    scope of authority of the Corporation, as well as issues relating to
    grants, cooperative agreements, loan guarantees and other financial
    assistance provided to entities by the Corporation for the purpose of
    commercializing new non-food uses for agriculture commodities.
        We continue to provide legislative drafting and related assistance
    to the Department and Congress on major legislative activities that
    involve the Department. We are providing assistance in the development
    of legislation to reauthorize the Department's research, education, and
    extension activities and the Department's child nutrition activities.
    We are preparing legislation to improve the Department's food safety
    programs. In addition, we are participating in the preparation of
    legislation in a number of areas in support of the President's fiscal
    year 1999 budget requests for USDA.
        Over the past year the Department has engaged in massive efforts to
    reform its civil rights performance. The Secretary wants to ensure that
    all our customers and employees are treated with dignity and respect
    and are afforded equal employment opportunity and equal access to all
    USDA programs. The Civil Rights Action Team appointed by the Secretary
    in December 1996, and the Civil Rights Implementation Team formed in
    January 1997, both concluded that an essential component to achieving
    the Secretary's civil rights goal is to establish a new division within
    OGC staffed with lawyers fully trained in, and dedicated to, civil
    rights compliance and enforcement.
        Our first Associate General Counsel for Civil Rights has been
    hired. The Associate General Counsel for Civil Rights is the chief
    civil rights attorney for USDA and is responsible for providing advice
    on civil rights law to the Department and its officers. The Associate
    General Counsel for Civil Rights is responsible for establishing and
    directing the newly created Civil Rights Division (CRD). CRD will
    assist USDA in fashioning responses to discrimination claims and
    provide assistance to the Department of Justice in relation to
    litigation of civil rights claims.
        The CRD will provide legal advice to the USDA Office of Civil
    Rights, which is responsible for investigating and administratively
    adjudicating complaints of discrimination by employees and farmers in
    the delivery of credit and other services by USDA. CRD will also assist
    the Office of Civil Rights in ensuring that investigations and
    decisions are conducted in accordance with the law. This effort
    includes assisting in the effort to resolve the significant backlog of
    program and employment complaints. The Secretary has requested that
    these complaints be resolved as quickly and fairly as possible.
        CRD will ensure that every mission area and agency within USDA
    receives timely and accurate legal advice on issues impacting the
    Department's compliance with, and enforcement of, civil rights laws.
    Further, CRD will proactively work to identify civil rights issues and
    potential problems, notify the General Counsel, the Secretary, and
    other appropriate Department officials of the issues and problems and
    possible courses of action, and work with the General Counsel,
    Secretary and Department officials to address the issues and problems.
        OGC has requested a supplemental in fiscal year 1998 which would
    provide funds needed to staff the newly created Civil Rights Division.
    The activities of this division cannot be carried out at current OGC
    resource levels without substantially reducing vital legal services to
    other areas of the Department. Since OGC has appointed an Associate
    General Counsel for Civil Rights, additional resources are now required
    to staff and maintain this new division with attorneys who are
    committed to civil rights in USDA and who specialize in civil rights
    law.
        Mr. Chairman, it is important to note that these comments only
    touch on the dozens of daily issues that come before the legal office
    of a Department with over 100,000 employees administering programs in
    an extremely wide range of areas.
                                    closing
        That concludes my statement, Mr. Chairman. We very much appreciate
    the support this Subcommittee has given us in the past. Thank you.

                          Office of Inspector General
           Prepared Statement of Roger C. Viadero, Inspector General
                           introduction and overview
        Good afternoon, Mr. Chairman and members of the Committee. I am
    pleased to have this opportunity to visit with you today to discuss the
    activities of the Office of Inspector General (OIG) and to provide you
    with information on our audits and investigations of some of the major
    programs and operations of the U.S. Department of Agriculture (USDA).
        Before I begin, I would like to introduce the members of my staff
    who are here with me today: James Ebbitt, Assistant Inspector General
    for Audit; Jon Novak, Acting Assistant Inspector General for
    Investigations; and Del Thornsbury, Director of our Resources
    Management Division.
        I want to thank the Committee for its support during the nearly
    3\1/2\ years since my appointment as Inspector General. We have tried
    to work closely with you, and I hope that we have been able to address
    some of your concerns.
        I am proud to say that in fiscal year 1997, we continued to more
    than pay our own way. In the audit arena, we issued 255 audit reports
    and obtained management's agreement on 207 recommendations. Our audits
    resulted in questioned costs of approximately $900 million. Management
    also agreed, as a result of our audit work, to recover $19 million and
    put $267 million to better use. Additionally, our investigative staff
    completed 958 investigations and obtained 703 convictions.
    Investigations also resulted in nearly $83 million in fines,
    restitutions, and other recoveries and penalties during the year.
        We continued to work closely with agency officials to address key
    issues and to expand our cooperation with other Federal, State, and
    local law enforcement and audit agencies to broaden the impact of our
    work. Our achievements would not have been possible without the actions
    of the Department's program managers who worked closely with us in
    carrying out our mission. Working together, our staffs identified
    program weaknesses and program violators. Capitalizing on the staffs'
    respective expertise, we created solutions for positive action.
        In fiscal year 1998, we are focusing our audit efforts on the
    Department's financial accounting systems, farm credit programs, civil
    rights, the Rural Rental Housing Program, and the Food Stamp Program
    including its Electronic Benefits Transfer project. Our investigative
    priorities include the timely and thorough investigation of threats to
    the health and safety of the public, emergency responses, child and
    adult care programs, employee integrity issues, and fraud in the
    Department's loan, regulatory, and benefit programs.
        Before I move to our special law enforcement initiative and other
    specific audit and investigative activities, I would like to update the
    Committee on our progress in implementing the requirements of the
    Government Performance and Results Act (GPRA) and our forfeiture
    authority.
        We have made significant progress in implementing GPRA in OIG. We
    have prepared a 5-Year Strategic Plan that describes our mission and
    sets forth our general goals and objectives through fiscal year 2002.
    We have completed our first Annual Performance Plan under GPRA, which
    contains specific performance goals and objectives for the fiscal year.
    We have also developed performance measures to assess our progress in
    achieving these goals and objectives under the plan so that we might
    make adjustments to maximize our effectiveness.
        On the forfeiture front, as I discussed last year, with the
    Committee's support we are now authorized to receive proceeds from
    forfeiture actions arising from our investigations. While we have
    seized over $11 million in assets for possible forfeiture to the
    Government as a result of our investigative actions since OIG was
    provided the authority in November 1995, to date, OIG has received only
    about $100,000 from these proposed forfeitures. We are continuing to
    work with the Department, the Office of Management and Budget, and the
    Departments of Treasury and Justice to ensure OIG receives its
    appropriate share of proceeds from these proposed forfeited assets as
    approved by you. However, after more than 2 years, the Department of
    Justice has not signed a memorandum of understanding with this agency.
    Special Law Enforcement Initiative
        Mr. Chairman, at this time I would like to discuss our special law
    enforcement initiative included in our fiscal year 1999 budget request.
    This initiative will be a major undertaking for the agency, and we ask
    your support to provide the resources necessary for it. I have provided
    each of you a handout on the initiative, highlighting our need and what
    we expect to achieve from this effort.
        This special law enforcement initiative is to provide funding for
    OIG to crack down on fraud and abuse in the Food Stamp and other
    nutrition programs, assistance programs such as the Rural Rental
    Housing Program, and disaster and health and safety programs requiring
    immediate response.
        Health and safety of food from production to the consumer is of
    special concern because of such highly visible emergencies as
    contaminated strawberries in the School Lunch Program and tainted meat
    in the food distribution chain which resulted in the recall of 25
    million pounds of ground beef. Also, OIG's recent pilot effort,
    Operation Talon, in 24 metropolitan areas around the country, has been
    extremely successful, resulting in the arrest of over 2,200 fugitive
    felons and the potential savings of millions of dollars to the U.S.
    Treasury. This initiative is to allow the agency to expand such efforts
    nationwide.
    Operation Talon
        The Department estimates that over $50 million a year in food
    stamps go illegally to convicted felons and prison inmates, and that a
    sizable number of retailers who accept Food Stamps make money from them
    illegally. Prior to the passage of the Personal Responsibility and Work
    Opportunity Reconciliation Act of 1996, also known as Welfare Reform,
    the exchange of information between law enforcement and State social
    service agencies was not allowed. Welfare Reform provided many useful
    tools to the law enforcement community, such as making fugitives and
    people who are violating conditions of probation and parole ineligible
    for food stamps. Additionally, the legislation made it possible for
    State social service agencies to provide law enforcement authorities
    certain identifying information from their files pertaining to
    fugitives.
        As a result of the tools provided by Welfare Reform, we initiated
    ``Operation Talon,'' a law enforcement initiative led by OIG and
    carried out in conjunction with other law enforcement agencies and
    State social service agencies across the country. Under this
    initiative, law enforcement agencies' fugitive records are matched by
    social service agencies with their food stamp recipient records.
    Information on fugitives is then shared with OIG and other law
    enforcement officials who use it to locate and apprehend the fugitives.
    As of January 13, 1998, ``Operation Talon'' has resulted in 2,235
    arrests of fugitive felons, the vast majority of whom were food stamp
    recipients or former recipients. These fugitives included numerous
    violent and dangerous felons who were wanted for murder, child
    molestation, rape, and kidnapping.
        I have included a chart which identifies the offenses for which
    these felons were wanted.

                                                                       Total
            Offense                                                  arrests
    Murder............................................................     9
    Attempted murder..................................................    10
    Child molestation.................................................    10
    Rape..............................................................     7
    Attempted rape....................................................     2
    Kidnapping........................................................     6
    Assault...........................................................   115
    Robbery...........................................................    86
    Drugs.............................................................   645
    Other............................................................. 1,345

        An example of the type of individuals we arrested is a fugitive
    wanted for selling a large quantity of marijuana. He was arrested at a
    sting site in Chicago, Illinois. The individual came to the site
    believing he had an appointment to discuss his food stamp benefits.
    When he was confronted by a Cook County Sheriff's deputy, the fugitive
    attempted to flee, running down a small corridor where an OIG special
    agent and local police officer tackled and subdued him. This fugitive
    later threatened to burn down the Cook County detention facility and
    kill the police officers and special agents. On his person, and in a
    bag, he was carrying 8 knives, 11 assorted lengths of steel pipe, 2
    screwdrivers, 1 wrench, and materials such as glass containers, wicking
    material, and candles needed to make Molotov cocktails.
        Operation Talon is a success story. I say this not only for OIG,
    but also for the State and local law enforcement agencies we helped to
    locate and arrest fugitive felons. Even more importantly, Operation
    Talon is a success for the American people who can know that their
    communities are safer now that these people wanted for murder, rape,
    drug dealing, and other violent and dangerous crimes have been taken
    off their streets and that food stamp benefits go only to those who
    need them.
        On December 18, 1997, Vice President Gore publicly announced
    Operation Talon during a press announcement at the White House. Also
    present for this announcement were 10 members of State and local law
    enforcement agencies with whom we worked during this operation. These
    participants included the Sheriff of Cook County, Illinois, where
    Operation Talon ``bagged'' 470 fugitives. Two deputies with the Pierce
    County, Washington, Sheriff's office, the entire fugitive squad for
    that office, traveled all the way across country to participate and to
    express their appreciation for our efforts, which they characterized to
    us as the ``best thing that has happened.'' They just could not get
    over that, with this new information, 90 percent of the doors they
    knocked on produced the fugitive they were looking for. This kind of
    positive feedback exceeded even what we had expected.
        Successful as they are, activities such as Operation Talon are not
    without their price. As of January 13, 1998, 116 OIG special agents had
    expended nearly 2,500 staff days on this operation. We can continue to
    recover and save money for the taxpayers only if we have the resources
    needed to perform our mission. Adequate funding and staffing for OIG
    makes good sense because we help create a Government that works better,
    produces positive results, and saves the taxpayers' money. We believe
    the success demonstrated through our pilot work in Operation Talon and
    the other areas of our special initiative provide outstanding examples
    of what can be accomplished if the necessary resources are made
    available to the agency to perform this critical work.
    Child and Adult Care Food Program (CACFP)
        Another area we are looking at in our initiative is the Child and
    Adult Care Food Program. The objective of CACFP is to ensure that
    children and adults being cared for in participating day-care homes and
    centers receive nutritious meals. To accomplish this, the Food and
    Nutrition Service (FNS) reimburses day-care providers for the meals
    they serve and sets nutritional requirements for the food. The program
    is administered by State agencies through sponsors, who are generally
    public or private, nonprofit organizations. Sponsors act as the link
    between the State agency and individual day-care providers. More than
    14,000 sponsors administer the program in just over 230,000 day-care
    homes and centers nationwide. CACFP funding for fiscal year 1996 was
    $1.5 billion.
        To ensure the integrity of the program, sponsors are required to
    train providers in program requirements and perform onsite visits to
    providers' homes and centers to make sure they are fulfilling these
    requirements. Sponsors are also responsible for reviewing provider
    claims to ensure that the meals are nutritionally balanced and that the
    children are eligible. Sponsors are ultimately responsible for program
    operations in the day-care homes they oversee. In return for carrying
    out their responsibilities, sponsors are reimbursed for their costs of
    administering the program.
        In a CACFP investigation in California, four executives of a non-
    profit child-care sponsoring organization are awaiting sentencing in
    March after they pled guilty to mail fraud in connection with their
    participation in CACFP. The organization oversaw in excess of 60 day-
    care centers and 175 day-care homes in the Los Angeles and Orange
    County areas.
        Our investigation disclosed that, through various fictitious names
    and bogus entities, two of the executives fraudulently obtained and
    diverted approximately $2.3 million in CACFP funds for personal and
    nonprogram-related expenses, including the purchase of a $1.5 million
    residence and the payment of their children's college-related expenses.
    The other two executives claimed and received over $60,000 in CACFP
    funds for nonexistent day-care home providers.
        One of the executives was also employed by the California
    Department of Education (CDE), the State agency responsible for
    administering CACFP. In that capacity, she was specifically responsible
    for monitoring her own sponsoring organization's compliance with CACFP.
    She and her husband used various aliases to conceal their business and
    family affiliations from her employer. She was subsequently fired by
    CDE as a result of her conflict of interest involving her association
    with the sponsoring organization. This investigation was conducted
    jointly by OIG and the U.S. Postal Inspection Service.
        A separate civil forfeiture action was filed against four
    residential properties in Southern California, owned by the subjects,
    and valued in excess of $2 million. This is being handled through the
    U.S. Postal Inspection Service and the Civil Division of the U.S.
    Attorney's Office, Eastern District of California in Sacramento.
        In the audit arena of CACFP, our reviews revealed a breakdown in
    controls at the sponsor level. In our pilot test, we have concentrated
    on the approximately 1,200 sponsors who primarily sponsor day-care
    homes. We reviewed 12 sponsors in 10 States and found 11 of them to be
    seriously deficient in their administration of the program--and this is
    only the tip of the iceberg, considering there are about 1,200 sponsors
    of some 195,000 day-care homes nationwide.
        As part of our sponsor reviews, we conducted unannounced visits to
    a substantial number of day-care homes and found widespread
    deficiencies in their operations. Many providers did not have adequate
    records to support the meals they claimed or had no records at all.
    Claiming of unallowable meals by providers appeared to be common. Many
    of the children for whom the providers claimed meals were not present
    when we visited, and we questioned whether they were actually in care.
    We also questioned whether some providers were eligible to claim the
    meals they served to their own children. At some homes, we found unsafe
    or unsanitary conditions and licensing violations, and we reported
    these conditions to the local health or licensing authorities.
        Based on the large numbers of problems we found at the homes, we
    concluded that the sponsors' training and monitoring efforts were
    generally ineffective. Sponsors did not provide all required training
    and did not conduct all required reviews. Reviews that were performed
    were often ineffective. Sponsor visits were usually scheduled in
    advance, were brief, in many cases, only 5 or 10 minutes in length, and
    very seldom disclosed any problems. Some of the extensive problems our
    unannounced home visits found included the following.
      --Conditions were unsafe or unsanitary at 10 providers of an Illinois
            sponsor. At one home, the only sources of heat, in the month of
            February, were the gas and oven burners on the kitchen stove.
            Several homes were seriously over capacity, with only 1 adult
            caring for up to 25 children, versus State licensing provisions
            which allow 1 adult to care for not more than 8 children.
      --One Oregon sponsor did not adequately monitor or train its
            providers, claimed unallowable administrative expenses, and
            failed to accurately report administrative costs on its monthly
            claims for reimbursement. The sponsor also may have been
            conducting unrelated outside business activities and charging
            their costs to the program. Based in part on our audit report,
            the State agency terminated this sponsor from the program.
      --Nearly one-third of a New Mexico sponsor's providers we attempted
            to visit were not home, yet they later claimed meals which were
            purportedly served at these times.
      --One-sixth of the reimbursements claimed by one Alabama sponsor's
            providers were improper. Numerous providers claimed
            reimbursement for meals not served or for ineligible meals. We
            recommended recovery of the $3,000 paid for ineligible meals
            and meals not served.
        Because of the serious deficiencies, FNS has terminated the
    participation of 5 of the 12 sponsors. Four of the five sponsors are
    being investigated for fraud-related activities.
        Due to the significant problems found, we have included this work
    in our national initiative to expand our efforts to identify abusive
    sponsors. These efforts will include ``sweeps''--unannounced, targeted
    visits--of sponsors and providers conducted jointly by OIG auditors and
    investigators with the assistance of FNS and State agency personnel.
    Because the ``sweeps'' place a large cadre of reviewers at selected
    onsite locations simultaneously and without warning, they will provide
    an authentic snapshot of CACFP operations in the targeted areas. Those
    sponsors found to be abusing the program will be removed from
    sponsorship; ineligible payments recovered; and, if warranted,
    prosecuted.
    Electronic Benefits Transfer (EBT)
        Another area we plan to emphasize in our initiative is monitoring
    of EBT systems that deliver program benefits. OIG remains the lead
    agency, under agreement with the President's Council on Integrity and
    Efficiency (PCIE), to review EBT systems that deliver State-
    administered programs. For USDA, the State-administered programs are
    the Food Stamp Program (FSP) and the Special Supplemental Nutrition
    Program for Women, Infants, and Children (WIC). Also included as State-
    administered programs are the Temporary Assistance for Needy Families
    (TANF), funded by the U.S. Department of Health and Human Services
    (HHS), and States' general assistance programs.
        While the majority of FSP benefits are still distributed in the
    form of paper coupons, electronic distribution of benefits is growing
    rapidly and currently sends about 27 percent of local food stamp
    benefits. Currently, 26 States have operational online food stamp EBT
    systems with 8 of the States operating statewide systems. Two States
    have operational off-line systems using the smart cards with one of
    these States using its system for the WIC Program. Many of the
    remaining States have selected EBT vendors and are at various stages of
    awarding contracts. The Personal Responsibility and Work Opportunity
    Reconciliation Act of 1996 mandates EBT for all States by 2002.
        EBT has an impressive impact in identifying individuals and
    retailers who are committing fraud in the program. While trafficking of
    benefits has not been eliminated by EBT, we believe the number of
    individuals involved in street trafficking has been reduced. EBT
    benefits are less negotiable ``on the street'' and, thus, less likely
    to be used as a ``second currency.'' We have not found, to any
    significant extent, the exchange of EBT benefits for illegal drugs, a
    not too uncommon occurrence with coupons. Instead, the individuals now
    exchanging cash and non-food items with recipients are generally
    retailers or those working with them.
        In addition, information available under EBT is now used to
    identify and prosecute those who engage in illegal transactions. While
    paper food coupons are generally not traceable to individual
    recipients, under EBT, details of all transactions are recorded. The
    system records the date, time, amount, recipient and store involved in
    all benefit transactions. This information is used to identify and
    prosecute both the retailers and the recipients involved in
    trafficking. FNS has also used EBT data to disqualify violating
    retailers, and State authorities are using information obtained from
    EBT records to disqualify recipients who have sold their benefits.
        An example of a significant EBT investigation was completed
    recently in Baltimore, Maryland. Maryland was the first State to
    implement EBT statewide. In this case, eight people pled guilty in
    Federal court to a variety of money laundering, conspiracy, and food
    stamp trafficking charges for their roles in a conspiracy that
    defrauded the program of $2.4 million.
        The group used eight stores, both authorized and unauthorized, to
    purchase and then redeem EBT benefits. In the unauthorized stores, ring
    members obtained the account and personal identifier numbers from
    recipients and then relayed the information over the telephone to
    members in authorized stores. The authorized stores had EBT machines
    which were used to access the recipients' accounts and remove the
    benefits. The recipient was then paid a reduced amount of cash. In
    addition, other ring members purchased benefits ``on the street'' and
    used mobile telephones to call in recipient information.
        The ring leader was sentenced to 48 months in Federal prison, while
    five others received prison terms ranging from 4 to 21 months.
    Additional subjects are pending prosecution and sentencing.
        This case is also useful in demonstrating how EBT data can identify
    traffickers. During analysis of EBT data during another trafficking
    investigation in Baltimore, our agents identified the above-mentioned
    conspiracy. We used the system to follow recipients with suspicious
    transactions to a second group of stores. We also followed recipients
    from the second set of stores to yet another trafficking operation in
    Baltimore. Members of all three trafficking operations were prosecuted.
        As mentioned earlier, EBT has also been used by State authorities
    to disqualify recipients who have sold their benefits. This has been
    occurring on a large scale in Maryland. For the past 3 years, we have
    provided lists of recipients who used their EBT benefits in stores
    which we found to be buying benefits, along with transaction
    information, to the Maryland Department of Human Resources (MDHR)
    Baltimore City Food Stamp Trafficking Unit. This information was
    compiled from data developed during OIG investigations of 14 stores.
        As an unfortunate indication of the extent of food stamp fraud and
    abuse, to date, over 5,200 heads of households in Baltimore, or 8.3
    percent of all Baltimore households receiving benefits, have been
    disqualified from FSP based upon the EBT data. These disqualifications
    have thus far resulted in a savings of over $3 million in suspended
    benefits. Additionally, another 11,604 Baltimore households--18.2
    percent of the total households receiving benefits in the city--are in
    various stages of administrative action by MDHR.
        We would like to take this opportunity to commend MDHR, especially
    its Baltimore City staff, and the prosecutors with the Office of the
    State's Attorney for Baltimore City for their efforts in addressing the
    problem of recipient fraud trafficking. Their aggressive administrative
    disqualifications and prosecutions of recipients have saved the
    taxpayers millions of dollars and should serve as an excellent
    deterrent to others who might consider abusing this valuable program.
        During the course of another OIG investigation into suspicious EBT
    transactions in Essex and Hudson counties in New Jersey, 10 authorized
    stores were identified as having engaged in food stamp fraud. Those
    stores redeemed an estimated $9.5 million in food stamp benefits during
    the period of investigation, of which $6 million is alleged to have
    been involved in fraudulent transactions. In addition, approximately
    1,000 individual food stamp benefit recipients were identified as
    having engaged in suspect transactions larger than $1,000. Thirteen men
    and three women who owned and/or operated the 10 stores pled guilty for
    various charges including conspiracy, food stamp fraud, and fraud in
    connection with electronic access devices. Seizure warrants netted
    $75,000 in cash, and asset seizures of real property are pending. We
    worked on this investigation with the U.S. Secret Service (USSS); the
    Internal Revenue Service (IRS); and the East Orange, New Jersey, Police
    Department. The investigation was initiated after a review by FNS'
    Compliance Branch identified the stores as potential violators of the
    Food Stamp Program.
        During the past year, we have performed audits of EBT systems used
    to issue FSP benefits in Illinois, New Mexico, North Dakota, South
    Dakota, and Wyoming. In Wyoming, we included the WIC Program in our
    review since Wyoming's EBT system delivers WIC benefits in six
    counties.
        Overall, security policies and control processes in the States
    reviewed were adequate to ensure timely and accurate availability of
    FSP and WIC Program benefits to recipients and payments to retailers.
    We did identify some areas in the individual States needing
    improvement. For example:
      --In Illinois, controls needed to be strengthened over State employee
            access to the EBT system, reconciliations of data transfers
            between the State and the EBT processor needed to be
            documented, and the aging of FSP accounts needed to be modified
            to comply with FSP regulations. Illinois also needed to address
            the EBT processor's timeliness in installing equipment at
            authorized retailers.
      --New Mexico's contract with its processor expires in 1998, but New
            Mexico does not have a contingency plan to continue FSP
            benefits if it must operate without an EBT processor. Dormant
            accounts remained accessible to recipients beyond the 1-year
            authorized period.
      --North Dakota and South Dakota use the same EBT processor, which
            agreed to provide interoperability between the two States. The
            EBT system did not document the full cycle of FSP activities
            and did not report approved FSP transactions pending retailer
            payment. As a result, the States cannot adequately monitor the
            processor's use of Federal funds or reconcile transactions to
            reimbursement drawdowns, which may increase the States'
            potential liabilities.
      --Wyoming's WIC EBT system did not allow clients to purchase the full
            amount of their WIC food prescriptions because it rounded the
            weights of foods purchased. Variations in product coding
            sometimes prevented clients from purchasing sale items and
            unnecessarily increased program costs. The FSP portion of EBT
            had a design feature to expunge unused benefits over a year
            old, but it was not in use. Appropriate recommendations were
            made in the individual State reports to address the problems
            found and strengthen controls.
    Emergency Response--Health and Food Safety
        OIG's highest priority is the investigation of criminal activity
    which poses a threat to the general health and safety of the public.
    Because of the high-profile cases in this area during the past year and
    our belief that these are only examples of possible threats to the
    health and food safety of the public, we have included health and food
    safety as part of our special initiative efforts that must be enhanced.
    Among these crimes are violations involving the processing and sale of
    adulterated meat, poultry, and egg products; criminal tampering with
    food products consumed by the public; and product substitution,
    adulteration, or other misrepresentation of food products which are
    regulated or purchased by USDA.
        OIG investigations in the health and safety area have traditionally
    been focused almost exclusively in the red meat industry. OIG agents
    traditionally investigated meat packers who clandestinely slaughtered
    diseased cattle and supplied the meat for public consumption, and
    processors who surreptitiously mixed tainted meat with wholesome meat
    which was sold to the public. The financial incentives for those who
    commit this type of crime remain so high that OIG expects to continue
    responding to these types of criminal activity far into the future.
        While OIG continues to conduct these traditional health and safety
    investigations, recent investigations of health-related criminal
    activity involving the inspection programs and other USDA programs have
    identified an increasing need for OIG attention. Last spring, OIG
    immediately responded and took control of an investigation surrounding
    an outbreak of hepatitis A in Michigan which eventually sickened 190
    school children and which was believed to have spread through their
    eating of strawberries served through USDA's School Lunch Program. The
    president of a San Diego based food processing company, his company,
    and the former sales manager pled guilty to conspiracy in regard to
    substituting Mexican strawberries for U.S. domestic strawberries in
    this case. Sentencing for all three defendants has been scheduled for
    next month. The company, through three brokers, supplied 1.7 million
    pounds of frozen strawberries to the School Lunch Program, for which
    USDA paid over $900,000. The USDA contract called for frozen
    strawberries that were 100 percent grown and processed in the United
    States. The company's president certified to USDA that all of the 1.7
    million pounds of frozen strawberries were domestically produced and
    processed, when in fact, at least 99 percent of the product supplied to
    USDA was grown in Mexico. This investigation was conducted jointly with
    the Food and Drug Administration (FDA), with assistance from the
    Federal Bureau of Investigation (FBI).
        Also during the past year, OIG was called upon to investigate the
    circumstances surrounding another life-threatening emergency, this time
    involving the often deadly bacteria E-coli 0157:H7. Knowing this to be
    the same type of outbreak which had caused fatalities in previous
    occurrences, OIG immediately dispatched an Emergency Response Team to
    the Nebraska meat-processing plant which prepared the ground beef
    patties identified by State Health Department officials as the source
    of the bacteria. While our criminal investigation into this matter
    continues, and it would be inappropriate for me to discuss our findings
    at this time, this is a perfect example of how OIG reacts to emergency
    situations involving USDA-regulated matters and the type of activity we
    plan to expand as part of our special law enforcement initiative.
    Rural Rental Housing (RRH)
        We also plan to place special emphasis on the Rural Rental Housing
    (RRH) Program as part of our initiative. A recent legislative change
    provided a new weapon to OIG and to the Rural Housing Service (RHS) for
    use in the fight against program fraud and hazardous living conditions
    in the Nation's 16,300 rural multifamily housing projects. With these
    new criminal sanctions, the agencies can take aggressive action to
    identify and eliminate the worst offenders--those who convert tenant
    rental proceeds and Federal assistance to personal use while neglecting
    the physical condition of deteriorating properties. Owners, agents, or
    managers convicted of ``equity skimming,'' or diversion of project
    assets, can be fined up to $250,000 or imprisoned for not more than 5
    years, or both.
        Using automated audit techniques and in consultation with RHS
    staff, we will identify RRH projects that have certain risk factors,
    such as chronically underfunded reserve accounts that may point to
    financial irregularities and threats to tenants' health and safety. A
    team comprising an auditor, an investigator, and an RHS employee will
    make visits to high-risk projects. We will follow up with detailed
    audit and investigative work where indications of fraud or unsafe
    living conditions are identified. To the extent necessary, local
    officials such as fire marshals and building inspectors may be involved
    to further corroborate any problems and to provide an additional
    impetus for improving substandard living conditions.
        As an example of the type of financial abuse we expect to find, the
    general partner of a Pennsylvania management company pled guilty to
    nine counts of false statements made to RHS. The individual planned,
    built, and managed 32 apartment projects in Pennsylvania, New York,
    Maryland, Delaware, and West Virginia, all under the RRH program. The
    general partner established a central disbursement company to oversee
    the operation of the projects and their accounts. It was determined
    that the individual made more than $1.3 million in unauthorized
    withdrawals from the tenants' security deposit and replacement reserve
    accounts. The money was used to support private real estate ventures
    that were losing money, which included housing developments and
    shopping malls. Sentencing is pending.
    Additional Controls Over the U.S. Department of Housing and Urban
            Development (HUD) Section 8/515 Projects Not Fully Implemented
        Under the Section 515 RRH Program, RHS approves loans to provide
    housing for persons with low or moderate income and for persons aged 62
    or over. Rent paid by tenants of these projects can be supplemented
    through RHS rental assistance or Section 8 rent subsidies provided by
    HUD. In September 1993, we reported several situations where
    improvements in servicing for projects receiving Section 8 rent subsidy
    were needed. RHS officials agreed to implement regulations requiring
    RHS countersignature for reserve withdrawals. RHS also issued
    instructions requiring servicing officials to identify and monitor
    projects with excess funds and cancel unneeded interest credit or
    recover the unneeded interest credit by collecting overages. In
    addition, RHS agreed to monitor lump sum retroactive rent subsidy
    payments from HUD.
        In followup to our 1993 audit, we selected 33 projects to determine
    if new procedures improved the cash management practices used by
    Section 8/515 borrowers and achieved savings. We found some borrowers
    were not investing project funds, in order to avoid tax liability. We
    estimated that interest income could have been increased by
    approximately $918,000 by investing reserve funds in accounts yielding
    higher interest rates. Countersignature reserve accounts were either
    not established or not operating effectively for approximately 48
    percent of the projects reviewed. Also, $45.2 million of reserve funds
    was not adequately secured for 422 projects in our universe of 895
    projects. In addition, we estimated that 46 percent of the projects did
    not transfer approximately $16.5 million from nonsupervised operating
    accounts to reserve accounts requiring the countersignature of an RHS
    official. In total, an estimated 258 borrowers, with interest credit
    agreements dated before RHS obtained regulatory authority, received $2
    million of unneeded interest credit annually. In addition, we estimated
    326 borrowers, with agreements dated after RHS obtained reduction
    authority, received unneeded interest credit totaling $3.4 million
    annually. An estimated 55 percent of projects accumulated excess funds
    totaling $31.3 million. In addition, we estimated that had
    approximately 28 percent of projects applied excess funds to loan
    obligations, annual savings to the Government and borrowers totaling
    $1.7 million would have resulted. We identified $169,000 of project
    funds used for questionable purposes, and we projected that $3 million
    had been used for questionable purposes.
        We recommended RHS seek legislation to eliminate dual subsidies
    arising from unneeded interest credit and require project managers to
    deposit reserve funds in an escrow account directly under RHS control.
    In addition, we recommend RHS strengthen servicing and establish
    procedures for situations where project managers did not timely
    establish or maintain countersignature reserve accounts. We recommended
    recovery of the questioned costs.
        Mr. Chairman, at this time, I would like to highlight some of our
    other audit and investigation activities.
                              entitlement programs
                        food and nutrition service (fns)
    Food Stamp Program (FSP)
        The Food Stamp Program is our nation's primary nutritional ``safety
    net'' for those in need. Program expenditures in fiscal year 1997 were
    about $21.5 billion, with benefits provided to about 23 million
    recipients monthly across the country. The program is administered by
    FNS through various State and local government entities. According to
    FNS, as of the end of fiscal year 1997, about 75 percent of food stamp
    benefits was issued using food stamp paper coupons. However, States are
    rapidly moving to implement EBT systems, and under welfare reform, EBT
    is mandated by 2002. About 187,000 retail grocery and other stores are
    authorized by FNS to accept food coupons or EBT benefits from
    recipients.
        Because of the huge size of the program and its vulnerability to
    fraud and abuse, OIG devotes a significant portion of its total
    resources to audit and investigative work in FSP. Our audit work
    focuses on the adequacy of controls and systems used to manage program
    areas such as issuance operations, wage-matching requirements, bank and
    retail store monitoring, and quality control procedures. Our audit
    staff is also working closely with FNS, other Federal agencies, and the
    States to monitor and review EBT systems as they expand in use. Our
    investigative emphasis is on food stamp trafficking, which is the
    illegal exchange of food stamp coupons or EBT benefits for cash or for
    other nonfood items. During fiscal year 1997, we devoted approximately
    46 percent of our investigative resources and 8 percent of our audit
    resources to FSP work. During the year, we conducted 598 food stamp
    fraud investigations, and we issued 19 audits relating to FSP. Our food
    stamp investigations resulted in 540 criminal convictions of
    individuals and businesses and over $17 million in fines, restitutions,
    and other monetary penalties. For fiscal years 1995 through 1997, OIG
    has conducted over 1,900 investigations of food stamp fraud, which have
    resulted in over 1,800 convictions and $49 million in monetary results.
    Trafficking
        Trafficking in food stamps has been a problem since the program
    began. While most food stamps are properly issued to eligible
    recipients and are used as they were intended to buy food in FNS-
    authorized stores, a significant amount of trafficking continues and
    remains a problem to this day. Street trafficking involves persons who
    purchase or barter food stamps for cash or other nonfood items. Street
    traffickers often obtain food stamps from recipients at a substantial
    discount of their face value, frequently in exchange for drugs or other
    nonfood items. Retailer trafficking involves FNS-authorized store
    owners and their employees who purchase food stamps for cash at a
    discount of their face value and then redeem them at their banks for
    full face value. Retailers traffick with both individual recipients and
    with street traffickers. Since the FNS-authorized retailer is the key
    to the eventual redemption of illegally obtained food stamps, OIG's
    primary investigative focus is on identifying and investigating those
    retailers who purchase food stamps. During fiscal year 1997, about 80
    percent of our food stamp investigations involved FNS-authorized
    stores. During the year, 326 retail stores were disqualified by FNS
    based upon OIG investigations. Those stores had annual redemptions of
    $65 million.
    FNS' Sanction Settlements Do Not Always Enhance Error Control
        As an incentive to control food stamp certification error rates,
    States are awarded additional administrative funding for low error
    rates and sanctioned for excessive error rates. As outlined in our 1997
    audit which covered a 14-year period ending in 1995, 48 States were
    sanctioned for excessive error rates. The States overissued
    approximately $8.5 billion in food stamps and were liable for
    approximately $1 billion for excessive errors.
        Between fiscal year 1981, when the sanctioning process became
    effective, and fiscal year 1995, FNS had collected only $6.2 million of
    the $1 billion in liabilities. FNS may waive collection of a State's
    liability incurred after fiscal year 1985 on the condition that the
    State invests its own funds in error control activities. Through
    settlements with FNS, States were required to reinvest $65.1 million in
    FSP, with contingency provisions for reinvestment of another $36.7
    million. Almost $765.4 million in potential sanctions was waived by FNS
    as part of the settlement agreements negotiated with the States.
        We reviewed the settlements that FNS had negotiated with the
    States, as well as the reinvestment activities the States engaged in.
    We found that the settlements (1) absolved States of their liabilities
    regardless of their error rates, (2) did not always provide incentives
    for States to reduce error rates, and (3) included payment of Federal
    matching funds for activities that should have been fully funded by the
    States. We also found ineligible projects and costs included in the 45
    reinvestment projects we reviewed in 17 States. The States had budgeted
    $70.8 million for the projects. We questioned an unduplicated $50.2
    million of the budgeted and actual costs. For example:
      --We questioned the eligibility of 11 projects budgeted for $42.3
            million because most of the work performed under the projects
            constituted the basic activities required for program
            administration. Also, the States funded some of the projects by
            reallocating existing resources rather than budgeting new
            expenditures.
      --The States charged ineligible costs to their reinvestment
            activities. We evaluated the propriety of costs charged to the
            30 projects conducted by 11 of the 17 States. Of the $40.5
            million the States had charged to the projects, we questioned
            $10.5 million in costs.
        We recommended that FNS (1) collect sanctions from States with
    historically excessive error rates; (2) make any settlement agreement
    contingent on a State's ability to reduce its error rate below the
    national average; (3) ensure that reinvestment activities enhance the
    controls over errors, not merely meet the minimum requirements for
    program administration; (4) ensure that reinvestment projects are not
    funded by reallocation of resources; (5) review each State's
    reinvestment activities to evaluate its eligibility; and (6) recover
    the questioned costs or require the States to reinvest in error rate
    control activities that qualify.
        FNS officials generally disagreed with our conclusions regarding
    the amount of questioned costs. We continue to work with them on
    resolution of the recommendations.
    One State Overclaimed As Much As $25 Million in Employment and Training
            Funds
        The Employment and Training Program (ETP) provides funds to train
    food stamp recipients to find work. FNS approves each State's
    Employment and Training plan, and reimbursements are based on the size
    of each State's food stamp work registrant population, as a percentage
    of food stamp work registrants nationwide, and on actual costs that
    exceed those calculated by the population formula. Reimbursed costs may
    not include overhead costs of normal educational operations.
        At the request of FNS, we evaluated Wisconsin's methodology for
    identifying those costs to be submitted for Federal Employment and
    Training matching funds, and we reviewed the State's procedure for
    determining the number of eligible program participants.
        FNS approved Employment and Training matching funds totaling $10.2
    million in fiscal years 1995 and 1996 to which Wisconsin was not
    entitled. The State's calculation of work registrants included food
    stamp recipients who were ineligible for ETP. Wisconsin also charged
    for costs of operating the Wisconsin Technical College System even
    though neither the colleges nor the attending food stamp recipients
    were given any Employment and Training funds by the State. FNS was
    unaware of these conditions because the regional office did not
    recognize the large increases in the State's claim for matching funds
    as an indicator of possible problems.
        An additional $15.3 million in Federal matching funds was approved
    for the costs of continuing a U.S. Department of Health and Human
    Services (DHHS) jobs program whose normal allocations had run out.
    Reimbursement of these transferred costs could constitute a violation
    of appropriation laws and, thus, may need to be refunded to FNS.
        We recommended that FNS collect $10.2 million from Wisconsin for
    the ineligible costs of the technical college system and for the
    overstated number of Employment and Training participants. We also
    recommended that FNS' regional office obtain a legal opinion from the
    Office of General Counsel on whether the payment of costs allocated to
    a DHHS program constitutes a violation of law and whether the
    associated funds should be collected. Finally, we recommended that FNS
    strengthen its monitoring procedures to prevent future recurrences of
    these problems in other States.
        FNS officials agreed that the State's grant and matching funds may
    have been overstated. They also agreed to obtain a legal opinion
    regarding the possible appropriations violation.
    Other Food Stamp Investigations
        In cooperation with the local Oregon police department, our
    investigation of an individual in Oregon who was illegally receiving
    food stamps, led to his January 30, 1998, guilty plea on two counts of
    Aggravated Murder. Our investigation determined that the individual,
    who was suspected of multiple homicides while riding railroad lines
    throughout the United States, had applied for and received food stamps
    using false identities in 12 States. Information we obtained from food
    stamp files around the country established a time line which tracked
    the individual around the country and helped place him in the locations
    where the homicides occurred and provided the motive for some of the
    murders. He admitted to using the identities of some of his homicide
    victims in order to receive their food stamp benefits. In Connecticut,
    15 individuals were arrested in a food stamp sting operation. Owners
    and employees of eight authorized stores had purchased approximately
    $256,000 in food stamps for $118,450 in cash, two handguns, and two
    vehicles. The 13 store owners and employees involved with food stamp
    trafficking were charged with Federal and/or State violations. The
    owner of one store was a city councilman, who pled guilty to State food
    stamp charges. During the course of the investigation, the owner of an
    authorized store introduced the OIG undercover agent to a Connecticut
    State Representative, who was also a police officer, for assistance in
    expediting a pistol permit. The OIG agent paid the Representative $400
    for his assistance. Even before the OIG investigation, the chief
    State's attorney's office had been investigating the Representative for
    election law violations. The OIG agent, while conducting this business,
    was approached by a second State Representative who was a police
    officer, as well. The Representative made a similar arrangement to
    assist in expediting the pistol permit. The OIG undercover agent paid
    this State Representative $200 for his assistance. Both Representatives
    were arrested and charged with various State violations by the chief
    State's attorney's office. Subsequently, both pled guilty, resigned
    from their positions, and were given suspended sentences with
    probation. The case was worked jointly with Connecticut's chief State's
    attorney's office, IRS, and the U.S. Attorney's Office.
        While the vast majority of our investigative time spent in the Food
    Stamp Program involves trafficking, we also conduct investigations of
    other types of criminal activity in the program, such as large-scale
    thefts of coupons from issuance offices and multiple issuances of
    benefits to the same individual, particularly if interstate fraud is
    involved.
        One recent investigation resulted in guilty pleas from three
    individuals who broke into food stamp issuance centers in Georgia,
    Oklahoma, and Alabama and stole nearly $500,000 in food coupons and
    over $47,000 in cash. The robbers gained entry to the businesses by
    cutting holes in the roofs. When employees arrived at work early in the
    morning, two of the armed robbers--dressed in black ski masks, gloves,
    and coveralls--crashed through the ceiling and climbed down ropes into
    the businesses. Two members of this robbery ring have pled guilty to
    multiple Federal crimes, including food stamp violations, and were
    sentenced to prison for 151 months and 60 months, respectively, along
    with total restitution of $142,380. The ringleader, who was wanted for
    numerous armed robberies in several States, was tried in Texas for a
    similar robbery which did not involve food stamps. He received two
    consecutive life sentences under the new Federal ``Three Strikes and
    You're Out'' law. The three gunmen have also been implicated in nine
    other armed robberies.
                                 farm programs
                           farm service agency (fsa)
    Tobacco Fraud
        A North Carolina tobacco dealer, who was also affiliated with the
    Montana Freemen organization, and a Fredericksburg, Virginia, tobacco
    dealer were among the 40 tobacco dealers, warehousemen, farmers, and 1
    corporation who have been convicted of felony charges for their roles
    in a tobacco fraud scheme that resulted in the illegal sale of more
    than 34 million pounds of excess tobacco valued at over $57 million.
    The Freeman pled guilty to charges of conspiracy to commit mail fraud
    and to making false statements regarding tobacco marketed on USDA
    tobacco dealer cards, after he and others used dozens of persons
    throughout the Southeastern United States to illegally sell the excess
    tobacco. He was sentenced to 5 years in prison for the tobacco-related
    charges. Information developed by OIG during the tobacco investigation
    laid the groundwork for another Federal prosecution and conviction of
    the Freeman relating to crimes associated with the Freemen group,
    including conspiracy to commit bank fraud and conspiracy to intimidate
    a Federal officer. The sentence for that conviction was 12 years in
    prison. The Fredericksburg tobacco dealer was sentenced to nearly 16
    years in prison following his trial and conviction. Additionally, the
    Government was awarded property, including the defendant's residence, a
    colonial era estate known as ``Beauclaire Plantation,'' which IRS has
    appraised at over $900,000, and $3 million in cash and substitute
    assets. The substitute assets seized include a registered American
    Quarter Horse, known as ``Coosa Lad,'' valued at nearly $500,000, and
    additional real estate valued at over $150,000. Administrative action
    has been initiated to collect up to $42.5 million in tobacco marketing-
    quota penalties. Civil suits have also been filed against some
    warehouse operators under the False Claims Act.
    Mohair Incentive Program
        Although the Mohair Incentive Program was eliminated in 1996, OIG
    continues to investigate criminal violations of this once-important
    program. This program allowed mohair producers to receive Government
    subsidies approaching 400 percent of the amount of their actual mohair
    sales. Prior to its elimination, this Program was defrauded out of $1.6
    million by three Texas ranchers. A fourth rancher submitted additional
    false claims for over $400,000 in program payments; however, the
    payments were not made. The producers, who were required to have
    actually owned the goats which produced the mohair for which they sold
    and received subsidy, actually purchased the mohair from other sources,
    resold it, and submitted bogus receipts to support their claim to USDA.
    All four of the defendants in this case pled guilty to charges of
    making false statements, and three of them have been sentenced to
    prison terms from 22 to 40 months and ordered to pay over $2.5 million
    in restitution. Sentencing is pending for the fourth. Interestingly,
    the Federal District Court Judge ordered the restitution to include
    interest on the amount of the fraud calculated, from the date the
    payments were received.
    Adulteration, Misgrading, and Misweighing of Grain
        A multinational food company headquartered in Omaha, Nebraska, pled
    guilty to charges of adulteration, misgrading, and misweighing of grain
    by the company's grain division and paid $8.3 million in fines and
    disgorgement of criminal profits. A significant part of the sum is
    being disbursed to more than 4,000 farmers who were cheated by the
    company's schemes to defraud. In addition, four former managers of the
    grain company pled guilty to misgrading grain. Two of the managers also
    pled guilty to wire fraud. One of the managers found guilty of wire
    fraud was sentenced to a prison term of 15 months, followed by
    probation of 2 years, and the other manager was fined $3,000 and placed
    on 4 months' home detention. The other two managers were fined $500 and
    $200, respectively, because they cooperated in the investigation and
    had not led the schemes. In lieu of debarment, the company signed a
    compliance agreement that establishes a corporate code of ethics and
    conduct and provides for training in ethics, as well as grading and
    weighing. The agreement also ensures a prohibition against adding water
    to grain except for processing.
        Our investigation found that the company used several schemes to
    defraud farmers and grain buyers and increase its grain inventories and
    profits. Soybeans were purposefully misgraded, allowing the company to
    pay less to the farmer yet sell at higher rates. The company also
    significantly misweighed grain it sold, thereby allowing it to ship
    less grain than it was paid for. In addition, water was added to grain
    inventories, which increased the grain's weight and the company's
    profits when the grain was sold. The excess moisture also caused
    spoilage of grain in transit, prompting international complaints.
    Further, the company paid gratuities to federally licensed grain
    samplers who worked for a Government contractor. These licensed
    personnel then allowed the grain company to exchange poor-quality grain
    samples for samples of a higher quality. The samples were used to
    prepare ``Official Certificates,'' which are used throughout the grain
    trade to market grain. End users received poor-quality grain but paid a
    higher price. Investigative findings of the questionable grain-handling
    practices prompted lawmakers to increase the level of violations of the
    USDA Grain Standards Act from misdemeanors to felonies. Subsequent
    rulemaking severely restricted the addition of water to grain. The 4-
    year investigation was a joint effort with FSA and the Grain
    Inspection, Packers, and Stockyards Administration.
    FSA Oversight of Certified State Mediation Programs Needs Strengthening
        The Secretary of Agriculture has the authority to help States
    develop certified mediation programs. These programs make a trained,
    impartial person available as a mediator to facilitate communication
    between disputing parties to promote reconciliation, settlement, or
    understanding among them. At the local level, mediation programs may be
    administered directly by the State. Since 1988, USDA has obligated
    $19.7 million for 20 State mediation programs.
        Although grant agreements give USDA officials full access to
    mediation records, OIG was denied access by all four State agencies
    visited. State officials withheld all records that would identify
    mediation participants, as well as the final agreement resulting from
    the mediation. State officials considered such records confidential. As
    a result, we were unable to fully evaluate the use of Federal funds and
    the accomplishments of the States. It is important to note that
    mediation programs are available for a variety of USDA loan and payment
    programs, which total approximately $33 billion. Since any borrower or
    participant in these programs can request mediation services, $33
    billion is the value of USDA funding impacted by the decision to deny
    OIG access to records.
        Through review of the limited records that were provided, we
    identified $2.1 million since 1988 in excessive or questionable
    reimbursements for activities that did not involve mediation. These
    activities included financial analysis, credit counseling, and other
    technical assistance for individuals not in mediation. In our opinion,
    mediation funds should be used to reimburse expenses associated with
    mediating disputes involving farmers directly affected by USDA actions.
        We also reported that the average cost per mediation case for FSA-
    administered mediation programs was $537 while the average cost for
    State-administered programs was $3,719 per case. In addition, we noted
    that the total fiscal year 1996 appropriation for the mediation program
    was $2 million; however, FSA obligated $3.1 million to the States and
    allowed them to carry forward unused amounts to the succeeding fiscal
    year.
        We recommended that FSA (1) withhold grant funds from the four
    States we visited until records are made available, (2) amend
    regulations to specify what costs can be claimed for reimbursement, (3)
    recover $1.2 million in questionable and unsupported costs, (4) reduce
    the cost per case for the State mediation program, and (5) stop
    obligating more grant funds in a fiscal year than are appropriated by
    Congress. We are working with FSA officials to resolve the issues
    identified in the report.
        Subsequent to the release of our audit report, OGC issued an
    opinion regarding USDA access to records. The opinion states in part:
      --Section 1946.4 of 7 Code of Federal Regulations (CFR) requires that
            any State requesting a mediation grant comply with 7 CFR parts
            3015 and 3016. Section 3015.24 of 7 CFR in turn provides, in
            part, that USDA and any of its authorized representatives ``* *
            * shall have the right of access to any * * * records of the
            recipient which are pertinent in a specific USDA award in order
            to make audit, examination, excerpts, and transcripts.''
        OGC concluded that FSA should notify the grantees of the regulatory
    requirements and that continued failure to grant access in accordance
    with the regulations will be considered a material violation of the
    grant award under 7 CFR part 3015, subpart n. FSA has notified the
    grantees of the OGC opinion.
        Currently OIG, FSA, and State-administered mediation officials have
    reached a compromise in our effort to complete a review of the
    mediation program, and the review is continuing in selected States. Our
    review objective, for this phase, is limited to determining whether the
    mediation program is effectively resolving USDA-related issues in
    accordance with applicable laws and USDA regulations and procedures.
    This phase is being limited since, in our earlier review, we made
    recommendations to FSA concerning matters eligible for funding with
    mediation grant funds. We continue to work with FSA officials to
    resolve these matters.
    Tobacco and Peanut Marketing Penalties Not Assessed
        The Omnibus Budget Reconciliation Act of 1993 requires that
    marketing assessments be collected on imported tobacco, while the
    Omnibus Budget Reconciliation Act of 1990 requires that producers and
    handlers remit marketing assessment fees for the sale and purchase of
    farmer stock peanuts.
        Tobacco importers who do not remit the assessment promptly are
    subject to marketing penalties and late payment interest charges. Over
    the period 1994 to 1996, potential marketing penalties and interest
    charges approximating $123 million were not timely identified and
    collected. FSA's failure to identify the penalties and interest could
    result in a material understatement of accounts receivable for the
    Commodity Credit Corporation (CCC).
        While peanut handlers generally remitted marketing assessments
    timely, FSA did not assess penalties against handlers who remitted the
    fees, or a portion thereof, late even though the legislation required
    it. Of the almost 12 million tons of peanuts marketed between 1991 and
    1996, assessments were remitted late on 700,000 tons, or 5.8 percent.
    The unassessed late payment penalties would have totaled $46.4 million.
        For tobacco, we recommended FSA (1) notify the respective importers
    of their liabilities and give them an opportunity for a hearing, (2)
    recover the net amount of marketing penalties determined due, (3)
    ensure that any reductions to marketing penalties are in accordance
    with legislated mandates, and (4) record accounts receivable in CCC's
    financial statements for penalties assessed. For peanuts, we
    recommended that penalties be assessed for late payments. FSA officials
    are in the process of taking corrective actions.
    Improper Conservation Reserve Program (CRP) Scoring Reduces
            Environmental Benefits of Land Accepted
        Under CRP, producers receive annual payments from FSA to take
    highly erodible cropland out of production and establish and maintain a
    vegetative cover on it. Last year, FSA opened the program to the
    fifteenth signup. During signup, producers designated tracts of land
    that were determined environmentally sensitive, and personnel from the
    Natural Resources Conservation Service (NRCS) reviewed the tracts and
    scored them according to values on the Environmental Benefits Index
    (EBI). One subpart of the index identifies the environmental benefits
    of the land, such as providing cover beneficial to wildlife, and
    specifies what numerical scores may be given for the different kinds of
    conservation practices--planting mixed grasses, legumes, etc.--that the
    producer established to enhance each benefit. Tracts that have been
    awarded higher scores are regarded as more worthy of conserving and
    qualify for CRP consideration ahead of tracts with lower scores. Tracts
    that fall below a minimum score are excluded from the program.
        Our audit disclosed significant inconsistencies in the
    methodologies used by States when they assigned scores for various
    conservation factors. Specifically, producers in some States received
    high scores for preserving cover beneficial to wildlife or for
    protecting threatened and endangered species even though the required
    cover or the endangered species were not present on the tracts of land.
    Such inconsistencies in scoring can result in greater CRP consideration
    for cropland in one State even though its environmental benefits are no
    greater than those of its neighboring States.
        Our review focused on two environmental benefits of land tracts
    offered to CRP--providing cover beneficial to wildlife and providing
    habitat for threatened and endangered species. Additional work was
    conducted in Kansas because of a complaint about that State's EBI
    scoring methods. Kansas, like most other States, provided little
    monitoring of county signups by State NRCS representatives to prevent
    counties from misapplying EBI criteria.
        Nationwide, we reviewed CRP land offers in 55 counties in 17
    States. Scoring errors and inconsistencies occurred on 47 percent of
    the CRP worksheets we verified. Inconsistencies occurred because States
    unilaterally modified EBI values, awarding 10 points, for example, for
    a category that allows either 15 points or no points. Errors occurred
    because some States developed EBI scoring software that was not always
    accurate and because some States entered improper values on CRP
    worksheets.
        We recommended that FSA and NRCS (1) provide additional guidance on
    criteria for assigning points for the environmental benefits we found
    improperly scored and (2) require field offices to review and correct
    EBI scoring, based on the additional guidance, before the CRP contracts
    are signed. We also recommended that software developed for future
    signups be field-tested for accuracy prior to use. Specifically, in
    Kansas, we recommended that CRP contracts not be finalized until the
    offers were reviewed and corrected.
        Based on a management alert we issued during our audit, FSA
    officials issued clarifying information and instituted a second-party
    review of CRP worksheets for the six counties with the largest number
    of land offers in each State that had CRP activity. NRCS management
    also issued a guidance document that addressed some scoring problems
    noted in our review. USDA also allowed 1 year of payment to producers
    whose offers were incorrectly accepted due to errors made determining
    EBI scoring. Due to the large error rate in the fifteenth signup, we
    have expanded our audit coverage into the sixteenth signup.
    Borrowers With Delinquent Farm Loans Received Full Benefit From Other
            FSA Programs in the Past, but Offsets Are Scheduled
        Farm loan borrowers whose accounts were delinquent have continued
    to get full Government payments from other FSA programs--for example,
    the Acreage Reduction Program or the Conservation Reserve Program--
    regardless of their delinquent debt to FSA. FSA did not offset the
    program payments to reduce the delinquent amounts because it did not
    have an automated system that could identify delinquent borrowers who
    were scheduled to receive other program payments. The offsetting was
    further complicated by procedures--inherited from the former Farmers
    Home Administration, that allow FSA to apply the offset only after it
    has ``accelerated'' the delinquent account--started formal foreclosure
    proceedings against the borrower.
        During 1995 and 1996, FSA made $72.1 million in program payments to
    over 4,000 borrowers whose total indebtedness was over $885 million and
    who were at least 180 days delinquent on these debts. It had
    accelerated the delinquent accounts of those who received $9.7 million
    of this amount, and it offset only $3.1 million in payments to those
    borrowers with the accelerated accounts.
        FSA's procedures regarding offsets were incompatible with
    departmental procedures. The Department does not require agencies to
    accelerate delinquent accounts before applying any offsets, and it
    gives agencies 10 years from the date the debt arose to collect the
    debt through the offset. FSA procedures required the acceleration and
    limited FSA to 6 years to collect the debt through the offset.
        In response to our management alerts, FSA issued interim
    regulations on August 1, 1997, authorizing the agency to offset program
    payments to delinquent borrowers without accelerating the loan accounts
    and by expanding the collection period to 10 years. We concluded that,
    with timely implementation of the new rules prior to the final 1997
    farm program payments, $34 million in program payments could be offset
    from borrowers whose accounts are more than 180 days delinquent.
        We recommended that FSA expedite the release of all procedures to
    implement the new regulation and that necessary actions be taken,
    manually if necessary, to offset 1997 payments due delinquent
    borrowers. We also recommended that FSA ensure that its automated
    administrative offset system will (1) identify delinquent borrowers who
    are also receiving program payments, (2) provide for an offset of those
    program payments, and (3) apply the offset to the delinquent account.
    The agency agreed with the findings and recommendations and initiated
    corrective actions.
    Disaster Overpayments Result from Improper Reporting and Weak Oversight
        As part of our nationwide review of FSA's noninsured crop
    assistance program (NAP), we reviewed producers' applications in two
    counties in California and one county in Alabama. Producers in a
    designated area are eligible for payments if a natural disaster reduces
    their crop yields below 50 percent of the expected yield.
        In California, we questioned payments in the 2 counties, totaling
    about $1.6 million, because 48 of 136 producers we reviewed had
    overstated their losses. In one of the counties, we also found that the
    Agriculture Credit Office made loans of $569,000 to two producers based
    on possible false certifications which underreported their production.
    In other cases, FSA made errors which resulted in overpayments of
    $88,000 and underpayment of $8,300.
        In the one Alabama county, the county office improperly used State-
    assigned yields to calculate benefits rather than the producers' actual
    production histories. Twenty-six of the 53 producers who applied had
    received disaster payments from FSA in 1 or more of the previous 4
    years and had production histories on file. Using these histories, we
    determined the 26 producers were eligible for only about $23,000 of the
    $126,000 determined by FSA.
        Since we found that assigning yields, rather than using actual
    yields, was a Statewide practice in Alabama and also occurred in other
    States, we recommended to FSA's national office that it base yields on
    actual production histories. As a result, Alabama halted payments to
    producers, pending national office instructions. In California, we
    recommended that FSA broaden the definition of ``misrepresentation'' to
    include inaccurate producer reporting that benefits the producer and
    that measures be taken to strengthen program controls. In all cases, we
    recommended recovery of overpayments and corrections of underpayment.
    FSA Reacts Quickly to Needs of Endangered Livestock in Upper Great
            Plains
        In response to severe winter storms in early January 1997, FSA
    implemented the Emergency Feed Grain Donation Program to provide
    immediate assistance to livestock producers in North Dakota, South
    Dakota, and Minnesota. It also implemented the Foundation Livestock
    Relief Payment for producers in the three States and other bordering
    States who needed feed to enhance the diet of foundation livestock
    weakened by the winter weather. FSA provided about $25 million in
    assistance through both programs.
        We worked closely with FSA officials during the programs'
    implementation and provided suggestions on how to address control
    weaknesses and abuses often associated with emergency programs. Based
    on our field work in selected locations, FSA issued notices to clarify
    provisions on producer eligibility and the duration of available
    assistance.
        In June 1997, Congress created the Livestock Indemnity Program to
    provide about $50 million in assistance for livestock and poultry
    losses that occurred between October 1, 1996, and June 12, 1997. We
    reviewed the program during the signup period and found that third-
    party verification statements were being accepted as evidence of losses
    instead of documented evidence. We also noted one State's
    interpretation of eligible loss conditions was inconsistent with
    national office guidance and noted inconsistencies in program
    administration between States. We made recommendations to FSA to
    address these issues. We are making further reviews of eligibility
    determinations, payment calculations, and spot-checks of livestock and
    poultry operations.
                       natural resources and environment
    Forest Service (FS)
        A former FS employee and a self-employed aircraft broker were
    recently found guilty at trial of conspiring to steal 28 Government-
    owned airplanes--22 C-130A cargo planes and 6 P-3A submarine attack
    planes--valued at up to $28 million.
        The Federal Property Management Regulations administered by the
    General Services Administration (GSA) allow excess Federal property to
    be transferred from one agency to another. However, under this program,
    title to the excess property must remain with the United States
    Government. Historically, the Air Force has provided used military
    aircraft to FS, which uses them to fight fires.
        Our investigation disclosed that five airtanker-operating companies
    signed exchange agreements with FS in which they exchanged alleged
    historic aircraft for either C-130A or P-3A aircraft owned by the
    United States Government. The C-130A and P-3A aircraft had originally
    been transferred to FS from the Air Force and the Navy as excess
    aircraft through the GSA exchange program. Both defendants assisted the
    airtanker operators in facilitating the aircraft exchanges. Also, both
    defendants made misrepresentations to officials of GSA, the Air Force,
    the Navy, and other Federal agencies to accomplish these exchanges. One
    of the airtanker operators, who received six C-130A aircraft from FS,
    transferred two of the planes back to the aircraft broker. The broker
    then transferred these two planes back to the same airtanker operator
    and received $450,000. Another airtanker operator, who also received
    six C-130A aircraft, transferred two of them back to the broker. The
    broker then transferred title of the two planes to a third airtanker
    operator in exchange for cash payments and other benefits with a value
    of $600,000. Sentencing for both defendants is scheduled next month.
    FS Cooperative and Reimbursable Agreements Neither Safeguard Funds Nor
            Identify Conflicts of Interest
        FS is authorized to cooperate and share scientific information and
    technology with other Government agencies, colleges and universities,
    businesses, and private landowners. During fiscal years 1994 and 1995,
    FS awarded $70.3 million in research grants and agreements to colleges
    and universities.
        We reviewed 33 grants and agreements awarded to 23 recipients by 7
    FS research stations in fiscal year 1994. More than one-third of the
    recipients in our sample did not always comply with Federal assistance
    regulations, Federal cost principles, or the terms of specific grants
    and agreements. Noncompliance included not providing sufficient
    resources to meet the agreement, failing to satisfy cost-share
    requirements, not obtaining FS prior approval for large purchases of
    equipment, and not maintaining adequate records to support claims.
        We recommended that FS (1) perform periodic national reviews of
    research grants and agreements and (2) require research stations to
    periodically review a sample of reimbursement claims from cooperators.
    FS officials have generally agreed with our findings and
    recommendations and are developing an acceptable corrective action
    plan.
    Controls Over USDA Environmental Hazardous Cleanup, Abatement, and
            Prevention Efforts Need Further Assurance Against Liabilities
            From Land Acquisitions
        The Hazardous Waste Management Program was established as a
    separate USDA appropriation to bring its agencies' past and current
    actions into compliance with Federal, State, and local environmental
    standards. Departmental policy provides for the initiation of
    agricultural and forestry programs that abate, control, and prevent
    pollution. OIG has assisted the agencies' efforts toward achieving
    environmental compliance for the facilities they own and operate by
    reviewing the adequacy of the individual policies, procedures, and
    actions they have adopted for meeting these standards and requirements.
        Over the past 6 years, OIG has reviewed the progress being made in
    USDA's management and disposal of hazardous chemical, biological, and
    radioactive materials and provided recommendations to make these
    efforts more effective and efficient. Eleven USDA agencies are involved
    in the purchase, exchange, assumption, or sale of lands and perform
    hundreds of transactions per year. Our immediate concern is to help
    these agencies avoid the accumulation of further environmental
    liabilities in the acquisition, management, and disposal of properties
    under their stewardship.
                 natural resources conservation service (nrcs)
    Water Quality Inventive Projects (WQIP) Need Clearer Focus
        The goal of WQIP is to provide incentive payments to reduce
    agricultural pollutants through environmentally and economically sound
    management practices. We found that funding of State and locally
    identified priority areas did not always increase conservation benefits
    on the most vulnerable lands. In addition, inconsistencies existed in
    the methodologies followed by States and local areas to identify and
    rank prospective projects and to prioritize requests to enroll land.
    Practice components were not always adequately planned or the most
    effective for improving water quality because plans did not always
    address all water quality problems identified, and incentive payments
    were approved for practices previously implemented or required to
    comply with the highly-erodible-land provisions.
        We recommended that NRCS coordinate with other conservation
    partners in developing the focus for the Environmental Quality
    Incentives Program (EQIP) and establish whether EQIP should address all
    existing resource concerns. EQIP, which was established by law in 1996,
    consolidated WQIP and three other USDA conservation programs into one
    program. We also recommended that NRCS develop policy and guidance for
    EQIP to promote total resource management planning and to prohibit
    payment for practices that were previously implemented or required to
    comply with highly-erodible-land provisions. NRCS officials agreed to
    implement our recommendations.
                              consumer protection
                   food safety and inspection service (fsis)
    FSIS User Fees Did Not Fully Cover Cost of Export Inspections
        In addition to the basic meat and poultry inspections performed by
    FSIS, products for export are reinspected to ensure they comply with
    meat and poultry regulations and specific requirements of the importing
    country. FSIS performs an estimated 450,000 reinspections of products
    to be exported which were previously inspected under the normal
    inspection process. FSIS does not collect user fees for these
    reinspections.
        FSIS could offset the Government's costs of providing export
    inspection services by collecting additional user fees. For certain
    services, such as export reinspection and preparation of certain export
    certificates, FSIS would need congressional authorization to collect
    user fees. If FSIS were to obtain this authority, some export
    inspection functions could become self-sufficient, thereby making an
    estimated $13.7 million of appropriated funds available annually for
    other inspection activities. In other areas where user fees are
    currently authorized and charged, FSIS did not charge for the full cost
    of the services provided. We estimated that FSIS could collect an
    additional $921,000 annually if such fees were adjusted to reflect all
    associated FSIS costs.
        We recommended that FSIS (1) seek statutory authority to assess,
    collect, and retain user fees for all export inspections/reinspections
    and for the preparation of the export certificates where such authority
    does not currently exist and (2) increase the user fees currently
    authorized and charged for products to be exported to cover the full
    costs of the services provided. FSIS management agreed with the
    reported findings and is taking corrective actions.
    FSIS Needs To Strengthen Policies and Procedures Over the Progressive
            Enforcement Action System
        FSIS developed the Progressive Enforcement Action system as a tool
    to monitor meat and poultry plants with continuing food safety problems
    and bring them back into compliance. However, the current system does
    not permit FSIS to suspend or withdraw inspection when contaminated
    products or conditions that may compromise food safety are first
    detected, even though such authority is provided for in the law and
    FSIS regulations. The Progressive Enforcement Action system requires
    inspectors to develop supporting documentation proving noncompliance
    before they can suspend or move to withdraw inspection. The four plants
    we reviewed produced 212 million pounds of products under conditions
    that could have caused contamination. Products included full carcasses
    of beef and poultry, and poultry for slaughter. FSIS neither took
    action to suspend inspections of the plants we reviewed nor established
    specific timeframes during which plants must complete corrective
    actions. Currently, plants are allowed to remain under progressive
    enforcement for extended time periods while continuing to produce
    products under conditions which do not meet food safety standards.
        Further, the current system places the responsibility for ensuring
    plant compliance on FSIS inspectors rather than on plant owners/
    managers. To comply with requirements contained in the Progressive
    Enforcement Action guidelines, inspectors must spend an inordinate
    amount of their time performing inspections and documenting the
    results. Plant management is required to provide an action plan but is
    not primarily responsible for ensuring compliance. FSIS' present grant
    of inspection does not provide for specific performance expectations or
    standards and does not establish the consequences or penalties for
    noncompliance.
        We recommended that FSIS improve progressive enforcement by
    developing and implementing procedures to ensure that (1) inspectors
    refuse or withdraw inspection when conditions that may lead to
    adulterated products are first detected and (2) specific timeframes are
    developed for plant management to complete corrective actions in
    noncomplying plants. We further recommended that FSIS revise (1) its
    progressive enforcement policies to require plant owners/managers to
    assume primary responsibility for establishing permanent corrective
    actions and (2) the grants of inspection to make plant owners/managers
    responsible for quality of plant operations and compliance with
    regulations by specifying expected plant performance levels and
    repercussions for noncompliance.
        FSIS management generally agreed with the reported findings and
    pointed out that publication of the Pathogen Reduction and Hazard
    Analysis and Critical Control Point (HACCP) final rule has changed FSIS
    enforcement strategies. FSIS now has specific regulatory requirements
    for plant-developed and -operated systems for process control and
    sanitation to prevent direct contamination or adulteration, and these
    preventive measures are a condition of receiving inspection. Compliance
    with procedures contained in the Pathogen Reduction and HACCP final
    rule should address the type of problems we identified.
        grain inspection, packers, and stockyards administration (gipsa)
    Investigative Techniques Lacking Against Anticompetitive Practices in
            Meat Packing Industry
        The Packers and Stockyards (P&S) division of GIPSA is responsible
    for enforcing Federal laws against anticompetitive practices in the
    meat packing industry. Recent changes in the meat packing industry have
    resulted in fewer companies controlling an ever-increasing share of the
    market. This has raised concern among livestock owners and others who
    depend on the sale of cattle to meat packers at open-market prices. In
    1995, the price livestock owners received for cattle decreased sharply
    while the major meat packers earned record profits. The perception
    among livestock owners was that the meat packers were manipulating the
    price of cattle. The Secretary of Agriculture requested that we assess
    GIPSA's efforts to monitor and investigate anticompetitive practices.
        P&S has performed few investigations of anticompetitive practices
    in the last few years which have been litigated successfully by OGC.
    This occurred partly because of the type of evidence available and
    partly because P&S has not kept pace with the techniques needed to
    monitor an industry that has changed. The evidence collected through
    traditional investigative methods is no longer sufficient, by itself,
    in litigating anticompetitive cases. Additional evidence from economic
    analysis is now needed, but P&S does not deploy sufficient economic
    resources in anticompetitive investigations to provide this evidence.
        P&S needs to deploy its economists better and obtain additional
    economic and statistical resources to prepare complex economic models
    that can demonstrate the adverse effects, if any, of industry
    activities on open and free competition in the marketplace. P&S also
    needs to integrate legal expertise into its investigations and consult
    with departmental attorneys at the beginning of an investigation to
    ensure that the evidence necessary to litigate a case is collected.
    Other Federal agencies use teams of attorneys and economists to
    investigate antitrust violations.
        We concluded that P&S needs to restructure its organization, both
    to place more of its resources in the regions and to redirect staff
    efforts toward monitoring of the meat packing industry. P&S has several
    economists on staff but has placed only one econometrician at the full
    disposal of its investigative staff. P&S' economists should be located
    at the regional offices, where investigations of anticompetitive
    practices are performed and where market data is more readily
    available.
        We presented a number of options to P&S to strengthen its
    operations: (1) reorganize its national and regional offices; (2)
    integrate its economics staff into the investigations of
    anticompetitive practices; (3) assess staff qualifications and obtain
    additional staff with economic, statistical, and legal backgrounds; (4)
    transfer its economic research activities to another USDA agency; (5)
    develop procedures to consult with OGC before initiating and during
    anticompetitive practice investigations; and (6) retain the services of
    a manager with expertise in all areas of directing anticompetitive
    investigations or request the U.S. Department of Justice (DOJ) and/or
    the Federal Trade Commission to provide a manager, on detail, to assist
    in the reorganization of P&S' functions related to anticompetitive
    practice investigations.
        Since it will take several, if not all, of the above options for
    P&S to develop an effective investigative staff, the Department may
    want to consider requesting legislative action to transfer USDA's
    responsibilities for performing anticompetitive practice investigations
    to another Federal agency.
        Another example of our activity in the health and food safety arena
    includes:
      --In Oklahoma and Texas, OIG and Food and Drug Administration agents
            are currently conducting investigations involving the
            adulteration of milk. To date, 12 dairymen and milk truck
            drivers have been convicted for conspiring to add water and
            salt to raw milk. It was also found that one driver pumped
            water directly out of a 55-gallon barrel, which was exposed to
            insects, bird droppings, and other outdoor elements, into his
            milk container truck. By adding salt to the water, these
            individuals evaded quality control detection and defrauded the
            Associated Milk Producers Incorporated (AMPI), AMPI cooperative
            members, and the general public. Criminal charges are pending
            against other identified drivers, and additional investigations
            involving several other dairymen and drivers are ongoing.
                      agricultural marketing service (ams)
    More Measures Needed To Ensure Dairy Processing Plants Meet Sanitation
            Standards
        AMS has improved its operations by implementing additional
    monitoring, training, supervising, and reporting measures related to
    sanitation in dairy-processing plants. However, improvement is still
    needed to ensure that regulatory agencies are notified of sanitation
    deficiencies, and increasingly stiffer penalties are needed for dairy
    processing plants with repeated sanitation deficiencies.
        AMS neither reported serious sanitation deficiencies to FDA if the
    conditions could be corrected quickly nor reported plants which were
    denied participation in the inspection program because the initial
    inspection disclosed serious unsanitary conditions. AMS' policy was to
    notify FDA only when it had withdrawn inspection services from a plant
    because of serious unsanitary conditions.
        We identified three instances where plants were repeatedly
    ineligible because of unsanitary conditions and appeared to implement
    only temporary fixes in order to obtain an approved status. Although
    the deficiencies were corrected sufficiently during inspections, the
    corrections were apparently only temporary. Though relatively few
    plants have this problem, for those that do, AMS needs to implement a
    system whereby plants are sanctioned for repeatedly failing to maintain
    acceptable standards or develop procedures to notify regulatory
    agencies of plants with repeated violations.
        We recommended that AMS report all significant sanitary
    deficiencies identified during plant inspections, regardless of a
    plant's status, to FDA. We further recommended that AMS develop
    procedures to notify regulatory agencies when plants have repeated
    sanitary deficiencies.
        AMS officials supported our conclusions and agreed to report all
    significant unsanitary conditions to FDA, State regulator agencies, and
    industry trade associations. They also agreed to develop procedures to
    notify regulatory agencies when plants have repeated sanitary
    deficiencies.
                                   insurance
                          risk management agency (rma)
    New Initiatives Under the Federal Agriculture Improvement and Reform
            (FAIR) Act
        The FAIR Act authorizes new revenue insurance programs. In 1995,
    the Federal Crop Insurance Corporation (FCIC) had already approved, for
    two crops in two States, the Crop Revenue Coverage (CRC) program, a
    privately developed insurance program that offered alternative coverage
    to FCIC's multitiered crop insurance. The FAIR Act also provided for
    phasing in of a single delivery system for catastrophic risk (CAT)
    coverage. In 1997, this involved transferring over 108,000 CAT policies
    to 15 private insurance companies in 14 States. In May 1997, the
    Secretary approved the transfer of all remaining policies. For both
    programs, FCIC reinsured companies that would service the policies.
    Through various interim reports, we provided RMA with recommendations
    to strengthen controls over these new activities. Regarding CRC
    implementation, we recommended that RMA develop regulations for
    administering privately developed programs. We also recommended that
    FCIC amend or establish new reinsurance agreements with the companies
    to shift additional risk to the private sector and reduce
    administrative expense reimbursements for CRC in line with other FCIC
    policies.
        Our reviews of the transfer of CAT policies in the first 14 States
    found a lack of interest by local agents in servicing policies and an
    unawareness of special provisions to forgo the $50-per-crop fee for
    producers with limited resources. For future transfers, we recommended
    that RMA determine the availability of agents in ``local'' areas and
    whether this is adequate. It should also measure the effectiveness of
    the transfer process in the first 14 States. We also recommended that
    RMA require reinsured companies to provide information to limited-
    resource producers on fee-waiver requirements. RMA agreed with our
    recommendations.
    Crop Insurance for Florida Fresh Market Tomatoes Was Not Properly
            Managed
        We audited the 1996 Dollar Plan Fresh Market Tomato Crop Insurance
    program in Florida and concluded that RMA should take sanctions against
    reinsured companies in Florida because their servicing of claims filed
    under the program was poorly managed. All seven indemnity payments we
    reviewed were improperly made, resulting in questionable indemnity
    payments of almost $1.5 million. The companies paid indemnities even
    though the insureds had (1) abandoned their crops because of low market
    prices, (2) claimed against losses that occurred after the reinsurance
    coverage period had ended, (3) planted crops on converted wetlands they
    had promised to restore to their natural state, and (4) failed to
    report all production.
        We found that the practices and procedures used in administering
    the insurance program for fresh market tomatoes allow indemnities to be
    paid to producers who did not experience a loss of commodity but,
    instead, suffered financial losses due to low market prices. We met
    with OGC officials and discussed the legality of paying indemnities
    based on low market prices and no loss of commodity. OGC officials
    verbally advised us that, to qualify for an indemnity, the insured must
    suffer a quantity or quality loss of a commodity caused by an insurable
    peril. We requested a formal, written opinion.
        We also found two reinsured companies' sales agents were employed
    by the policyholders to whom they sold policies that resulted in
    claims. The agents involved in the conflict of interest received almost
    $400,000 in commissions, and one of the policyholders received over
    $2.4 million in indemnities on his claims.
        We recommended that RMA officials develop a plan of action to
    ensure that reinsured companies comply with program regulations in
    their management of the Fresh Market Tomato Crop Insurance Program. In
    addition, we recommended that RMA obtain data on all cases where
    indemnities were paid on fresh market tomato claims where there was no
    commodity loss and, based on the results of OGC's formal opinion,
    recover any indemnities that should not have been paid. Other
    recommendations included one in which we asked RMA to determine what
    sanctions should be taken against the reinsured companies and the sales
    agents involved in the conflicts of interest. RMA management generally
    agreed with the reported findings and is addressing the
    recommendations.
    Errors in Establishing Yields and Adjusting Claims Resulted in
            Incorrect Indemnity Payments
        Our review of 12 California crop insurance claims for 1995 and 1996
    identified errors in the calculation of indemnity payments for 8 of the
    12 claims. Sales agents, loss adjusters, insured producers, and FSA
    personnel misstated historical yields, miscalculated appraised
    production, and inconsistently established insurable acreage and
    production-to-count. It is to the producer's advantage to overstate
    historical yields and understate production during a loss year; an
    overstated historical yield will increase the amount of actual
    production that can still qualify for indemnities. Of the eight claims
    we found in error, indemnities for seven were overpaid by approximately
    $125,000, and the indemnity for one was underpaid by approximately
    $9,500.
        We also reviewed the 1995 claims of one cotton producer in
    Mississippi. The audit identified errors made by the reinsured company
    in calculating indemnity payments and premiums. In adjusting the loss
    claim, insurance company officials (1) overstated the number of acres
    affected by the disaster by 60 acres and (2) understated the producer's
    prior yield by 157 pounds per acre. The errors resulted in overpaid
    indemnities of approximately $32,000; underpaid indemnities of $4,400;
    and overpaid premiums of just over $1,000.
        In these two audits, we recommended that RMA recover overpaid
    indemnities totaling approximately $152,000; pay $14,000 to the
    underpaid producers; and require the reinsured company to credit the
    insured's account for the $1,000 premium overpayment. RMA should also
    ensure that proper adjustments are made to historical yields for
    policies where errors were identified by our review. RMA management
    agreed with the reported findings and is implementing corrective
    actions.
                               market development
                       foreign agricultural service (fas)
        During this past year, as a result of an OIG investigation, the
    Government concluded a global settlement with a prominent international
    grain company in New York and its foreign affiliate. As agreed to by
    the parties, the grain company paid $25 million to the United States
    Government in settlement of any potential civil claims, and its
    affiliate paid a $10 million fine after pleading guilty to a criminal
    charge of conspiracy. In addition, three associated entities agreed to
    permanent debarment from participation in any Federal programs.
        This settlement represented the culmination of a series of
    investigations conducted by OIG special agents since 1989 into fraud
    related to USDA's General Sales Manager 102 and 103 Export Credit
    Guarantee Programs, which were administered by FAS on behalf of CCC.
        In 1989, two employees of the Banca Nazionale del Lavoro (BNL),
    Atlanta, Georgia, branch disclosed to the U.S. Attorney's Office that
    BNL branch management issued unauthorized loans to foreign governments
    and exporters. Repayment of some of those loans was guaranteed by CCC
    under Export Credit Guarantee Programs. The guarantees enabled foreign
    entities that otherwise could not obtain credit to purchase U.S. farm
    commodities and products. If the foreign entity defaulted on its loan,
    CCC paid the holder of the guarantee 98 percent of the unpaid principal
    and interest.
        OIG initiated an investigation after inquiry with FAS revealed that
    BNL held CCC loan repayment guarantees exceeding $1.6 billion. The USDA
    investigators were joined by agents from the U.S. Customs Service, FBI,
    and IRS, and examiners from the Federal Reserve. The team included
    Assistant U.S. Attorneys in the Northern Judicial District of Georgia,
    and various divisions of DOJ's national office, who worked closely with
    the agents.
        In 1991, a Federal grand jury in Atlanta had handed down a 347-
    count indictment. Named in the indictment were a Turkish-owned
    corporation, its manager, a bank owned by the Iraqi Government, four
    Iraqi Government officials, and two former officers and an employee of
    the BNL Atlanta branch. The indictment alleged that officials of the
    BNL Atlanta branch, without authority and in disregard of BNL internal
    policies and procedures, issued more than $4 billion in loans and
    credit extensions to the Government of Iraq. Approximately one-half of
    those loans involved USDA programs. The ten defendants were charged
    with conspiracy, mail and wire fraud, money laundering, false
    statements to USDA, falsification of documents presented to USDA, and
    other counts.
        The Turkish company named in the indictment pled guilty to 20
    counts of the indictment, paid $5 million in restitution to BNL and a
    $1 million fine to the U.S. Treasury, and agreed to voluntary permanent
    debarment from participation in all U.S. Government-funded programs.
    The three BNL employees named in the indictment pled guilty to various
    charges. Three additional BNL employees, not named in the indictment,
    also pled guilty to various charges. The Turkish company's manager and
    the four Iraqi Government officials remain fugitives, with an
    unconfirmed report that one of the Iraqi officials has died.
        The BNL investigation resulted in numerous spinoff investigations.
    One of those spinoff cases investigated by the USDA agents resulted in
    a U.S.-based trading company pleading guilty to charges that it
    conspired to make false statements to CCC. The trading company paid
    over $8 million in restitution to CCC and a maximum fine of $10,000.
    The responsible division of the company and three employees agreed to
    debarment from U.S. programs for periods up to 3 years.
        The USDA portion of these investigations resulted in $38 million of
    restitution and over $11 million in fines. These investigations also
    developed sufficient evidence to allow FAS to cancel $500 million in
    additional CCC guarantees requested by Iraq for 1990, saved the
    American taxpayers even more losses, and led to the debarment of seven
    parties from participation in USDA and U.S. governmentwide programs.
    Changes Are Needed To Improve Delivery and Effectiveness of
            Humanitarian Aid
        FAS and CCC provided $81 million to the Russian Federation and the
    Kyrgyz Republic to establish joint commissions. We found that the joint
    commissions did not operate efficiently and impacted embassy workloads
    adversely, and funds were misspent. As recommended, the U.S. Department
    of State issued a protest to the Government of the Russian Federation
    resulting in the return of over $6 million to the joint commission from
    the Russian tax authorities, and the Government of the Kyrgyz Republic
    agreed to use the funds owed to support the activities outlined in the
    original agreement. The joint commissions are being terminated.
    Commodities Donated to Russia Mismanaged
        A U.S. private voluntary organization that was sponsoring the
    distribution of donated USDA commodities under the Section 416(b)
    Program was negligent in its sponsorship. It provided little or no
    management oversight of overseas operations, essentially abdicating its
    responsibilities to its Russian agent and the Salvation Army.
        We found the sponsor's Russian agent misappropriated commodities
    valued at $1.5 million. Another $653,000 in commodities could not be
    accounted for, and $2 million in commodities would have ended up ``in
    the streets'' of Moscow if the Salvation Army had not paid $55,000 of
    its own money to secure storage space. Also, contrary to its agreement,
    the sponsor did not use half of the approximately $3.6 million from
    commodity sales to support humanitarian projects in Russia.
        FSA officials were unaware of the problems because the sponsor did
    not provide adequate logistical reports nor did the sponsor fully
    comply with its plan of operation and its project proposal. We
    concluded the sponsor was negligent in its management of the sale and
    distribution of $19.6 million in USDA commodities and that it should be
    debarred from further participation.
        FAS officials agreed to require the sponsor to make a full
    accounting of all commodities and repay USDA for any misappropriated
    and unaccounted-for commodities. Although they would not debar the
    sponsor, they agreed to keep the sponsor out of any new programs until
    all issues raised in the audit are fully resolved.
                               rural development
                    rural business-cooperative service (rbs)
    Intermediary Relending Program (IRP) Borrowers Used Loans for
            Ineligible Purposes
        RBS provides IRP loans at 1 percent interest for up to 30 years to
    intermediary relenders, who reloan the funds at low interest rates to
    ultimate recipients in rural areas--those areas with populations less
    than 25,000. Relenders use the income from the recipient loan
    repayments to cover operating expenses, make loan payments to RBS, and
    make additional loans. Loan repayments from the recipients are known as
    second generation funds.
        We questioned loans to 21 recipients, totaling almost $2 million,
    because (1) relenders made ineligible loans and loans in cities with
    populations of 25,000 or more, (2) relenders used second generation
    funds for purposes not in the loan agreement or work plan and for
    relending in urban areas, and (3) conflicts of interest existed between
    relenders and ultimate recipients. In addition to the loans we
    questioned, we reviewed the relenders' annual reports and identified
    other possibly ineligible or inappropriate loans, totaling $1.6
    million.
        Relenders requested and received IRP advance funds from RBS far
    exceeding the amount necessary to cover a 30-day period. As a result,
    advance funds were held for periods ranging from 4 months to almost 2
    years before being used. Also, relender IRP loan accounts often
    exceeded the federally insured amount of $100,000.
        In addition, relenders held excessive amounts of IRP funds and were
    not loaning them timely. Fifteen relenders had rural business loans,
    totaling $17.7 million which closed in 1993 and 1994 but had requested
    advances of only $1 million or 6 percent. Seven of the 15 relenders,
    with loans of $7.7 million, had made no drawdowns of loan funds to
    reloan to ultimate recipients.
        We recommended that RBS (1) recover the funds used for ineligible
    purposes, (2) revise IRP regulations to state clearly that second
    generation funds are for rural development and for purposes that meet
    the eligibility requirements for initial loans, (3) clarify regulations
    to provide detailed guidelines for making conflict-of-interest
    determinations, (4) improve procedures for more efficient use of
    program funds, and (5) improve reporting and monitoring procedures.
                       research, education, and economics
     cooperative state research, education, and extension service (csrees)
    Schedule A Extension Appointees' Rights Need Clarification
        There are approximately 8,000 CSREES Schedule A appointees working
    nationwide in the State Cooperative Extension System (CES). The
    appointees receive Federal benefits including participation in the
    Federal Health Benefits program and Civil Service retirement plan. Our
    review of adverse actions taken against two of these appointees by one
    State university CES director disclosed that the universities are not
    always aware that protection, such as counseling and appeals
    procedures, apply. In this case, the university offered no protection
    and stated its own policy allowed CES to dismiss the appointees without
    taking any such actions. OGC provided CSREES with an opinion that these
    positions fall within the due process requirements of the Merit
    Protection System. The Merit Systems Protection Board is currently
    reviewing an appeal by the individuals. OIG continues to support action
    by CSREES that will inform all CES offices of the appointees' current
    status and direct them to seek the agency's advice before taking
    actions that would invalidate these appointments.
                               employee integrity
        Investigation of serious misconduct by USDA employees remains a
    high priority for OIG. During fiscal year 1997, OIG issued 82 reports
    of investigation concerning serious breaches of employee integrity by
    USDA employees. Our investigations resulted in 21 convictions of
    current and former USDA employees and 67 personnel actions, including
    reprimands, suspensions, removals, resignations, and alternative
    discipline. For example:
      --In Kentucky, 12 people, including the FSA County Executive Director
            (CED), a program assistant, and the FSA building landlord, pled
            guilty to defrauding three FSA programs of approximately
            $850,000 over a 9-year period. All 12 defendants were sentenced
            to terms ranging from probation to 57 months in jail and were
            ordered to pay fines and restitution totaling approximately
            $607,000. Forfeiture of $246,350 was ordered against the CED
            and the building landlord, and both of the FSA employees have
            been dismissed. The investigation also prevented an additional
            $15,500 in funds from being issued by FSA. The multifaceted
            scheme involved the Feed Grain, Disaster, and Tobacco Programs.
            The two FSA employees falsified documents, enabling the
            coconspirators to receive payments they were not entitled to,
            and, in return, approximately half the proceeds were given to
            the CED. The numerous checks were made payable in the names of
            the various coconspirators and to fictitious names. Of the 12
            who pled guilty, only 1 was a farmer. In addition, the CED and
            the building landlord conspired to steal Burley Tobacco
            Marketing Cards and tobacco poundage quotas from various farms.
            The proceeds were laundered through a business account
            belonging to the building landlord. We were assisted in this
            investigation by the FBI.
      --A Texas FSA program assistant who was charged with theft and
            embezzlement of more than $945,500, confessed and pled guilty,
            and was suspended without pay pending conclusion of the
            criminal action. The employee had created numerous false loans,
            altered several CCC checks to bear her name, forged the
            signatures of two FSA county supervisors on the CCC checks, and
            deposited several CCC loan and program payment checks into her
            personal bank account. Our investigation determined the
            employee used some of the fraudulent loans to pay off other
            fraudulent loans in order to keep the scheme active. The actual
            dollar loss to the Government was approximately $286,400.
            Sentencing is pending.
                                 administration
    The Department's Backlog of Discrimination Complaints Has Increased;
            Greater Technical Assistance is Needed for Loanmaking and Loan-
            Servicing
        As requested by the Secretary, we reviewed the backlog of
    complaints made by disadvantaged and minority farmers. We issued a
    report in February 1997 that detailed the staffing problems, obsolete
    procedures, and lack of direction from management that resulted in a
    backlog of 530 civil rights complaints within the Department. During
    the second phase of our work, we found that the backlog had increased
    from 530 to 984, as of August 1997. In FSA alone, the backlog nearly
    doubled, increasing from 241 to 474.
        Although an ad hoc team was formed in April 1997 with the goal of
    eliminating the backlog by June 1997, the Office of Civil Rights (OCR)
    found that the complaints had never been properly investigated. As a
    result, the ad hoc team was disbanded without accomplishing its goal.
    We believe additional efforts are needed by ad hoc teams, under the
    direction and control of OCR, to help address the backlog of
    complaints. Further, we think the task of performing preliminary
    inquiries on FSA complaints should be performed by OCR investigators,
    who can be more objective and independent than FSA employees in
    performing the task.
        The Secretary also asked us to review a broad range of issues
    concerning program participation by minorities. For this review, we
    selected 11 States and 33 counties to determine if FSA provided
    sufficient technical assistance to help minority farmers apply for and
    receive farm credit loans and if FSA processed minority farm loan
    applications and serviced minority accounts in the same manner as for
    nonminorities. Our review disclosed the following.
      --FSA needs to provide greater technical assistance during the
            loanmaking and loan-servicing processes. One of the greatest
            frustrations to applicants is the extent of the information
            needed to complete the multiple documents for financial
            assistance. Statewide data for the 11 States reviewed showed
            that it took minorities and nonminorities about the same number
            of days, on average, to get their applications processed from
            receipt to loan closing. However, in certain locations, it took
            minorities longer than nonminorities to complete an approved
            application from receipt to completion status. At certain
            locations, disparities were noted in the number of multiple
            servicing decisions provided to nonminority farmers compared to
            the number provided to minority farmers. In those locations,
            the percentage of accounts that were delinquent was higher for
            minorities than for nonminorities.
      --FSA could improve its relations with the minority community by
            better targeting its outreach efforts, upgrading the status of
            its minority advisors, and increasing its work force diversity
            at the local level. The field offices visited used traditional
            means to reach out to minority farmers, relied on 1890 Land
            Grant colleges to promote their programs for them, or were
            satisfied with the status quo and awaited guidance from
            headquarters.
          County officials told us that outreach has been a pointless
            exercise in recent years because funding for loans has been
            unavailable. However, we found that during fiscal years 1992
            through 1996, $557 million in available loan funds nationwide
            was allowed to expire and was never obligated. Most of these
            funds, approximately $542 million, were available in fiscal
            years 1992 and 1993.
      --Concerning FSA's fund allocating decisions, the agency needs a
            recordkeeping system to account for its unspent direct
            operating loan funds which are redistributed to States from a
            national reserve account. FSA's current practice of ``pooling''
            and redistributing its unspent direct operating loan funds does
            not always follow the normal ``first-come, first-served''
            procedure. We also believe that socially disadvantaged
            applicant (SDA) direct operating loan funds should be
            ``pooled'' along with non-SDA funds that are sent to the
            national reserve account for redistribution. Pooling of SDA
            funds, however, will require a legislative change.
        The Secretary also asked us to determine the degree of
    participation in farm credit programs by minority farmers. We attempted
    to make direct correlations between FSA's direct loan portfolio and
    Government census data but were unable to make any meaningful
    correlations. Neither the general population census or the agricultural
    census identified the number of individuals in the business of farming.
    Further, the FSA portfolio itself may contain borrowers who are still
    indebted to FSA but are no longer farming.
        We did compare the applications received and approved from minority
    and nonminority farmers for the sites visited. We found that, during
    fiscal year 1996, the loan service centers that serviced the 33
    targeted counties received 1,416 applications for direct loans; 317, or
    22 percent, were submitted by minority applicants and 1,099, or 78
    percent, were submitted by nonminority applicants. A total of 190, or
    60 percent, of the minority applications were approved, whereas 729, or
    66 percent, of the nonminority applications were approved.
        We recommended that the Secretary seek changes to legislation which
    will allow FSA to ``pool'' SDA direct operating loan funds and allocate
    the funds to States instead of allowing them to expire. We also
    recommended that the Secretary (1) convene ad hoc teams to help address
    the backlog of civil rights complaints in the Department and (2) revoke
    the delegation of authority that granted FSA responsibility to conduct
    preliminary inquiries and return this authority to OCR.
        We also recommended that the Secretary direct FSA to provide
    greater technical assistance to farmers for the entire application
    process and throughout loan-servicing, establish effective methods of
    outreach, and develop standards and benchmarks by which to evaluate
    outreach performance.
        The Secretary has requested the Acting Assistant Secretary for
    Administration to work closely with OIG to ensure that the
    recommendations are promptly implemented.
               accounting, financial, and information management
    Financial Statement Audits
        As required by the Chief Financial Officers Act of 1990 and the
    Government Management Reform Act, we completed seven financial
    statement audits. We issued unqualified (clean) opinions on the fiscal
    year 1996 financial statements of the Federal Crop Insurance
    Corporation and the Rural Telephone Bank. Audits of the Rural
    Development mission area and FNS resulted in qualified opinions. Rural
    Development received a qualified opinion because we were unable to
    assess the reasonableness of its estimated loan subsidy costs for loans
    obligated after fiscal year 1991. FNS received a qualified opinion
    because we were unable to assess the reasonableness of its gross, non-
    Federal accounts receivable for the Food Stamp Program and the related
    account balances, and notes to the financial statements. We issued a
    disclaimer of opinion on FS, CCC, and USDA consolidated statements for
    fiscal year 1996.
        FS received a disclaimer because it was not able to produce
    auditable financial statements in a timely manner for the year. We are
    working with FS in a coordinated effort towards correcting weaknesses
    addressed by our prior audit reports. Corrective action plans have been
    developed, and significant progress has been achieved in cleaning up
    invalid accounting data. Through consulting services and monitoring
    reviews, we continue to help FS personnel implement applicable
    accounting standards and improve accountability.
        CCC received a disclaimer of opinion due to a scope limitation
    resulting from restrictions imposed on our access to necessary records.
    Our initial review of FSA's mediation program indicated a variety of
    program abuses. When we attempted to determine the scope and
    materiality of irregularities and expand our review to three additional
    State-administered programs, officials in the States denied us access
    to the mediation records needed for our assessment. FSA's management
    asserted that the records available for our review in its State offices
    were sufficient when, in fact, they were not and did not aggressively
    assist us in resolving the encumbrance. Because management within FSA
    has a significant role in CCC's internal control structure, the actions
    taken to deny our access to records needed to assess compliance with
    applicable laws and regulations caused us to question the
    representations by CCC's management.
        The USDA consolidated statements received a disclaimer of opinion
    because the Department could not provide assurance that its
    consolidated statements were presented in accordance with applicable
    accounting principles. This lack of assurance was primarily due to (1)
    FS' inability to provide the Department with complete, auditable
    financial statements and (2) the Department's inability to provide
    assurance that, as a whole, its internal control and financial
    management systems comply with requirements under the Federal Manager's
    Financial and Integrity Act.
                        information resources management
    Department Progressing with ``Year 2000'' Conversion
        The ``Year 2000'' date conversion crisis poses a significant
    challenge to all users of affected information technology. Every
    organization, whether Federal or private, must ensure that its
    information systems are fully Year 2000 compliant well before December
    31, 1999, or risk catastrophic failure of those systems. The Office of
    the Chief Information Officer (OCIO) serves as the Department's focal
    point for addressing Year 2000 issues.
        We initiated a review to assess the readiness of USDA agencies and
    service centers to achieve Year 2000 computer compliance. This review
    will encompass a determination as to whether agencies have (1)
    established an overall strategy; (2) prioritized the conversion or
    replacement of certain systems and/or hardware, including system
    interfaces; (3) a strategy to convert, replace, or eliminate certain
    hardware and software, including operating systems software and
    application software; (4) a strategy to test, verify, and validate
    converted or replaced systems; (5) devoted sufficient resources to
    accomplish the plan and prioritized critical systems and activities;
    and (6) a contingency plan for critical systems and activities.
        Generally, we have found the agencies we have examined thus far
    have initiated actions to address their individual Year 2000 conversion
    projects. We have, however, found areas for improvement at four USDA
    agencies visited and have reported those matters to them. For example,
    USDA agencies, under a departmentwide contract, purchased a large
    number of personal computers which were found to be Year 2000
    incompatible. The particular vendor sold various types and
    configurations of computers, totaling approximately $31.6 million, to
    10 USDA agencies. These findings and others have been provided to the
    affected agencies in interim reports, and the agencies have responded
    to our recommendations. Our audit of the Year 2000 issue continues, and
    we will issue a report early in 1998.
        On a personal note, I am pleased to report that OIG is Year 2000
    compliant.
                                   conclusion
        This concludes my statement, Mr. Chairman. As you can see, the work
    of OIG is far-reaching and expansive. I appreciate the opportunity to
    appear today and present this information, and I hope that my comments
    have been helpful to you and the Committee. I will be pleased to
    respond to any questions you may have at this time.

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

                                  ----------

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.

                           NONDEPARTMENTAL WITNESSES

        The following testimonies were received by the Subcommittee
    on Agriculture, Rural Development, and Related Agencies for
    inclusion in the record. The submitted materials relate to the
    fiscal year 1999 budget request for programs within the
    subcommittee's jurisdiction.
                   Prepared Statement of the Ad Hoc Coalition
        Mr. Chairman, Members of the Subcommittee, this statement is
    respectfully submitted for the hearing record on behalf of the ad hoc
    coalition \1\ supporting fiscal year 1999 appropriations of not less
    than $244.5 million for title I of Public Law 480, the same level as
    provided in the current fiscal year.
    ---------------------------------------------------------------------------
        \1\ The ad hoc coalition is composed of the USA Rice Federation,
    the National Association of Wheat Growers, the National Council of
    Farmer Cooperatives, the American Soybean Association, the American
    Maritime Congress, the Maritime Institute for Research and Industrial
    Development, the Transportation Institute, Gulfcoast Transit Company,
    and Liberty Maritime Corporation.
    ---------------------------------------------------------------------------
        The ad hoc coalition also strongly supports the administration's
    request that $109 million of CCC funds be used to support Food for
    Progress in fiscal year 1999, and that the program level for Public Law
    480, title III, be maintained at $30 million for the fiscal year. The
    coalition also supports full funding for title II at the level
    requested by the Administration. Using carryover funds, title I
    programs can be increased by maintaining appropriations of budget
    authority at fiscal year 1998 levels.
        In its fiscal year 1999 budget, the Administration without
    explanation recommends a title I program level of only $112 million, a
    drastic decline to less than one-half of that established for the
    current fiscal year. While acknowledging the importance of title I in
    promoting long-term markets for U.S. agriculture, the Administration
    fails to recommend the resources required to do the job. At a time when
    U.S. agricultural exports are declining, the Department should increase
    its efforts, with strong Congressional support, to alleviate hardships
    in friendly countries and promote new markets for our farmers.
                    long-term significance of public law 480
        Mr. Chairman, the title I program has an illustrious history. From
    enactment in 1954 until the mid-1960's, title I shipments accounted for
    about 20 percent of the annual value of all agricultural exports. Until
    foreign sales dramatically increased in the 1970's, title I shipments
    continued to represent more than five percent of all agricultural
    exports. As recently as fiscal year 1990, moreover, title I export
    values regularly exceeded $700 million. Only in recent years has the
    U.S. commitment to this program eroded substantially, to a low of $202
    million in title I credit sales in fiscal year 1997.
        Under the leadership of the Agriculture Appropriations
    Subcommittees of the Congress, funding for title I was modestly
    increased in fiscal year 1998, and the Administration's estimated
    program level for this fiscal year currently stands at $245 million.
    This funding will permit the shipment in fiscal year 1998 of 1.2
    million metric tons of grain equivalent, up from a low of 900,000
    metric tons in fiscal year 1997.
        Mr. Chairman, the export subsidy reduction commitments established
    in conjunction with the Uruguay Round Agreement on Agriculture severely
    restrict U.S. flexibility in agriculture export market development.
    Those commitments curtail the use of the Export Enhancement Program and
    similar strategies that might be implemented in the future. But Food
    for Peace is exempt from the Uruguay Round restrictions: Public Law 480
    remains one of the principal programs for penetrating new overseas
    markets, for establishing trading relationships that will surely become
    essential to the economic survival of our agricultural sector.
        In the two decades following World War II, Food for Peace was
    instrumental in securing long-term, stable markets for American food
    and fiber. In fiscal year 1996, U.S. agricultural exports reached a
    record value of $59.8 billion, representing more than 25 percent of
    total farm cash receipts for crops and livestock. In that year, the
    U.S. share of the global agricultural export market reached 23 percent,
    an increase of more than one-third in a single decade. But the record
    level achieved in fiscal year 1996 was no more than a snapshot of
    conditions at a given moment in time. The current picture is troubling:
    pessimistic forecasts for agricultural trade in fiscal year 1998
    require enhanced effort, a renewed dedication to the principles of
    market development.
              fiscal year 1998 outlook for u.s. agricultural trade
        Mr. Chairman, the Foreign Agricultural Service on February 27,
    1998, reported that fiscal year 1998 agricultural exports are forecast
    to decline by $1.3 billion from fiscal year 1997 levels, and that
    exports will fall $3.8 billion below the record established in fiscal
    year 1996. The reasons for the falloff in U.S. foreign sales are
    increased competition in corn markets, weaker prices for grains and
    soybeans, and reduced Asian demand due to the current financial crisis.
        Agricultural export volume is forecast to reach 149.2 million
    metric tons in fiscal 1998, up 1.9 million tons from 1997 but about 20
    million tons below the record established in 1995. In terms of bulk
    commodity sales, the value of U.S. exports in fiscal year 1998 is
    expected to fall $1.6 billion to $22.5 billion, largely due to lower
    prices and export volumes for corn, and lower wheat and soybean prices.
    According to FAS, increased export competition from China and Eastern
    Europe is reducing U.S. corn sales, while South American competition is
    being felt in the world soybean market.
        In the former Soviet Union and other emerging market economies,
    important new opportunities for sales of U.S. agricultural commodities
    will emerge in coming years: The United States must compete
    aggressively for these markets. For the duration of the current
    economic crisis in East Asia, America must maintain export volumes and
    market share.
        The Foreign Agricultural Service of the U.S. Department of
    Agriculture, in administering Food for Peace, will be instrumental in
    protecting existing markets and developing potential new markets.
    Through sustained title I funding, Congress must give the Department
    the tools it needs to do the job.
                usda should be directed to use title i resources
        Mr. Chairman, the ad hoc coalition strongly recommends a fiscal
    year 1999 appropriation for title I of Public Law 480 of not less than
    $244.5 million, the level provided in fiscal year 1998. Using carryover
    funding from prior fiscal years, increased program levels can be
    achieved without diverting resources from other worthwhile programs of
    the Department.
        On February 26, 1998, the Foreign Agriculture Service announced its
    revised Second Quarter country allocations for title I funded programs
    in the amount of $227.8 million. This is substantially below the
    Department's established program level of $245 million for the current
    fiscal year. The newly independent states of the former Soviet Union,
    together with a number of Eastern European countries, are prime
    candidates for increased concessional credit sales under title I of
    Public Law 480. The Department of Agriculture should be encouraged to
    promote this program throughout the world, both for humanitarian
    reasons today and for the development of foreign markets in future
    years.
        Mr. Chairman, the ad hoc coalition respectfully requests report
    language accompanying the fiscal year 1999 funding bills which would
    direct the Department of Agriculture to increase title I country
    allocations and make full use of the resources available for this
    worthwhile program. Working closely with the representatives of
    recipient countries, we are confident that USDA can restore title I
    program levels to those most recently achieved in fiscal 1996.
                                   conclusion
        Mr. Chairman, the administration has long acknowledged the
    importance of title I of Food for Peace as a program to promote long-
    term markets for U.S. commodities, and to alleviate hardship in
    friendly countries. But the administration suggests a title I program
    level for fiscal year 1999 of only $112 million, a drastic decline to
    less than half that established for the current fiscal year.
        With enactment of the 1996 farm bill, Government price supports and
    producer payments are being phased down. As a result, agricultural
    producers have become increasingly dependent on export markets to
    sustain a healthy economy. The title I, Public Law 480 program, coupled
    with the other export programs, have become of even greater
    significance than ever before in meeting this objective, sustaining the
    many allied industries dependent upon a healthy agricultural economy,
    as well as providing valuable humanitarian assistance to developing
    countries.
        The members of the ad hoc coalition respectfully request an
    appropriation of not less than $244.5 million for the title I program
    and committee report language directing the Department of Agriculture
    to establish a program level for the title I program that makes full
    use of this appropriation and the carryover funds. The need is there.
    We also request that the Agriculture Appropriations Subcommittees of
    Congress closely monitor the performance of the Department in
    fulfilling this objective over the course of the fiscal year.
        Our farmers and the U.S. maritime transport system depend upon
    Congress to set the standard, and upon the Department to meet that
    standard, as we enter an era of uncertainty and volatility in trading
    relationships. The title I program of Food for Peace must be preserved
    and effectively employed to promote American interests in an
    environment of uncertain markets and increasing global competition.
                                     ______

       Prepared Statement of the American Association of Retired Persons
        The American Association of Retired Persons appreciates this
    opportunity to comment on appropriations next year for various programs
    which benefit the low income elderly in rural America. Initiatives such
    as Section 515 Rural Housing Loans and Section 504 Very Low Income Home
    Repair Grants and Loans make a real difference in the quality of life
    for many elderly Americans.
        AARP's recommendations may be summarized as follows:
      --Provide at least current funding for Section 504 Very Low Income
            Home Repair Grants and Loans;
      --Maintain Section 515 Rural Housing Loans at current level;
      --Provide the Administration's recommended increase for Section 521
            Rental Assistance; and
      --Provide sufficient resources for Food Stamp outreach activities.
                        poverty among rural older people
        Some of the nation's most persistent economic, housing, and health
    problems are concentrated in rural areas among older people. In 1996,
    older people living in nonmetropolitan areas had a poverty rate over 13
    percent, compared with approximately 9 percent for those living in
    other areas. Poverty increases with age, rising to a rate of more than
    25 percent for rural Americans who are 85 and above.
        Economic problems are particularly severe among older minorities
    and among rural women living alone. When these factors are combined,
    poverty is nearly universal. According to the 1995 American Housing
    Survey, 36 percent of all nonmetropolitan households consisted of older
    women living alone. Especially hard hit are older minorities living in
    areas where poverty is highly concentrated. Among rural Americans age
    65 and older, the poverty rate in 1996 was 34 percent for Hispanics and
    nearly 40 percent for those of African descent. Poverty rates are
    higher among elderly households in the southern U.S.--23 percent--
    compared with approximately 17 percent in other parts of the country.
        The Association urges special attention to the plight of older
    migrant and seasonal farmworkers. Working and living conditions, which
    are generally bad for farmworkers of all ages, are abysmal for older
    workers. Earnings for those over age 65 continue to be far below the
    poverty threshold, and many receive no Social Security or other
    benefits. Not surprisingly, farmworkers often experience problems
    characteristic of the elderly before reaching their fiftieth birthday.
    Disability levels are disproportionately high. Unfortunately, access to
    needed services has often been blocked by prejudice, language barriers,
    and a lack of outreach activities.
                                 rural housing
        One result of high rates of rural impoverishment is a striking
    concentration of housing problems among rural older people. Data from
    the 1995 American Housing Survey indicate that 39 percent of older
    households living in moderately or severely inadequate housing reside
    in rural areas, though only 28 percent of all older households live in
    rural areas. To address the needs of these older households and other
    vulnerable populations, it is critical that federal housing programs
    targeted to rural America be continued and strengthened.
        For Section 515 Rural Housing Loans, AARP urges at least a freeze
    next year at the existing $150 million loan level. We also support the
    Administration's recommended increase in Section 515's companion
    program: Section 521 Rental Assistance (from $541.3 million to $583.3
    million). Loans made under the Section 515 program have decreased
    substantially over the past few years--down from more than $500 million
    in fiscal year 1994 to the current $150 million. Demand for both new
    construction and rehabilitation far exceeds available resources.
        The Administration's recommended $50 million cut next year for
    Section 515 would push funding to the bare minimum required to continue
    a national program. Trade-offs will be necessary between badly needed
    new construction and rehabilitation loans to maintain current stock.
    Section 515 is the only federal program to target funds directly to
    rural areas for rental housing production. Half of these loans have
    historically gone to provide housing for the elderly poor and disabled
    tenants of all ages. More than half of older renters living in rural
    areas spend at least 30 percent of their income on housing. Given the
    extreme poverty which exists in many rural areas, the availability of
    such housing is vital for many families.
        AARP recommends that more emphasis be placed on the development of
    congregate facilities and on the retrofitting of existing Section 515
    projects. Because of the scarcity of social services in many rural
    communities, congregate housing projects which provide nonmedical
    assistance such as meals, housekeeping and transportation can be
    especially crucial to the independence of frail older residents.
        AARP further recommends that greater attention be given to
    initiatives which provide affordable housing to remote rural areas and
    areas with large concentrations of underserved populations such as
    older and disabled farmworkers. We also support funding for the program
    for migrant workers and rural homeless people. Migrant workers tend to
    be older than other farmworkers and are more likely to be minorities
    with extremely low incomes. Farmworker housing very often has no heat
    or running water, creating barely tolerable living conditions for most
    families and a health-threatening situation for older persons.
        The Association appreciates the Subcommittee's continued support of
    the Section 504 Very Low Income Home Repair Program. Funds are used to
    remove safety and health hazards for the elderly poor or to install
    basic necessities such as indoor plumbing. We support the $25 million
    assumed in the Administration's budget for Section 504 grants,
    contingent upon congressional approval of the funding request for Rural
    Housing Assistance. We recommend that Section 504's loan component be
    maintained at the existing $30 million. The Administration recommends a
    $5 million reduction. The Very Low Income Home Repair Program makes a
    tangible difference in the quality of life for elderly Americans. Cuts
    made here really do hurt those most in need.
                         food stamp outreach activities
        Many older people in rural areas also suffer from nutrition-related
    health problems because they are economically unable to maintain a good
    diet. All too often, these individuals are forced to limit food
    purchases in order to manage the increasing costs of other necessities
    such as medical care, housing, and energy.
        Food Stamp benefits can be a lifeline for such families but
    participation rates remain low due to a lack of information about the
    program or distance from Food Stamp offices. The social and physical
    isolation of rural older people makes outreach activities difficult but
    all the more critical. We urge the Subcommittee to provide sufficient
    resources for outreach activities next year.
        Thank you again for the opportunity to present our views on rural
    housing and food stamps. We look forward to working with the
    Subcommittee to improve the lives of rural Americans of all ages.
                                     ______

           Prepared Statement of the American Farm Bureau Federation
                            farm bill implementation
    Farm Bureau supports continuation of the principles of the Federal
            Agriculture Improvement and Reform Act (FAIR).
        Full implementation of the FAIR Act should not be compromised. As
    you know, the FAIR Act set agriculture on a seven-year course that
    reduces income supports by establishing a hard cap on total spending
    regardless of prices or the volume of production. Agriculture's support
    for the FAIR Act was based upon the promise and assurance given that it
    was a seven-year contract between the federal government and
    agricultural producers. Accordingly, any change in current policies and
    programs would represent a violation of that agreement.
        Farm Bureau believes in free and open movement of markets and
    prices. We oppose the Administration's program to extend non-recourse
    crop loans for an additional six months. While an extension would be
    budget neutral when market prices are well above loan rates, the
    potential for high costs exists if producers store their crops under
    loan for an extended period of time causing burdensome supplies to
    depress market prices.
        We support the Commission on 21st Century Production Agriculture
    and urge sufficient funding to ensure that the Commission will be able
    to conduct a thorough evaluation of the effectiveness of the FAIR Act
    and potential agricultural policy alternatives. In just four years,
    Congress will again need to address agricultural policy and the
    recommendation of the Commission will be important to that activity.
                                risk management
    Farm Bureau places a high priority on the development of risk
            management tools to supplement or provide an alternative to
            traditional crop insurance.
        The expansion of risk management programs is of importance to
    farmers and ranchers. Farm and ranch income is increasingly at risk due
    to the phase-out of traditional price and income support programs. New
    and innovative tools to manage risk are needed by farmers everywhere.
        We support the continued expansion of new risk management tools
    that may be offered by private companies and reinsured by the federal
    government. To the extent that those programs are actuarially sound, we
    believe they should be expanded to cover as many crops as is feasible.
                             conservation programs
    Farm Bureau places a high priority on funding for voluntary incentive-
            based conservation programs.
        Conservation funding is an integral component of the nation's
    overriding food and natural resource policy. Farmers and ranchers
    respond to positive incentives that enable them to: improve soil, water
    and air quality; reduce erosion; provide additional wildlife habitat;
    and increase green space. Because conservation projects can be very
    costly to implement, priority should be given to initiatives that
    provide education, technical assistance, training and financial
    assistance to accomplish the nation's farm and resource policy
    objectives.
        We oppose all user fees for conservation programs. Conservation
    programs are often costly to implement and benefit everyone, not just
    farmers and ranchers. Public policy should encourage farmers and
    ranchers to increase conservation efforts, not place additional
    impediments to their efforts.
        We are concerned that while the Administration has proposed
    increasing the National Resource Conservation Service (NRCS) budget,
    the net effect may be a decrease in NRCS staff that work directly with
    farmers and ranchers because the Administration budget does not provide
    funding for increased NRCS workload and administrative costs. Congress
    should appropriate funds so that programs which benefit farmers and
    ranchers and the environment are maintained and expanded.
        The Environmental Quality Incentive Program (EQIP) is an important
    program that strives to improve water quality. The program should be
    available to all producers, regardless of size of operation. We support
    increased funding for EQIP, but it should not come at the expense of
    other agricultural programs or through user fees, including user fees
    for NRCS technical assistance.
        Farm Bureau continues to be a strong supporter of the Conservation
    Reserve Program (CRP). We are concerned that increased emphasis on the
    Conservation Reserve Enhancement Program will detract from the
    traditional CRP program and its goals. The focus of the program should
    not be broadened to the point that it loses its effectiveness in
    meeting soil conservation and water quality goals.
        We support continued funding for the Forestry Incentive Program
    (FIP) at $6 million. Private forestry is an important part of American
    agriculture and makes a strong economic contribution to the nation's
    economy. FIP has played an important role in reforestation efforts and
    is strongly supported by the agricultural community and maintains
    strong congressional support.
        Farm Bureau continues to support the goals of the Grazing Lands
    Conservation Initiative. The program allows farmers and ranchers to
    accomplish further conservation and environmental gains without
    compromising net farm income by providing technical assistance.
                           food safety and inspection
    Farm Bureau supports the modernization of food safety and inspection
            programs.
        No group is more concerned about food safety than farmers and
    ranchers. USDA programs that keep food safe as it moves from farm to
    market and those that monitor the safety of consumer ready products are
    very important.
        Meat and poultry inspection is a public health function mandated by
    public law which should be paid from the general fund. We oppose user
    fees to finance federally-mandated meat and poultry inspection. In
    general, user fees are not passed onto the consumer, but rather are
    passed downward to producers in the form of lower prices paid for
    livestock. If the fees are passed onto consumers, they would be a food
    safety tax.
        Farm Bureau supports adequate funding to implement Hazard Analysis
    Critical Control Point (HAACP) meat and poultry inspection reforms. We
    are concerned about the impact on smaller processors and ask that an
    unreasonable burden not be placed on these plants.
        Farm Bureau supports USDA funding for the Pesticide Data Program
    (PDP). PDP provides valuable pesticide residue information to the
    Environmental Protection Agency so that chemical registration decisions
    can be made on actual pesticide residues rather than on presumed
    maximum possible residue levels. This program should remain within USDA
    because it has the scientific expertise and working agreements with
    state agencies to effectively administer this program.
        Improper implementation of the Food Quality Protection Act may
    force the unnecessary and unwarranted cancellation of essential crop
    protection products. The USDA Office of Pesticide programs should
    provide advocacy for farmers' continued access to safe and effective
    crop protection products, and must be adequately funded to perform this
    important task.
        Key functions of the office must include assisting EPA in
    establishing accurate data for risk assessments where current data is
    inaccurate or incomplete. USDA must be a full partner with EPA in all
    key implementation policy decisions. To reduce disruption of U.S.
    agricultural producers, USDA should conduct an economic impact analysis
    of proposed EPA implementation strategies, including EPA's proposals
    relating to risk assessments for organophosphate and carbamate.
        Also important is funding for USDA to update its database on human
    food consumption patterns. The Food Quality Protection Act requires EPA
    to evaluate the total risk associated with pesticide use. To do this,
    accurate information on human diets is needed. Funding to keep this
    information current should be a priority.
        The Food Animal Residue Avoidance Database (FARAD) has been an
    invaluable tool for veterinarians and producers in assuring the proper
    use of animal health products. It is an important cog in our overall
    food safety assurance effort. Funding is needed to allow it to continue
    to operate.
                             agricultural research
    Farm Bureau places a high priority on funding for research which is
            focused on food and production agriculture.
        Agricultural research, education and extension activities should be
    focused on improving the performance of the food and agriculture
    sector. The benefits of this research will accrue not just to
    agricultural producers, but also to the general public. The food and
    fiber needs of a growing world population can be met only if there is a
    sharp focus on securing answers to questions challenging production
    agriculture.
        Innovative research depends upon the availability of modern
    facilities. Many of the major Agricultural Research Service facilities
    were constructed prior to 1960 and are now functionally obsolete and in
    of need major modernization to bring them up to current health and
    safety code requirements. A total of $35.9 million is needed in fiscal
    year 1999 to update and modernize numerous facilities nationwide.
        Increased funding for the National Research Initiative Competitive
    Grants Program and the Food Genome initiative are important.
        Farm Bureau supports allowing the Agriculture Research Service to
    regain ownership of the National Swine Research Center. This center
    will conduct essential research to resolve the odor and water quality
    issues facing the pork industry and will integrate production issues
    with nutrient management.
        Increased funding for the National Research Initiative Competitive
    Grants Program and the Food Genome initiative are important.
                        international market development
    Farm Bureau supports programs to maintain and expand foreign markets
            for agricultural products.
        Farm Bureau places a high priority on export promotion programs,
    especially given the current Asian economic crisis. Foreign sales
    continue to provide a market for 30 percent of U.S. agricultural
    production. Passage of the 1996 farm bill has increased the
    significance of overseas markets to farm and ranch profitability as
    farmers and ranchers become more dependent on exports to expand their
    incomes.
        The Market Access Program (MAP) supports the development,
    maintenance and expansion of commercial agricultural export markets by
    partially reimbursing participating organizations for the costs of
    carrying out foreign market development activities in designated
    countries. This program is more important than ever because the FAIR
    Act phase out of commodity programs increases the importance of export
    markets and because new markets must be found to make up for export
    markets lost due to the Asian financial crisis.
        Maximum funding for the Market Access Program (MAP), the Foreign
    Market Development Program, the Export Enhancement Program (EEP) and
    Dairy Export Incentive Program (DEIP) are critical to maintaining and
    expanding foreign export markets. Funding provided for EEP and DEIP
    should be $320 million and $82 million, the maximum allowed. Stable
    funding for MAP, at $90 million, will allow that program to continue to
    expand markets.
        Farm Bureau also supports stable funding for Public Law 480
    programs which finances sales of agricultural commodities to developing
    countries for dollars on credit terms or for local currencies. The
    needed appropriation for Public Law 480 grants I and II is estimated at
    $949 million for fiscal year 1999.
        The Overseas Private Investment Corporation (OPIC) should be funded
    at no less than last year's levels to guarantee access and investment
    in developing counties and territories. Because OPIC targets emerging
    markets for American products, the program provides access to markets
    with the greatest potential for growth.
        We support the flexibility to maximize the use of available
    resources by allowing funds not utilized for direct export subsidies to
    be made available for other GATT-allowed or ``Green Box'' programs
    (including market development, research and promotion).
        Last year's appropriations bill prohibited the use of MAP funds for
    promotion of mink in international markets. We believe that no
    agricultural commodity should be discriminated against in allocation of
    MAP funding. The only criteria should be the potential to increase
    sales of agricultural products and the availability of funds.
                            animal and plant health
    Farm Bureau places a priority on programs that protect plant and animal
            health.
        The Animal and Plant Health Inspection Service (APHIS) must be
    adequately funded to meet the high demands of protecting the nation's
    agriculture industry and its role in maintaining consumer confidence in
    the safety of the U.S. food supply.
        APHIS must have state-of-the-art diagnostic and processing
    procedures to ensure plant and animal health and to guarantee the
    safety of agricultural imports and exports. Funding for diagnostic
    tests, vaccine development, disease surveillance and emergency
    preparedness must be increased as we increase international trade.
    Important to this effort is funding for such programs as Animal Health
    Monitoring and Surveillance.
        Farm Bureau continues to support eradication of the boll weevil and
    requests full funding to provide a 30 percent match with producer
    funding. USDA should continue to work with the Boll Weevil Eradication
    Program to collect funds from farmers, certify cotton acreage, assist
    in conducting referendums and make maps available. We also ask for
    increased availability of low interest revolving loan funds to
    facilitate expansion of the program.
        The President's operating budget for APHIS Wildlife Services is
    $26.1 million, a reduction of $2.5 million from fiscal year 1998. These
    cuts would reduce levels of animal damage control funding in 28 states.
    We recommend funding at the fiscal year 1998 level of $28.6 million.
        The President's budget for Wildlife Services Methods Development
    (Research) is $9.7 million, a reduction of $855,000 from fiscal year
    1998. If this level of funding were adopted, one of the casualties
    would be the National Trap Testing Program which tests trap types to
    determine the most humane design while maintaining efficiency. Funding
    should remain at the level of fiscal year 1998 of $10.2 million.
        Congress authorized the construction of a $37.7 million Wildlife
    Services Wildlife Research Center in Fort Collins, Colorado. A
    appropriation of $20.5 million should be provided to complete this
    project.
        The present Wildlife Services Management Information Reporting
    System is outdated, uses obsolete hardware and is limited in the amount
    of data it collects. Funding of $700,000 should be provided to for
    implementation of a new system.
        With the expansion of wolf numbers and areas where they are
    dispersing, the Wildlife Services wolf management budget should provide
    $275,000 in new funding for the increased workload.
        The Berryman Institute for Wildlife Damage Management at Utah State
    University is the nation's premier academic institution in this field.
    The institute needs to improve its capabilities in social science
    research, expand continuing education programs and begin publishing a
    quality journal on wildlife damage management. We recommend an increase
    in Wildlife Service funding of $236,000 for the Berryman Institute.
        The President's budget would require states and other cooperators
    to pay at least 50 percent of the Wildlife Services program costs in
    each state. Animal damage problems don't lend themselves to a ``one-
    size-fits-all'' approach and instead should include flexibility for
    cost-sharing mechanisms.
                              agricultural credit
    Providing farmers and ranchers with a variety of credit at the lowest
            possible interest rates is important to Farm Bureau.
        For the past 10 years, Farm Bureau has supported the shift away
    from direct USDA operating and farm ownership loans to loans provided
    by private lenders and guaranteed by USDA. This is consistent with
    making maximum use of limited USDA funds and ensuring that the loans
    will be creditworthy over the long term. We oppose the Administration
    proposal to increase funding for direct operating and farm ownership
    loans.
                              usda administration
    Farm Bureau believes that USDA should monitor domestic and
            international agriculture affairs and provide an accurate
            source of agricultural data.
        We support funding for Packers and Stockyards Administration
    programs. Expenditures to enable electronic submission of industry
    data, to increase poultry compliance activities, to monitor and analyze
    packer market competition and implications of structural change and
    behavioral practices in the meat packing industry are important.
        The Administration's budget includes $500,000 for the first-ever
    census for the aquaculture industry. It would survey all farms that
    report in the 1997 agricultural census at least $1,000 of aquaculture
    sales. Aquaculture is a billion-dollar industry, but information on the
    industry is very incomplete and a census would be of great value.
                                     ______

     Prepared Statement of Ruth Goldstein, Federal Policy Program Manager,
                              American Farm Trust
        Dear Mr. Chairman: I write regarding the fiscal year 1999
    appropriations for USDA natural resource conservation and research
    programs under NRCS, CSREES, and ARS. I'd like to request that this
    letter be made a part of the record.
        American Farmland Trust is a 30,000 member, private, non-profit
    organization founded in 1980 to protect our nation's farmland. AFT
    works to stop the loss of productive farmland and to promote farming
    practices that lead to a healthy environment.
        Land protection and natural resource conservation must go hand in
    hand. USDA must be able to protect our nation's farmland through the
    Farmland Protection Program; ensure a vital natural resource base
    through conservation technical assistance and voluntary programs such
    as WRP, CRP, WHIP and EQIP; and identify ways to produce safer,
    healthier food and maintain America's working landscapes through the
    Sustainable Agriculture Research and Education programs. USDA
    conservation and research programs have the potential to work together
    to address the long-term sustainability of our natural resource base
    and the availability of this base for agricultural production.
                     natural resources conservation service
        Farmland Protection Program.--We strongly support funding of the
    Farmland Protection Program at $50 million per year through fiscal year
    2002. Every minute of every day America loses two acres of farmland to
    sprawling development. This is the land that produces three-quarters of
    our fruits and vegetables and more than half our dairy.
        States have taken the lead in addressing this national problem
    through voluntary purchase of development rights (PDR) programs, which
    are so popular with landowners that there is typically a six-year
    waiting list. Eighteen states and dozens of local governments have
    spent $900 million to protect more than a six hundred thousand acres of
    important farmland.
        The FAIR Act directed USDA to implement a new $35 million Farmland
    Protection Program to support these state and local farmland protection
    efforts. The FPP has thus far helped protect nearly 82,000 acres of
    farmland on more than 230 farms. Moreover, it has generated a
    substantial amount of new farmland protection activity at the state and
    local level.
        The last of the $35 million will be disbursed by the end of fiscal
    year 1998. We urge the subcommittee to request $50 million for fiscal
    year 1999 to continue the Farmland Protection Program and continue its
    success.
        America's Private Land Conservation (Conservation Technical
    Assistance).--The America's Private Land Conservation account (formerly
    Conservation Technical Assistance) allows NRCS to provide basic
    technical conservation services to private agricultural landowners
    across the country. NRCS employees work with producers to create farm-
    wide conservation plans; design and build grassed waterways, sediment
    retention ponds, and stream-side buffers; collects and analyze soil
    quality data for nutrient management and erosion control; and design
    and establish wildlife habitat or manure management systems. NRCS works
    with communities and conservation districts to share information about
    conservation opportunities and technologies. These services are
    critical both to all producers regardless of whether they participate
    in cost-share programs like EQIP, WHIP, CFO, WRP and FPP.
        The Administration's fiscal year 1999 request for the APLC account
    will limit the availability of general technical assistance services.
    Limitations on EQIP's technical assistance funds means the agency will
    have to supplement EQIP funding with $27 million from the America's
    Private Land Conservation account. (Technical assistance funding under
    EQIP is limited to 10 percent of the total instead of over 19 percent
    needed by NRCS to effectively carry out the program.) In addition, over
    $43 million of the APLC account is earmarked for specific activities.
    This reduces the availability of funds for general technical assistance
    activities discussed above.
        We support funding for the APLC at $616.110 million (an increase of
    $27 million over the Administration's fiscal year 1999 request of
    $589.110) to meet the conservation needs of producers across the
    country.
        Conservation Farm Option.--The Conservation Farm Option provides a
    voluntary approach to implementing full-farm conservation. Six regional
    pilot programs, authorized by section 335 of the 1996 FAIR Act, will be
    conducted for the purpose of soil and water conservation; water quality
    protection or improvement; wetland restoration, protection and
    creation; wildlife habitat development or protection, or other similar
    conservation purposes. CFO provides an opportunity to achieve multiple,
    targeted conservation benefits on farmland. AFT supports the
    Administration's fiscal year 1999 request of $25 million for the
    Conservation Farm Option.
        Wetlands Reserve Program.--The Wetlands Reserve Program, authorized
    by the 1990 FACT Act, is an example of the kind of incentive driven
    approach to wetlands protection and restoration that should be a
    centerpiece of national agricultural policy. AFT supports the
    Administration's $127.741 million request for fiscal year 1999.
        Environmental Quality Incentives Program.--EQIP provides technical
    and financial assistance to landowners for changes in cropping and
    grazing systems, and manure, nutrient and pest management. Land
    management practices such as installing riparian buffer strips, are
    eligible for assistance. AFT supports the Administration's fiscal year
    1999 request for $300 million to help farmers voluntarily address water
    quality, soil erosion, and wildlife habitat needs.
        Wildlife Habitat Incentives Program.--WHIP is a positive step
    towards helping landowners continue to sustain healthy wildlife
    populations on private agricultural land. We support the
    Administration's request for $20 million for the WHIP program.
                          agriculture research service
        Healthy, well-managed grazing lands can be instrumental in
    maintaining healthy watersheds across the country. ARS soil, water,
    plant and animal sciences strengthens our understanding of how grazing
    systems impact water quality and provides tools for reducing impacts on
    watersheds. We support the Administration fiscal year 1999 budget
    request for a $7.5 million increase for Environmental Quality and
    Natural Resources research.
          cooperative state research, education and extension service
        Sustainable Agriculture, Research and Education.--Sustainable
    Agriculture, Research and Education (SARE) funds high quality, farmer
    involved research and education on economic, agronomic, and
    environmental aspects of sustainable agriculture farming systems.
    Professional Development Grants (Chapter 3) fund outreach and education
    workshops for natural resource professionals, soil and water
    conservation districts, RC&D's, NRCS, and extension personnel on
    community development, whole farm planning, and farmland protection. We
    support the Administration's fiscal year 1999 request for $10 million
    for SARE and $3.3 million for SARE Chapter 3 Professional Development
    Grants.
        Renewable Resources Extension Act.--American Farmland Trust is
    pleased to see the Administration has requested renewed funding for the
    Renewable Resources Extension Act program (RREA), and we applaud the
    action of this subcommittee in restoring that program in spite of the
    Administration's request to eliminate it last year. American Farmland
    Trust supports this program which helps to train natural resource
    professionals regarding the impacts of increasing suburbanization on
    ranch and forestlands. We support the Administration's fiscal year 1999
    request for $3.4 million dollars for the RREA program.
        Thank you for the opportunity to share the views of American
    Farmland Trust.
                                     ______

     Prepared Statement of Kim M. Wardensky, American Federation of State,
        County, and Municipal Employees and Steven M. Hollis, American
                       Federation of Government Employees
     i. some of president's budget requests should be supported, as follows
        We urge Members of Congress to support, or increase, the following
    items in the President's fiscal year 1999 Budget:
    Farm Operating Loans, Direct, $500 Million Program Level
        This increased funding level for the direct operating loan program
    was recommended by the Civil Rights Action Team and the Small Farms
    Commission. It is projected to support operating loans to approximately
    11,580 farmers, with at least 12 percent targeted to socially
    disadvantaged farmers. The share of direct loans made at the reduced
    interest rate for limited resource borrowers would be continued at
    current levels, approximately 40 percent.
    Farm Ownership Loans, Direct, $85 Million Program Level
        This increase was also recommended by the Civil Rights Action Team
    and Small Farms Commission. It is projected to support about 1,000
    small farmers to either acquire their own farm or to save an existing
    one--nearly 500 more than in 1998. Roughly 60 percent of these loans
    are provided to limited resource borrowers, with at least 18 percent
    targeted to socially disadvantaged farmers.
    Rural Housing Loans, Single-Family, Direct, $1 Billion Program Level
        The single family housing direct loan program provides subsidized
    loans for the purchase of modest housing in rural areas. Nationally,
    the average income of a direct loan borrower is about $17,000, which is
    about 55 percent of area median income.
    Water and Waste Disposal Loans, $839 Million Program Level
    Water and Waste Disposal Grants, $500 Million Program Level
        Continuation of the program at these levels is consistent with the
    President's Water 2000 Initiative which was designed to help ensure
    that all rural households have access to clean running water by the
    year 2000.
    Farm Labor Housing Loans, $32 Million Program Level
    Farm Labor Housing Grants, $13 Million Program Level
        These increases were also recommended by the Civil Rights Action
    Team. They would provide for the construction of 658 new units and
    rehabilitation of 199 existing units of housing for farm workers.
    Rural Development Salaries and Expenses, $527 Million Program Level
        This increase of $18 million over the fiscal year 1998 levels is
    absolutely imperative. Unless Congress supports this request from the
    President's Budget proposal, there will be RIF's in Rural Development
    within the next few months. Congress must support the increase in
    Salaries & Expenses for Rural Development for the following reasons:
        (a) The ill-housed rural poor, and the small rural community
    infrastructure needs, must not be expected to continue to bear a
    disproportionate share of the sacrifice necessary to achieve a balanced
    budget. These programs are crucial to rural America and provide an
    invaluable service to minorities and socially disadvantaged citizens.
        (b) The President's budget proposal would reduce overall USDA staff
    by 14.3 percent during the period from 1993 through 2002, but proposes
    to reduce the Rural Housing staff by 33 percent over this same period.
    It will be impossible for Rural Development to perform its mission if
    these additional disproportionate cuts are allowed to stand.
    Section 2501 Socially Disadvantaged Farmers Outreach Program, $1
            Million
        The Outreach and Technical Assistance program is the most effective
    tool developed to carry out the mission of USDA as the technical
    provider for small farmers. For a very small investment, the program
    has significant multiplier effects in the small and poor communities
    where there exist few other possibilities for sustainable economic
    development. It also serves as a small token of relief for the many
    deficiencies in the service provided to these farmers by the Department
      ii. one of president's budget requests must be increased, as follows
        We urge Members of Congress to increase the funding for the Section
    515 Rural Rental and Cooperative Housing program by at least $50
    million over the President's Fiscal Year 1999 Budget request, to at
    least maintain the Program Level at the 1998 level of $150 million.
        The President's proposal to reduce funding below the 1998 level of
    $150 million would end this program as a national program. We would not
    be able to fund even one project in each State. Rural Development area
    offices have a backlog of applications on hand that need funding.
    Multi-Family Housing helps senior citizens and others on fixed low
    incomes with many medical expenses.
        We urge the Committee to direct USDA to place a priority, in the
    use of these limited funds, on rehabilitation of existing units rather
    than new construction. Unless this is done, the Rural Housing Service
    will become known as the nation's largest slum landlord.
    iii. some of president's budget requests should be decreased to offset
      the increase needed in the section 515 rural rental and cooperative
                              housing, as follows
    Export Enhancement Program: Fiscal Year 1997, $0; Fiscal Year 1998,
            $150 Million; Fiscal Year 1999, $320 Million
        The Export Enhancement Program subsidizes American grain companies
    to enable them to dump wheat, corn, and other grains into international
    markets at below market prices.
        This undermines self-sufficient farming in these other counties and
    provides direct payments to such corporations as Cargill, Continental
    Grain, Louis Dreyfus, Bunge Corporation, and others. There are better
    uses for our tax dollars.
              iv. usda reorganization and streamlining initiatives
        Our labor unions appreciate the recognition by the leadership of
    this Subcommittee that we can only create a USDA that ``works better
    and costs less'' if we make sure the proposed changes, in their
    implementation, will enhance, rather than harm, the ability of the
    front-line workers to serve the public in the most effective and
    efficient manner. Unfortunately, we must report to Congress that the
    Department has failed to adopt this common sense approach.
                 administrative convergence--ready, shoot! aim?
        AFSCME and AFGE urge Members of Congress to block implementation of
    Secretary Glickman's proposal for ``Administrative Convergence'', still
    scheduled for October 1, 1998, until the following problems are worked
    out:
        1. Information Technology (IT) and Financial Management (FM)
    Workload Has Increased, yet Secretary Glickman proposes to decrease IT
    and FM Staff?
        (a) Attachment 1 shows, for rural Development, that the Information
    Technology workload, measured in terms of lines of code, has increased
    from 4 million to 11 million since 1993, while IT staffing for Rural
    Development in St. Louis, Missouri, and Washington, D.C., has already
    been reduced by over 30 percent since 1993! Attachment 2 documents
    where administrative staffing reductions have been accomplished since
    1993. The Rural Development staff in St. Louis, Missouri, and
    Washington, D.C., has already been cut to the bond. Further cuts would
    jeopardize program viability. For example, Rural Development's ability
    to make all its software Year 2000 compliant would be placed in great
    jeopardy. NRCS and FSA (Kansas City and Washington) have done much less
    streamlining.
        (b) The Congress and the Administration have actually increased the
    Information Technology (IT) and Financial Management (FM) workloads, in
    Rural Development and in the Ag Credit/Farm Loan Programs, by placing
    greater controls over fraud, abuse, the integrity of loan making, etc.
    If IT and FM staffing is reduced too much, or too soon, the very
    management controls which have been placed on these programs to improve
    accountability will not be implemented in a proper, timely, manner.
        (c) To accomplish the ``business reengineering'' proposed by the
    Service Center Implementation concept--a Common Computing Environment
    and better business and financial practices and supporting computer
    systems--also means more work, not less, for IT and FM support
    employees.
        To proceed with further staff reductions before there is a
    reduction in work requirements can only lead to greater problems with
    the integrity and effectiveness of program delivery.
        2. Contracting Out Will Cost More and Produce Lower Quality
    Results.
        In 1993, the House Agriculture Committee nearly passed to the USDA
    Reorganization Bill that would have required the Department to do such
    cost comparisons of current and future service contracts. The amendment
    was withdrawn based on the Department's promise to establish such an
    in-house procedure. This has not been done. Attachment 3 documents,
    from USDA's own figures, the continuing over-reliance on commercial
    support contracts for Information Technology.
        We urge the Appropriations Committee to require the Department to
    conduct cost comparisons on all current and future commercial service
    contracts. This includes instructing USDA to abandon FTE controls and
    ``fee for service'' proposals which require, or even allow, the hiring
    of contractors to do the work that can be more cost effectively
    performed by Federal employees. No more Federal employees should be
    laid off so long as contractors are working for the Department
    performing work that Federal employees could perform at better quality
    and less cost.
        3. Streamlining the middle management bureaucracy.
        There should be an upfront requirement that supervisory ratios
    within the proposed Support Service Bureau will be less than 1:15, as
    mandated by the National Performance Review. We are not opposed to
    consolidating multiple administrative support and IT organizations into
    a Departmentwide organization, but only if the unnecessary management
    bureaucracy is dramatically reduced.
        4. County Office Administrative Functions Must Be Included.
        The GAO/RCED-97-214 Report emphasizes that about two (2) staff
    years of effort per County Office is being devoted to the activities
    associated with keeping the offices open and functioning. These duties
    include obtaining and managing office space, paying utilities, computer
    administration, and processing payroll. It is not possible to honestly
    and successfully streamlining administrative functions unless all
    administrative activities are included in the streamlining effort.
        5. Damage to Civil Rights and Work Force Diversity.
        Current plans for Administrative Convergence would cut 1,800 jobs
    in Washington, St. Louis, and Kansas City--where the percentage of
    minority participation in the work force is greatest. In response to
    the obvious Civil Rights implication of this proposal, FFAS
    representatives have indicated they will find some way to transfer
    minority employees to the State level, presumably bumping out current
    non-minority employees. Do Members of Congress want to deal with these
    constituent complaints?
        6. Damage to Servicing of USDA Loan Programs.
        Secretary Glickman's plan for Administrative Convergence would cut
    many of the centralized loan servicing staff supporting RD and FSA loan
    portfolios by lumping them into the ``administrative'' Financial
    Management category. These program servicing positions must be excluded
    from Administrative Convergence.
        USDA should build on the widely heralded Rural Housing Centralized
    Servicing Center and DLOS initiative in St. Louis. It makes no sense to
    provide centralized servicing and debt collection for Rural Housing in
    St. Louis, and then to duplicate those functions, in Kansas City or the
    Field, for the farm loan programs and farm loan debt.
        7. Compliance With the Intent of Congress.
        Administrative Convergence should comply with the intent of the
    Congress before it is implemented. In 1994, the House Agriculture
    Committee included the following report to Section 105 of the House
    bill, which became Section 216 of Public Law 103-354 (7 USC 6916),
    Improvement of Information Sharing:

              The Committee intends that the Department fully retrain and
            use the employees who are currently responsible for developing
            and implementing its program delivery, accounting, and
            administrative computer systems to update and improve the
            Department's computer systems, and to provide support for the
            new systems * * * the Committee intends that the Department
            maintain and enhance the current automation, accounting, and
            administrative support centers in St. Louis, Kansas City,
            Washington, and Ft. Collins as ``centers of excellence'' in
            support of multiple programs and agencies. In particular,
            (FmHA) service center in St. Louis should continue to provide
            automation and accounting support for the farm credit programs
            that are being transferred to the ASA, as well as for the
            programs of the Rural Community and Economic Development
            mission area.

        In the House Report on the Fiscal Year 1997 Agriculture
    Appropriations Act, your Committee reaffirmed this direction that the
    Department maintain Farm Service Agency automation and accounting
    support for the farm loan programs in St. Louis, Missouri. We urge the
    Appropriations Committee to enforce the previously stated intent of the
    Congress, as contained in these authorizing and appropriations reports.
                                   in summary
        We urge the Committee to strengthen the oversight role of the
    Committee which was envisioned in Section 727 of the Fiscal Year 1998
    Agriculture Appropriations Act by adopting language in this year's act
    as recommended in Attachment 4.
                                 [attachment 1]
    [GRAPHIC] [TIFF OMITTED] T01NDPT.007

                                 [attachment 2]

                                       ADMINISTRATIVE STAFFING REDUCTIONS, 1993-98
    ----------------------------------------------------------------------------------------------------------------
                                                                                                Total agency staff
                                                                                               years (For comparison
                                                                                                     purposes)
       Administrative staffing (IRM, FM, PM, HRM)        SL        KC        DC       Other  -----------------------
                                                                                                             Non-
                                                                                                Federal     Federal
    ----------------------------------------------------------------------------------------------------------------
    Fiscal year 1993:
        Farm Service Agency.........................       147       953       600   ( \1\ )       7,490      14,953
        Rural Development...........................       690  ........       402   ( \1\ )       9,347  ..........
        Natural Resource and Conservation Service...  ........  ........   ( \2\ )     1,444      13,280  ..........
    Fiscal year 1998 (Current):
        Farm Service Agency.........................       110       860       491   ( \1\ )       5,877      11,229
        Rural Development...........................       492  ........       277   ( \1\ )       7,360  ..........
        Natural Resource and Conservation Service...  ........  ........   ( \2\ )     1,204      12,048  ..........
    Percent reduction (1993-98):
        Farm Service Agency.........................       -25       -10       -18  ........         -22         -25
        Rural Development...........................       -29  ........       -31  ........         -21  ..........
        Natural Resource and Conservation Service...  ........  ........  ........       -17          -9  ..........
    ----------------------------------------------------------------------------------------------------------------
    \1\ There are also hundreds of administrative (IRM, FM, PM, HRM) positions in the State and county offices in
      FSA and RD.
    \2\ Some of NRCS administrative staff is located in Washington, DC, some in Ft. Collins, some in Ft. Worth, and
      most of it in Regional Offices, to the best of our information. The detailed breakdown is unclear to us.

        Summary: Rural Development Operations and Management staff (St.
    Louis and Washington) has already been cut to the bone. Further cuts
    would jeopardize program viability. NRCS and FSA (Kansas City and
    Washington) have done much less streamlining.
                                 [attachment 3]
      USDA Over-reliance on Commercial Support Contracts for Information
                                   Technology
        The real point about balancing the budget should be taxpayer
    dollars, not Federal employee jobs. We need to ensure that
    Administrative Convergence does not just lead to replacing Federal
    employees with more expensive contractors who can't do as good a job.
    AFGE is very concerned about this, because in DOD and other agencies,
    the Administration has consolidated administrative functions--and then
    tried to contract them out. The following numbers come from the
    Agencies' A-11 submissions to OMB, reporting on ``Obligations for
    Information Systems.''

                            [In thousands of dollars]
    ------------------------------------------------------------------------
                                                Commercial
                                                  support        Personnel
                                                 services
    ------------------------------------------------------------------------
    Fiscal year 1993:
        ASCS................................          39,029          27,657
        FAS.................................           4,366           3,033
        OICD................................             183             245
        FCIC................................           8,572           3,627
        FmHA/RDA............................          40,627          36,181
        REA.................................             618           1,506
        SCS.................................          17,419          38,131
    Fiscal year 1998:
        FSA.................................          90,894          44,898
        FAS.................................           7,252  ..............
        RMA.................................           8,597           4,206
        RD..................................          26,148          15,048
        NRCS................................          23,223          25,516
    Percent change (1993-98):
        FSA/FAS/RMA \1\.....................             +51             +30
        RD..................................             -36             -60
        NRCS................................             +25             -33
    ------------------------------------------------------------------------
    \1\ Some amount of the Rural Development decrease, and the FSA increase,
      from fiscal year 1993 to fiscal year 1998, consisted of the transfer
      of Farm Credit functions from FmHA/RD to FSA.

        The ACAT Team 1 Draft Report (11/3/97) proposed two IT staffing
    options under Administrative Convergence Option 2 (50 percent decrease
    of Federal FTE's from fiscal year 1993) would require the Department to
    replace 397 Federal employees with contractors as compared to Option 1
    (30 percent decrease of Federal FTE's from fiscal year 1993). ``The
    Standard Costs for a government ITS employee FTE is $69,250. The
    average costs for a contractor FTE is $109,000. The option 1 mix of
    governmental and contractor ITS personnel will save USDA $15.8 million
    per year over the option 2 mix of ITS FTE's.''
        Summary: Contractors cost more than Federal employees. USDA already
    spends more on IT contractors than on employees, and this will continue
    to increase total IT costs more than would reducing contractors and
    retaining employees.
                                 [attachment 4]
     Proposed Language for the Fiscal Year 1999 Agriculture Appropriations
                                      Act
        None of the funds provided by this Act, or provided by previous
    Appropriations Acts, to the agencies funded by this Act, or provided
    from any accounts in the Treasury of the United States derived by the
    collection of fees available to the agencies funded by this Act, shall
    be used to implement Administrative Convergence, or any other
    initiative to reduce Federal staff performing Information Technology,
    Financial Management, Management Services, Civil Rights, Human
    Resources, or other administrative functions in support of the county-
    based agencies, Farm Service Agency, Natural Resources and Conservation
    Service, or Rural Development, until a plan for such convergence and
    streamlining has been presented to, and approved by, the Appropriations
    Committees of both House of Congress. Such plan shall include, at a
    minimum, the following:
        (1) the number of additional County Offices to be closed, along
    with criteria for determining which offices will be closed, and a
    timetable for the closures;
        (2) a detailed statement of the Information Technology, Financial
    Management, Management Services, Civil rights, Human Resources
    (including Training), or other activities considered to be
    administrative in purpose as distinct from program delivery,
    identifying such workload which will be eliminated or reduced through
    convergence and where each activity is proposed to be performed (i.e.,
    County Offices, State Offices, Regional Offices, or National Support
    Centers such as Washington, DC, St. Louis, MO, Kansas City, MO, New
    Orleans, LA, Ft. Worth, TX, Ft. Collins, CO, etc.);
        (3) a detailed statement of the program delivery activities which
    may be centralized for the purpose of improving consistency and
    achieving efficiencies as has been accomplished with the Section 502
    Rural Housing program;
        (4) a statement as to whether the Department intends to maintain
    two personnel systems within the Farm Service Agency, or whether the
    Department intends to phase out the County Office Committee personnel
    system;
        (5) the projected impact (with locations and timetables) on
    Federal, non-Federal, and Contractor staff and associated costs; and
        (6) a detailed statement of the Civil Rights impact on both
    employees and customers of the proposed changes.
    Justification:
        The 1996 Farm Bill (Public Law 104-127, April 4, 1996) dramatically
    reduced the Federal Government's role in supporting agriculture and,
    therefore, the county office workload. The Federal Crop Insurance
    Reform and Department of Agriculture Reorganization Act of 1994 (Public
    Law 103-354, October 13, 1994) also directed the Secretary of
    Agriculture to streamline departmental operations by consolidating
    county offices and merging various agencies. Yet, both non-Federal and
    Federal employees report that USDA workload has not decreased as a
    result of these changes. The GAO/RCED-97-214 also reports that it is
    not possible to determine the impact of the 1996 act on the workload of
    the Farm Service Agency's county offices. GAO also emphasizes that
    about two (2) staff years of effort per office is being devoted to the
    activities associated with keeping the offices open and functioning.
    These duties include obtaining and managing office space, paying
    utilities, computer administration, and processing payroll. The
    Department has entered into a contract with an outside consulting firm
    to conduct a study of the farm and rural program delivery system of
    these county-based agencies, FSA, NRCS, and RD, to be completed by
    September 1, 1998. Among other things, the study will clearly identify
    the purposes agency operations are intended to achieve, an independent
    assessment of agency workload estimates, identify criteria for
    determining the highest value use of office staff, evaluate county
    office efficiencies gained so far, etc. That study should serve as the
    basis for any plan to converge the administrative support functions of
    these agencies.
                                     ______

        Prepared Statement of Paul Brouha, Executive Director, American
                               Fisheries Society
        The American Fisheries Society (AFS) appreciates the opportunity to
    present written comments concerning the proposed fiscal year 1999
    budget of the USDA Cooperative State Research, Education, and Extension
    Service (CSREES). We ask that this letter be included in the official
    record of the agency's appropriation hearings.
        The Society is an international organization of more than 9,000
    fisheries and aquatic science professionals. Chartered in 1870, the
    Society is the world's oldest and largest scientific body dedicated to
    the advancement of fisheries science and the conservation of renewable
    aquatic resources.
        The American Fisheries Society (AFS) recognizes that the research
    and educational programs of the CSREES and its Land Grant Partners
    effect relevant, positive changes in attitudes and implementation of
    new technologies by private landowners, managers, community
    decisionmakers, and the public. This results in significant benefits to
    individuals and to the Nation through building and sustaining a more
    viable and productive natural resource base and a competitive and
    profitable agriculture. Since over two-thirds of our lands,
    approximately 1.35 billion acres, are controlled by over 10 million
    private landowners and managers, it is most appropriate that the
    CSREES-Land Grant System, with its grass roots credibility and delivery
    system, be adequately funded to translate and deliver research-based
    educational programs and new technologies to help the Nation's private
    landowners and managers move towards a more sustainable society.
    However, in the President's fiscal year 1999 budget, we see very little
    emphasis on natural resources research and education directed toward
    helping these clientele.
        The American Fisheries Society recommends that the fiscal year 1999
    budget for CSREES should redirect funding to accomplish the following
    goals:
        AFS recommends that the Renewable Resources Extension Act be funded
    at a minimum level of $9.5 million in fiscal year 1999. The RREA funds,
    which are apportioned to State Extension Services, effectively leverage
    cooperating partnerships at an average of about four to one, with a
    focus on the development and dissemination of useful and practical
    educational programs to private landowners (rural and urban) and
    continuing education of professionals. The increase to $9.5 million
    would enable the Extension System to accomplish the goals and
    objectives outlined in the 1991-1995 Report to Congress. The need for
    RREA educational programs is greater today than ever because of the
    fragmentation of ownerships, the diversity of landowners needing
    assistance, and the increasing environmental concerns of society about
    land use. It is important to note that RREA has been reauthorized
    through 2002. It was originally authorized at $15 million annually;
    however, even though it has been proven to be effective in leveraging
    cooperative state and local funding, it has never been funded at a
    level beyond $3.4 million. An increase to $9.5 million would enable the
    Extension Service to expand its capability to assist over 500,000
    private landowners annually to improve decisionmaking and management on
    an additional 35 million acres while increasing productivity and
    revenue by $200 million.
        AFS recommends that Smith-Lever 3(b)&(c) base program funding be
    increased by 9.0 percent to a level of $280,950,770 with an appropriate
    portion of this increase targeted to Extension's Natural Resource and
    Environmental Management programs (NREM). The President's fiscal year
    1999 budget requests a reduction of $10,740,000 funding for Smith-Lever
    3(b)&(c) funds from the fiscal year 1998 level. AFS appreciates that
    Smith-Lever 3(b)&(c) base programs provide ``Block Grant'' type funds
    for land grant universities to provide essential educational outreach
    based on local needs assessment. This will enable NREM programs to
    develop the critical mass of expertise at the state and local levels to
    redirect and leverage limited funding to address critical existing and
    emerging natural resource and environmental issues that are directly
    affecting small landowners and farmers in both rural and urban
    communities nationwide.
        Expanding Extension programs in natural resource public issues
    education on important issues such as forest health, wetlands,
    endangered species, and human/wildlife interactions, as well as to
    strengthen its programs in urban and community forestry and
    environmental education as called for in the 1990 FACT Act is essential
    to address natural resource issues that are relevant to the
    sustainability of these critical resources. Such an increase targeted
    appropriately would help producers better understand and implement the
    changes in the 1995 Farm Bill Conservation Provisions. Moreover, we are
    concerned that appropriate positions in the Natural Resources and
    Environment Unit have not been retained to provide needed national
    leadership for critical interdisciplinary resources such as range
    management.
        AFS encourages continuation of close cooperation between State
    CES's and their State Fish and Wildlife agencies, as well as other
    appropriate state and federal agencies and conservation organizations.
    Extension 4-H Youth natural resource programs and projects continue to
    increase with over 1,350,000 youngsters presently enrolled from both
    urban and rural communities across the Nation. Increased Smith-Lever
    funds targeted appropriately will enable CSREES to carry out its
    environmental education and NREM National Strategic Plan obligations
    nationwide.
        AFS recommends restoration of the Rangeland Research Grants
    $500,000 budget for fiscal year 1999. The Society is disappointed that
    the practical and applied problems addressed by the Rangeland Research
    Grants (RRG) program were zeroed out in the President's 1998 budget and
    totally ignored in this fiscal year 1999 budget. Over one half of the
    land area of the United States is rangeland; and elimination of the
    only federal competitive grants program for rangelands has serious
    implications for wildlife, watersheds, and other natural resources.
    Modest appropriations for RRG in the past have supported some of the
    most important rangeland research conducted over the past decade, and
    wildlife issues on rangelands will present some of the more critical
    rangeland research problems over the next decade. This would help
    increase the interdisciplinary capacity of research and educational
    programs to help landowners improve the adoption of forests and
    rangelands ecosystem management and the conservation of biodiversity on
    an ecoregion level.
        AFS recommends that an appropriate portion of the total increased
    appropriation for Pest Management should be dedicated to educational
    programs for prevention and control of vertebrate pests in urban and
    rural communities and to address invasive exotic species and noxious
    weed problems on rangelands for restoring, managing, and sustaining the
    biological integrity of the Nation's natural resource base upon which
    the agricultural and natural resource economies depend. AFS notes that
    a combined total increase of almost $15.5 million has been recommended
    in the President's budget for Pest Management and related research and
    extension programs over and above increases received in fiscal year
    1998. Vertebrate pests and invasive species have been identified in
    many states as posing the most significant problems, now and in the
    future, that agricultural and related crop producers and private
    landowners face. This targeting of Pest Management funds for research
    and educational programs would advance the knowledge and capability of
    landowners to reduce significant losses to vertebrate pests and
    invasive species.
        AFS recommends that the Hatch and McIntire-Stennis funds be
    restored to fiscal year 1998 levels and, if necessary, redirected from
    the substantial $32,800,000 proposed increase in NRI funding. AFS is
    pleased that the Administration proposes a 9.5 million increase in
    basic research identified under the National Research Initiative (NRI)
    as Natural Resources and the Environment; however, what is proposed
    under this ``Area of Specials Emphasis'' clearly does not address
    critical natural resource research needs that the Natural Resource
    Community and the public are vitally concerned about. The Society is
    alarmed at the significant reduction in both the Hatch Act and
    McIntire-Stennis research programs of over $15.5 million. Both of these
    research programs, conducted by land grant university partners and
    other educational institutions, are crucial to addressing natural
    resource and environmental issues critical to agriculture and natural
    resource sustainability now and in the future.
                                    summary
        The American Fisheries Society, based on the above considerations,
    recommends the following for the fiscal year 1999 budget of CSREES:
        (a) The RREA budget be increased to $9.5 million;
        (b) Smith-Lever 3(b)&(c) base program funding be increased by 9.0
    percent;
        (c) Rangeland Research grants be restored at $500,000 level;
        (d) A portion of the Pest Management and related increase be
    targeted to provide increased research and education programs to
    address vertebrate pest prevention and control needs and invasive
    species and exotic weed problems; and
        (e) McIntire-Stennis and Hatch Act funding be restored to fiscal
    year 1998 levels.
        Thank you for the opportunity to comment on the USDA Cooperative
    State Research, Education, and Extension Service programs. If there is
    any way we can be of further assistance, please let us know.
                                     ______

    Prepared Statement of Richard Adee, President, American Honey Producers
                               Association, Inc.
        My name is Richard Adee. I am President of the American Honey
    Producers Association, Inc. and I am submitting this statement in its
    behalf. The American Honey Producers Association, Inc. is a national
    organization of commercial beekeepers with activities in most of the
    States in this country.
        The Association is seeking the inclusion of sufficient funds in the
    appropriation for the Agricultural Research Service of the Department
    of Agriculture to meet with the critical needs of the industry.
    Specifically, the Association is seeking the restoration of $500,000 in
    the baseline funding for the bee laboratory at Weslaco, Texas, and an
    increase of $500,000 in the level of funding for the ARS honey bee
    breeding, genetics, and physiology laboratory at Baton Rouge,
    Louisiana.
        Honey bees pollinate over 90 cultivated crops whose estimated value
    exceeds $9.3 billion and produce an average of 227 million pounds of
    honey annually. Since 1984, the survival of the honey bee has been
    threatened principally by a number of problems for which beekeepers are
    depending upon research for the answers. Unfortunately, there is no
    simple solution to these problems. The honey bee industry is too small
    to support the cost of the needed research, and there are no funds,
    facilities, or personnel elsewhere available in the private sector for
    this purpose. Accordingly, the beekeeping industry is dependent on
    research from public sources for the scientific answers. As you know,
    there are no longer any federal subsidies on honey, there is no longer
    a honey price support program in effect. The key to the survival of the
    honey industry lies with the honey bee research program conducted by
    the Agricultural Research Service.
        Parasitic mites, primarily the varroa mite, are causing a crisis
    for the U.S. beekeeping and pollination industry. Hundreds of thousands
    of domestic honey bee colonies are being lost annually to varroa mites,
    and wild bee colonies are being devastated. The only chemical now
    registered for varroa mite control has been rendered ineffective by the
    development of resistant mite populations. Moreover, chemical
    pesticides for mite control can adversely affect the bees, as well as
    being a food safety concern.
        The USDA-ARS honey bee research facility at Weslaco has been
    working hard in trying to find alternative chemicals to deal with the
    varroa mite. It is responsible for finding new and improved methods for
    control of parasitic mites and other pathogenic organisms on honey
    bees, solving beekeeping problems that interfere with honey production
    and effective crop pollination, and determining the impact and spread
    of Africanized honey bees. Until the appropriation for fiscal year
    1998, it has not been possible to fully operate the facility with full-
    time permanent scientists and cover the necessary overhead expenses.
    The uncertainty of continued funding is halting the efforts of the
    Weslaco laboratory in implementing its plans for making full use of the
    fiscal year 1998 appropriation. A reduction of $500,000 in the base
    line appropriation for the Weslaco facility will disrupt its operations
    and make it more difficult to achieve its research objectives. These
    funds need to be restored.
        The ARS laboratory at Baton Rouge, Louisiana, is the only
    laboratory world wide focusing on the development of long-term,
    genetics-based solutions to the varroa mite. After multiple matings,
    scientists at this laboratory have found a few colonies of honey bees
    that show possible resistance to the varroa mite. These types require
    intensive evaluation to assure that the resistance holds up under a
    wide range of environmental and beekeeping conditions. Attributes such
    as vigor, pollination, and honey production must be evaluated. There is
    an immediate need to propagate the resistant queen bees in large
    numbers for wide scale distribution to beekeepers so that this
    evaluation can be accomplished. The work is slow and tedious. It is
    also costly. We are seeking an increase of $500,000 in permanent
    funding for the Baton Rouge, Louisiana, laboratory to accelerate the
    research, development, and transfer of queen bee stock resistant to
    varroa mites to U.S. beekeepers.
        We wish to thank you for your support of honey bee research in the
    past and would appreciate your continued support by approving an
    appropriation for the ARS bee research laboratories at Weslaco, Texas,
    and Baton Rouge, Louisiana, that includes an additional $500,000 for
    each of those laboratories above the level recommended in the
    Administration's budget. Only through research can we achieve and
    maintain profitability in U.S. beekeeping and continue to provide
    stable and affordable supplies of bee pollinated crops which make up
    fully one-third of the U.S. diet.
                                     ______

     Prepared Statement of the American Indian Higher Education Consortium
                                  introduction
        Mr. Chairman and Members of the Subcommittee, on behalf of the
    American Indian Higher Education Consortium (AIHEC) and the 29 Tribal
    Colleges that comprise the AIHEC land-grant institutions, we thank you
    for this opportunity to share our funding requests for fiscal year
    1999. On behalf of the Tribal Colleges, we respectfully request full
    funding of our four land-grant programs, along with funding under the
    Agriculture Research Reauthorization. These include: $4.6 million for
    the Tribal College endowment; $1.45 million for the equity grant
    program; $5 million for the extension program; $1.7 million for
    institution capacity building grants; and $10 million for research.
        This statement will cover three key points: first, it will provide
    a brief background on the Tribal Colleges and our long-awaited
    inclusion in this nation's land-grant system; second, it lays out
    Tribal Colleges' ambitious efforts through extension services to
    fulfill the agricultural potential of American Indian communities and
    to ensure that American Indians have the skills needed to maximize the
    economic development potential of our resources; and third, it
    describes our additional program requests for fiscal year 1999.
                         background on tribal colleges
        Today, 130 years after enactment of the first land-grant
    legislation, Tribal Colleges, more so than any other institutions,
    truly exemplify the original intent of the land-grant legislation. The
    first Morrill Act was enacted in 1862 specifically to bring education
    to the people and to serve their fundamental needs. Mr. Chairman, this
    is the definition and mission of the Tribal Colleges. We truly are
    institutions by, of, and for our people.
        The dismal statistics concerning the American Indian experience in
    education brought tribal leaders to the realization that only through
    local, culturally-based education could many American Indians succeed
    in higher education and help bring desperately needed economic
    development to the reservations. In the late 1960's and early 1970's,
    the first Tribal Colleges were chartered on remote reservations by
    their respective tribal governments, to be governed by boards of local
    tribal people. In 1972, the first six tribally-controlled institutions
    came together to form the American Indian Higher Education Consortium.
    Today, AIHEC is a cooperatively sponsored effort on the part of 31
    member institutions in the United States and Canada, 29 of which are
    the 1994 land-grant institutions.
        Tribal Colleges now serve 26,500 students each year, offering
    primarily two-year degrees, with some colleges offering four-year and
    graduate degrees. Since their inception, the Tribal Colleges have
    helped address the problems and challenges of our welfare system.
    Tribal Colleges provide GED and other college preparatory courses,
    probably more than any other community colleges in this country. We
    have done this because our mission requires us to help move American
    Indians toward self-sufficiency and help make American Indians
    productive, tax-paying members of our society. Fulfilling this
    obligation will become even more difficult over the next several years
    as Tribal Colleges feel the impact of welfare reform legislation--
    already, our colleges are seeing increasing numbers of welfare
    recipients turn to the colleges for training and employment
    opportunities. Tribal Colleges serve as community centers, providing
    libraries, tribal archives, career centers, economic development
    centers, public meeting places, and child care centers.
        Despite our many obligations, functions, and notable achievements,
    Tribal Colleges are the most poorly funded institutions of higher
    education in this country. Historically, states do not have an
    obligation to American Indian lands because our reservations are trust
    lands under federal jurisdiction. Unlike mainstream land-grant
    institutions, we cannot depend on state and local governments to match
    or surpass the federal investment. Our core funding under the Tribally-
    Controlled Community Colleges Assistance Act of 1978 remains grossly
    inadequate; and total funding for the agriculture programs authorized
    for all 29 of the 1994 institutions combined equals approximately the
    amount the Department of Agriculture gives to just one state land-grant
    institution each year.
        The members of AIHEC enjoy strong support from the U.S. Department
    of Agriculture, as witnessed by the Memorandum of Understanding between
    the Department and the Tribal Colleges, signed by Secretary Dan
    Glickman on February 3, 1998. The MOU, which was mandated in the 1996
    Farm Bill, is targeted at achieving full integration of the Tribal
    Colleges into the land-grant system and ensure their full participation
    in the USDA's land-grant programs. Objectives were established covering
    four key areas: (1) student programs; (2) employment and program
    opportunities; (3) capacity building; and (4) full access to grant and
    excess property programs. We are heartened by the Department's apparent
    commitment to the Tribal Colleges, and we look forward to joining with
    the Department and other land-grant institutions in continuing this
    important work.
      extension services--ambitious efforts to reach economic development
                                   potential
        Although current land-grant programs at the Tribal Colleges are
    modest, our 1994 authorizing legislation is vitally important to us
    because of the nature of our land base. Of the 54.5 million acres that
    comprise American Indian reservations, 75 percent are agricultural
    lands and 15 percent are forestry holdings. In fact, Indian
    agricultural production has been valued at nine times the production
    potential of oil and gas resources.
        Tragically, due to lack of expertise and training, millions of
    acres lie fallow, under-used, or are developed through methods that
    render the resources non-renewable. The Educational Equity in Land-
    Grant Status Act of 1994 is our hope for turning this situation around.
    It is absolutely critical that American Indians learn more about new
    and evolving technologies for managing our lands. We are committed to
    becoming, as we were when your forefathers came to this land centuries
    ago, productive contributors to this nation's--and the world's--
    agricultural base.
        This year witnessed impressive efforts to address economic
    development through land use, as Tribal Colleges entered into
    partnerships with 1862 land-grant institutions through extension
    services. This program, which is administered and coordinated through
    the 1862 institutions, represents an ideal combination of federal
    resources and Tribal College-state institution expertise, with the
    overall impact being far greater than the sum of the parts. Some
    examples of the innovative programs that are funded under extension
    services include:
      --Fond du Lac Tribal and Community College and the University of
            Minnesota Extension Service are partnering in a project to
            develop, conduct, and distribute an environmental analysis of
            the St. Louis River ecosystem. This project will introduce
            students from the college and the university to scientific
            research and interpretation, and promote thoughtful management
            and use of water resources.
      --Salish Kootenai College, through a partnership with Montana State
            University, developed a native plant/ecosystem restoration
            program, that will create a tribal center for native plants and
            horticulture to serve the Confederated Salish and Kootenai
            Tribes. As part of this project, the college will conduct a
            market feasibility study for tribally grown native plant
            materials and encourage, support, and coordinate native plant
            knowledge on the Flathead Reservation.
      --Sitting Bull College and North Dakota State University will focus
            on providing training and support services to ranchers in the
            area of bison production and management. This project will
            generate a database of producers and offer training sessions
            on-site at tribal ranches covering topics like marketing,
            processing, herd management, life cycle and grazing patterns.
        Additional funding to support such efforts is needed because
    extension services provided by the states on our reservations are
    woefully inadequate, and the Tribal Colleges need to fill that void. It
    is important to note that this program is not duplicative of ongoing
    extension activities, and that it will complement and build on the
    existing Indian Reservation Extension Agent program.
        In fiscal 1997 and fiscal 1998, the 1994 institutions were awarded
    $2 million for extension services. In fiscal 1999, we are requesting
    that Congress build on the modest funding increase of $1.5 million
    proposed in the President's budget, and raise funding to $5 million,
    the fully authorized level for this program. The increase recommended
    in the President's request emanates from the strong relationship we
    have with USDA and is evidence of our successes in this program.
               other funding requests for tribal college programs
        The twenty-nine 1994 Institutions' appropriations request for
    fiscal year 1999 are extremely modest when compared with the annual
    appropriations to each existing land-grant institution. Along with our
    request of $5 million for the joint 1862-1994 institution extension
    program, we are seeking the following amounts for the three other
    authorized programs for 1994 institutions: $4.6 million for the Tribal
    College endowment; $1.45 million for the equity grant program; and $1.7
    million for institution capacity building grants; and $10 million for
    research. It is important to remember, as stated earlier, total funding
    for the programs authorized for all 29 of the 1994 institutions
    combined equals approximately the amount the Department of Agriculture
    gives to just one state land-grant institution each year.
        The Tribal Colleges are grateful for the Subcommittee's support in
    the past for funding of three of our programs. These small programs
    catalyzed the 1994 Institutions' crucial first steps in initiating and
    strengthening agriculture and natural resource programs in our
    communities. However, it is critical that we build on the momentum we
    have gained. Justification for our requested funding levels follows.
        1. $1.7 million Institutional Capacity Building Grant Program.--
    This competitive grant program, which requires a non-federal match,
    would provide the 1994 institutions with the investment necessary to
    allow us to strengthen and more fully develop our educational
    infrastructure. Facilities maintenance and improvement are urgently
    needed at many of the Tribal Colleges, which are currently operating in
    abandoned, condemned, or donated buildings. Hazards include leaking
    roofs, asbestos insulation, exposed wiring, and crumbling foundations.
    In a recent needs assessment, nine of the Tribal Colleges identified
    facility maintenance and renovation as a high priority, at an estimated
    cost of $8.3 million. Many of these facility improvements are needed to
    provide American Indian students with the education necessary to fully
    compete in the modern agricultural world.
        2. $4.6 million Endowment Fund for 1994 Land-Grant Institutions.--
    This endowment installment remains with the U.S. Treasury, and only the
    interest is distributed to the 1994 institutions. Just as other land-
    grant institutions historically received large grants of land or
    endowments in lieu of land, this sum assists the 1994 institutions in
    establishing and strengthening our academic programs in the areas of
    curricula development, faculty preparation, instruction delivery
    systems, equipment and instrumentation for teaching, experiential
    learning, and student recruitment and retention in the food and
    agricultural sciences. As the endowment increases over time, it will
    provide each 1994 institution with significant income. The second year
    interest payment totaled nearly $116,000, which was distributed to the
    29 land-grant institutions on a formula basis.
        3. $1.45 million Tribal College Educational Equity Grant Program.--
    Closely linked with the endowment fund, this program provides $50,000
    per 1994 Institution to assist in academic programs. The 1994
    institutions are in their second year of funding under this program.
    Through the funding made available in fiscal year 1996, the Tribal
    Colleges were able to begin to support vital courses and planning
    activities specifically targeted to meet the unique needs of our
    respective reservations. Examples of programs include:
      --Fort Belknap College in Harlem, Montana, will build on its fiscal
            year 1996 project, which established a Global Positioning
            System/Geographic Information System (GPS/GIS), using the GPS/
            GIS to research, document and inventory the location of
            important cultural and ethno-botanical sites on the
            reservation. Faculty and students from natural resources
            courses will work with traditional leaders and elders from the
            Fort Belknap community to complete this project.
      --Sinte Gleska University in Rosebud, South Dakota, will use the
            equity grant to support its development of a community-based
            forestry project that will involve the full life cycle of
            trees. The project will document tribal stories and teachings
            about trees and their related environment and the acquired
            knowledge will form the foundation for an ecological and
            cultural understanding of native trees that will be
            incorporated into the University's courses and practices.
        Other Tribal Colleges have started natural resource management
    courses; nutrition and dietetic programs; environmental sciences
    curricula; comprehensive horticulture programs; and courses on
    sustainable development, forestry, and buffalo production and
    management.
        Funding for Research.--In addition to these authorized programs for
    the 1994 institutions, we are requesting funding for a new research
    program, which has been proposed in an amendment to the Agriculture
    Research, Extension, and Education Reform Act of 1997 (currently in
    conference). This amendment proposes that the 1994 land-grant colleges
    receive the same agriculture research authority granted to 1862 and
    1890 land-grant institutions, through a competitive program authorized
    at $10 million.
        This authority, and its corresponding appropriation, is vital to
    ensuring that Tribal Colleges finally have the opportunity to become
    full partners in this nation's land-grant system of colleges and
    universities. Many of our institutions are currently conducting applied
    agriculture-based research, yet they struggle to finance this research
    and meet their community's other research needs. Some of the research
    in progress includes soil and water quality research; amphibian
    propagation; pesticide and wildlife research; range cattle species
    enhancement; and native plant preservation, for medicinal and economic
    purposes. We urge the committee to fully fund this program's pending
    authority, as we expect this amendment to be approved in the near
    future.
        Funding for the Rural Development Trust Fund.--The Tribal Colleges
    also support the administration's request for the Rural Development
    Trust Fund, which includes a 3-percent transfer dedicated for rural
    development programs conducted by federally-recognized tribes.
                                   conclusion
        The 1994 institutions are efficient and effective tools for
    bringing education to American Indians. The modest federal investment
    in the Tribal Colleges has paid great dividends in terms of employment,
    education, and economic development, and continuation of this
    investment makes sound moral and fiscal sense. No communities are in
    greater need of land-grant programs than American Indian reservations,
    and no institutions better exemplify the original intent of land-grant
    institutions than the Tribal Colleges.
        Mr. Chairman, we appreciate your long-standing support of the
    Tribal Colleges, and we are grateful for your commitment to our efforts
    to bring self-sufficiency to our communities. We look forward to
    continuing a partnership with you, the Members of your Subcommittee,
    the U.S. Department of Agriculture, and the mainstream land-grant
    system--a partnership that will bring equal educational, agricultural,
    and economic opportunities to Native America.
        Thank you.
                                     ______

       Prepared Statement of the American Nursery & Landscape Association
        Mr. Chairman, the American Nursery & Landscape Association (ANLA)
    welcomes this opportunity to present the nursery industry's views
    regarding the U.S. Department of Agriculture's (USDA) budget for the
    1999 fiscal year.
        ANLA is the national trade association for the nursery and
    landscape industry. ANLA represents 2,500 production nurseries,
    landscape firms, retail garden centers and horticultural distribution
    centers, and the 16,000 additional family farm and small business
    members of the state and regional nursery and landscape associations.
                 economic significance of the nursery industry
        According to USDA's Economic Research Service (ERS), the nursery
    and greenhouse industry remains the fastest growing agricultural sector
    in cash receipts. An estimated 18,000 farms (or one percent of all
    farms) were engaged in producing at least some nursery and greenhouse
    crops in 1969. By 1992, an estimated 47,425 farms were included in this
    sector--an increase of 163 percent. Nursery and greenhouse crops in
    1996 totaled an estimated $10.9 billion in farm-gate value,
    representing nearly 11 percent of the total cash receipts for all U.S.
    farm crops.
        In 1996, nursery and greenhouse crops ranked 7th in total grower
    cash receipts among all agricultural commodities. It is the third
    largest plant crop--behind corn and soybeans, yet ahead of wheat,
    cotton, and tobacco. Nursery and greenhouse crop production now ranks
    among the top five agricultural commodities in 24 states, and among the
    top 10 in 40 states. According to USDA, growers produce thousands of
    varieties of cultivated nursery, bedding, foliage and potted flowering
    plants in a wide array of different forms and sizes on 390,200 acres of
    open ground and 678 million square feet under the protective cover of
    permanent or temporary greenhouses.
        USDA data from 1990 also show that nursery and greenhouse farms had
    the highest average net farm income of all agricultural commodity
    groups at $53,589. This was four times higher than the average American
    net farm income in 1990 of $13,458. Although nursery farms can be
    profitable, they are often more capital intensive than other
    agricultural operations, and are very labor intensive given the
    thousands of different plant species and the wide-ranging sizes in
    which they are grown.
                      agricultural research service (ars)
    Reinstatement of Nursery/Greenhouse Research Funding
        Noting the increasing economic significance of the nursery and
    greenhouse industry, ANLA is very grateful and pleased that Congress
    provided $200,000 to ARS in fiscal year 1998 specifically to address
    the important research needs of the nursery and greenhouse industry.
    Nevertheless ANLA is deeply disturbed that the Administration has once
    again failed to provide for a continuation of these research dollars in
    fiscal year 1999. ANLA respectfully urges Congress to restore in fiscal
    year 1999 the $200,000 funding which serves as a foundation and
    springboard for the joint research initiative that the nursery and
    floral industry has developed (see below).
        Although recognition of the economic significance of the nursery
    industry is indeed increasing, very few federal dollars are dedicated
    directly to the nursery and greenhouse industry. In fact, only about
    0.02 percent of all federal agricultural research dollars are currently
    so dedicated. This underscores why last year's provision of $200,000
    was so important. Current competitive grant programs and other public
    funding mechanisms are unable to meet the industry's research needs. In
    fact, the nursery industry has been largely excluded from funding under
    the National Research Initiative (NRI) competitive grants simply
    because it does not grow food or fiber crops. The only rare NRI
    exceptions are when a horticultural crop has been utilized solely by
    reason of its rapid production. The nursery and greenhouse industry has
    an exemplary record of supporting its own research needs as industry-
    funded research grants annually total several million dollars.
        The industry will continue to support research efforts through its
    own privately funded research foundations, including ANLA's very own
    research division (the Horticultural Research Institute) which is
    providing $350,000 in research grants this year alone. The federal
    government must play a research role more appropriate to its scope. It
    must retain the lead in developing the basic building blocks of plant
    science, in contrast to the industry's applications of those blocks to
    build solutions to its particular challenges. For instance, ANLA
    supports the federal funding of biotechnology as ARS fulfills its role
    as the international leader of such fundamental research. Biotechnology
    is a crucial tool for use in dealing with a wide spectrum of challenges
    to environmental horticulture, as well as other important agricultural
    sectors. The federal role in research is: (1) longer term; (2) cuts
    across multiple disciplines; (3) calls for extensive coordination among
    scientists and institutions; and, (4) involves higher risk than can be
    undertaken by any one industry. Only the federal government can fulfill
    this essential role.
    Joint Nursery/Floral Industry Research Initiative
        ANLA and the Society of American Florists (SAF) have jointly
    developed a detailed $21 million proposal establishing a coordinated
    research initiative for the environmental horticulture (nursery and
    floral) industry. Its goals are to:
      --Protect the environment, including human health and safety through
            research leading to reduced use of chemicals and a reduction in
            runoff and other wastes.
      --Enhance environmental remediation and cleanup efforts on wetlands,
            post-industrial sites, air quality and other environmental
            areas through research on the ability of plants to reverse and
            mitigate environmental pollution.
      --Improve the ability to prevent the spread of plant pests and
            diseases in international trade.
      --Strengthen rural and suburban economies across the U.S. by
            providing improved crop production systems and technologies to
            nursery and greenhouse crop growers and helping them to
            increase production efficiency.
      --Contribute to the U.S. agricultural economy and increase
            international competitiveness by conducting research leading to
            improved nursery and greenhouse products and production
            strategies, and by improving technology transfer of research
            results to benefit other U.S. agricultural sectors.
      --Maintain biodiversity through germplasm preservation enabling
            useful botanic traits to be transmitted to future generations.
      --Enhance Americans' quality of life by increasing the availability
            and diversity of plants and flowers for the consumers' purchase
            and enjoyment.
        The joint nursery and floral industry research initiative shall
    accomplish these goals by focusing on three essential research areas:
    (1) Improved environmental and resource management; (2) improved pest
    management; and, (3) improved production system practices and
    strategies.
        ANLA respectfully requests an increase of $8.0 million in fiscal
    year 1999 to begin to reach the funding balance envisioned by this
    research initiative for the nursery and floriculture industry
    representing nearly 11 percent of all U.S. farm crop cash receipts.
    ANLA urges Congress to allocate the requested $8.0 million as follows:
    (a) $4.5 million to ARS centers including the U.S. National Arboretum;
    (b) $500,000 to Ohio State University to establish an ornamental Plant
    Germplasm Center in conjunction with USDA's National Plant Germplasm
    System; and, (c) $3.0 million to multi-state, multi-location
    cooperative agreements between ARS and appropriate university
    researchers.
    Methyl Bromide
        As a widely used fumigant, methyl bromide is a critical input to
    many nursery crop management and quarantine systems. However, the U.S.
    Environmental Protection Agency has listed methyl bromide as a Class I
    ozone-depleting substance under the Clean Air Act and will ban its use
    by January 1, 2001. Research and development of effective methyl
    bromide alternatives for soil fumigation and quarantine treatments are
    absolutely critical to the nursery industry. Effective alternatives to
    methyl bromide must be identified. Therefore, ANLA supports the
    proposed $2 million in fiscal year 1999 for extramural research on
    methyl bromide alternatives. ANLA urges that such research be funded
    based on a priority-setting awards process that encourages grower
    input. 3
    U.S. National Arboretum
        When it was founded in 1927, Congress had the foresight to
    designate research and education as the mission of the U.S. National
    Arboretum. Since its founding, the U.S. National Arboretum has
    introduced over 200 important new cultivars, including azaleas, New
    Guinea impatiens, crepe myrtles, hollies, magnolias, and disease
    resistant elms. ANLA and the nursery industry have immense respect for
    this highly successful federal institution. ANLA is proud to support
    the Friends of the National Arboretum (FONA)--the non-profit, private
    sector organization whose mission is to garner additional resources to
    advance the quality and scope of the U.S. National Arboretum's
    important research and education activities. ANLA supports full fiscal
    year 1999 funding for the U.S. National Arboretum.
    Northwest Nursery Crops Research Center (OR, WA, ID)
        ANLA appreciates the $500,000 in fiscal year 1998 funding for the
    Northwest Nursery Crops Research Center. This collaborative research
    center is supported by the American, Oregon, Idaho and Washington
    nursery associations, Oregon State University, Washington State
    University, the University of Idaho, and the related extension
    services. Nursery crop growers in the Pacific Northwest play a pivotal
    role in supplying nursery stock--not only to the retail and landscape
    segments of the industry. They provide plants and trees to growers in
    other areas of the nation for further cultivation and development. ANLA
    urges Congress to continue funding the Northwest Nursery Crops Research
    Center in fiscal year 1999 at the current level of $500,000.
    Nursery Crops Research Station (Tennessee State University)
        ANLA appreciates the prior federal funding which helped lead to the
    establishment and construction of the Nursery Crops Research Station at
    Tennessee State University. Nursery crop growers in the South continue
    to face myriad serious plant pest problems. At the same time,
    implementation of the 1996 Food Quality Protection Act (FQPA) could
    drive the loss of many pesticide uses critical to nursery growers in
    the South and throughout the nation. ARS recently established research
    positions at the Nursery Crops Research Station at Tennessee State
    University. ANLA urges Congress to provide $515,000 in fiscal year 1999
    for such positions to conduct the critical research to address pest
    management and other nursery crop production issues.
    Endorsement of Minor Crop Farmer Alliance's Testimony
        ANLA endorses the appropriations testimony of the Minor Crop Farmer
    Alliance regarding the following USDA programs: Agricultural Research
    Service (ARS)--Food Consumption Survey; National Agricultural
    Statistics Service (NASS)--Pesticide Use Surveys and the National
    Agricultural Pesticide Impact Assessment Program; and, Agricultural
    Marketing Service (AMS)--Pesticide Data Program.
               animal and plant health inspection service (aphis)
        International and interstate trade in nursery crops is governed by
    inspection and quarantine regulations designed to prevent or slow the
    artificial spread of hazardous agricultural pests. APHIS works in
    cooperation with state departments of agriculture to promulgate and
    enforce such regulations. ANLA strongly supports APHIS' request for
    adequate program funds for safeguarding plant resources from exotic
    pests and diseases. The continued growth and success of the nursery
    industry, and all of American agriculture, depend on these vital APHIS
    programs.
    Agricultural Quarantine Inspection (AQI)
        Port-of-arrival inspections and first-class mail inspection under
    the AQI program are the first line of defense against damaging pest
    introductions. About 80 percent of the funding for this important
    program comes from user fees levied broadly across international travel
    and commerce.
        APHIS does not currently collect user fees associated with commerce
    and travel from Canada to the U.S. Given the risks demonstrated in
    recent years of movement of such pests as exotic fruit flies into the
    U.S. from Canada, APHIS might consider whether collection of user fees
    on goods moving from Canada would allow for enhanced pest exclusion
    efforts along the U.S./Canada border.
    Pest and Disease Management
        The Administration's budget seeks about $80 million for pest and
    disease management programs in fiscal year 1999. ANLA supports the
    proposed modest increase for Pest Detection to $6.685 million in fiscal
    year 1999. This increase represents sound public policy as evidenced by
    several recent pest outbreaks. For example, detections of Asian
    longhorned beetle in New York and Mediterranean fruit fly in Florida
    have precipitated expensive quarantine and eradication efforts. These
    outbreaks underscore the need for enhanced pest detection programs. The
    earlier infestations of damaging exotic pests can be detected, the
    better the chances of achieving containment or eradication at
    reasonable expense. We are reminded of the wise adage: ``Pay a little
    now or pay a lot later.''
    Imported Fire Ant
        ANLA notes that the Administration proposes to discontinue funding
    for the imported fire ant quarantine. The fiscal year 1998 funding
    level of $1 million represented only 27 percent of the funding level
    four years ago, yet the workload associated with the quarantine has
    increased as the pest has continued to spread. ANLA respectfully urges
    Congress to direct APHIS to maintain imported fire ant funding in
    fiscal year 1999 at the fiscal year 1998 funding level of $1 million.
        The small federal funding share is used to carry out cooperative
    efforts with infested states in the South and Southeast. Continued
    federal involvement strengthens the level of protection enjoyed by
    uninfested states wishing to remain free from the agricultural and
    public health burdens posed by imported fire ants. The federal
    quarantine ensures a fair, consistent framework for domestic commerce
    for nurseries located in the 11 affected states from North Carolina
    through Florida and west to Texas. In exchange for those benefits,
    nurseries in infested states incur substantial quarantine compliance
    costs--often in excess of $100,000 in a single nursery--for a pest that
    does not cause significant harm to nursery crops. Given the great
    environmental and public health benefits to society resulting from a
    successful quarantine effort, ANLA strongly believes that a modest
    federal expenditure of $1 million in fiscal year 1999 is justified.
    Golden Nematode
        In 1995, a science panel was jointly appointed by the National
    Plant Board and USDA to review, evaluate and make recommendations
    regarding the golden nematode program. This action was in part
    necessitated by federal and state reductions in funding and support
    that jeopardize the very integrity of the federal domestic quarantine.
    Federal/state cooperative efforts to control and contain the spread of
    this serious pest have been successful and economically beneficial.
        In its report, The Golden Nematode: Future Strategies for
    Quarantine and Management (May 15, 1996), the science panel found the
    golden nematode to be of continued quarantine importance and regulatory
    significance. Furthermore, the current quarantine program was deemed
    biologically sound. However, federal funding shortfalls truly
    jeopardize the continued long-term viability of the golden nematode
    management effort. Erosion of this management effort will negatively
    impact the entire U.S. potato industry from both production and
    international trade viewpoints, and it may also have disruptive impacts
    on the nursery industry.
        Funding for this program dropped from almost $900,000 in fiscal
    year 1992 to $444,000 in fiscal year 1997, and to $435,000 in fiscal
    year 1998. ANLA strongly urges that at least the fiscal year 1997
    funding level of $444,000 be provided in fiscal year 1999 for the
    necessary survey and regulatory enforcement activities. Optimally, a
    future appropriation of $862,000 will maintain the integrity of the
    quarantine by providing for the necessary supporting research and
    regulatory activities.
    Chrysanthemum White Rust
        Chrysanthemums are an important nursery and greenhouse crop. Annual
    farm-gate value of the U. S. chrysanthemum crop is about $160 million.
    Chrysanthemum white rust (CWR), a serious disease of chrysanthemums not
    known to be established in the United States, has been detected in
    recent years in California, Oregon, Washington, New York and New
    Jersey. During fiscal year 1995-98, APHIS and state cooperators engaged
    in CWR detection survey, control and regulatory activities with these
    states. Yet, this level of funding has been inadequate to yield a
    comprehensive understanding as to whether eradication efforts have
    succeeded. Future regulatory decisions must be based on sound,
    comprehensive information. ANLA urges Congress to direct APHIS to
    cooperatively fund completion of thorough CWR detection surveys, and
    evaluate the success of the eradication program based on the survey
    results.
    Plant Pest Emergency Fund
        In recent years, emergencies have been declared as a result of
    discovery of such devastating pests as Karnal bunt of wheat, Asian
    gypsy moth, and Mediterranean fruit fly. The long-term benefits of
    successful eradication efforts far outweigh the short-term costs of
    emergency programs to eradicate such pests. However, such efforts
    require rapid response and adequate resources. ANLA supports the
    establishment of a ``no-year'' emergency agricultural pest fund that
    could be accessed at the sole discretion of the Secretary of
    Agriculture in the event of pest emergencies. Such a fund should be
    adequate to deal with multiple emergencies, and should be replenished
    as needed.
                                 forest service
    Gypsy Moth Slow-the-Spread (STS)
        ANLA recognizes that jurisdiction for U.S. Forest Service funding
    rests with another appropriations subcommittee. Nonetheless, ANLA
    believes that the gypsy moth issue is so important that it needs to be
    brought to this subcommittee's attention as well.
        Gypsy moth is a devastating forest and landscape pest that was
    introduced into the U.S. in 1869. It has since spread to all or part of
    17 states and the District of Columbia. However, this area represents
    only 25 percent of the total area susceptible to gypsy moth outbreaks.
        A recent Forest Service pilot program demonstrated that the rate of
    gypsy moth spread could be slowed by at least 60 percent through the
    application of modern survey and management practices. National
    implementation of ``Slow-the-Spread'' (STS) would cost-effectively
    reduce the new territory invaded by gypsy moth along a 1,200 mile
    ``frontier'' stretching from Wisconsin to North Carolina. STS would
    protect environmental resources and reduce the burden of quarantines on
    the nursery industry.
        ANLA urges that the $3.5 million in Forest Service funds provided
    for the annual pilot program in recent years be dedicated to the STS
    program. ANLA also urges Congress and the Forest Service to vigorously
    pursue full STS funding of $8 million by the year 2000.
          cooperative state research, education and extension service
    Pesticide Clearance
        ANLA strongly supports the Administration's fiscal year 1999 budget
    proposal of $10.7 million for the JR-4 program under the USDA-CSREES
    Special Research Grants Program. Further increases may be needed and
    justified in view of the new requirements of the 1996 Food Quality
    Protection Act--(FQPA). FQPA requires the reassessment of virtually all
    pesticide dietary tolerances over the next 10 years--an enormous task
    that will require comprehensive JR-4 support. Together with USDA-ARS
    funding, this would increase JR-4 funding to $12.8 million for fiscal
    year 1999.
        The JR-4 program has achieved unparalleled success in facilitating
    the registration of minor-use crop protection tools, including big-
    pesticides and other reduced-risk pesticides. While most JR-4 projects
    focus on minor-use food crops, the program to date has generated
    crucial data supporting uses of most products registered for nursery
    and greenhouse use. Private industry resources are also leveraging the
    program's successes. For example, ANLA led a successful effort in 1996
    to raise $20,000 to fund a high level workshop where key nursery and
    floral researchers prioritized production problems and critical
    pesticide registration needs. ANLA's research division, the
    Horticultural Research Institute, as well as the American Floral
    Endowment and the Society of American Florists supported this effort.
                national agricultural statistics service (nass)
        ANLA thanks Congress for funding the very practical and efficient
    Census of Agriculture now under the auspices of the National
    Agricultural Statistics Service (NASS). Not only does the Census of
    Agriculture and related surveys provide environmental horticulture
    statistics unavailable from any other source, these critical surveys
    reduce both government duplication and respondent burdens.
        ANLA supports the proposed $1.4 million in fiscal year 1999 to
    expand the current pesticide use surveys to include the burgeoning
    environmental horticulture industry. ANLA believes strongly that
    regulations need to be science-based, real world solutions to protect
    the environment, valued workers and nursery families. ANLA is concerned
    that in the absence of actual use data, regulators employ overly
    conservative default assumptions to determine pesticide risks and
    application rates.
        ANLA strongly supports expansion of the labor statistics gathering
    of NASS as part of the Horticultural Specialties survey. As the
    industry's single greatest production expense, labor is key to the
    ability to move into the future, while attracting, training and
    retaining employees.
                        economic research service (ers)
        The nursery industry relies heavily upon the agricultural economic
    analyses produced by the Economic Research Service (ERS). In fact, ERS
    is this nation's sole source of such comprehensive nursery industry
    analyses. ANLA deeply appreciates the past support provided by Congress
    for the continued support of economic analyses of the nursery and
    greenhouse industry. Despite this congressional support, ANLA remains
    concerned that ERS may ignore both the congressional support and the
    nursery industry's demonstrated need for continuation of these economic
    analyses. Therefore, ANLA urges Congress to earmark $240,000 in USDA's
    fiscal year 1999 funds and direct ERS to continue conducting its on-
    going economic analyses of the size and scope of the nursery and
    greenhouse industry. ANLA respectfully requests Congress to direct ERS
    to analyze interstate and international trade flows of the nursery
    industry.
                                   conclusion
        In closing, Mr. Chairman, ANLA is mindful of the budget constraints
    faced by this Committee. Yet, we believe that federal funding of the
    kinds of activities supported in our testimony is not only justified,
    but necessary, if the nursery industry is to continue to prosper and
    play its increasingly significant role in this nation's economic
    strength. As in past years, ANLA genuinely appreciates this opportunity
    to present the nursery industry's views regarding USDA's agricultural
    research programs and the Department's annual proposed budget. Thank
    you for your consideration, and we look forward to continuing to work
    with you, Committee members and your staff.
                                     ______

    Prepared Statement of the American Seed Trade Association (ASTA), Corn
                      and Sorghum Basic Research Committee
       strengthening the germplasm base of usa hybrids by enhancing corn
                                   germplasm
                                    summary
        We are requesting $500,000 be appropriated annually for enhancing
    corn germplasm.
        1. Corn is a key resource providing food, industrial uses,
    livestock feed, and export.
        2. Corn production in the U.S. is based on less than 5 percent of
    corn germplasm available in the world. Broadening the germplasm base
    would provide genes to improve yields and protect against new disease,
    insect and environmental stresses. Exotic germplasm would also be a
    source for changes in grain quality being demanded by export markets,
    industrial processors, and other end users.
        3. Most exotic germplasm is unadapted to growing conditions in the
    U.S. This proposal is a joint USDA/ARS, university, and industry effort
    to adapt this material, so that it can be used by commercial breeders
    in the development of new hybrids to meet the demands of the American
    consumer and our foreign markets.
        4. We greatly appreciate the $500,000 previously appropriated for
    this research, beginning in the 1995 federal budget. This funding is
    supporting the two main USDA/ARS locations involved in this research
    (Iowa and North Carolina), as well as USDA/ARS and university locations
    in Delaware, Georgia, Illinois, Iowa, Mississippi, Missouri, New York,
    Tennessee, and Wisconsin. Industry is providing $450,000 in-kind
    support annually for this effort.
        5. The additional appropriation of $500,000 annually would enable
    the Iowa and North Carolina locations to purchase equipment and add
    staff necessary for carrying out this research. It would also provide
    funding for the increased germplasm evaluation and breeding necessary
    to test and enhance the exotic materials available.
                                   background
        Corn is the major crop on the cultivated land of the USA where
    approximately 75 million acres are planted each year. U.S. corn
    production, accounting for about half of the world's annual production,
    adds over $16 billion of value to the American economy as a raw
    material. About 20 percent ($3.2 billion) of this production is
    exported each year, thereby providing a positive contribution to the
    nation's trade balance. Approximately 17 percent of the yearly corn
    crop is industrially refined. A portion of refined products is exported
    resulting in an additional $1.4 billion in export. Through feeding
    livestock, the rest of the crop is processed into meat and dairy
    products that affect everyone in our society. Corn is a key resource
    within our country.
                                    concerns
        All of this production is based on using less than 5 percent of the
    corn germplasm available in the world. Less than 1 percent of our
    commercial corn is of exotic (foreign) origin, and tropical exotic
    germplasm is only a fraction of that. This situation exists because
    private sector corn breeders have generally concentrated on genetically
    narrow based, or elite by elite, sources for their breeding efforts,
    since their use results in getting hybrids to the marketplace faster.
        Traditionally, corn has been treated as a commodity. In recent
    years corn grain users and processors have become more interested in
    the quality characteristics of the grain itself and how this affects
    their business. Since much of the exotic germplasm has undergone
    selection for many indigenous uses (foods, beverages, etc.) by various
    cultures, it seems likely that new grain quality characteristics will
    be found in exotic rather than the narrow-based germplasm now used. A
    small increase in value to the grain, such as 10 cents per bushel,
    would increase its annual value by $800 million for an eight billion
    bushel harvest.\1\
    ---------------------------------------------------------------------------
        \1\ Salhuana, Pollask, Tiffany 1994. Public/Private Collaboration
    Proposed to Strengthen Quality and Production of U.S. Corn through
    Maize Germplasm Enhancement, Diversity Vol. 9, no. 4, 1993/Vol. 10, no.
    1, 1994.
    ---------------------------------------------------------------------------
        Breeders must still be concerned with breeding for higher yields so
    that U.S. corn farmers can remain competitive. Tapping into the broader
    germplasm pool could provide new sources of genes for higher yield and
    other performance traits, such as disease and insect tolerance or
    improved stalk and root strength.
        A further concern with a narrow genetic base is the potential for
    widespread disease or insect damage due to new diseases or insect
    species spreading into U.S. corn growing areas. It is more likely that
    resistance to these dangers would be found in genetically diverse
    exotic germplasm sources than in our breeding material. One major
    benefit would be reduced pesticide use. In addition to protection
    against diseases and insects, these exotic materials provide insurance
    for unforeseen climatic or environmental problems.
        A great deal of excitement has been generated over the new
    techniques of biotechnology, especially over the potential value to the
    corn industry of gene transformation using genetic engineering.
    Research conducted on exotic germplasm could yield many beneficial
    genes that genetic engineers could quickly transfer to commercial
    hybrids.
                                  lamp project
        What would be the source of this exotic germplasm? Over the years,
    collections of corn have been made from farmers' fields and other
    sources all over the world, and are stored in various germplasm banks.
    In 1987, the Latin American Maize Project (LAMP) was initiated to
    evaluate these corn collections (accessions). It was a cooperative
    effort among 12 countries to identify accessions that might provide
    valuable source material for further improvement in hybrid and open-
    pollinated cultivars in the U.S.A. and other areas. Pioneer Hi-Bred
    International gave USDA/ARS $1.5 million to fund the LAMP research.
        Nearly 12,000 maize (corn) germplasm accessions were evaluated. In
    successive stages, the project identified the top 268 accessions. The
    environmental areas of adaptation for these 268 ``elite'' populations
    range from temperate to tropical, and are prime candidates for
    enhancing the U.S.A. corn germplasm base.
                             germplasm enhancement
        Most of this germplasm is unadapted to growing conditions in the
    U.S. and requires genetic enhancement to make it adapted, or able to
    grow and mature in our environmental conditions. Enhancement basically
    means that these exotic materials will be bred with U.S. adapted
    materials and breeders will select progeny that carry the desired
    exotic traits and are also adapted to U.S. growing conditions. This
    will require a concerted long-term breeding approach by corn breeders
    at numerous locations (environments) throughout the U.S. Only after
    this process of enhancement will these exotic materials be ready to
    enter commercial corn breeding channels and be effectively utilized by
    a broad cross-section of the industry in the development of new hybrids
    for farmers and corn users.
        The total process of enhancement is too large and long-term for
    public institutions and/or seed companies to accomplish individually.
    An ambitious task of this nature can only be completed through a
    coordinated and cooperative effort between the USDA/ARS, land-grant
    universities, and industry.
        The Corn and Sorghum Basic Research Committee of the American Seed
    Trade Association has been concerned that enhancement of this exotic
    germplasm would proceed. The Committee consists of representatives from
    about 30 companies actively involved in the corn and sorghum seed
    industry, and at the committee's request, Dr. Linda Pollak, Research
    Geneticist, USDA-ARS, et al., developed a proposal for enhancing exotic
    germplasm starting with materials which will include the elite LAMP
    accessions as noted above. This proposal has developed into the U.S.
    GEM (Germplasm Enhancement of Maize) Project.
                            u.s. gem project outline
        Since this project serves a national need, the primary effort and
    direction has come from the USDA/ARS. Two permanent USDA/ARS locations
    are being used as primary sites for enhancement breeding and
    coordination. One is at Ames, Iowa, where the USDA/ARS currently
    conducts corn evaluation and enhancement efforts. Dr. Linda Pollak,
    Research Geneticist, is located there. Dr. Pollak was the Principal
    Investigator of the U.S.A. for LAMP, and is the lead scientist for this
    project.
        The other permanent site is the USDA/ARS location in North
    Carolina. This site has responsibility for initial evaluation and
    conversion of the tropical materials. Tropical corn populations
    normally will not reach maturity in the Corn Belt, but will produce
    seed in North Carolina. After initial enhancement of the tropical
    materials in the South, they will be sent to Ames for further
    enhancement and testing in Corn Belt conditions. Dr. Marty Carson is in
    charge of this program.
        A number of corn researchers at various land-grant universities and
    other ARS locations are also taking part in the enhancement and
    evaluation of this exotic germplasm. This cooperative effort is very
    important and serves not only as a source of improved germplasm but
    also provides excellent training for future plant scientists.
        Industry is also involved. A total of 21 companies have pledged
    research nursery and yield trial plots to be used in this breeding
    effort. This in-kind support is valued at $450,00 per year.
        An important component of the project is an annual meeting of all
    cooperators to evaluate progress and plan strategies. An information
    network has been established to keep everyone up-to-date. A U.S. GEM
    Technical Steering Group consisting of members from USDA/ARS,
    University, and Industry has been formed for guidance and
    administration of this cooperative effort.
        This germplasm enhancement project is public and is open to all
    public sector institutions as well as private seed companies.
    Information will be freely available and publicly developed materials
    will remain in the public domain, accessible to all.
                           accomplishments in 1996-97
        Following is a description of accomplishments and research
    conducted at various locations using 1996-7 funding.
        Ames, Iowa.--Priorities for the corn enhancement work at this
    location are overall project coordination, data analysis and
    management, management and release of enhanced germplasm, analysis of
    materials for value-added traits, and as one of the many breeding
    sites. In cooperation with Iowa State University, a postdoctoral food
    technologist is working on the utility of unique oils obtained from GEM
    accessions and a graduate student is studying environmental effects on
    starch quality measurements.
        The laboratory is continuing to evaluate oil, starch, and protein
    in the exotic accessions and in the breeding populations made up of
    exotic materials crossed to proprietary corn belt inbreds. In results
    from 1996, a line from one breeding cross measured total protein of 16
    percent (corn belt germplasm has 10 percent) and total oil level of 6
    percent (corn belt is 4 percent). It is extremely unique to find
    increased levels for both of these traits in the same line, and it is
    potentially very useful for food and feed applications. In 1997, lines
    were identified with unique starch characteristics, which may be
    beneficial for human food products.
        GEM's World Wide Web site opened on July 15, 1996. From this site
    cooperators can obtain the latest data from yield tests, disease and
    insect screening, and value-added trait research, as well as news and
    upcoming events.
        Raleigh, North Carolina.--The focus of this location is twofold.
    One priority is to develop enhanced material adapted to the Southern
    U.S. corn growing conditions. The second is to be a stepping stone for
    adapting tropical material to Midwest conditions.
        Breeding populations were tested for resistance to various leaf
    diseases and stalk rots. Selections were made for improved material
    with resistance to these diseases as well as for improved yield,
    standability, and adaptation to North Carolina conditions. For example,
    in 1997 significant resistance to Fusarium ear rot was found in 4 GEM
    breeding populations. Resistance to Aspergillus ear rot was also found
    in 2 of these same 4 populations. Hybrids of about 130 advanced
    breeding lines developed from tropical x elite breeding populations
    outyielded the mean of commercial check hybrids.
        Other public cooperators conducted evaluations in 1997 as follows:
    Drought resistance in Delaware. Yield data accumulation in Georgia.
    Grain yield, disease resistance and starch content in Illinois. Corn
    rootworm and Fusarium ear rot resistance in Iowa. Grain physical
    properties, wet milling properties, starch functionality, and other
    value added grain traits in Iowa. Resistance to aflatoxin in
    Mississippi. Resistance to corn rootworm and corn borer in Missouri.
    Resistance to anthracnose stalk rot in New York. Grain yield tests in
    Tennessee. Evaluation of silage quality in Wisconsin.
        Demonstration nurseries were planted at Iowa and North Carolina for
    viewing by cooperators. Fall field days were held at Iowa and
    Wisconsin.
        In 1997, private cooperators continued the breeding and adaption of
    about 15 accessions following the protocol developed by the GEM
    Technical Steering Group. Companies increased their nursery and yield
    trial in-kind support by approximately 25 percent in 1996.
                                research in 1998
        Research will continue at the various USDA/ARS, university, and
    company locations similar to 1997.
                 effects of increased funding beginning in 1999
        Appropriation of the additional $500,000 annually would provide
    funds to increase research in the following ways:
        Ames, Iowa.--The corn genome is being mapped by researchers in the
    corn genome project. This DNA information is only useful if it is
    associated with traits of interest. Many unique traits of interest,
    such as value-added traits, are being discovered in the GEM materials.
    Additional funding will add personnel and resources to speed up the
    discovery of value-added traits and help tie these two areas of
    research together. The increase in winter nursery funding would allow
    the Ames location to support the public breeding activities and allow
    public materials to reach commercial breeding programs in half the
    time. A small amount of money would be available to help public
    cooperators to attend the annual meeting and field day.
        Raleigh, North Carolina.--This location has a number of equipment
    needs, such as a seed storage unit, because current facilities are
    filled to capacity. A technician would be added to handle the expanded
    field work. Current resources restrict testing and development work to
    relatively few breeding populations. With the increased funding, the
    number of breeding crosses could be increased, greatly speeding up the
    introduction of adapted GEM material into private and public breeding
    programs. Additional funding would provide for yield trial testing at
    more locations and more extensive disease and insect resistance
    screening, greatly increasing the precision in selecting materials that
    are high yielding and have high levels of pest resistance.
        Other Public Cooperators.--The increase in funding for public
    cooperators (to $202,000 per year in the third fiscal year) would allow
    for full evaluation and development of new breeding materials improved
    for productivity as well as disease and insect resistance and value-
    added traits. It would also provide for the use of biotechnology tools
    in this development work. Most public cooperators are willing to
    participate, but cannot unless they have at least partial funding.
    There are approximately 30 public cooperators now, and as the project
    develops we are likely to have more.
                                   conclusion
        Corn hybrids in the U.S. have a very narrow genetic base, utilizing
    only a small percentage of all available corn germplasm. This greatly
    increases vulnerability to unforeseen pest problems, and may lead to an
    eventual yield cap. Exotic corn germplasm could provide genes for
    resistance to pest problems and for increased yields. These exotic
    materials may also contain quality traits to meet new market demands.
    This will help ensure the U.S. maintains its world leadership in
    providing the best raw materials to meet the demand for the production
    of meat, eggs, milk, and many other food and industrial uses.
        LAMP project identified the top 268 corn accessions from among
    12,000 populations evaluated. The present proposal represents a joint
    USDA/ARS, land-grant university, and industry effort to enhance these
    and other exotic accessions so that they can enter commercial corn
    breeding programs. The result of this cooperation will be an increase
    in the productivity, quality, and marketability of hybrid corn in the
    U.S. and for export, benefiting the farmer, the feed and processing
    industries, and the consumer.
        Therefore, the ASTA Corn and Sorghum Basic Research Committee
    hereby requests the 106th Congress of the United States to add funding
    of $500,000 (in addition to the $500,000 appropriated initially in
    1997, for a total of $1,000,000) annually for this corn germplasm
    enhancement project beginning with the 1999 federal budget.
                                 budget summary
        This is a summary of the operational and capital budgets for 1998,
    1999, and 2000; 2000 will only be operational. The budget is divided
    into the Corn Belt Location and corresponds to Ames, Iowa (USDA-ARS)
    and the cooperators in the Corn Belt area. The Southern Location
    corresponds with Raleigh, North Carolina (USDA-ARS) and the cooperators
    in the states in the South. For a complete copy of the budget, please
    contact Dr. David Harper, Holden's Foundation Seeds LLC, Box 839,
    Williamsburg, IA 52361 or 319-668-1100.

    ----------------------------------------------------------------------------------------------------------------
                                  Items                                    1998            1999            2000
    ----------------------------------------------------------------------------------------------------------------
    Corn Belt location:
        Board reductions............................................         $18,500         $19,100         $19,800
        Personnel...................................................         143,500         252,200         262,600
        Office/field................................................          43,600          91,000          91,000
        Capital equipment...........................................          34,400          68,700          57,600
        Specific agreements for public cooperators \1\..............          60,000         169,000         169,000
                                                                     -----------------------------------------------
          Total for Corn Belt location..............................         300,000         600,000         600,000
                                                                     ===============================================
    Southern location:
        Personnel...................................................          90,000         123,000         126,000
        Office/field................................................          25,100          53,500          54.000
        Capital equipment                                                      4,900          68,000          68,000
        Specific agreements for public cooperators \1\..............          30,000          55,500          52,000
                                                                     -----------------------------------------------
          Total for Southern location...............................         150,000         300,000         300,000
                                                                     ===============================================
    Summary:
        Corn States location........................................         300,000         600,000         600,000
        Southern location...........................................         150,000         300,000         300,000
        USDA/ARS overhead...........................................          50,000         100,000         100,000
                                                                     -----------------------------------------------
          Grand total...............................................         500,000       1,000,000       1,000,000
    ----------------------------------------------------------------------------------------------------------------
    \1\ Specific Agreements for Public Cooperators: Agreements for public cooperation can be made with universities
      and ARS scientists in many locations which could include the following states: Delaware, Ohio, Pennsylvania,
      Indiana, Illinois, Wisconsin, Kentucky, Missouri, New York, Iowa, Michigan, Minnesota, North Dakota, South
      Dakota, Nebraska, North Carolina, Mississippi, Georgia, Louisiana, Texas and Tennessee. Research at these
      locations would include selection for disease and insect resistance, evaluation for value added traits, and
      yield trials.

                                     ______

      Prepared Statement of Lorin Moench, Jr., President, American Sheep
                              Industry Association
        The American Sheep Industry Association (ASI) is a federation of
    state member associations representing the nearly 80,000 sheep
    producers in the United States. The sheep industry views numerous
    agencies and programs of the U.S. Department of Agriculture as
    important to lamb and wool production. Sheep industry priorities
    include rebuilding and strengthening our infrastructure, critical
    predator control activities, maintaining and expanding research
    capabilities and animal health efforts.
        The rapid changes that have occurred in the domestic sheep industry
    and continue to take place put further emphasis on the importance of
    adequately funding the U.S. Department of Agriculture programs
    important to lamb and wool producers.
        We appreciate this opportunity to comment on those portions of the
    USDA fiscal year 1999 budget.
               animal and plant health inspection service (aphis)
        The mission of APHIS, ``to protect U.S. animal and plant resources
    from diseases and pests,'' is very important to the sheep industry of
    the nation.
    Wildlife Services
        The Wildlife Services (WS) program of USDA-APHIS is vital to the
    economic survival of the sheep industry. The value of sheep and lambs
    lost to predators and predator control expenses are second only to feed
    in sheep production costs. Costs associated with predation now exceed
    our industry's veterinary costs, labor, and transportation costs.
        The sheep industry adamantly disagrees with the Administration's
    budget proposal to reduce the Wildlife Services operations budget $3.4
    million and to decrease methods development funding $829,000. The
    proposed $4.3 million funding cut for programs and research will not
    only severely impact tens of thousands of agricultural producers, but
    will endanger the health and safety of millions on Americans,
    jeopardize a number of endangered species and other wildlife programs,
    and carry negative international implications.
        The Agricultural Statistics Service estimates that two-thirds of
    the nation's farms suffer some form of wildlife damage each year. Most
    recent loss surveys found that over 520,000 head of sheep, 117,000 head
    of cattle and 35.4 million bushels of corn were lost to wildlife
    damage. The president's budget reduction will not only reduce or
    eliminate efforts to control livestock losses in a number of states,
    buts also threatens efforts to control aquaculture losses to migratory
    birds in Arkansas, Alabama and Pennsylvania, rice losses in Louisiana,
    sunflower, corn and other small grains losses in North Dakota and Iowa.
    Losses of federal cooperative dollars is also expected to result in
    corresponding reductions in state and local cooperative dollars,
    further reducing the effectiveness of Wildlife Services.
        Agriculture is not the only sector of the public affected by the
    proposed Wildlife Services budget cut. Urban America makes as many
    requests on WS for protection of private property and human health and
    safety as agriculture. With over 2,000 commercial jets hitting wildlife
    each year, airport safety is also heavily dependent on WS. The
    president's budget needlessly threatens to reduce efforts to protect
    airlines and passenger safety in states such as Florida, Pennsylvania,
    Iowa, Kansas and Utah. The president's budget recommendations to
    eliminate $800,000 in rabies control funding for New York, Vermont,
    Ohio and Texas also places needless risk on human health and safety.
        Due to its cooperative nature, the Wildlife Services program
    continues to be the most cost effective and efficient program within
    the U.S. Department of Agriculture in managing the public's wildlife
    for purposes of reducing wildlife damage to private property and
    protecting human health and safety. Wildlife Services is one of the few
    federal programs that has been consistently at or above the 50-50
    federal to cooperative funding ratios. The president's recommendation
    that a 50-50 ratio of cooperator funding be applied at the states and
    local level has no justification in statute, regulation or policy.
    Efforts by the administration to micromanage this successful
    cooperative program will only serve to take away needed flexibility of
    WS managers and will inhibit Wildlife Service's ability to accomplish
    its mission as mandated by the Animal Damage Control Act, NEPA and the
    Government Performance and Results Act.
        Although the funding for Wildlife Services has seen slight
    increases in the past, most increases have been Congressional
    Directives aimed at specific projects. Inflation has slowly eaten away
    at funds used to support general operations programs. The sheep
    industry strongly supports the funding for fiscal year 1999 Wildlife
    Services operations be set at $33,997,600, an increase of $5,511,600
    over the fiscal year 1998 level.
        Aerial hunting is one of Wildlife Service's most efficient and cost
    effective core programs. Past appropriations have not kept pace with
    inflationary effects which have almost double the cost of flying since
    1980. As the budget availability for aerial hunting has decreased,
    Wildlife Service's ability to oversee safety inspections and to conduct
    annual certifications on all contract aircraft's has also decreased. A
    total of $3,182,500 is needed to offset inflationary effects on the
    aerial program and to provide better safety, training and inspection
    for Wildlife Service pilots.
        The United States Fish and Wildlife Service continues to place
    increased budgetary demands on Wildlife Services in terms of endangered
    species protection and management. With record numbers of wolves in
    Minnesota this past year, also came record numbers of farms where
    livestock were verified killed by wolves. Wolf predation on livestock
    in Montana, Wyoming and Idaho doubled in 1997 vs. 1996. An additional
    $285,000 over fiscal year 1998 levels of funding is needed to manage
    rapidly expanding wolf populations.
        A total of $700,000 is needed to continue implementing the new
    Management Information Reporting system. Implementation is expected to
    cost $6 to $8 million over a five year period and is necessary to
    replace Wildlife Service' outdated system which is to obsolete to
    handle current amounts of information. The new system is necessary for
    NEPA compliance and to provide trend information and information on
    resources protected, etc. as required by the Government Performance and
    Results Act.
        As stated in the president's budget, the National Wildlife Research
    Center (NWRC) is the only research facility in the world devoted
    exclusively to studying and developing socially acceptable methods on
    managing wildlife damage and related human health and safety issues.
    The president's budget, however, is inaccurate in its statements that
    the NWRC cannot accommodate much of the specialized requirements of its
    methods development programs within current facilities and therefore
    requests a $479,000 decrease. These monies are being fully utilized for
    research in areas of airport safety, human health and safety, predator
    management and the protection of aquaculture, small grains and forests.
    Facilities in Olympia, Washington; Starkville, Mississippi;
    Gainesville, Florida; Logan, Utah and others are fully capable of
    conducting this research until the Ft. Collins, Colorado facility is
    complete. The $479,000 proposed budget cut by the president will only
    serve to cripple or close existing facilities.
        The sheep industry urges Congress to provide the necessary $20.5
    million needed to complete the state-of-the-art facilities and Ft.
    Collins, Colorado. Future improvement of humane and effective wildlife
    damage management programs depends on identification and development of
    more effective control methods.
        The president's budget also carries negative international
    implications. After five years of negotiation, the United States has
    reached agreement with the European Union (EU) to test and develop
    scientific information in relationship too safe and humane trapping
    standards. Not providing the necessary funding to conduct this research
    will cause the United States to renege on its international promises to
    the EU. The sheep industry urges Congress to add $450,000 to the budget
    for this very critical wildlife management, economic and trade issue.
    Scrapie
        Adequate funding of the Voluntary Scrapie Flock Certification
    Program and other scrapie control measures through USDA-APHIS is of
    critical importance to the sheep industry, as well as all segments of
    the livestock industries. ASI appreciates this Subcommittee's efforts
    in recognizing the seriousness of this devastating disease and the real
    need for control and eradication. ASI and others have urged APHIS to
    step up its efforts in scrapie control/eradication through a more
    aggressive regulatory approach. We request that the scrapie control/
    eradication program be funded more adequately in fiscal year 1999 as
    requested by the administration.
        No country has, to date, conducted an active surveillance study of
    scrapie. ASI has requested that APHIS conduct a national surveillance
    study of scrapie since our industry's ability to compete in the market
    place is encumbered by both existence of scrapie in our flock and the
    lack of quantitative data about the disease. ASI has committed to
    investing producer funds to help cover laboratory costs associated with
    the study. Additional appropriations up to $600,000 are supported by
    the industry to insure completion of this critical surveillance effort.
                         agricultural marketing service
    Lamb Market Information and Price Discovery Systems
        The sheep industry strongly supports the fiscal year 1999 budget of
    $22,166,00 for Market News of USDA-Agricultural Marketing Service. The
    increased appropriations of $820,000 is critical for the agency to
    conduct the increased international market reporting and activities
    associated with the concentration in the livestock industry. The sheep
    industry has requested a review and update to the lamb and lamb meat
    market reporting system in the U.S. and inclusion of imported lamb
    product prices in the market news which brings added importance to
    increasing funds for the Foreign Agricultural Service (FAS).
        The sheep industry participates in FAS programs such as the Market
    Access Program (MAP) and the Foreign Market Development Program. ASI
    strongly supports continued appropriations at the fiscal year 1998
    level for these critical Foreign Agricultural Service programs. ASI is
    the cooperator for American wool and sheep genetics and has achieved
    remarkable success in increasing exports of domestic wool, breeding
    sheep and semen. Wool exports have increased 170 percent over the last
    five years with the aid of this funding. American lamb sales also
    benefit from the Foreign Market Development Program though increased
    international efforts.
                 natural resources conservation service (nrcs)
        ASI urges increased appropriations for the range programs of the
    Soil Conservation Service to benefit the private range and pasture
    lands of the United States with conservation assistance. We support the
    budget item and recommend an increased level for the Grazing Lands
    Conservation Initiative which ASI has worked with, along with other
    livestock and range management organizations, to address this important
    effort for rangelands in the U.S.
                       research, education and economics
        The sheep industry recognizes that it must be globally competitive,
    profitable and sustainable as a user of and contributor to our natural
    resource base; that production and processing practices must be
    environmentally sound, socially acceptable and must contribute to the
    goals and overall well-being of families and communities. It is
    therefore essential that an integrated systems approach be used,
    focusing on problem-oriented programs utilizing interdisciplinary team
    efforts. These efforts should be applied both to plan and to conduct
    research on complex problems as well as to apply problem-solving
    technologies on farms and ranches through quality educational programs.
    We are disappointed in the small increases requested by the
    administration for agricultural research and education funding. In
    order for U.S. Agriculture to be globally competitive and
    environmentally sound in the future we must invest in the discovery of
    new technologies for producing, processing, and marketing food. We urge
    the subcommittee to give send a strong message supporting agricultural
    research and education increases.
    Agricultural Research Service
        ASI recommends the continued support and expansion of the scrapie/
    BSE and other TSE research initiatives at Pullman, Washington and Ames,
    Iowa as requested by the administration. The collaborative research
    that is ongoing at these locations is recognized world wide and will be
    key in finding solutions to these disease problems. We believe
    regulatory initiatives to prevent, control, and eradicate TSE's in our
    livestock populations will work when based on sound research
    information. We also strongly support the administration's request of
    $6 million for emerging diseases and we urge significant appropriations
    for the animal component of this line item.
      cooperative state research education and extension service (csrees)
        We strongly support the National Research Initiative (NRI) and we
    appreciate the Administration's request of $130 million. The
    competitive grants awarded under its program are for the highest
    quality research addressing the goals and objectives of FAIR 1995.
        The ongoing research in wool is critically important to the sheep
    industry. ASI supports continued funding of $212,000 for fiscal year
    1998 through the special grants program of the CSREES.
        We urge the subcommittee to appropriate both intramural and
    extramural funding for research to measure the well being of livestock.
    Animal well being is an emotional issue; in order to consider new
    management strategies for the enhancement of animals, we need improved
    methods of measurement.
        The industry greatly appreciates this opportunity to discuss these
    programs and appropriations important to the sheep industry.
                                     ______

      Prepared Statement of the American Society for Nutritional Sciences
                                     (ASNS)
        The American Society for Nutritional Sciences (ASNS) is the
    principal professional organization of nutrition research scientists in
    the United States representing 3,500 members whose purpose is to
    develop and extend the knowledge and application of nutrition science.
    Our members include scientists involved in human as well as animal
    nutrition research. Our members hold positions in virtually every land
    grant and private institution engaged in nutrition-related research in
    the United States as well as industrial enterprises conducting
    nutrition and food related research.
                    the need for nutrition-related research
        The need for nutrition science and research is critical within the
    USDA. Nutrition and agricultural research are areas that impact the
    constituents of every congressional district in the nation. New
    technologies are demanded to reduce the likelihood of pathogen
    transmission by food, to improve the quality of processed foods, and to
    deliver greater nutritional value in foods. Additionally the economic
    impact on society in healthcare costs produced by advances in nutrition
    research is significant in the number of dollars saved by the American
    taxpayer. As health costs continue to rise, it is imperative that our
    medical practices take a preventive approach. This requires a thorough
    understanding of the role of nutrients in foods in preventing chronic
    illnesses such as heart disease, cancer and diabetes.
        Research in the areas of food safety and human nutrition has paid-
    off with considerable benefits to society. The USDA has a unique role
    in the area of nutrition research, particularly as it applies to human
    nutrition. For example, although there is a serious and obvious
    commitment to the funding of disease-related research within the
    National Institutes of Health, issues important to the basic mechanisms
    of nutrient function and the safety of the food supply have
    traditionally been the purview of USDA funded research. Most of the
    recent work on nutrient content and availability in various foods has
    come from USDA-NRI supported research. From a consumer perspective, it
    is this type of information that is often the most useful. It is
    clearly an important extension of the commodity-oriented research
    carried out by our land grant universities. And from the perspective of
    nutrition, the goal of this research often achieves optimal health in
    the context of using given commodities as part of our diets.
        ASNS is aware that nutrition research is among those areas of
    public policy that has received bipartisan support, and we hope that
    support will continue. Nutrition scientists are grateful to those
    members of both parties who have supported scientific research. This
    investment increases knowledge that ensures a healthy and productive
    society.
        We need to continue to invest in research as greater challenges
    face us in the 21st century. Increasing populations, international
    economic competitiveness, improving the environment and minimizing
    healthcare costs through disease prevention are all areas that will
    continue to demand solutions for the future. These solutions might
    include advances in the understanding of the genetic basis of disease
    and the genetic basis of nutrient requirements for optimal health,
    which will require greater understanding of how nutrition and dietary
    information can be used for disease prevention in at-risk populations.
    In recent years nutrition research has led to nutritionally improved
    school lunches, implemented changes in safety requirements, and
    increased awareness for pregnant women, children and the elderly.
             significant nutrition-related research accomplishments
    Zinc Intake Important to Maintaining Good Health
        National surveys have shown that in the U.S. half of the adults
    have inadequate intakes of zinc. Inadequate intakes of zinc can make
    one more susceptible to infection, poor wound healing and skin lesions.
    It is not known how much zinc is needed to maintain good health. In a
    study funded by USDA's NRI, investigators developed a model of zinc
    kinetics which shows the relationship between endogenous excretion,
    absorption, pool sizes and dietary zinc intakes. They were able to show
    that the size and turnover rates of rapidly equilibrating zinc pools
    are specific indicators of zinc status and can be used to assess the
    prevalence of low zinc in a population. Future studies will entail
    developing zinc status tests that can be used in field settings.
    Dietary Energy Requirements in Children and Obesity
        Data from National health surveys have shown that pediatric obesity
    is increasing in the U.S. This is a critical health concern because
    obesity in childhood increases the risk for obesity in adulthood and
    the many diseases associated with obesity. It has been shown that 26-41
    percent of obese preschool children are obese as adults. Diet is
    considered to be an important variable, especially dietary fat intake.
    In a study supported by USDA's NRI, investigators showed that maternal
    obesity influences dietary fat intake in children and in boys there was
    a correlation between their fat intake and amount of body fat.
    Researchers have been able to show that physical activity (hrs/day) is
    more related to body fatness than to energy expenditure (kcal/day).
    Total energy expenditure is influenced by season and geographic
    location independent of differences in body composition. Gender
    influences energy expenditure through its effect on resting energy
    expenditure and this effect is consistent among several ethnic groups
    tested. They have been able to provide and validate new tools for
    assessment of diet, energy expenditure and body composition in growing
    children, which can be used in the development of new guidelines for
    dietary energy needs in children.
    Vitamin B-6 Kinetics in Women
        Vitamin B-6 is required for numerous metabolic functions. Lower
    serum levels of vitamin B-6 have been found in pregnant women. It is
    still unclear what is a good method for assessing vitamin B-6 status in
    people, especially in women during pregnancy and lactation, a time of
    stress. Pyridoxal, pyridoxamine and pyridoxine are the forms of vitamin
    B-6 found in the body and these metabolites provide critical
    information about vitamin B-6 status. In a study supported by USDA NRI,
    investigators examined the appearance of a stable isotope given to
    women in pyridoxic acid (important vitamin B-6 metabolite) in urine and
    in pyridoxal in milk of lactating women. They have shown that lactation
    may have a greater influence on vitamin B-6 metabolism than pregnancy.
    The researchers have also shown that using standard clinical assays for
    alkaline phosphatase and phosphorus may be used to estimate pyridoxine
    phosphate phosphatase activity in undiluted plasma, an indicator of
    vitamin B-6 status.
    Vitamin A Critical to Embryonic Development
        Numerous studies have shown that adequate vitamin A is critical for
    normal embryonic and fetal development in humans. Maternal
    insufficiency of vitamin A during pregnancy results in several
    abnormalities and death of the fetus. In a study supported by USDA's
    NRI, the investigators used an avian model to look at the physiological
    function of vitamin A in early development. In vitamin A-deficient
    embryos no retinoic acid (metabolite of vitamin A) was found. However,
    normal early embryos were shown to be capable of processing vitamin A.
    Using molecular biology techniques, developmental patterns between
    normal and vitamin A-deficient embryos were compared. These studies
    showed a role for vitamin A in heart, central nervous system and
    vascular system development. In addition, the researchers were able to
    identify a valuable marker (retinoic acid receptor beta), which is
    vitamin A status dependent, for vitamin A-dependent developmental
    events. It is widely accepted that very early developmental events are
    similar across species, thus the finding of this research is relevant
    to human embryonic development, which could lead to a scientific basis
    for evaluating vitamin A nutrition in humans.
                     research funding mechanisms and issues
    Competitive Grants
        A competitive system for allocating government research funds is
    the most effective and efficient mechanism for focusing efforts on
    cutting edge research aimed at improving the health of the American
    people. Competitive grants provides the most effective, efficient and
    economic return to the public. ASNS strongly supports the competitive
    grants process as reflected in the National Research Initiative and
    believes that an open, merit and peer review process, applied as
    extensively as possible throughout the research system, is the
    preferred way to distribute research funds among qualified scientists
    and to support the most meritorious new concepts.
    Special Grants
        ASNS strongly believes that the best research results come from
    research that is peer reviewed. That is why researchers funded by
    federal agencies, such as the NIH and the NSF, that award grants on
    merit have made such great progress. There is a danger that special
    grants and earmarked research funds from USDA may be awarded on the
    basis of politics rather than merit, priority or research need.
    Therefore, the integrity of the research system and agricultural
    science may be eroded. Last year special grants were appropriated at
    $66 million even though the Administration's request for this year was
    just over half of that figure. We recognize that there is pressure to
    maintain these special grants. Special grants, however, do not always
    make for the best science or good use of scientific expertise. While
    special grants have their place to address emergency needs of national
    priority such as food safety, they may also be used to address research
    that is not deemed of the highest priority or merit. Thus, the
    proportion of special grants in comparison to the total research budget
    at USDA should be decreased.
      initiative for future agriculture and food systems in the research,
                 extension, and education reauthorization bill
        The Agricultural Research, Extension, and Education Reform Act,
    which has been agreed upon in conference, and still pending in the
    Senate (4/29/98) includes an Initiative that would create new mandatory
    spending that provides $600 million for funding competitively-awarded
    research programs at USDA over a five year period. Priority mission
    areas to be addressed in the first year are food genome, food safety,
    food technology and human nutrition; new and alternative uses and
    production of agricultural commodities and products; agricultural
    biotechnology; and natural resource management. The Initiative also
    includes provisions that allow merit/peer review and lets those who
    benefit from agricultural research provide input about the priority
    setting process. ASNS supports this Initiative and urges members of
    this subcommittee to support the bill when it comes to the Senate
    floor.
                               animal welfare act
        Research using animals has been crucial to virtually every advance
    in medicine in the past century. Agents for control of high blood
    pressure and the management of diabetes, vaccines for the control of
    poliomyelitis and mumps, development of artificial joints and heart-
    lung machines, and many more medical advances have depended on animal
    research.
        USDA's Animal and Plant Health Inspection Service (APHIS) is
    charged by Congress to enforce the Animal Welfare Act (AWA). Under the
    AWA, USDA licenses dealers to buy and sell random-source animals to
    research facilities that are unable to obtain them from municipal
    pounds and shelters. This provides access to a critical supply of
    animals since animals bred specifically for research often lack
    characteristics needed by researchers studying health-related problems.
    Much of their work relies on older, larger, and genetically diverse
    animals.
        ASNS recommends that Congress provide APHIS with adequate funding
    for enforcement of the Animal Welfare Act in fiscal year 1999 so that
    it can continue to ensure compliance with the AWA.
                                closing remarks
        Agriculture has been and will continue to be important to human
    health in terms of food that provides proper nutrition for healthier
    people. As the future challenges us with more complicated diseases,
    research is forced to expand outside the traditional disciplines and
    approaches, such as the work that is being done is plant and animal
    genomics. Transgenic plants and animals offer potential for new
    developments never before thought possible. New approaches must be
    implemented to address new societal concerns. For example, despite our
    hard efforts to plan healthy diets for school children much of this
    food is being wasted. Nutritionists are constantly challenged to
    develop nutrient-balanced meals that will encourage our children to
    choose more healthful foods. New demands to fit busy lifestyles is
    another example. Issues such as product convenience, uniformity of
    products, ease of preparation, ``automatic'' nutrient balancing, and
    packaging are all areas scientists must address. Research in areas of
    how our food is produced, pesticide usage, animal care and food
    handling issues also present demands to our scientists. These demands
    and opportunities must be answered in a way that sustains or enhances
    our quality of life. Although greater challenges lie ahead,
    agricultural research funding continues to be stagnant.
        It is for these reasons that ASNS recommends to the Committee an
    increase in funding for USDA's National Research Initiative Competitive
    Grants Program from $97 million to $130 million. This amount reflects
    our view that the increase requested for the competitive grants program
    is an investment which will lead to a more balanced and productive
    research system that is vital to our national interest.
                                     ______

    Prepared Statement of Carolyn Cheney, Chairman, American Sugar Alliance
        Thank you for the opportunity to submit testimony for this
    important hearing. I am Carolyn Cheney, Washington Representative for
    the Sugar Cane Growers Cooperative of Florida. I also serve as chairman
    of the American Sugar Alliance, of which my cooperative is a member.
    The ASA is a national coalition of growers, processors, and refiners of
    sugarbeets, sugarcane, and corn for sweetener. I am proud to present
    the views not only of the Sugar Cane Growers Cooperative of Florida,
    but also of the American Sugar Alliance.
                                    summary
        The U.S. sugar industry has long endorsed the goal of global free
    trade because we are efficient by world standards and would welcome the
    opportunity to compete on a genuine level playing field. Until we
    achieve that free trade goal, however, we must retain at least the
    minimal, transitional sugar policy now in place to prevent foreign
    subsidized, dump market sugar from unfairly displacing efficient
    American producers. This policy was substantially modified by Congress
    in the 1996 Farm Bill, but remains highly beneficial to American
    taxpayers and consumers.
        Despite its free trade goal, however, the sugar industry has some
    serious concerns about the structure of future multilateral or regional
    trade agreements.
        Multilaterally, we are concerned that, while U.S. agriculture
    unilaterally far surpassed its Uruguay Round commitments through huge
    government cutbacks in the 1996 Farm Bill, many foreign countries have
    yet to even minimally comply with their Uruguay Round commitments.
        Regionally, we are facing serious problems with both Canada and
    Mexico. Canada is exploiting a loophole to circumvent the U.S. tariff-
    rate quota for sugar and threaten the no-cost operation of U.S. sugar
    policy. Mexico, three years after the NAFTA went into effect, is
    calling into question the validity of special sugar provisions to which
    it agreed before the NAFTA was voted upon and approved.
        American sugar farmers want free trade. But we have trouble moving
    further in that direction when past free trade agreements are being
    ignored, or circumvented, by our trading partners, to the possible
    detriment of our farmers.
        I would like to provide some background on the United States' role
    and standing in the world sugar economy and on U.S. sugar policy's
    effect on American consumers and taxpayers and discuss the U.S. sugar
    industry's trade policy goal, concerns, and recommendations, with
    special focus on the next round of World Trade Organization (WTO)
    talks.
                   background on u.s. sugar industry, policy
        Size and Competitiveness.--Sugar is grown and processed in 17
    states and 420,000 American jobs, in 40 states, are dependent, directly
    or indirectly, on the production of sugar and corn sweeteners. The
    United States is the world's fourth largest sugar producer, trailing
    only Brazil, India, and China. The European Union (EU), taken
    collectively, is by far the world's largest producing region. It
    benefits from massive production and export subsidy programs.
        Despite some of the world's highest government-imposed costs for
    labor and environmental protections, U.S. sugar producers are among the
    world's most efficient. According to a study released in 1997 by LMC
    International, of Oxford, England, American sugar producers rank 19th
    lowest in cost among 96 producing countries, most of which are
    developing countries. According to LMC, fully two-thirds of the world's
    sugar is produced at a higher cost per pound than in the United States.
        Because of our efficiency, American sugar farmers would welcome the
    opportunity to compete against foreign farmers on a level playing
    field, free of government subsidies.
        Unfortunately, the extreme distortion of the world sugar market
    makes any such free trade competition impossible today.
        World Dump Market.--More than 100 countries produce sugar and the
    governments of all these countries intervene in their sugar markets in
    some way. The most egregious, and most trade distorting, example is the
    EU. The Europeans are higher cost sugar producers than we are but they
    enjoy price supports that are 40 percent higher--high enough to
    generate huge surpluses that are dumped on the world sugar market, for
    whatever price they will bring, through an elaborate system of export
    subsidies.
        World trade in sugar has always been riddled with unfair trading
    practices. These practices have led to the distortion in the so-called
    ``world market'' for sugar. These distortions have led to a disconnect
    between the cost of production and prices on the world sugar market,
    more aptly called a ``dump market''. Indeed, for the period of 1984/85
    through 1994/95, the most recent period for which cost of production
    data are available, the world dump market price averaged just a little
    more than 9 cents per pound raw value, barely half the world average
    production cost of production of over 18 cents.
        Furthermore, its dump nature makes sugar the world's most volatile
    commodity market. Just in the past two decades, world sugar prices have
    soared above 60 cents per pound and plummeted below 3 cents per pound.
    Because it is a relatively thinly traded market, small shifts in supply
    or demand can cause huge changes in price.
        As long as foreign subsidies drive prices on the world market well
    below the global cost of production, the United States must retain some
    border control. This is our only response to the foreign predatory
    pricing practices that threaten the more efficient sugar farmers.
        The reformed sugar policy of the 1996 Farm Bill does retain the
    Secretary of Agriculture's ability to limit imports, and also provides
    a price support mechanism, though only when imports exceed 1.5 million
    short tons. We are currency only 240,000 tons above chat critical
    trigger level.
        Sugar Reforms.--The 1996 Farm Bill drastically changed U.S. sugar
    policy, as it did ocher commodity programs. All American farmers,
    including sugar farmers, now face a less certain future, with less
    government intervention, higher risk, and the prospect of lower prices.
        There were six major reforms to U.S. sugar policy in the 1996 Farm
    Bill:
        1. Marketing allotments eliminated.--With no production controls,
    we now have a domestic free market for sugar. Less efficient producers
    are more likely to go out of business; more efficient producers are
    free to expand. Just two months ago, the only sugarbeet processing
    company in Texas announced it is closing, ending sugarbeet production
    in that state, because of low returns.
        2. Guaranteed minimum price eliminated.--Sugar is the only program
    crop that has lost the guarantee of non-recourse loans and a minimum
    grower price. Sugar producers will have access to non-recourse loans
    only when imports exceed 1.5 million short tons.
        3. Minimum imports effectively raised.--Under the Uruguay Round of
    the GATT, the U.S. was required to import no less than 1.256 million
    tons of sugar per year. The non-recourse loan trigger of 1.5 million
    tons effectively raises our import minimum to that level, a unilateral
    increase of 20 percent.
        4. Marketing tax raised.--The special marketing assessment, or tax,
    sugar producers must pay to the government was raised by 25 percent, to
    1.375 percent of the loan rate on every pound of sugar produced. This
    added burden on sugar farmers will generate about $40 million per year
    for the U.S. Treasury, with all this money earmarked for federal budget
    deficit reduction.
        5. Forfeiture penalty initiated.--To discourage forfeiture of loans
    to the government when non-recourse loans are in effect, and to raise
    even more money for the U.S. Treasury, a 1-cent per pound forfeiture
    penalty was initiated.
        6. Commitment to further reductions.--A provision called ``GATT
    Plus'' requires that the U.S. will reduce its sugar supports further
    if, and when, foreign countries surpass their Uruguay Round
    commitments, as the U.S. has done.
        Effect on Consumers.--American consumers and food and candy
    manufacturers benefit from high-quality, dependable, reasonably priced
    supply of sugar. Consumer prices in the United States are fully 32
    percent below the developed-country average, according to a world
    survey by LMC International. Compared with consumers worldwide, and
    taking varying income levels into account, LMC found that in terms of
    minutes to purchase one pound of sugar, American consumers are the
    second lowest in the world, trailing only the tiny country of
    Singapore.
        Consumer Cost Myths.--The food manufacturer critics of U.S. sugar
    policy repeatedly point to a severely flawed 1993 General Accounting
    Office study that estimated a consumer cost of U.S. sugar policy at
    $1.4 billion per year. Experts at the U.S. Department of Agriculture
    have twice vilified this flawed report, as have noted academicians.
    More recently critics are citing a Public Voice ``update,'' which
    mimicked the faulty methodology of the GAO report and dropped this
    supposed cost to $1.2 billion.
        Both of these absurd studies assumed that: (1) All U.S. sugar needs
    could be supplied from the world dump market at a price well below the
    world average cost of production; (2) We could fulfill our needs from
    this thinly traded, highly volatile world market without that price
    increasing at all; and (3) Every penny of the food manufacturers' and
    retailers' savings from the lower dump market sugar prices would be
    passed along to consumers.
        For reasons I have already outlined, it is clear that if the United
    States destroyed its sugar industry and shifted all its demand for
    sugar to the thinly traded world dump market--which would increase
    demand on that market by about 50 percent--the price would skyrocket,
    as it has in the past with far smaller surges in offtake.
        To address the third and most outrageous of these assumptions, one
    need only examine price behavior of the past year, or the past decade.
    History shows absolutely no passthrough.
        No Passthrough to Consumers.--Since Farm Bill reforms went into
    effect in October 1996, both raw cane and wholesale refined beet sugar
    prices to producers have dropped dramatically, wholesale refined prices
    by a whopping 12 percent. But at the retail level, not even the price
    of sugar on the grocery shelf has dropped at all. And prices for
    sweetened products, such as candy, cereal, ice cream, cakes, and
    cookies have all risen by 1-5 percent. Looking back to price changes
    since 1990, the story remains the same: producer prices down, by 6-10
    percent, but consumer prices for sugar and products up, with product
    prices rising 18-26 percent.
        The disconnect between producer and consumer prices is even more
    pronounced with regard to beverages. Over the past year high fructose
    corn syrup producers have suffered a catastrophic 50 percent drop in
    the price for their product, the principal sweetener used in American
    soft drinks. Have cola consumers seen any benefit? Not a bit.
    Carbonated drink prices are up, by almost 1 percent, over the same
    period.
        Effect on Taxpayers.--Not only has U.S. sugar policy been run at no
    cost to the government since 1985, but since 1991 it has been a revenue
    raiser. The marketing assessment burden on sugar farmers will generate
    an estimated $288 million for federal budget deficit reduction over the
    seven years of the 1996 Farm Bill.
                     u.s. sugar industry's free trade goal
        Because of our competitiveness, with costs of production well below
    the world average, the U.S. sugar industry supports the goal of
    genuine, global free trade in sugar. We cannot compete with foreign
    governments, but we are perfectly willing to compete with foreign
    farmers in a truly free trade environment.
        We were the first U.S. commodity group to endorse the goal of
    completely eliminating government barriers to trade at the outset of
    the Uruguay Round, in 1986. We understand we are the first group to
    endorse this same goal prior to the start of the 1999 multilateral
    trade round. We described our goals and concerns to the Administration
    in a letter last May to Trade Representative Barshefsky and Agriculture
    Secretary Glickman.
        The U.S. sugar industry does not endorse the notion of free trade
    at any cost. The movement toward free trade must be made deliberately
    and rationally, to ensure fairness and to ensure that those of us who
    have a global comparative advantage in sugar production are not
    disadvantaged by allowing distortions, exemptions, or delays for our
    foreign competitors.
        To achieve a free trade transition process that is rational and
    fair, we offer the following thoughts on past agreements, and our
    concerns and recommendations regarding future negotiations.
                          sugar and the uruguay round
        Little Effect on World Sugar Policies.--More than 100 countries
    produce sugar and all have some forms of government intervention.
    Unfortunately, these policies were not significantly changed in the
    Uruguay Round Agreement (URA) of the GATT.
      --The agreement failed to reduce the European Union's lavish price
            support level and requires only a tiny potential drop in their
            massive export subsidies.
      --Developing countries, which dominate world sugar trade, have little
            or no labor and environmental standards for sugar farmers, have
            no minimum import access requirements, and often have high
            import tariffs. Nonetheless, developing countries were put on a
            much slower track for reductions, or were exempted altogether.
      --Important sugar-producing and importing countries such as China and
            the former Soviet republics are not GATT members, and need to
            do nothing.
      --State trading enterprises (STE's) that are prevalent in sugar-
            producing countries such as Australia, Brazil, China, Cuba, and
            India were ignored.
        Furthermore, some countries have not yet even complied with their
    URA commitments.
        U.S. Sugar Surpasses URA Requirements.--The United States is one of
    only about 25 countries that guarantees a portion of its sugar market
    to foreign producers and it has far surpassed is URA commitment on
    import access. The URA required a minimum access of 3-5 percent of
    domestic consumption. The United States accepted a sugar-import minimum
    that amounts to about 12 percent of consumption. In practice, U.S.
    imports the past two years have averaged 24 percent--double the promise
    we made in the GATT, and about six times the global GATT minimum.
        All this sugar imported from 41 countries under the tariff-rate
    quota enters the United States at the U.S. price, and not at the world
    dump price. Virtually all this sugar enters duty free. Just five
    countries (Argentina, Australia, Brazil, Gabon, and Taiwan) that lack
    Generalized System of Preferences (GSP) status pay a duty, and that is
    quite small, about 0.6 cents per pound.
        The United States calculated its above-quota tariff rate in the
    manner dictated by the URA. These tariff levels are totally GATT
    consistent, and are dropping by 15 percent over the 6-year transition
    period, as we promised they would in the Uruguay Round.
                              sugar and the nafta
        Canada.--Sugar trade between the United States and Canada, which
    imports about 90 percent of its sugar needs, was essentially excluded
    from the NAFTA. U.S.-Canadian sugar trade is governed mainly by the
    U.S.-Canada Free Trade Agreement and by the WTO.
        Currently, Canada is threatening the integrity of U.S. sugar policy
    by circumventing the quota with a new product referred to in the trade
    as ``stuffed molasses''--a high-sugar product not currently included in
    U.S. sugar TRQ classifications. USDA has estimated imports of this
    product could add 125,000 tons of non-quota sugar to the U.S. market
    this year. That amount could grow if this loophole is not closed.
        Mexico.--Mexico had been a net importer of sugar for a number of
    years prior to the inception of the NAFTA. Nonetheless, the NAFTA
    provided Mexico with more than three times its traditional access to
    the U.S. sugar market during the first six years, 35 times its
    traditional access in years 7-14, and virtually unlimited access
    thereafter.
        These provisions were negotiated by the U.S. and Mexican
    governments and contained in President Clinton's NAFTA submission to
    the U.S. Congress, which Congress approved in November 1993.
    Nonetheless, Mexico is now undermining the integrity of the NAFTA by
    claiming the sugar provisions are somehow invalid.
                    concerns regarding the 1999 trade round
        Export Subsidies.--The most distorting practice in world
    agricultural trade is export subsidies. In the world sugar market,
    subsidized exports by the EU alone amount to about a fifth of all the
    sugar traded each year.
        Export subsidies provide countries the mechanism to dispose of
    surpluses generated by high internal production subsidies. In the
    absence of export subsidies as a surplus-removal vehicle, countries
    would have to reduce their production supports.
        The Uruguay Round did not significantly reduce the amount of sugar
    sold globally with export subsidies.
        State Trading Enterprises (STE's).--STE's are quasi-governmental,
    or government-tolerated organizations that support domestic producers
    through a variety of monopolistic buyer or seller arrangements,
    marketing quotas, dual-pricing arrangements, and other strategies.
    These practices were ignored in the Uruguay Round, but are,
    unfortunately, common in the world sugar industry. Major producers such
    as Australia, Brazil, China, Cuba, and India have sugar STE's, but were
    not required to make any changes in the Uruguay Round.
        Compliance with Past Agreements.--While the United States has far
    surpassed its Uruguay Round commitments, many other countries have yet
    to even minimally comply. Numerous examples exist where export
    subsidies, internal supports, and import tariffs for many crops are not
    in compliance with GATT. A key example in sugar is the Philippines'
    failure to lower its import tariffs.
        In the NAFTA, Mexican sugar producers are casting doubts on the
    validity of the sugar provisions, three years after the agreement's
    inception, and have slammed the door on imports of U.S. corn sweeteners
    with duties as high as 100 percent.
        Widely Varying Levels of Support.--Unilateral reforms to U.S.
    agriculture policy in the 1996 Farm Bill far exceeded U.S. commitments
    made the year before in the Uruguay Round. Furthermore, developing
    countries, which dominate world agricultural trade and particularly
    sugar trade, were subject to a slower pace of reductions, if any.
        As a result, the United States is way out in front of the rest of
    the world in removing its government from agriculture and has placed
    its farmers in a domestic free market situation. This gap makes
    American farmers uniquely vulnerable to continued subsidies by foreign
    competitors.
        In sugar, two examples come to mind: (1) The EU sugar support price
    is approximately 40 percent higher than the stand-by U.S. support
    price. The Uruguay Round's formula-driven percentage reductions in
    support levels do not reduce the gap between the EU and the U.S. at
    all. (2) Actual U.S. sugar imports the past two years have been nearly
    double the 1.26-million-ton minimum import commitment the U.S. made in
    the Uruguay Round and about six times the URA global minimum.
        It is key that American fanners not be penalized for attempting to
    lead the rest of the world toward free agricultural trade. American
    farmers must be given credit for the reforms they have endured.
        Labor and Environmental Standards.--The gap in government
    standards--and resulting producer costs--between developed and
    developing countries is well documented and immense. In sugar, the gap
    is particularly pronounced because, while the EU and the U.S. are major
    players, production and exports are highly dominated by developing
    countries, especially in the cane sector.
        For example, the LMC International survey of global production
    costs revealed labor costs--per worker, per day--in Malawi, ostensibly
    one of the world's lowest cost producers, to be a mere one-hundredth of
    the average wages paid to sugarcane workers in Hawaii.
        Sugar producers in Florida, and every sugar-producing state in
    America, comply with the world's highest standards for environmental
    protection--at a price. For example, the Everglades Forever Act (EFA)
    mandates that Florida farmers pay at least $232 million in taxes for
    Everglades preservation activities--on top of the many costs borne by
    farmers to monitor and clean water leaving farm areas. In Hawaii,
    extremely high environmental compliance costs have been a factor in
    driving two-thirds of the state's sugar growers out of business in the
    past 10 years. In many developing countries, by contrast, sugar mills
    face no restrictions, or no enforcement of restrictions, on the quality
    of water or air emissions.
        American sugar farmers are proud to raise sugar with the highest
    possible regard for workers and the environment. But we should not be
    penalized in multilateral trade negotiations for providing these costly
    protections. And foreign countries that do not provide such protections
    should not be rewarded.
        If we are attempting to globalize our economy, we should also
    globalize our food safety and worker and environmental protection
    responsibilities.
        Formula Driven Trade Strategy.--For the many reasons I have
    outlined, the rigid, formula-driven, or ``one-size-fits-all,'' approach
    for trade concessions does not work for agriculture in general, or for
    sugar in particular. Pursuing this approach would:
      --Fail to reduce the gap in supports between countries--lowering the
            playing field, but not leveling it;
      --Again give developing countries a free ride;
      --Further diminish our negotiating leverage, which was severely
            reduced through our unilateral concessions in the 1996 Farm
            Bill.
        To date, we have led the world in trade barrier reductions and we
    are disadvantaged as long as the rest of the world fails to follow our
    example.
        We can turn our unilateral concessions to our advantage only if we
    follow a request/offer strategy. Essentially, we provide foreign
    countries the incentive to reduce their government programs by
    promising to reduce ours further when, and only when, they have reduced
    their export subsidies, internal support, import tariffs, and STE or
    similar practices to our levels.
                    recommendations for the 1999 trade round
        To address these concerns, we would like to make four
    recommendations for U.S. negotiators in the next trade round.
        1. Elimination of export subsidies, the most trade distorting of
    all practices, and of state trading enterprises, which were ignored
    previously, must be given top priority in the next trade round.
        2. The United States should not reduce its government programs any
    further until other countries have complied with their Uruguay Round
    commitments and have reduced their programs to our level.
        3. The wide gap in labor and environmental standards between
    developed and developing countries must be taken into account in the
    next trade round, and addressed in a manner that ensures global
    standards rise to developed-country levels, rather than fall to
    developing-country levels.
        4. We can address the huge disparities in supports among nations
    and turn the United States' unilateral concessions to our advantage
    only if we follow a flexible, request/offer type of strategy in the
    next trade round.
                                   conclusion
        In conclusion, Mr. Chairman, thank you for convening this timely
    and important hearing. U.S. agriculture is extremely vulnerable as we
    approach the next trade round. If we negotiate carefully and
    rationally, however, there is enormous potential for responsible
    American producers to compete and prosper in a genuine free trade
    environment, free from the need for government intervention. Thank you
    for the opportunity to participate.
                                     ______

              Prepared Statement of Bernard H. Berne, M.D., Ph.D.
                      appropriation for fda consolidation
        I am a resident of Arlington, Virginia. I serve the Food and Drug
    Administration (FDA) as a Medical Officer and as a reviewer medical
    device approval applications. I am testifying as a private individual.
    I ask your Subcommittee to appropriate $4,000,000 for FDA to study the
    feasibility of consolidating its facilities at the Southeast Federal
    Center or at another site that is within half a mile of a Metro Station
    in the Washington Metropolitan Area.
        The FDA Revitalization Act (Public Law 101-635, Nov. 28, 1990) (104
    Stat. 4583 et seq.) authorizes the Secretary of Health and Human
    Services (the Secretary), in consultation with the Administrator of the
    General Services Administration (GSA), to ``enter into contracts for
    the design, construction, and operation of a consolidated Food and Drug
    Administration administrative and laboratory facility.'' It is
    therefore the responsibility of your Subcommittee to initiate the
    appropriations of funds to permit the Secretary to develop this single
    facility.
        In the past, Treasury, Postal Services, and General Government
    Appropriations Acts have appropriated funds to GSA to construct
    separate consolidated FDA facilities in Montgomery and Prince George's
    Counties, Maryland. Public Law 101-635 did not authorize these
    appropriations, since this law only authorized a single facility and
    only authorized the GSA Administrator to consult with the Secretary
    regarding this project.
        Further, because of a 1995 rescission (Public Law 104-19, July 17,
    1995) and the lack of proper authorization for later appropriations,
    there are presently no funds available to GSA or to FDA to design,
    construct, or operate the consolidated facilities.
        GSA is presently making plans to develop the two new separate
    consolidated facilities for FDA. These facilities would be located far
    from each other in College Park in Prince George's County and in White
    Oak in Montgomery County. If supported by appropriations, GSA's plans
    would negate the goal of Public Law 101-635, which authorizes only a
    single consolidated facility.
        There does not appear be any benefit to the government for FDA to
    consolidate in two locations, rather than in one. This is a wasteful
    type of consolidation that is not cost-effective to the government or
    to the public.
        In 1991, a Conference Committee of the Treasury, Postal Services,
    and General Government Subcommittees (Treasury Subcommittees) of the
    House and Senate Committees on Appropriations created this double
    ``consolidation'' so that the two facilities would serve the political
    jurisdictions represented by certain members of the Treasury
    Subcommittees (House Report 102-234 (Oct. 3, 1991)). This so-called
    ``consolidation'' would benefit neither FDA, the federal government,
    the general public, the federal taxpayer, nor the Washington
    Metropolitan Area.
        The Congressional division of the single consolidated facility and
    the forced suburban locations of the resultant FDA buildings
    contradicted both Public Law 101-635 and an existing Executive Order
    that is designed to strengthen the Nation's central cities. The
    location of the facilities also contravened a long-standing National
    Capital Region Planning Commission goal of retaining and increasing
    federal employment in the District of Columbia. It is difficult to find
    a worse example of ``pork-barrel'' legislation.
        It is therefore necessary for your Subcommittee to review this
    situation and to appropriate funds to the Secretary of Health and Human
    Services (not to the GSA Administrator) to design and construct a
    single consolidated FDA headquarters facility. Your Subcommittee also
    needs to encourage the Secretary to locate the facility at a site that
    conforms with existing Executive Orders and Presidential policies that
    direct the placement of federal facilities in urban areas and in the
    National Capital Region. Previous appropriations acts relating to the
    FDA consolidation have disregarded these Orders and policies.
        Former President Jimmy Carter's Executive Order 12072 (August 19,
    1978, 43 F.R. 36869 (Federal Space Management)) states in Section 1-1
    (Space Acquisition), Subsection 101: ``Federal facilities and Federal
    use of space in urban areas shall serve to strengthen the nation's
    cities and to make them attractive places to live and work. Such
    Federal space shall conserve existing urban resources and encourage the
    development and redevelopment of cities.''
        Section 1-1, Subsection 1-103 of the Executive Order states:
    ``Except where such selection is otherwise prohibited, the process for
    meeting Federal space needs in urban areas shall give first
    consideration to a centralized community business area and adjacent
    areas of similar character, including other specific areas which may be
    recommended by local officials.'' Section 1-3, Subsection 1-301 of the
    Executive Order states: ``The heads of Executive agencies shall . . .
    economize on their use of space.''
        President William J. Clinton has reaffirmed the Administration's
    commitment to Executive Order 12072 in his Executive Order 13006, May
    21, 1996 (61 F.R. 26071). Section 1 (Statement of Policy) states:
    ``Through the Administration's community empowerment initiatives, the
    Federal Government has undertaken various efforts to revitalize our
    central cities, which have historically served as the centers for
    growth and commerce in our metropolitan areas. Accordingly, the
    Administration hereby reaffirms the commitment set forth in Executive
    Order No. 12072 to strengthen our nation's cities by encouraging the
    location of Federal facilities in our central cities.''
        In March, 1997, President Clinton ordered his Cabinet Secretaries
    to assure that federal agencies do not leave the District of Columbia.
    The President considers this action to be an important element in his
    plan to revitalize the District.
        Despite all of the above Executive policies and orders, GSA and FDA
    are presently planning to locate the major consolidated facility on a
    sprawling 130-acre site at White Oak, Maryland. According to GSA's 1996
    Draft Environmental Impact Statement for the project, no building on
    this campus-like site would exceed six stories in height. The campus'
    site plan is clearly not intended to economize on the use of space.
        White Oak is located about a mile outside of the Capital Beltway in
    a suburban area of Montgomery County that is far from any centralized
    business area, is not in any city, and is three miles from the nearest
    Metrorail station. The highways and roads near White Oak are among the
    most congested and dangerous of all traffic arteries in the Washington
    Metropolitan Area.
        If implemented as GSA intends, the Prince George's and Montgomery
    Counties consolidations would relocate about 1000 FDA employees out of
    D.C. and would encourage associated development to occur in the
    District's suburbs, rather than in the District itself. The White Oak
    facility's decentralized location would discourage FDA's visitors and
    employees from using Metrorail and would force nearly all employees to
    drive to work. FDA's consolidations would therefore serve to weaken a
    central city, rather than to strengthen it.
        Your Subcommittee needs to take control of the FDA consolidation
    process and to stop this wasteful type of planning. Appropriations
    legislation should encourage the Secretary to consolidate FDA in a
    compact facility that can fit into the District of Columbia's central
    business area and is convenient to Metrorail.
        It is not difficult to achieve such an economy of space. FDA's
    major headquarters presently occupy an 18-story building (the Parklawn
    Building in Rockville, MD). Further, the National Institutes of Health
    constructed in 1980 a 13-story building at its Clinical Center in
    Bethesda, MD, to house many of its clinical research laboratories. The
    FDA consolidated facility can thus be entirely accommodated in several
    high-rise buildings located close to each other in Washington, D.C.
        GSA controls a large amount of underutilized federal space at the
    Southeast Federal Center. This space is located next to the Navy Yard
    Metrorail station in downtown Washington, D.C.
        The Southeast Federal Center is only a mile from Capitol Building
    and from the headquarters of the Department of Health and Human
    Services in the Hubert H. Humphrey Building. It is thus an ideal site
    for the FDA consolidation.
        The Southeast Federal Center can easily accommodate the FDA
    consolidation. GSA's plans for the Federal Center show that there is
    more developable space available at the site than FDA requires for its
    entire consolidation. No appropriated funds are presently available to
    construct any federal facilities at this location, which is largely
    vacant or occupied by obsolescent facilities.
        In the National Capital Planning Commission's March, 1996, Plan for
    Washington's Monumental Core, a proposal in the category of ``Economic
    Development'' states: ``Assist the transformation of the Southeast
    Federal Center and adjacent Navy Yard into a lively urban waterfront of
    offices, restaurants, shops and marinas.''
        An FDA office and laboratory facility at the Southeast Federal
    Center would be fully consistent with this goal. The facility would
    further help to compensate for the relocations of thousands of federal
    employees from the District of Columbia to suburban sites in Maryland
    and Virginia that have taken place in recent years. During the last two
    decades, these relocations have contradicted Executive Order 12072 and
    have greatly contributed to the decline of the District's economy.
        Because of budgetary constraints and of FDA's uncertain future,
    your Subcommittee should not appropriate a large amount of funding to
    the Secretary for the FDA consolidation at this time. However, a small
    appropriation is needed to encourage FDA and GSA to begin to plan for a
    consolidation at the Southeast Federal Center or at another location in
    the District of Columbia.
        I therefore request that your Subcommittee initiate a fiscal year
    1999 appropriation of $4,000,000 to FDA for the specific purpose of
    studying the feasibility of constructing a single consolidated FDA
    administrative and laboratory headquarters facility within half a mile
    of a Metrorail station in the Washington Metropolitan Area. Legislative
    or Committee Report language can direct or request the Secretary to
    give first consideration to the Southeast Federal Center in Washington,
    D.C., as the site for the consolidation.
        Thank you.
                                     ______

    Prepared Statements of Michael P. Kenny, Executive Officer, California
    Air Resources Board; Barbara Patrick, Member, Board Supervisors of Kern
     County and Member, California Air Resources Board; Manuel Cunha, Jr.,
    President, Nisei Farmers League; Les Clark, Vice President, Independent
         Oil Producers' Association; and Catherine H. Reheis, Managing
      Coordinator, Western States Petroleum Association, on Behalf of the
          California Industry and Government Coalition on PM-10/PM-2.5
        Mr. Chairman and Members of the Subcommittee: On behalf of the
    California Industry and Government Coalition on PM-10/PM-2.5, we are
    pleased to submit this statement for the record in support of our
    fiscal year 1999 funding request of $436,500 (one-half of the
    historical baseline split between California and Washington) from
    CSREES, for the California Regional PM-10/PM-2.5 Air Quality Study.
        The San Joaquin Valley of California and surrounding regions exceed
    both state and federal clean air standards for small particulate
    matter, designated PM-10/PM-2.5. The 1990 federal Clean Air Act
    Amendments require these areas to attain federal PM-10/PM-2.5 standards
    by December 31, 2001. Attainment of these standards requires effective
    and equitable distribution of pollution controls that cannot be
    determined without a major study of this issue.
        According to EPA and the California Air Resources Board, existing
    research data show that air quality caused by the PM-10/PM-2.5 problem
    has the potential to threaten the health of more than 3 million people
    living in the region, reduce visibility, and impact negatively on the
    quality of life. Unless the causes, effects and problems associated
    with PM-10/PM-2.5 are better addressed and understood, many industries
    will suffer due to production and transportation problems, diminishing
    natural resources, and increasing costs of fighting a problem that begs
    for a soundly researched solution.
        PM-10/PM-2.5 problems stem from a variety of industry and other
    sources, and they are a significant problem in the areas that are
    characteristic of much of California. Typical PM-10/PM-2.5 sources are
    dust stirred up by vehicles on unpaved roads, and dirt loosened and
    carried by wind during cultivation of agricultural land. Soil erosion
    through wind and other agents also leads to aggravation of PM-10/PM-2.5
    air pollution problems.
        The agriculture portion of this study will be developing specific
    types of information, tools and techniques needed to develop an
    inventory and the management practices that will most likely be part of
    the control strategies. They are: (1) validate method or methods for
    accurately measuring fugitive PM-10/PM-2.5 emission rates from an
    individual site or operation; (2) a method to easily and quickly
    estimate PM-10/PM-2.5 emissions; (3) an accurate inventory of fugitive
    PM-10/PM-2.5 dust sources by individual farming operations; (4)
    validated (field tested) best management practices; (5) a clear
    understanding of significant factors that effect PM-10/PM-2.5
    emissions; and (6) a workable, validated model or models for predicting
    PM-10/PM-2.5 emission, based on operational parameters.
        The primary focus of the short term objectives is on those soils,
    practices, and conditions presumed to have the highest PM-10/PM-2.5
    emissions. Priority for this work will be focused on the following
    situations, practices, and crops within the study area.
        Almond, Walnut and Fig Harvest: Preparation for harvest; Shaking
    trees; Windrowing; Picking up nuts; and Ambient conditions before and
    after.
        Cotton Harvest: Harvesting--1st and 2nd picking; Shredding of
    stalks; Stalk incorporation; and Ambient conditions before and after.
        Dairy Industry: Dairy Lagoons and Livestock Corrals.
        Fall/Spring Land Preparation: Deep tillage; Discing; Land planning;
    Bed formation; Ambient conditions before and after.
        Feedlots: Feedlot activities.
        Grain Harvesting: Harvesting; Stubble incorporation; Discing;
    Burning.
        Land Leveling: Appropriate practices.
        The importance of this study on PM-10/PM-2.5 is underscored by the
    need for more information on how the federal Clean Air Act Amendments
    standards can be met effectively by the business community, as well as
    by agencies of federal, state and local government whose activities
    contribute to the problem, and who are subject to the requirements of
    Title V of the Clean Air Act. There is a void in our current
    understanding of the amount and impact each source of PM-10/PM-2.5
    actually contributes to the overall problem. Without a better
    understanding and more information--which this study would provide--
    industry and government will be unable to develop an effective
    attainment plain and control measures.
        Agriculture wants to be a part of the effort to solve this major
    problem, but to do so, we need federal assistance to support research
    and efforts to deal effectively with what is essentially an unfunded
    federal mandate.
        Agriculture and industry, in concert with the State of California
    and local government entities, are attempting to do our part, and we
    come to the appropriations process to request assistance in obtaining a
    fair federal share of financial support for this important research
    effort. In 1990, our Coalition joined forces to undertake a study
    essential to the development of an effective attainment plan and
    effective control measures for the San Joaquin Valley of California.
    This unique cooperative partnership involving federal, state and local
    government, as well as private industry, has raised more than $19
    million to date to fund research and planning for a comprehensive PM-
    10/PM-2.5 air quality study. Our cooperative effort on this issue
    continues, and our hope is that private industry and federal, state and
    local governments will be able to raise an additional $8 million over
    the next two years to fund this important study.
        To date, this study project has benefited from federal funding
    provided through USDA's, DOT's, DOD's, EPA's, and Interior's budgets--a
    total of $10.6 million in federal funding, including $436,500 from USDA
    (one-half of CSREES amount provided for California and Washington) in
    the last three fiscal years. State and industry funding has matched
    this amount virtually dollar for dollar.
        The UC Davis research into the contribution of agriculture to
    airborne PM-10 in the San Joaquin Valley has produced a number of
    interim results. Some of these results have already been incorporated
    into the San Joaquin Valley Unified Air Pollution Control District's
    planning, and additional research efforts have been planned in
    consultation with district personnel.
        The agricultural emissions research is critical to the district's
    efforts to understand and control PM-10 in the valley. The San Joaquin
    Valley is a serious non-attainment area for PM-10 and also experiences
    high concentrations of PM-2.5. The district's strategies toward PM-10
    emissions from agriculture focus on research to identify activities
    that significantly contribute to the PM-10 problem, and then to develop
    feasible methods of controlling emissions from those sources. Without
    this information, the district could be demanded to control
    agricultural sources in ways that may or may not be effective at
    reducing PM-10. Effective control plans are those that actually reduce
    PM-10 concentrations, so that there is some assurance that the cost of
    implementing them is well-laced.
        UC Davis research has produced much better emission factors for the
    harvesting of cotton than were previously available, and has produced
    the only available emission factors to date for harvesting almonds.
    These emission factors were obtained under actual harvest conditions,
    so should be representative of agricultural operations in the San
    Joaquin Valley. UC Davis research has also investigated the emissions
    generated form harvesting figs and walnuts, and the burning of raisin
    trays. For raisin trays, the results indicate that the emissions are
    not significant. For fig and walnut harvesting, the results also show
    that the emissions are not highly significant. Moreover, actions taken
    to reduce almond harvest emissions will be effective at controlling
    emissions from fig and walnut harvesting, as these crops use the same
    harvesting equipment.
        UC Davis has initiated research into the emission of ammonia from
    livestock facilities in the San Joaquin Valley, primarily dairies and
    feedlots. Approximately half of all ammonia emissions in the San
    Joaquin Valley is thought to come form animals. This research is
    significant because ammonia combines with NO in the atmosphere to
    produce fine particles in the PM-2.5 size range. Further, the ammonia
    emissions are not well characterized for the livestock management
    practices prevalent in the San Joaquin Valley, so new information is
    needed. some preliminary results have been obtained, but they need to
    be confirmed with additional measurements.
        The currently available fugitive dust emission factors approved for
    use by the U.S. EPA rely on the dry silt content of the soil, defined
    as the fraction that passes through a 75 PM sieve. The emission factors
    were developed empirically, and there is scientific disagreement over
    their utility as a predictive tool. UC Davis research is exploring
    other methods of defining the potential of a soil to emit PM-10 and has
    developed laboratory procedures to measure an index of PM-10 emission
    potential in a repeatable manner. Additional research is ongoing to
    develop this as a useful tool.
        The fugitive dust emissions UC Davis has measured from agricultural
    operations so far has relied on physically collecting the dust from the
    plumes on filters. UC Davis has developed a remote sensing lidar (light
    detection and ranging) instrument to characterize the extent of a dust
    plume fro afar. This instrument has been used successfully in the field
    to collect information on the size and shape of dust plumes. Additional
    research is ongoing to calibrate it and use it to quantitatively
    measure the dust concentrations. The device will be particularly useful
    under conditions when it is not possible to collect a valid sample on
    filters.
        During the coming year, UC Davis will focus on the following
    research areas:
      --Fugitive dust emission from land preparation activities. Land
            preparation is common to nearly all agricultural crops in the
            valley, but the emission factors from this activity is very
            poorly defined in the current methods. There is tremendous
            value in developing better emission factors from this activity.
      --Controlled testing of almond harvesting. Almond harvesting is one
            of the dustiest activities examined to date. This summer, UC
            Davis plans to test several different harvesters on the same
            orchard, including the latest harvester from each of the two
            companies that produce them, as well as the most commonly used
            harvester of each manufacturer.
      --Initiate emissions testing of garlic harvesting. This crop is
            expanding in the San Joaquin Valley, and is potentially very
            dusty. A few pilot tests will provide information on how much
            further this crop should be examined.
      --Emissions from livestock management. UC Davis has conducted
            preliminary testing of dust and ammonia emissions from dairies
            and feedlots; additional research is needed to acquire a valid
            database for analysis.
        The support of the Department of Agriculture has been indispensable
    to the completion of the work performed to date. Continued support for
    this research is essential to assure that decisions made on behalf of
    improved air quality are based on scientifically valid information, and
    that the interests of agriculture are considered in the process.
        For fiscal year 1999, our Coalition is seeking federal funding once
    again through the U.S. Department of Agriculture to support
    continuation of this vital study in California. In the budget for the
    Cooperative State Research, Education, and Extension Service (CSREES),
    we request $436,500, representing one-half of the $873,000 historical
    baseline split between California and Washington in the past three
    budget cycles.
        The California Regional PM-10/PM-2.5 study will not only provide
    vital information for a region identified as having particularly acute
    PM-10/PM-2.5 problems, it will also serve as a model for other regions
    of the country that are experiencing similar problems. The results of
    this study will provide improved methods and tools for air quality
    monitoring, emission estimations, and effective control strategies
    nationwide. Consequently, the beneficial results of this research will
    contribute to national policy as well.
        The Coalition appreciates the Subcommittee's consideration of this
    request for a fiscal year 1999 appropriation of $436,500 for U.S.D.A.
    to support the California Regional Region PM-10/PM-2.5 Air Quality
    Study.
                                     ______

     Prepared Statement of David P. Holveck, President and Chief Executive
                            Officer, Centocor, Inc.
        Mr. Chairman and Members of the Subcommittee, I am David P.
    Holveck, President and Chief Executive Officer of Centocor, Inc., a
    biotechnology company located in Malvern, Pennsylvania. Like other
    biotech companies, most of our products are or will be regulated as
    biological products by FDA's Center for Biologics Evaluation and
    Research (CBER). CBER--and our emerging industry--face a crisis in
    research funding. Action by this Committee can resolve this potential
    crisis and insure informed regulation of biotechnology products, to the
    benefit of the United States biotechnology industry, and to patient
    care.
                                   background
        Mr. Chairman, as you know, late last year Congress enacted FDA
    reform legislation \1\ that updated antiquated laws and practices
    applicable to biologics, drugs and medical devices. An integral part of
    this law was the renewal of the Prescription Drug User Fee Act (PDUFA)
    \2\ under which the pharmaceutical and biotechnology industries pay
    user fees with most applications submitted to FDA. These fees are paid
    in exchange for increased numbers of scientific review staff and FDA's
    agreement to meet specified performance goals in the drug review and
    approval process.
    ---------------------------------------------------------------------------
        \1\ Food and Drug Administration Modernization Act of 1997 (Public
    Law 105-115).
        \2\ Prescription Drug User Fee Act of 1992 (Public Law 102-571).
    ---------------------------------------------------------------------------
        The FDA reform law reauthorized the PDUFA program, with increased
    performance goals. Under the first five years of PDUFA, the FDA used a
    fraction of user fee funds to support research activities related to
    the drug review process. However, as part of the five year extension of
    PDUFA, use of user fee monies was restricted to information management,
    personnel for faster reviews and meetings on investigational new drug
    applications (as well as review activities themselves). User fee monies
    may no longer be used to support CBER research activities, even though
    these activities are an integral part of product regulation.
    Compounding the problem is the fact that the overall CBER research
    budget has declined significantly since fiscal year 1994. For the
    reasons set forth below, many of us in the biotechnology community fear
    that unless this Subcommittee takes action, a depleted research
    capability will impede the agency's review and approval process and
    threaten its mission to protect the public health.
        While the Subcommittee has never specified appropriations that may
    be spent by CBER for research, our best estimates are, that for the
    fiscal year 1994, CBER's research budget was $18.4 million. This amount
    declined to $6.9 million for fiscal year 1998. Reductions in user fee
    monies for research activities of CBER will be $3.5 million in 1999 and
    CBER's fiscal year 1999 research budget will decline to $4.5 million--a
    little more than one-quarter of the fiscal year 1994 amount. Without
    action by this Subcommittee the result will be ``reassignment'' of 79
    full-time equivalent research positions, or approximately 154 biologics
    center physicians and laboratory scientists, over the next three years
    to other Federal agencies. CBER's research capability will be severely
    impacted.
                  history of cber and its research activities
        Historically, CBER has recognized the link between the conduct of
    original research and appropriate regulation of biological products.
    Until the early 1970's, what is now CBER was part of the National
    Institutes of Health--indeed, CBER's headquarters remain on the NIH
    campus. Since the turn of the century, CBER and its predecessors have
    been involved in assuring the safety, purity and potency of biological
    products such as vaccines and blood products. Research was an
    indispensable component of these responsibilities, since often
    standards for biological products could only be developed after gaining
    an understanding of the products themselves. For over 90 years, CBER
    has maintained a tradition that combines scientific research with
    product review.
        Mr. Chairman, today CBER also regulates products derived from new,
    emerging technologies. CBER regulates AIDS drugs, gene therapy,
    monoclonal antibodies and other products resulting from the genius of
    biotechnology. In many cases, regulatory issues related to new and
    emerging technologies are not initially well understood. Thus, the
    agency must conduct research in biomedical areas to develop the
    expertise necessary to address new technologies and issues, develop and
    validate testing methodologies, and establish standards for new
    biological products. Research is required to assess risks of new
    therapies so that the agency, in concert with industry, can, reduce and
    control such risks. Appropriate regulation of the biotechnology
    industry, consistent with the FDA reform law, demands state of the art
    knowledge of the science employed to develop our products.
        CBER's research team includes both scientists who perform primarily
    review of products and those who perform both research and review
    (``researcher/reviewers''). Unlike other health-related agencies, such
    as NIH or CDC, where the majority of the professional researchers
    exclusively conduct research, in CBER all researchers are fully
    integrated into the regulatory process. CBER's researchers/reviewers
    participate in development of regulatory policy and the establishment
    of methods and standards to which products can be compared. They review
    investigational new drug applications (IND's) and biologics license
    applications (BLA's), attend pre-IND, IND and BLA meetings with
    investigators and manufacturers, carry out pre-license inspections, and
    evaluate adverse drug reaction and risk assessment issues. In short,
    they contribute their knowledge of complex scientific matters gained by
    intramural research to the regulation of increasingly complex
    biological and biotechnology products.
           science board review of fda's intramural research program
        Mr. Chairman, on two recent occasions, subcommittees of FDA's
    outside Science Board have reviewed the fiscal status of FDA's research
    budget, and expressed strong support for its strengthening, in order to
    ensure informed regulation.
        Subcommittee on FDA Research.--At the recommendation of FDA's
    Deputy Commissioner of Operations in 1996, a Science Board Subcommittee
    on FDA Research was convened and Chaired by David Korn, M.D., former
    Dean of Stanford Medical School and currently Senior Vice President of
    the Association of American Medical Colleges. The Subcommittee was
    charged with determining how the FDA could ensure that the agency's
    regulatory review and decision-making processes would continue, in an
    era of extraordinary rapid scientific advancements, to be informed by
    the very best and most current scientific information available.
        The Subcommittee undertook a high-level review of the state of
    intramural science in the FDA, including organization of the scientific
    programs, their interactions with the extramural scientific community,
    and the policies, procedures and standards that governed their conduct.
        As part of its recommendations, the Subcommittee stated that:

              . . . robust, high-quality programs of intramural research
            are essential components of the FDA's science base and are
            critical for supporting, in a scientifically sound and rigorous
            fashion, the review and regulatory decisions made by the agency
            in discharging its mission to promote and protect the public
            health. The intimate proximity and interaction of cutting-edge
            scientific research with review and regulatory activities is
            more important today than ever before given the extraordinary
            rapid pace of advancements in . . . biomedicine, materials
            science, micro-electronics, information technology, and others.
            . . . A strong and well managed intramural research program
            provides the foundation for creating a climate of science and
            scientific communication within the FDA that enhances the
            ability of the agency to recruit and retain high quality
            scientific staff [and] to address existing regulatory issues
            and anticipate future problem. . . .

        The majority of the Subcommittee rejected the arguments that the
    scientific research needs of the FDA can be obtained from outside
    sources in a more cost-effective manner that would meet criteria of
    timeliness, competence and freedom from conflict of interest. Likewise
    the Subcommittee rejected the notion that a strong program of
    intramural scientific research is not necessary for the recruitment and
    retention of high quality scientific staff The Subcommittee found that
    ``starving the agency's base of intramural scientific expertise must
    inevitably compromise the quality of review and regulatory
    activities.''
        Subcommittee on CBER Review.--Last month, the Science Board's
    Subcommittee on CBER Review, comprised of distinguished scientists from
    academic centers, major pharmaceutical companies, the biotechnology
    industry, research foundations and the NIH expressed great concern over
    declines in research funding at CBER.\3\ The Committee determined that
    ---------------------------------------------------------------------------
        \3\ Science Board Subcommittee for the Center for Biologics
    Evaluation and Research Review, Report to the Science Board to the Food
    and Drug Administration, May 19, 1998.

              . . . inadequate funding for CBER, particularly the
            inadequate funding for laboratory research within CBER, would
            risk potential damage to the health of the population of the
            United States, but also the health of our economy, by affecting
    ---------------------------------------------------------------------------
            an industry that will expand in the 21st Century.

        The Subcommittee conducted an exhaustive review of the research
    capabilities of the various divisions and units within CBER. It pointed
    out that historically, because of their nature, biological products
    have been associated with adventitious (accidentally arising from an
    external source) contaminants that have led to adverse reactions and
    death. It stated that ``a credible emergency response by CBER to
    adventitious agent problems associated with marketed biological
    products, including blood and blood products, requires immediate
    availability of a laboratory-based team of experts who understand both
    the potential adventitious agents involved in the scientific,
    manufacturing, control, and clinical aspects of the product.'' (p. 4)
        The Subcommittee concluded as follows:

              Thorough and timely review of the safety, efficacy, and
            quality of a biological/product license application (BLA/PLA)
            requires experts with appropriate experience at CBER, including
            relevant laboratory techniques required to perform
            characterization, manufacturing, and control of the product. In
            a field of biotechnology, virtually every IND or BLA
            application raises new policy issues which are identified and
            addressed as part of the review process. It is incumbent upon
            the CBER reviewer to assess the potential merits of new
            technologies, to identify new risks or potential risks
            associated with these technologies and to develop methods for
            evaluating and controlling these risks.''
          relationship between cber research and effective regulation
        Intramural research has shortened development time of biological
    products and served as the basis for product approval. Examples of the
    importance of CBER's research to product development are numerous:
        For many years, the whole cell pertussis (whooping cough) vaccine
    was used to prevent pertussis in infants and young children in the
    United States. While this vaccine was effective in preventing pertussis
    in the U.S., it was associated with a number of adverse reactions.
    While the most severe reactions were never positively linked to
    vaccination with the whole cell pertussis vaccine, scores of lawsuits
    were filed and it became clear that a safer pertussis vaccine was
    desirable. Clinical trials to test the safety and efficacy of a new
    generation of pertussis vaccines, known as acellular pertussis
    vaccines, were completed last year. In July of this year, the first
    acellular pertussis vaccine was licensed in the U.S. for infant use.
    Research conducted at CBER shortened the development time for the
    acellular pertussis vaccines, sped approval time, and resulted in
    improved products.
        Expeditious approval of recombinant Factor VIII (which promotes
    blood coagulation) was facilitated by CBER research that provided a
    well-calibrated reference preparation to measure the potency of these
    materials, and that established the conditions for potency assays that
    allowed comparison with plasma-derived products. CBER directed the
    preparation and calibration of large amounts of a Factor VIII reference
    standard that has received international recognition for its long-term
    stability and quality. CBER also recently developed a Factor IX
    standard that will speed approval of a recombinant Factor IX currently
    under development. CBER recruited large donations of potential source
    material from industry, assessed the biochemical and assay
    characteristics of these materials in the CBER laboratory, and selected
    one for further evaluation in an international collaborative study.
    This study led to the acceptance of the FDA material by the European
    Pharmacopoeia and WHO as the new international reference preparation
    and working standard.
        CBER research will lead to expeditious approval of safe and
    effective DNA vaccines. These agents, which are based on new and
    untested technology, are now being developed for preventing viral,
    bacterial, and parasitic infections, as well as for treatments of
    hepatic, colon and cervical cancer.
        One of the ways that FDA has sped approval of breakthrough drugs is
    through the development of clinical endpoints--laboratory measurements
    that are reasonably likely to predict clinical benefit. Use of these
    endpoints has resulted in early approval of several AIDS drugs--more
    quickly in this country than in Europe or England. CBER research led to
    development of the surrogate endpoint for protease inhibitors. In
    collaboration with the developer of the drug, CBER's research was
    crucial to the development of quantitative polymerase chain reaction,
    which became the means by which the drug's contribution to a patient's
    viral load is determined. The viral load was used as a surrogate
    endpoint, rather than multi-year clinical trials to evaluate lone-term
    survival, to determine efficacy of this important class of AIDS drug.
        Each year the Food and Drug Administration determines the type, or
    strains, of the influenza virus most likely to enter the United States
    in the coming year. This determination is based on worldwide
    surveillance of influenza isolates conducted by the Center for Disease
    Control (CDC) in collaboration with the World Health Organization
    (WHO). After the strains are chosen each year, CBER works closely with
    influenza manufacturers to provide high growth reassortant influenza
    viruses for use by vaccine manufacturers so that adequate vaccine
    supplies can be made each year. This involves basic laboratory research
    by molecular biologists and virologists at CBER. They also must provide
    new reagents each year for standardization of strains used in the
    vaccines produced by various manufacturers which supply the U.S.
    market. CBER's research on high growth reassortants and standardization
    of manufactured vaccines is critical for assuring that safe and
    effective vaccines for adults and children are available in the fall of
    each year. Without the support of basic science at CBER, the quality
    and quantity of influenza vaccines would decrease with resultant excess
    mortality from influenza each year.
        Mr. Chairman, these examples--and scores of others--demonstrate the
    fact that the CBER research program is an integral component of
    biological product regulation. CBER research leads to establishment of
    standards for biological products. It shortens development time for
    products under investigation. It serves as a basis for FDA
    decisionmaking on the safety and efficacy of biological products. And--
    perhaps most importantly--CBER research protects the public health.
                                action requested
        Mr. Chairman, we want to emphasize that we do not disagree with the
    decision of Congress that PDUFA fees may no longer be used for research
    related activities. Indeed it is entirely proper that PDUFA fees should
    be dedicated to their original purpose--speeding the review of product-
    specific submissions. However, we are concerned that the message that
    research activities are essential to the broader statutory mission of
    CBER and FDA to protect the public health may have fallen from view in
    our collective interests to assure full and proper allocation of PDUFA
    funds. Although FDA's research efforts are not devoted to the product
    of a specific company, they are nevertheless critical to assuring
    speedy access of safe and effective products to the market.
        Mr. Chairman, in terms of appropriations action, we recommend that
    the Committee specify amounts from appropriated funds that should be
    dedicated to CBER research activities. These amounts should be no less
    than the fiscal year 1998 amount plus inflation. We thus recommend that
    a minimum of $7 million be specified for CBER research for fiscal year
    1999. This will require an increase in the FDA budget of $2.5 million.
        Beyond this immediate request are concerns about the need to assure
    adequate funding for future research at CBER. In our view, the best way
    to assure that any program received adequate funding is to clearly and
    convincingly illustrate the value that the program delivers. When it
    comes to research efforts at CBER, neither CBER staff nor we in
    industry have made our best efforts to assure that the value of CBER's
    research programs are documented and communicated. To that end, we urge
    this committee consider requiring CBER to develop guidance for the
    process by which research programs at CBER are authorized. CBER
    supported research should be clearly distinct from academic or basic
    research efforts in that it should be conducted in support of specific,
    statutory, regulatory or mission-related purposes. In our view, it is
    not the role of CBER to conduct research intended solely to contribute
    to the general knowledge or the advancement of a specific field of
    science. The research should be consistent with CBER's statutory
    responsibilities, authority and with its mission. It is Centocor's
    position that CBER's research activities should fit within one or more
    of the following criteria in order for it to be authorized:
        1. It should fulfill a specific need identified in support of
    specific functions and responsibilities of the Center.
        2. It should relate directly to a product category or technology
    for which CBER has responsibility.
        3. It should identify whether it relates specifically to issues of
    safety, effectiveness or both. For example, many of the products under
    CBER's jurisdiction raise unique issues related to the impact of
    viruses and other adventitious agents on product safety. Also, some
    materials regulated by CBER are not synthesized but are the product of
    complex or undefined physiological processes. Process control and
    validation may be of greater importance for these products than for
    traditional synthetic drug products.
        4. CBER should justify why the research must come from original,
    laboratory-based research conducted by CBER staff. For example, CBER
    should document the findings which support the conclusion that the
    specific type of research is not already being done elsewhere within
    the federal government or the public or private sectors or that the
    results of such research would not be readily available or useful to
    CBER.
        Beyond these points, all research should be subject to active
    management and oversight by CBER and FDA staff as well as open to
    comment from regulated industry, academia and the general public. We
    anticipate that this or another appropriate form of cataloging CBER's
    important research activities will help CBER and the biotechnology
    industry better communicate the value and importance of the research
    work of CBER's scientific staff.
        Once this action is taken, the committee will be able to evaluate
    specific amounts that should be allocated for CBER research and whether
    the recent recommendation of the Science Board Subcommittee that the
    budget be restored to the fiscal year 1994 level is realistic.
        Thank you for your attention to the important issue of appropriate
    funding of CBER research. We are anxious to work with this Subcommittee
    in a mutual effort to halt the decimation of CBER's research program,
    while assuring that CBER research activities are relevant to its
    statutory mission of reviewing and approving life-giving biotechnology
    products.
                                     ______

    Prepared Statement of Dennis Bier, M.D., Director, Children's Nutrition
                                Research Center
        Mr. Chairman and members of the Subcommittee, thank you for your
    continuing commitment to nutrition research, and most especially for
    the much-needed funding increase which you provided to the Children's
    Nutrition Research Center (CNRC) last year. Your foresight in funding
    this program is more widely recognized each year as the importance of
    nutrition research grows and the trend of scientific discoveries
    continues to underscore the fact that good nutrition information is
    vital to our hopes of controlling a large number of very serious, and
    very expensive, diseases. As a physician, my own personal clinical
    nutrition interest relates to the management of diabetes, and I
    initially came into nutrition research because of its critical
    importance to our efforts to control the complications of this serious
    malady.
        The CNRC was established in 1978 and operates under a cooperative
    agreement between the Agricultural Research Service (ARS), Baylor
    College of Medicine, and Texas Children's Hospital, a unique public/
    private partnership between the ARS and two of the nation's leading
    pediatric research institutions which also draws on the resources of
    the world's largest medical center.
        The CNRC has been, and continues to be, a world leader in nutrition
    research. Since the Center is the best-equipped pediatric facility of
    its kind in the world, we can undertake many research projects that no
    other children's research laboratory can do. This is particularly
    valuable in light of our rapidly-growing knowledge of the intimate
    relationships linking an individual's genetic constitution (genotype),
    lifestyle, and diet to that individual's ultimate health. We now know
    that whether a person leads a long and productive life or is more
    likely to suffer early disability or death from chronic disease is
    determined in very large part by the interplay between that
    individual's heredity, lifestyle choices, and what he or she chooses to
    eat.
        At least five of the ten leading causes of death--heart disease,
    cancer, stroke, diabetes, and atherosclerosis--are diet-related, and
    there is strong evidence that the contributions to the overall outcome
    of these diseases begin in childhood. Dealing with these diseases by
    preventing or delaying them through early dietary changes is a major
    goal of our research. The potential cost savings to the government
    through Medicare and Medicaid are enormous, not to mention the need
    both to see to the nutritional adequacy and to provide the basic
    scientific evidence for the USDA feeding programs which account for a
    considerable part of your Subcommittee's budget allocation each year.
        Through advances in genetics and molecular biology, we now have the
    tools to aggressively investigate prevention of diet-related problems
    such as obesity, high cholesterol, and certain types of cancer. If we
    can identify a specific individual's risk factors in childhood, we
    could then target our efforts to those at-risk individuals alone and
    not expend scare funds on persons who are not at risk. Thus,
    identifying the specific individuals at risk and preventing the
    exposure to these risks in childhood will pay health dividends to
    society for many decades while reducing costs in two major ways: first,
    by not spending money needlessly on individuals without risk and,
    secondly, by preventing disease, which is invariably cheaper than
    treating the consequences of already established ailments in adulthood.
    Similarly, non-monetary benefits are enhanced in two ways: first, by
    allowing individuals not at risk to live a less restricted and,
    presumably, less worrisome lifestyle and, secondly, by providing at-
    risk individuals with a health maintenance environment whose benefits
    are invariably greater and last longer than the shorter and more
    limited benefits of treating already established adult diseases. These
    goals are a major priority for our research program, and we are using
    the additional funding which you provided last year to expand our
    research program in this area of nutrient-gene interactions,
    specifically to allow us to identify the genetic factors which place a
    person at risk of nutritional diseases.
                         cnrc national research awards
        The Children's Nutrition Research Center is dedicated to
    investigating the food needs that ensure health in pregnant and nursing
    women, and in children from conception through adolescence. The success
    of your decision to support the CNRC over the years, and the quality of
    research being done at the CNRC, is evidenced by the fact that CNRC
    researchers won a total of five top national research honors during
    this last year.
        Dr. Buford Nichols, who is our Director Emeritus, was awarded the
    1997 Nutrition Award from the American Academy of Pediatrics. The
    Academy has always been a champion and forceful advocate of the
    nutritional health of America's children and their Nutrition Award is
    their single, highest honor in children's nutrition. Dr. Nichols has
    made major strides in the last few years in advancing our understanding
    of the gastrointestinal genes regulating carbohydrate digestion in
    malnourished children. In some malnourished children, the body
    essentially turns off certain digestive enzymes. As a result, the
    children are unable to utilize food properly and they die even if,
    during treatment, they are provided with what should be adequate food.
    Dr. Nichols' lifelong work in this important area was the foundation
    for the American Academy of Pediatrics Nutrition Award and, last year,
    Dr. Nichols made important strides by describing for the first time the
    complete gene structure of the principal human gastrointestinal enzyme
    responsible for the digestion of starches in our diet.
        Dr. Teresa Davis was chosen as the winner of the E.L.R. Stockstad
    Award by the American Society for Nutritional Sciences, the nation's
    largest scientific nutrition society. The award is given for
    outstanding fundamental research in nutrition. Dr. Davis' research
    focuses on determining the mechanisms by which nutrients, hormones, and
    growth factors regulate the high rate of body protein accretion that
    occurs during early postnatal life and is both necessary and
    responsible for the rapid growth rate observed in healthy infants.
        Dr. Peter Reeds has been awarded the 1998 Osborne and Mendel Award
    from the American Society for Nutritional Sciences. Dr. Reeds was given
    the award for his innovative applications of non-radioactive isotope
    techniques to an inherently complex area of nutrient metabolism,
    specifically, the intestinal and liver metabolism of amino acids
    liberated during the consumption of dietary protein. In this work, Dr.
    Reeds demonstrated the important role of dietary amino acids,
    particularly the amino acid glutamate, in providing the metabolic fuel
    source for gut energy metabolism and for the synthesis of glutathione,
    the critical gut compound providing defense against oxidative stress
    damage in the intestine. Oxidative stress reactions are important
    contributors to the development of diseases such as cancer and are also
    an underlying cause of aging.
        And, if I may toot my own horn for a moment, I was elected to
    membership in the Institute of Medicine of the National Academy of
    Sciences, an award which is bestowed on only a select number of the
    nation's scientists and physicians. I was selected for contributions to
    the fields of nutrition and metabolism, and for my role in developing
    the field of the study of human metabolism using stable, non-
    radioactive isotopes. In addition, I won the National Institutes of
    Health Excellence in Clinical Research Award for my lifelong career
    work in clinical nutritional metabolism studies in NIH-funded General
    Clinical Research Centers (GCRC), first as Associate Program Director
    the GCRC at the University of California, San Francisco, then as
    Program Director of the GCRC at St. Louis Children's Hospital,
    Washington University School of Medicine, and currently as Program
    Director of the GCRC at Texas Children's Hospital, Baylor College of
    Medicine.
        I want to thank the members of this Subcommittee for your support
    for the CNRC over the years. You have made it possible for us to do the
    research which has won these distinguished awards, and we want to share
    with you the credit for these accomplishments.
                           examples of cnrc research
        The CNRC is continuing to be a leader in the field of pediatric
    nutrition. Some of the studies now underway include:
        A study which is looking at the possible relationship between
    attention-deficit/hyperactivity disorder (AD/HD) in children and DHA
    (docosahexanoic acid), a fatty acid found in breast milk. DHA is
    concentrated in the brain, is essential for normal brain growth, has
    effects on brain cell membrane function, and is believed necessary for
    overall proper functioning of the central nervous system. Some studies
    have shown that children with AD/HD have lower levels of DHA in their
    blood. We are conducting a study in which we are giving dietary
    supplements of DHA, which is also found in fish oil, to determine its
    impact on AD/HD behavior.
        The potential benefits to society are enormous. Many children with
    AD/MD continue to have problems in adulthood with employment, family
    relationships, and anti-social behavior, and society ends up paying a
    high price for these problems. If this simple dietary intervention has
    an effect, then the benefits to society could be significant.
        We are studying a possible link between fetal development and
    coronary heart disease in adult life. We have found evidence that poor
    fetal growth permanently alters cholesterol metabolism. As part of our
    ongoing collaborative research and training efforts internationally,
    our scientists studied the levels of HDL apolipoprotein A1, an
    independent predictor of coronary heart disease, in 16 Jamaican
    children whose mothers were not properly nourished during pregnancy.
    HDL apolipoprotein A1 transports cholesterol from the peripheral
    tissues back to the liver for excretion. High levels of HDL
    apolipoprotein A1 usually means that a person has a good cholesterol
    level. We found that the lower the birth weight, the lower the HDL
    apolipoprotein A1 levels in these children. The fact that they have low
    levels of HDL means their ability to transport cholesterol back to the
    liver for excretion is impaired. This study was accepted by and
    appeared in the prestigious international scientific journal, The
    Lancet, and, when confirmed by additional expanded studies, we believe
    this finding will enable pediatricians to use HDL apolipoprotein A1 as
    a screening tool to determine those children who are at greater risk of
    coronary heart disease later in life and allow parents to begin feeding
    their vulnerable children a low cholesterol diet early on.
        Our researchers have developed a new experimental approach that
    will, for the first time, help directly measure beta-carotene
    absorption from vegetables and determine the extent to which it is
    converted to vitamin A in humans. Thanks to our greenhouse and stable
    isotope facilities, we were able to grow spinach hydroponically in
    order to label the beta carotene with stable isotopes. This technique
    will allow us to assess beta-carotene absorption and metabolism from
    individual plant foods and identify whether some foods are better
    sources of vitamin A. This method will also give us the opportunity to
    identify other factors that could improve beta carotene absorption,
    such as processing, cooking techniques, or the amounts of oils that are
    consumed with the food. We are cooperating with the USDA/ARS Human
    Nutrition Research Center at Tufts University in Boston to do the first
    human feeding studies.
        This new method will provide useful information for intervention
    and education programs that deal with vitamin A deficiency, which is a
    major nutritional problem in the developing world, especially in areas
    where a persons diet consists mainly of plant-derived foods.
        Also, beta carotene is one of nature's most important natural anti-
    oxidant compounds. Oxidative stress reactions are important
    contributors to the development of cancer and heart disease, as well as
    an underlying cause of aging. We believe that the CNRC plant
    scientists' new approach, which promises to allow direct study of beta
    carotene metabolism in humans, will play a significant role in research
    toward a more comprehensive understanding of cancer, heart disease and
    aging.
                                    summary
        The CNRC is a truly unique, world-class research program in a field
    that is increasingly being recognized as critical to health maintenance
    and to food production. Top-quality basic nutrition research is of
    increasing importance, and the multi-disciplinary ARS human nutrition
    research centers are uniquely well-suited to this task. Thanks to the
    foresight of the Congress, the ARS human nutrition research program as
    a whole is strategically well-placed to tackle today's critical
    research issues. Congress expanded this network in the 1970's and has
    provided needed research funding since then. Last year, to enhance our
    research efforts, the ARS Human Nutrition Research Program presented
    you with a unified, coordinated initiative for new areas of necessary
    scientific investigation. You were kind enough to provide us with
    additional funding, and we thank you for that.
        These new directions are no less important this year. To accomplish
    our aims, we need a significant budget increase, and you would get a
    very good return on that investment if you choose to make it. I urge
    the Subcommittee to make every effort to provide a substantially
    greater level of funding for these ARS Human Nutrition Research Centers
    this year. The research opportunities are great, and there are huge
    potential rewards both in cost savings and in good health in this
    critical area of research.
        I would invite you, Mr. Chairman, and any members of your
    Subcommittee to come and visit the CNRC. Our visitors can testify that
    the program is much more impressive in person than I can make it in my
    description. Thank you for the opportunity to submit this statement,
    and thank you for your support.
                                     ______

      Prepared Statement Dr. Melvin C. Ray, Mississippi State University,
      Chair, Mississippi EPSCoR Committee, on behalf of the Coalition of
                                 EPSCoR States
        Mr. Chairman and Members of the Subcommittee, thank you for the
    opportunity to submit this testimony on behalf of the Coalition of
    EPSCoR States \1\ regarding the U.S. Department of Agriculture
    Experimental Program to Stimulate Competitive Research (USDA EPSCoR).
    USDA EPSCoR is extremely important to the state of Mississippi and to
    our nation. I appreciate the opportunity to testify.
    ---------------------------------------------------------------------------
        \1\ Alabama, Arkansas, Idaho, Kansas, Kentucky, Louisiana, Maine,
    Mississippi, Montana, Nebraska, Nevada, North Dakota, Oklahoma, Puerto
    Rico, South Carolina, South Dakota, Vermont, West Virginia, and
    Wyoming.
    ---------------------------------------------------------------------------
        Mr. Chairman, let me begin by thanking you for your strong and
    unwavering support of USDA EPSCoR. Your support has been absolutely
    crucial in establishing and maintaining this important program. As you
    know, Mr. Chairman, USDA EPSCoR is having a significant impact in
    Mississippi, and those of us committed to improving Mississippi's
    research and development capability deeply appreciate your continued
    efforts. Thank you for all of your fine work representing Mississippi
    in the United States Senate.
        EPSCoR is a research and development program that was first
    established in the National Science Foundation. EPSCoR works to improve
    our country's science and technology capability by funding research
    activities of talented researchers in states that have historically not
    received significant federal R&D funding. USDA EPSCoR was established
    in fiscal year 1992 with a goal of increasing the amount of
    agricultural research at academic institutions within states that have
    had limited success obtaining competitive funds from USDA.
        Mr. Chairman, USDA EPSCoR is helping to improve the quality and
    competitiveness of agriculture research in Mississippi. The amount of
    USDA research funds received by Mississippi increased by more than 500
    percent between 1990 and 1996, a clear indication that Mississippi
    researchers are becoming more effective. The bulk of Mississippi's
    funding increase since 1990 has been in the non-EPSCoR Standard
    Research Grants program.
        Important examples of Mississippi's research include such varied
    studies as kenaf processing, which is a potential economic opportunity
    for rural states; rapid detection of E coli, an important safety issue
    that has been in the news recently; and disease mechanisms in channel
    catfish, impacting a significant cash crop across the southern part of
    the country. These projects and those they represent address important
    issues not only to rural states, but to the rest of the nation. Because
    of this important program, EPSCoR researchers are able to contribute to
    our economy and our knowledge base.
        USDA EPSCoR states are those whose funding ranks no higher than the
    38th percentile of all states, based on a three year rolling average of
    funding. For fiscal year 1998, the following states are eligible for
    USDA EPSCoR: 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, and the Commonwealth of Puerto Rico. Let me stress
    that EPSCoR relies on rigorous merit review in order to ensure high-
    quality research.
        USDA makes four types of competitive awards through USDA EPSCoR:
    Research Career Enhancement Awards, Equipment Grants, Seed Grants, and
    Strengthening Standard Research Project Awards. Proposals must be
    related to the program priorities of the National Research Initiative
    Competitive Grants Program, which address critical issues facing
    agriculture today.
      --Research Career Enhancement Awards help faculty enhance their
            research capabilities by funding sabbatical leaves. Applicants
            may not have received a NRICGP competitive research grant
            within the past five years.
      --Equipment Grants strengthen the research capacity of institutions
            in USDA EPSCoR states. The principal investigator for this
            grant is responsible for securing non-Federal matching funds.
      --Seed Grants enable researchers to collect preliminary data in
            preparation for applying for a standard research grant. Seed
            Grant awards are limited to a total cost of $50,000 and are
            non-renewable. Applicants must indicate how the research will
            enhance future competitiveness in applying for standard
            research grants.
      --Strengthening Standard Research Project Awards fund standard
            research projects of investigators who have not received a
            NRICGP grant within the past five years.
        USDA EPSCoR allows Mississippi and the other USDA EPSCoR States to
    contribute more effectively to our nation's science and technology
    capability, and provides our country with needed, high-quality, peer-
    reviewed research. It allows all regions of the country to contribute
    to our nation's science and technology capability while allowing
    flexibility to meet regional research needs. Because EPSCoR awards are
    matched with state funds, it is a sound investment of taxpayer dollars.
        Mr. Chairman, this Subcommittee has for the past several years
    directed USDA to set aside 10 percent of USDA NRICGP funds for USDA
    EPSCoR. Those funds have provided significant opportunity and very real
    success in Mississippi and in the other EPSCoR states. I request that,
    as it has done in previous years, the Subcommittee direct USDA to set
    aside 10 percent of its NRI competitive grant funds in fiscal year 1999
    for an EPSCoR program. These funds will allow the EPSCoR states to
    continue providing for the agricultural research needs of rural America
    and of our nation.
        I thank the subcommittee for the opportunity to submit this
    testimony.
                                     ______

      Prepared Statement of Dr. Robert G. Zimbelman, Chair, Coalition on
                     Funding Agricultural Research Missions
        Mr. Chairman: The Coalition for Agricultural Research Missions
    (CoFARM) consists of 20 professional scientific societies united in a
    commitment to support fundamental and applied agricultural research.
    CoFARM advocates agricultural investments in the USDA research budget
    that will enhance the health and well being of all Americans and
    increase U.S. competitiveness in expanding world markets.
        Contributions of USDA-supported research to the biotechnology
    revolution in this age of biology is leading to extraordinary new
    advances in the plant, animal, microbial and nutritional sciences.
    Basic studies in plant genetics and plant growth and development have
    led to the ability of industry to regenerate transformed plant tissues.
    This has enabled industry to develop transgenic plants containing
    agronomically important genes. The plant biotechnology industry in the
    U.S. has flourished with the help of basic plant research in this area
    supported by the National Research Initiative.
        Leaner meats and more nutritious plant-produced foods are resulting
    from USDA-supported plant and animal research. More effective
    protections from food-borne illnesses are being found through microbial
    and food safety research supported by the Department. Economic studies
    assist the Department in implementing more efficient practices.
        With predictions of substantial increases in demand for safe and
    nutritious food worldwide and the limitation of available land to farm,
    the nation and world must rely on agricultural research to increase
    food production on existing farmland. Support of this committee for
    agricultural research sponsored by the NRI, Agricultural Research
    Service, formula funds and Economic Research Service has been key to
    assisting American farmers lead the world in agricultural production.
        Stagnant research budget for agriculture exposes the nation and its
    people to loss of leadership in agriculture--this dynamic sector that
    contributes to national and world security; healthier lives and higher
    disposable incomes for all Americans; a substantial, revenue-producing
    surplus in trade of agricultural products; and gainful employment for
    22 million Americans. We urge the Committee to increase support for the
    NRI to $130 million as recommended by the President and encourage
    increases of 7 percent for the Agricultural Research Service and for
    the other areas of the fiscal year 1999 research budget for the
    Department of Agriculture. Enclosed is the most recent annual brochure
    of CoFARM with more information on the benefits of agricultural
    research supported by the Department of Agriculture.
        Thank you, Mr. Chairman.
                                     ______

       Prepared Statement of the Coalition to Promote U.S. Agricultural
                                    Exports
        As members of the Coalition to Promote U.S. Agricultural Exports,
    we commend the Chairman and members of the Subcommittee for their
    interest and support of U.S. agriculture and express our appreciation
    for this opportunity to share our views.
        The Coalition to Promote U.S. Agricultural Exports is an ad hoc
    coalition of over 80 organizations, representing farmers and ranchers,
    cooperatives, small businesses, regional trade organizations and the
    State Departments of Agriculture. We believe the U.S. must continue to
    have in place policies and programs that help maintain the ability of
    American agriculture to compete effectively in a global marketplace
    still characterized by subsidized foreign competition.
        This is especially true under the new Federal Agriculture
    Improvement and Reform Act of 1996 (FAIR Act), which resulted in the
    most sweeping reforms in farm policy in over 60 years. While achieving
    significant budget savings, it reduces income support to producers over
    7 years; eliminates acreage reduction programs; and provides increased
    planting flexibility. More than ever, farm income and the economic well
    being of American agriculture are now dependent on continued access to
    foreign markets and maintaining and strengthening U.S. agricultural
    exports.
        Accordingly, we strongly urge that USDA's export programs be fully
    funded and aggressively implemented. This includes maintaining funding
    for USDA's Market Access Program (MAP) at $90 million as recommended in
    the President's fiscal year 1999 budget; providing $30 million for the
    Foreign Market Development (FMD) Cooperator Program; and ensuring
    adequate funding for USDA's Foreign Agricultural Service (FAS) to help
    meet critical export goals and objectives. Such action is essential to
    America's overall trade strategy and economic interest.
        Agriculture is our nation's most export dependent industry with
    exports accounting for one third of U.S. production. In 1998, U.S.
    agricultural exports are projected to reach $58.5 billion,
    strengthening farm income, generating billions more in related economic
    activity, broadening the tax base, and providing jobs for over one
    million Americans. U.S. agricultural exports this past year also led to
    an agricultural trade surplus of approximately $22 billion. Without
    such exports, our nation's trade deficit would have been even worse.
        American agriculture and American workers, however, continue to be
    threatened by subsidized foreign competition. Recent trade agreements,
    including NAFTA and the Uruguay Round Agreement on GATT, did not
    eliminate the use of export subsidies or other forms of export
    assistance. The European Union (EU), which maintains a huge advantage
    over the U.S. in terms of export subsidies, last year announced a major
    initiative to promote EU exports of meat, dairy, fruit, vegetables, and
    wine into Japan--a significant U.S. market.
        U.S. agricultural exports to Japan last year amounted to nearly $11
    billion (down about $1 billion from the previous year), accounting for
    19 percent of total U.S. agricultural exports. As many as 200,000
    American jobs depend on continued exports to Japan. Clearly, any
    further loss with regard to the Japanese market would have an adverse
    impact on American agriculture and American workers.
        This is but one example of the competition facing American
    agriculture. Other countries are pursuing similar strategies. Again,
    this underscores the importance of USDA's export programs, including
    the Market Access Program (MAP) and FMD Cooperator Program. American
    agriculture is the most competitive industry in the world, but it can
    not and should not be expected to compete alone against the treasuries
    of foreign governments.
        Funding for USDA's Market Access Program (MAP) has already been
    reduced by two thirds from its original authorized level. It now
    represents only a fraction of what our competitors are spending. To
    further reduce or eliminate funding for MAP in the face of increasing
    subsidized foreign competition would put U.S. agriculture at a
    substantial competitive disadvantage.
        Further, it is important to note; USDA's Market Access Program has
    been substantially reformed. The FAIR Act, for example, made permanent
    the reforms contained in previous appropriations bills by specifically
    targeting direct assistance to small businesses, farmer cooperatives,
    and trade associations. In addition, the Act (1) continues the
    requirement that the program be administered on a cost share basis; (2)
    requires that funds be used only to promote American grown and produced
    agricultural commodities and related products; (3) prohibits assistance
    to foreign firms relating to foreign products; (4) maintains ongoing
    review and certification of use of funds; and (5) provides for program
    graduation.
        By any measure, USDA's Market Access Program has been a tremendous
    success and extremely cost effective. It demonstrates what can be
    accomplished as a result of a true public private partnership. Since
    the program began, U.S. agricultural exports have more than doubled and
    value added exports have tripled. The number of jobs that depend on
    U.S. agricultural exports has also more than doubled making it one of
    the most successful job creating programs ever established.
        For all these reasons, we again urge that USDA's export programs be
    fully funded and aggressively implemented. As a nation, we can work to
    export our products, or we can export our jobs. USDA's export programs
    are a key part of an overall trade strategy that is pro growth, pro
    trade and pro job.
                                     ______

      Prepared Statement of Jack A. Barnett, Executive Director, Colorado
                       River Basin Salinity Control Forum
        The Congress concluded that the Colorado River Basin Salinity
    Control Program should be implemented in the most cost-effective way
    and realizing that agricultural on-farm strategies were some of the
    most cost-effective strategies authorized a program for the Department
    of Agriculture. With the enactment of the Federal Agriculture
    Improvement and Reform Act of 1996 (FAIRA), the Congress concluded that
    the Salinity Control Program could be most effectively implemented as
    one of the components of the EQIP program. Since the enactment of
    FAIRA, the Salinity Control Program has not been funded at a level
    adequate to ensure that water quality standards in the Colorado River,
    with respect to total dissolved solids (salinity), can be honored, nor
    is the funding sufficient to prevent salt loading from irrigated farms
    from impacting the quality of water delivered to Mexico under a minute
    of the International Boundary and Water Commission, the United States
    and Mexico.
        The problem rests with the Department of Agriculture concluding
    that it should not designate any area of the county as a national
    priority area at this time. The Salinity Control Program has been
    subsumed into the EQIP program without giving recognition to the
    requirement in the Colorado River Basin Salinity Control Act that the
    Secretary of Agriculture carry out salinity control measures in the
    Colorado River Basin. Further, the Administration has concluded that
    the expenditure of EQIP funds shall be determined by initiatives
    developed at the grassroots level. Under USDA directives, this means
    that Upper Basin agricultural communities advance salinity control
    proposals for the salinity control efforts. The efforts must be
    implemented in the Upper Basin, as that is where the salt loading is
    occurring. Water users hundreds of miles downstream are the
    beneficiaries of this water quality improvement program.
    Agriculturalists in the Upper Basin, however, see local benefits as
    well as downstream benefits and have submitted cost-effective proposals
    to the State Conservationists in Utah, Wyoming and Colorado. The
    ranking criteria, however, prohibit the identification of downstream
    benefits as a benefit that can be credited when proposals are being
    evaluated.
        If the Department of Agriculture believes that it is directed by
    the Congress to implement the Salinity Control Program, then it is
    incomprehensible that the program that is designed to provide
    downstream benefits cannot receive credit in ranking criteria for the
    accomplishment of the downstream benefits. The solution to the problem
    is simple. Grassroots in the Colorado River Basin means at the state
    level and at the seven Colorado River Basin states level. The states,
    organized as the Salinity Control Forum, have adopted a program
    approved by EPA. The Colorado River Basin Salinity Control Forum should
    be recognized as the grassroots level for the Salinity Control Program
    and the Forum should serve as the Technical Advisory Committee (local
    work group) to Administration officials as to the need for and the
    expenditure of funds for the Salinity Control Program. The Colorado
    River Basin is covered by two NRCS regions and the program must be
    coordinated at a high administration level. Numerous requests have gone
    to the Department of Agriculture to make this designation, and the
    response has been that there are not adequate funds in the EQIP program
    to go beyond the initially adopted ``grassroots'' effort. Therefore,
    the Forum is pleased with the Administration's statement that it
    intends to spend $300,000,000 in fiscal year 1999 on the EQIP program.
        The Basin states have cost sharing dollars available to participate
    in on-farm salinity control efforts in the cost-sharing fashion
    provided for by the Congress. The agricultural producers in the Upper
    Basin are standing in line waiting for their applications to be
    considered so that they might also cost share in the program. When all
    of the cost sharing is tabulated, the federal cost of the program is
    less than 50 percent. However, because of the structure of the EQIP
    program and the associated authorized cost sharing, these funds cannot
    be expended in this co-operative effort until federal funds are made
    available.
        The Forum urges that this committee support the statement of the
    President when he indicated he intends to borrow $300,000,000 from the
    Commodity Credit Corporation (CCC) in fiscal year 1999 for the EQIP
    program. The Forum also requests that this Committee advise the
    Administration that it would be most important if $12,000,000 of these
    funds were designated for the Colorado River Basin Salinity Control
    Program.
                                    overview
        The Colorado River Basin Salinity Control Program was authorized by
    Congress in 1974. The Title I portion of the Colorado River Basin
    Salinity Control Act responded to commitments that the United States
    had made, through a minute of the International Boundary and Water
    Commission, the United States and Mexico, with Mexico with respect to
    the quality of water being delivered to Mexico below Imperial Dam.
    Title II of the Act established a program to respond to salinity
    control needs of Colorado River water users in the United States and to
    comply with the mandates of the then newly legislated Clean Water Act.
    Initially, the Secretary of the Interior and the Bureau of Reclamation
    were given the lead federal role by the Congress. This testimony is in
    support of funding for the Title II program.
        After a decade of investigative and implementation efforts, the
    Basin states concluded that the Salinity Control Act needed to be
    amended. Congress revised the Act in 1984. That revision, while keeping
    the Secretary of the Interior as lead coordinator for Colorado River
    Basin salinity control efforts, also gave new salinity control
    responsibilities to the Department of Agriculture, and to a sister
    agency of the Bureau of Reclamation--the Bureau of Land Management.
    Congress has charged the Administration with implementing the most
    cost-effective program practicable (measured in dollars per ton of salt
    removed). The Basin states are strongly supportive of that concept as
    the Basin states consider cost sharing 30 percent of federal
    expenditures up-front for the salinity control program, in addition to
    proceeding to implement their own salinity control efforts in the
    Colorado River Basin.
        Since the Congressional mandates of nearly two decades ago, much
    has been learned about the impact of salts in the Colorado River
    system. The Bureau of Reclamation has recently completed studies on the
    economic impact of these salts. Reclamation recognizes that the damages
    to United States' water users alone may soon be approaching $1 billion
    per year.
        The Colorado River Basin Salinity Control Forum (Forum) is composed
    of Gubernatorial appointees from Arizona, California, Colorado, Nevada,
    New Mexico, Utah and Wyoming. The Forum has become the seven-state
    coordinating body for interfacing with federal agencies and Congress to
    support the implementation of a program necessary to control the
    salinity of the river system. In close cooperation with the
    Environmental Protection Agency (EPA) and under requirements of the
    Clean Water Act, every three years the Forum prepares a formal report
    analyzing the salinity of the Colorado River, anticipated future
    salinity, and the program necessary to keep the salinities at or below
    the levels measured in the river system in 1972.
        In setting water quality standards for the Colorado River system,
    the salinity levels measured at Imperial, and below Parker, and Hoover
    Dams in 1972 have been identified as the numeric criteria. The plan
    necessary for controlling salinity has been captioned the ``plan of
    implementation.'' The 1996 Review of water quality standards includes
    an updated plan of implementation. The level of appropriation requested
    in this testimony is in keeping with the agreed to plan. If adequate
    funds are not appropriated, state and federal agencies involved are in
    agreement that the numeric criteria will be exceeded and damage from
    the high salt levels in the water will be widespread and very
    significant.
                            additional funding needs
        The authorized cost sharing by the Basin states was at first
    difficult to implement as attorneys for USDA concluded that the Basin
    states were authorized by FAIRA to cost share in the effort, but the
    Congress had not given USDA authority to receive the Basin states'
    funds. After almost a year of exploring every possible solution as to
    how the cost sharing was to occur, the states, in agreement with the
    Bureau of Reclamation, with state officials in Utah, Colorado and
    Wyoming and with NRCS State Conservationists in Utah, Colorado and
    Wyoming, agreed upon a parallel program wherein the states' cost
    sharing funds will be used. We are now in the second year of that
    program and, at this moment in time, this solution to how cost sharing
    can be implemented appears to be a good one.
        With respect to the states' cost sharing funds, the Basin states
    felt that it was most essential that a portion of the program be
    associated with technical assistance and education activities in the
    field. Without this necessary support, there is no advanced planning,
    proposals are not well thought out, allegations in the proposals cannot
    be verified, implementation of contracts cannot be observed, and the
    most valuable partnering and education efforts cannot occur.
    Recognizing these values, the parallel state cost sharing program
    spends 40 percent of the funds available on these support activities.
    Initially, it was acknowledged that the federal portion of the salinity
    control program funded through EQIP was starved with respect to needed
    technical assistance and education support. The Forum is encouraged
    with the Administration's recent determination that 19 percent of the
    EQIP funds will be used for technical assistance. The Forum urges this
    Committee to encourage or direct the Department of Agriculture and the
    NRCS to spend an adequate portion of the EQIP funds on technical
    assistance and education. The Forum believes, however, that it would be
    better for Congress to appropriate adequate funds for these support
    activities rather than to have NRCS borrow these needed funds from the
    CCC.
                                     ______

    Prepared Statement of Gerald R. Zimmerman, Executive Director, Colorado
                           River Board of California
        Your support and leadership are needed in securing adequate fiscal
    year 1999 funding for the U.S. Department of Agriculture (USDA) with
    respect to it's salinity on-farm program. This program in the past had
    been carried out through the Colorado River Basin Salinity Control Act,
    which was initially enacted by Congress in 1974, Section 303(c) of the
    Clean Water Act of 1977, and now with the enactment of the Federal
    Agricultural Improvement and Reform Act (FAIRA) in 1996, it is being
    implemented through the Environmental Quality Incentive Program (EQIP)
    as one of its program components. With the enactment of the FAIRA,
    Congress concluded that the Salinity Control Program could be more
    effectively implemented as one of the components of the EQIP program.
    However, since its enactment, the Salinity Control Program has not been
    funded at the levels adequate to ensure that water quality standards in
    the Colorado River, with regards to salinity can be honored, nor is the
    funding sufficient to prevent salt loading from irrigated farms from
    impacting the quality of water consumed by water users along the River
    and delivered to the Republic of Mexico as provided for in the treaty
    with Mexico. It has been estimated through previous federal studies
    that the Lower Basin States'(Arizona, California, and Nevada) Colorado
    River water users are presently suffering economic damages estimated to
    be in excess of $750 million per year due to the salts in the River
    system. Most of that damage is occurring in California. The potential
    impact of failing to maintain the plan of implementation for salinity
    control in a timely manner would be to permit these damages in the
    Lower Basin to exceed an estimated $1 billion annually by the year
    2015.
        The Colorado River Board of California (Colorado River Board) is
    the state agency charged with protecting California's interests and
    rights in the water and power resources of the Colorado River System.
    In this capacity, California along with the other Basin States through
    the Colorado River Basin Salinity Control Forum (Forum), the interstate
    organization responsible for coordinating the Basin States' salinity
    control efforts, established, in June 1975, numeric criteria for
    salinity levels in the River to lessen the damages in the Lower Basin
    States as well as meet the United States' treaty obligations to the
    Republic of Mexico. The goal of the Colorado River salinity control
    program is to maintain the flow-weighted average salinity at or below
    the River's 1972 levels. To maintain these levels, the salinity control
    program must remove 1.48 million tons of salt loading annually from the
    River by year 2015. To date, only 621,000 tons of salt load reduction
    has been achieved. In the Forum's last report entitled 1996 Review,
    Water Quality Standards for Salinity, Colorado River System released in
    June 1996, it found that additional salinity control measures were
    necessary beginning in 1994 to meet the implementation plan that had
    been adopted by the seven Colorado River Basin States and approved by
    the Environmental Protection Agency. For the last three years, federal
    appropriations for the USDA have not equaled the Forum's identified
    funding levels for the USDA's portion of the program the Federal
    Government has the responsibility to implement. In the Forum's report,
    it identified a ``backlog'' of salinity control measures of over
    418,000 tons annually. This is in addition to future controls designed
    to lower the River's salt loading by 437,000 tons per year over the
    next twenty years in order to meet the established salinity standards.
    Very simply, there is a need for 45,000 tons of new salinity control
    measures to be implemented each year until 2015. The Forum has
    presented testimony to Congress recommending that the salinity control
    efforts through EQIP be accelerated to continue to meet the numeric
    criteria through 2015.
        The President's proposed budget for fiscal year 1999 contains
    funding of $300 million for implementation of EQIP, up $100 million
    from the $200 million that has been offered the first two years of the
    program. The Colorado River Board is pleased with the Administration's
    statement that it intends to spend $300 million in fiscal year 1999 on
    the EQIP program. In fact, the Colorado River Basin Salinity Control
    Forum, at its meeting in Tucson, Arizona, during October 1997,
    recommended a funding level for the USDA of $12.0 million for fiscal
    year 1999 in order to maintain water quality consistent with the
    established standards. The Colorado River Board supports that action by
    the Forum. The salinity control program has proven to be a very cost
    effective approach to help mitigate the impacts of higher salinity.
    Continued federal funding of the program is essential.
        In addition, the Colorado River Board recognizes that the federal
    government has made significant commitments to the Republic of Mexico
    and to the seven Colorado River Basin States with regard to the
    delivery of quality water to Mexico. In order for those commitments to
    be honored, it is essential that in fiscal year 1999 and in future
    fiscal years, the Congress provide funds to the USDA to allow it to
    continue providing technical support in the Basin for salinity control.
        The Colorado River is, and will continue to be, a major and vital
    water resource to the 17 million residents of southern California as
    well as throughout the Lower Colorado River Basin. As stated earlier,
    preservation of its quality through an effective salinity control
    program will avoid the additional economic damages to users of Colorado
    River water in California.
        The Colorado River Board greatly appreciates your support of the
    federal/state Colorado River Basin Salinity Control Program and again
    asks for your assistance and leadership in securing adequate funding
    for this program.
                                     ______

        Prepared Statement of Dr. Michael Crow, Vice Provost, Columbia
                                   University
        Mr. Chairman, and Members of the Subcommittee, thank you for the
    opportunity to submit a statement for inclusion in the hearing volume
    for outside witnesses. My statement concerns USDA funding for accessing
    and interacting with long range forecasting and modeling efforts in the
    area of climate change. Specifically, I propose that USDA utilize
    existing climate forecasting and predictive modeling expertise for:
        (1) yield calculations (using seasonal-to-interannual temperature
    and precipitation forecasts) in the world and domestic (U.S.) supply
    and demand estimates: and
        (2) stewardship of natural resources, in programs managed by USDA
    that involve soil and water conservation and forestry management.
        The value to the agricultural community of this approach has been
    estimated at $4.5 billion in preventable losses. The fiscal year 1999
    project costs for this initiative are $750,000.
       the international research institute for climate prediction (iri)
        Columbia University's Lamont-Doherty Earth Observatory (LDEO), in
    conjunction with The Scripps Institution of Oceanography (SIO) of the
    University of California at San Diego, has entered into a Cooperative
    Agreement with NOAA to establish and manage the International Research
    Institute for Climate Prediction (IRI). The IRI's mission is to provide
    experimental climate forecast guidance on seasonal-to-interannual time
    scales for use by affected communities around the world. Working with
    an extensive network of domestic and international research and
    applications centers worldwide, the IRI will provide the necessary
    scientific institutional focus for a multi-national ``end-to-end''
    prediction program. This ``end-to-end'' prediction program supports the
    development and production of forecasts of changing physical conditions
    (temperature and precipitation) on year-to-year time scales,
    assessments of the regional consequences of those variations, and the
    application of this information to support practical decision making in
    critical sectors such as agriculture, water resources, fisheries,
    emergency preparedness, and public heath and safety.
                          fiscal year 1998 activities
        During the current fiscal year, the IRI will continue to develop
    improved seasonal to interannual climate forecasts in partnership with
    NOAA and other research elements of the Climate and Global Change
    effort. Recently, NOAA issued an evaluation on the ENSO Rapid Response
    Project, which compared the IRI net assessment precipitation forecasts
    to actual observed precipitation. A copy was provided to this
    Subcommittee's staff. Termed a ``Validation of October-November-
    December Net Assessment Precipitation Forecasts'', NOAA compared the
    graphics of the predictive models with the graphics of actual
    precipitation for the following regions: Africa; Asia; Australia and
    Indonesia; Europe; North America; and South America. The assessment
    showed that in the ten models that were used for comparison to actual
    events, the forecasts were accurate for nine of those models. The
    models accurately predicted the following:
      --Eastern Africa: normal precipitation;
      --Southern Africa: below normal precipitation;
      --Northeastern China: below normal precipitation;
      --Southeastern China: above normal precipitation;
      --Indonesia: below normal precipitation;
      --Europe: above normal precipitation;
      --North America; West Coast, Southwest, Southeast: above normal
            precipitation;
      --South America; Ecuador/Peru: above normal precipitation;
      --South America; Argentina, Uruguay, Southeastern Brazil: above
            normal rainfall;
      --South America; Northern Continent: below normal rainfall.
        The only model that failed to predict accurate forecasts occurred
    for Queensland, Australia. The model failed to predict the rainfall
    delivered by tropical storms and cyclones, which are extremely rare in
    this region. In evaluating the model, IRI scientists attribute the
    failure of the prediction to the fact that tropical storms and cyclones
    cannot be resolved by the climate models currently used operationally.
    We are eager to see the results from the next validation assessment. We
    will transmit to you the NOAA evaluation as soon as it becomes
    available, as we did with this evaluation.
        The development of regional applications of climate modeling by
    other institutions, currently in process as a function of fiscal year
    1998 funding, will bring new data sources to the efforts of the IRI
    when they become operational.
                          fiscal year 1999 activities
        The fiscal year 1999 program level for the IRI (through Department
    of Commerce funding) remains at the $5 million level we are receiving
    in fiscal year 1998. IRI activities in fiscal year 1999, as planned
    within the budget request, involve continued refinement of end-to-end
    modeling and the incorporation of additional regional data and
    modeling. The periodic evaluations of three month predictions versus
    actual events provide near time feedback on the accuracy of IRI models
    and permit corrections and adjustments to ongoing modeling efforts.
        Since the IRI was initially funded by NOAA, Columbia and Scripps
    have invested heavily in capital and research efforts. The ratio of
    private to public investment has been on the order of 3 to 1. The
    Fiscal Year 1998 Appropriations Act was the first year in which the
    Congress fully funded NOAA's request for IRI funding. We realize that
    the funding occurred concurrently with the biggest El Nino event in
    over one hundred years.
            potential benefits of improved forecasting and modeling
        The more we are able to conduct improved modeling and forecasting
    experiments, the better prepared we will be when the next big event
    occurs. Studies have shown that with improved forecasting and advanced
    warning, billions of dollars in savings can be achieved in several
    economic sectors:
      --Agriculture, fisheries and forestry: Annual losses, $15 billion.
            Preventable losses, 30 percent, or $4.5 billion.
      --Mining and manufacturing: annual losses, $1.5 billion. Preventable
            losses, 5 percent or $75 million.
      --Transportation: Annual losses, $1.2 billion. Preventable losses, 40
            percent or $40 million.
      --Communications: Annual losses, $334 million. Preventable losses, 8
            percent or $26 million.
      --Financial, insurance and real estate: Annual losses (above
            premiums), $5.4 billion. Preventable losses, 40 percent or
            $2.16 billion.
      --Other (including wholesale and retail trade, services, farm and
            non-farm residences, and government fixed capital): Annual
            losses, $6.9 billion. Preventable losses, 40 percent or $2.6
            billion.
      --Total annual losses: $30.53 billion. Preventable losses, $10.01
            billion.
        Avoidance of losses in the $10 billion range, not to mention
    reduced fatalities and injuries due to hazards from storms and floods,
    dangers along the coast, and conditions of poor air quality, can be
    achieved.
                                project proposal
        USDA's Budget Request includes $410,000 for two staff years for
    Modernization of Weather and Climate Data Acquisition. In reviewing the
    detail of the request, and the responsibilities of the Chief Economist
    for production of the monthly World Agricultural Supply and Demand
    Estimates (WASDE), we know that current IRI predictive modeling would
    greatly enhance USDA's efforts. On page 8g-4 of the Fiscal Year 1999
    Budget Justifications for the World Agricultural Outlook board, the
    following statement appears:
        ``Despite inadequate data from the National Weather Service, JAWF
    analysts assembled data from alternate sources along the Gulf Coast and
    in Southern Florida to assess the probable impact of a freeze episode
    which occurred in mid-January.''
        This type of analysis, forecasting for temperature and
    precipitation, is what the IRI was designed to produce. The products of
    the IRI, noted in the NOAA evaluation earlier in this statement, are
    developed to assist governments and private concerns in the planning
    decisions they make that are affected by climate related events.
        In another context, USDA management of the Forest Service, though
    not funded in this Bill, come directly from the secretary's Office. the
    Secretary Of USDA relies on the weather and climate assessments of the
    Chief Economists office in determining many of the activities that
    might be affected by extreme or unusual climate phenomena.
        Following the above rationale, coupled with the IRI's current
    capability and the potential for growth in the natural resource
    assessment sector, we recommend that USDA contract with the IRI for the
    development of refined models that will produce long range and near
    term climate for use in USDA's supply and demand estimates and in the
    management decisions related to natural resource stewardship.
        The development costs related to this refined modeling will total
    $750,000 in the first year. The project is estimated for a three year
    effort, which involves model development, assessment and validation,
    and real-time experimental testing. At the end of the first year, USDA
    would be provided predictive model information and forecasts that could
    be used in conjunction with traditional, less sophisticated methods.
    The potential benefit to the economy, local farmers and the environment
    far outweighs the modest investment of $750,000.
        The IRI is prepared and eager to embark on exactly this kind of
    project with USDA. The Budget Justifications certainly speak to the
    need for such expertise, and that expertise is available through the
    IRI.
                             overarching iri goals
        We are seeking to gain more quickly the capability for avoiding
    losses similar to those listed on an earlier page. The IRI's core
    function is prepared to move to a more mature stage. We could employ
    more of an engineering approach to forecast system development. The
    characteristics of this approach include more quantitative testing,
    more precise figures of merit, and particularly a much more controlled
    environment.
        The IRI would develop the analog of a state-of-the-art wind tunnel
    to aerodynamically design models with physical properties. The
    infrastructure of this advanced approach involves computation: software
    environment and computing power. The IRI seeks to develop and test
    improved coupled ocean-atmosphere climate forecast system for El Nino
    and La Nina events, thereby enhancing the ability to understand and
    predict climate impacts on a higher resolution at the national scale in
    the near-term future.
                                   conclusion
        Mr. Chairman, I recommend that the Committee provide $750,000 in
    fiscal year 1999 for climate modeling and forecasting development
    through the IRI for the purposes of (1) improved USDA capability and
    accuracy in producing the World Agricultural Supply and Demand
    Estimates; and (2) improved information for making decisions related to
    management and stewardship of our nation's natural resources.
        Thank you for the opportunity to present this statement for the
    Committee's consideration in funding decisions you will make for the
    fiscal year 1999 Agriculture Appropriations Act.
                                     ______

      Prepared Statement of Susan G. Schram, Ph.D., Food and Agriculture
    Program Coordinator, Deputy Director, Washington Operations, Consortium
          for International Earth Science Information Network (CIESIN)
        Mr. Chairman, thank you for the opportunity to submit testimony to
    the Subcommittee. I would like to thank you and the Subcommittee for
    your support for The USDA/CIESIN Global Change Data Assessment and
    Integration Project, funded through the Agricultural Research Service
    (ARS). I am pleased to have the opportunity to report the
    accomplishments of the project over the past year, highlight the
    importance of the continuation of the project, and, inform the
    Subcommittee of some changes that will be taking place at CIESIN in
    1998.
        Mr. Chairman, it has been another successful year for the USDA/
    CIESIN project. As you know, the focus of our work is to increase the
    taxpayer's return on investment in years of agricultural research and
    data collection. CIESIN's work in global environmental change related
    to agriculture has provided the opportunity to document, rescue and use
    more efficiently, the vast long-term data resources of the USDA and its
    related field offices across the United States.
        Specifically, the major objectives of our work are to:
        (1) rescue and put to use valuable long-term scientific
    agricultural and natural resources data that taxpayers have paid
    millions of dollars to collect and that are at risk of being lost;
        (2) provide state-of-the-art technical tools so that concerned
    farmers, ranchers, and citizens can visualize alternatives and
    participate in decision-making about the uses of our natural resources;
        (3) provide cross-agency access to documentation on USDA's data
    resources related to agriculture and global environmental change; and
        (4) bring the latest developments in electronic information
    technology to bear on challenges faced by USDA agencies.
        Over the course of the project our work has helped address long-
    term agricultural and natural resource issues in: New Mexico, Michigan,
    Arizona, Colorado, Texas, Oregon, Alaska, Hawaii, Oklahoma and Idaho.
    Through the support of the subcommittee and in cooperation with the
    Agricultural Research Service, we have also been able to disseminate
    our new technologies to assist other USDA agencies such as the Forest
    Service and the Natural Resources Conservation Service.
        Mr. Chairman, an important aspect of harnessing our scientific data
    resources for improved use by the research community and the public is
    to determine the location and condition of our long-term agricultural
    and natural resource data assets needed for analysis of global
    environmental change over time. We must assure that previous public
    investments in scientific data collection are not squandered due to
    retirement of veteran scientists, poor storage conditions, inadequate
    documentation, or existence of the data in single, hard copy format.
        CIESIN has continued its collaboration with the Physical Sciences
    Lab (PSL) at New Mexico State University (NMSU) to address data rescue
    needs. Our efforts have been devoted to salvaging data related to two
    of the most valuable resources of the western United States--water and
    grazinglands.
        In previous years we have been able to complete data rescue
    projects at the ARS Jornada Experimental Range and the Cibola National
    Forest in New Mexico, and the Santa Rita Experimental Range in Arizona.
    These projects transformed single hard copy data into digital data that
    are now being put to use by researchers. Rescued data have been
    incorporated with other digital data to provide an historic picture of
    long-term changes in grazingland vegetation and to permit analysis of
    the relationship between grazingland vegetation and climate variation.
        This past year, data rescue efforts focused on rescuing hard-copy
    animal weight and forage density data at the ARS Southern Plains
    Experimental Range in Woodward, Oklahoma, and on digitizing aerial snow
    cover photographs at the ARS Northwest Watershed Research Center in
    Boise, Idaho. Following is a capsule summary of each of these projects:
        Southern Plains Experimental Range.--Twenty years of steer and cow/
    calf monthly weights and forage density data were transcribed from
    ledgers to data sheets and keypunched into a data base format. These
    data were then combined with climate data to provide a means of
    performing statistical analysis over a twenty year period in the
    southwestern United States (including the massive drought of the
    1950's).
        Northwest Watershed Research Center.--Snow cover information is
    vital to the development of snow melt and runoff calculation used to
    predict water availability in the high desert country of Idaho. This
    information is presently contained in twelve years of individual 8 by
    10 hard copy aerial photographs of snow cover on the Reynolds Creek
    Watershed. Snow cover percentage is currently estimated by visual
    examination of the photographs. During the 1997-1998 contract year
    CIESIN will digitize these photographs. Digitizing will not only
    provide the information in electronic format, but will also allow image
    processing and pattern recognition software to be employed to give a
    more accurate estimate of snow cover.
        Looking forward to future data rescue projects, CIESIN is presently
    working with the ARS Southwest Watershed Research Center in Tucson,
    Arizona to evaluate the feasibility of extracting valuable long-term
    precipitation, runoff, and sedimentation data from old magnetic tapes,
    and applying these data to decision support systems to assist ranchers,
    farmers, and municipalities in southern Arizona and New Mexico.
        Since the beginning of the USDA/CIESIN Global Change Data
    Assessment and Integration Project, CIESIN has been concerned with
    improving the ways in which data and information are presented to
    scientists, policymakers, and the public at large to facilitate
    decision making about agricultural resources. CIESIN has performed
    continuous research to stay abreast of the latest advances in data and
    information visualization techniques and applications. Research
    conducted in the past year focused on cutting edge visualization
    techniques and agricultural applications.
        CIESIN continues to advance knowledge in the area of giving a
    spatial context to agricultural decision making. In the past year, the
    Agricultural Research Service has been particularly excited about
    CIESIN's work with the ARS Great Plains Systems Research Unit in Fort
    Collins, Colorado to develop a means of displaying the results of the
    Great Plains Framework for Agricultural Resource Management (GPFARM)
    model.
        CIESIN work provides GPFARM with geographic capabilities--we
    provide a way for the farmer to see the model output (which is usually
    displayed in numbers) in a much more easily understood map format.
    Presently we are working with ARS scientists to implement the Farm
    Spatial Data Management System (FSDMS). FSDMS will provide a geographic
    interface for farm and/or ranch record keeping and trend analysis.
        The FSDMS is a three level system, with each level providing
    additional capability for spatial analysis and modeling. The three
    levels are: Level 1--Farm Layout and Record Keeping; Level 2--Farm
    Analysis; and Level 3--Farm Research.
        Level 1 helps the farmer ``sketch'' farm layouts and fields, import
    digital images such as scanned quad maps and aerial farm photos,
    supplement field sketches with commentary data and photos, record weed
    and pest infestation data with direct reference to the farm layout, and
    analyze trends in weed and pest records through interactive query.
        Level 2 assists the farmer in translating farm sketches to precise
    geographic coordinates. This permits direct integration with Global
    Positioning Systems yield monitors, soil sampling, and precision
    chemical application. In addition, this allows the farmer to begin to
    take advantage of federal data resources such as NRCS digital soils
    maps, digital weather maps, and terrain maps. Level 2 provides the
    interface to GPFARM and other farm simulation models, allowing for
    direct benefit from federally funded research programs and model
    development.
        FSDMS Level 3 will provide a spatial interface for agricultural
    research scientists to evaluate new models, develop enhanced simulation
    techniques, and investigate prescriptive farm assistance through
    artificial intelligence procedures. A detailed design for both Level 1
    and Level 2 of the FSDMS system have been developed, as well as a
    conceptual design for Level 3. In addition, a functional Level 1
    prototype has been developed and has been distributed to local farm
    consultants for review and feedback.
        This year, CIESIN continued its work in global environmental change
    data documentation across USDA agencies. CIESIN has developed new
    metadata about global environmental change-related data sets across the
    major USDA research agencies and continuously updated metadata
    collected in previous years. This information is made accessible to
    USDA and other researchers through the World Wide Web. The USDA/CIESIN
    World Wide Web ``home page'' (http://www.ciesin.colostate.edu/USDA),
    provides an integrated view of 750 USDA global change data sets, 160
    models, and 173 GIS applications with electronic connections to a full
    spectrum of information related to environmental change research
    topics. Information about all of CIESIN's project deliverables to date
    may also be found on the home page. Between September, 1997 and
    January, 1998, there were over 14,000 ``hits'' on the USDA/CIESIN home
    page.
        The home page now connects USDA researchers, land-grant university
    and other users with over 520 additional sources of agriculture and
    natural resource data worldwide. CIESIN also serves as the official
    provider of agricultural data entries, formatted appropriately, for
    inclusion in the electronically-accessible NASA Global Change Master
    Directory.
        Finally, Mr. Chairman, I would like to inform you of some pending
    changes at CIESIN. CIESIN is in the final stages of negotiating an
    agreement to move its headquarters staff and operations to Columbia
    University in New York. Under the proposed arrangement, CIESIN would
    become a Center of the Columbia Earth Institute and be located at the
    Lamont Doherty Earth Observatory campus in Palisades, NY. This new
    arrangement will provide CIESIN with many new opportunities for
    scientific and technical collaboration, and reduce its overall current
    indirect cost structure, freeing more USDA/CIESIN project dollars for
    research.
        The transition and relocation are scheduled to occur on June 30,
    1998. Plans call for me to remain in the CIESIN Washington office to
    conduct project work and to perform federal liaison functions and for
    the CIESIN Ft. Collins office to continue to be co-located with ARS.
        Mr. Chairman, this project is an important part of the work of USDA
    in preserving previous taxpayer investment in scientific data
    collection, providing state of the art tools for sound agriculture and
    natural resource decision making, and making scientific data and
    information more readily available and more useful for the research
    community, for federal, state and local policy makers and the public.
    We are grateful for the opportunity to provide Subcommittee members
    with an update on our activities and respectfully request your
    continued support of this program.
                                     ______

        Prepared Statement of E. Edward Kavanaugh, President, Cosmetic,
                      Toiletry, and Fragrance Association
                                  introduction
        The Cosmetic, Toiletry, and Fragrance Association (CTFA)
    respectfully urges you to direct $5 million in increased appropriations
    to the Food and Drug Administration's regulatory program for cosmetics
    in the Center for Food Safety and Applied Nutrition (CFSAN) Office of
    Cosmetics and Colors. This additional funding is essential to ensure
    continuing confidence in the safety of personal care products.
        We believe that this funding should be provided through increased
    appropriations rather than through reallocation of existing resources
    or through user fees. Although we feel very strongly about this, we
    understand the difficult budget decisions facing the Subcommittee. If
    an increase in appropriations is not possible at this time, we ask you
    instead to earmark $5 million specifically for the regulatory program
    for cosmetics within the CFSAN Office of Cosmetics and Colors.
                additional appropriations are desperately needed
        Without this funding, we firmly believe that the FDA will be hard
    pressed to maintain a credible cosmetic regulatory program. In recent
    months, the FDA's cosmetic regulatory program has sustained crippling
    cuts:
      --In January 1998, the agency announced that all 12 of its field
            personnel assigned to cosmetics had been reassigned to food
            programs. This necessitated the immediate cancellation of the
            FDA's compliance programs for domestic and imported cosmetics.
      --In March 1998, the remaining staff assigned to the program was
            reduced from 27 to 15 full-time equivalents. These cuts
            resulted in the suspension of the FDA Voluntary Cosmetic
            Reporting Program, which for more than 25 years had provided
            the agency and our industry with valuable information about the
            ingredients used in cosmetic and personal care products. The
            FDA has also indicated that, because of these cuts, it will
            limit the number of cosmetic-related telephone inquiries it
            takes from the public and the industry. Additionally,
            laboratory studies of cosmetics will be significantly reduced
            or suspended.
        During discussions with the cosmetic industry about these
    devastating program cutbacks, the agency raised the possibility of
    further weakening the regulatory program for cosmetics by moving it
    from CFSAN to the Center for Drug Evaluation and Research (CDER). We
    believe that such a shift would be disruptive and counterproductive. It
    is absolutely imperative that the program remain in CFSAN, where it has
    functioned effectively for almost 30 years and where the expertise
    exists.
        With finite resources and a long list of responsibilities, the FDA
    faces daunting budget decisions. Cosmetic products have a stellar
    safety record and, according to FDA commissioners spanning more than
    two decades, are the safest products the agency regulates. Therefore,
    when the agency needs resources for other products or issues that
    present a critical and immediate problem, such as food safety, there is
    an understandable temptation to draw those resources away from the
    regulatory program for cosmetics. We must not allow this to happen.
        This ``rob Peter to pay Paul'' approach is, at best, a short-term
    solution. It fails to recognize that by downgrading the cosmetic
    regulatory program, the agency is sowing the seeds for future problems.
    For one thing, it could unwittingly encourage unwarranted attacks on
    the agency's ability to police the industry. In addition, it could
    encourage entry into the market of product manufacturers that do not
    maintain the current high standards of the industry. We know that
    cosmetics are by far the least of the problems facing the agency today;
    we want to keep it that way. To do that, we must have a strong FDA
    regulatory program to stand behind the industry's commitment to
    maintain its high standards of safety.
      a strong cosmetic program is crucial to our industry and the public
        An exhaustive discussion of the importance of a healthy FDA
    cosmetic regulatory program is beyond the scope of this statement. We
    must point out, however, that the American people rely on the FDA and
    have every right to expect that the Congress will provide the agency
    with the resources it needs to ensure the safety of the products it
    regulates, including cosmetics.
        CTFA members provide consumers with a wide choice of safe cosmetic
    products, including such things as makeup preparations, shampoos,
    deodorants, toothpastes, mouthwashes, perfumes, shaving creams, and
    skin lotions. These products promote personal hygiene. They help people
    look and feel their best, thereby increasing self assurance and self
    esteem. Virtually every man, woman, and child in the United States uses
    cosmetics every day. Due to the historic effectiveness of the FDA and
    the voluntary safety programs undertaken by the cosmetic industry--
    often with the agency's cooperation and participation--they do so
    safely and with confidence. Failure to fund adequately the agency's
    regulatory program for cosmetics will undercut a vital component of a
    safety system that has served consumers well for decades.
        Moreover, the continued economic well-being of the $25 billion
    cosmetic industry depends on a strong FDA regulatory program. Our
    industry relies on the FDA compliance function. Without compliance,
    unscrupulous competitors can not only defraud the public, but undermine
    legitimate industry as well. The cosmetic industry needs a level
    playing field. We need to know what regulatory requirements apply. We
    want to be certain that the FDA law and regulations will be enforced
    consistently against all marketed products, whether imported or
    produced domestically.
        A strong FDA Office of Cosmetics and Colors exerts national
    leadership, maintains appropriate standards to assure the safety and
    proper labeling of cosmetics throughout the nation, and ensures that
    Americans can enjoy a nationwide marketing system with adequate public
    protection and uniform enforcement in every part of the country. If the
    FDA's cosmetic program is diminished, the states may be encouraged to
    ignore the agency and establish their own, potentially conflicting,
    regulatory requirements for cosmetics. Such a patchwork of state
    mandates could only confuse consumers and wreak havoc on our industry's
    ability to operate in interstate commerce.
        The FDA is currently recognized as the preeminent international
    body in the field of cosmetic regulation. A visible and vigorous CFSAN
    Office of Cosmetics and Colors is necessary to maintain this
    international leadership and to move even more quickly toward the goal
    of international harmonization, which the Congress established as an
    FDA priority for cosmetics and other regulated products under Section
    410 of the FDA Modernization Act of 1997.
              the cosmetic regulatory program must remain in cfsan
        The cosmetic industry believes that it is imperative for the FDA's
    regulatory program for cosmetics to remain in CFSAN. Therefore, we are
    asking the Subcommittee to ensure that any funding it provides to the
    agency's regulatory program for cosmetics is specifically directed--and
    firmly tied--to the CFSAN Office of Colors and Cosmetics. There is
    simply no budgetary, policy, or management reason to move the program
    from CFSAN to CDER.
        No savings would result from transferring the cosmetic program. At
    least the same levels of staffing and funding would be needed to
    establish and maintain an effective cosmetic program at CDER as at
    CFSAN. In fact, since the present CDER personnel are not knowledgeable
    or experienced in cosmetics, even greater levels might be required were
    the program shifted.
        Moreover, maximum efficiency and effectiveness demand that the
    cosmetic program be in a scientifically compatible environment.
    Cosmetics and food share many more common scientific characteristics
    than do cosmetics and drugs. Unlike drug ingredients, for example, food
    and cosmetic ingredients are largely inert, are not intended to produce
    a pharmacologic effect, are not the subject of therapeutic claims, and
    are not investigated for their clinical benefit.
        More than 3,400 functional cosmetic ingredients are also regulated
    by the FDA's CFSAN as food additives or GRAS food substances. Food
    flavors and cosmetic fragrances share the same natural sources and have
    many substances in common. Color additives--which are a significant
    component of most cosmetics--and food additives have been regulated by
    the same scientists in CFSAN since enactment of the Color Additive
    Amendments of 1960. Safety decisions regarding food ingredients and
    cosmetic ingredients rely on the same scientific disciplines, which
    differ from those regarding drug ingredients.
        Some personal care products, such as deodorant/antiperspirants,
    antidandruff shampoos, and dentifrice/fluoride toothpastes, do fall
    into both the drug and cosmetic definitions of the Federal Food, Drug,
    and Cosmetic Act. They are currently and appropriately handled by CDER,
    in cooperation with CFSAN, as over-the-counter drugs. These products,
    however, represent a small portion of cosmetic products and provide no
    justification for transferring the vast bulk of cosmetics, which have
    no pharmacologic properties, from CFSAN to CDER.
        We are also convinced that the regulatory program for cosmetics
    must remain at the Office level within CFSAN. A reduced program, buried
    in the bowels of the FDA, would be unable to attract leaders or staff
    with strong qualifications and national stature. Moreover, such a
    reduction would send the unmistakable signal that the FDA is abandoning
    this area and would virtually preclude a position of leadership either
    nationally or internationally.
                  funding the regulatory program for cosmetics
        We are seeking $5 million for the regulatory program for cosmetics
    in the CFSAN Office of Cosmetics and Colors. Although it is difficult
    to pinpoint an exact figure, we believe that this approximates the
    amount that the FDA has been allocating annually to its regulatory
    program for cosmetics. In this era of budgetary constraints, we are not
    asking for new programs. We are merely asking for a level of stable
    funding that will ensure the restoration and maintenance of a program
    similar to the one that existed prior to the debilitating cuts recently
    instituted by the agency.
        CTFA believes it is essential to secure the $5 million through
    additional appropriations rather than by drawing resources from other
    FDA programs or by imposing user fees. If that is impossible, however,
    we ask the Subcommittee instead to allocate $5 million to ensure that
    there is a strong regulatory program for cosmetics in CFSAN.
        We favor additional appropriations because we know that the FDA has
    many important responsibilities, of which cosmetics is only one. We
    believe that the agency needs appropriate levels of funding to do the
    kind of job that the American people expect and deserve. Furthermore,
    we believe that it is the responsibility of the Congress to ensure that
    the FDA has the necessary resources to regulate cosmetics adequately.
        We appreciate the fact that the Congress and this Subcommittee in
    particular have consistently, and we believe correctly, rejected the
    imposition of user fees to fund general government operations. Such
    fees, in effect, would be a regressive tax on the products manufactured
    by our industry.
        Prescription drug user fees are used to speed up a specific
    company's new drug applications. They are not used for general FDA
    administrative or enforcement purposes. Having the cosmetic industry
    pay user fees to finance the FDA's inspection and enforcement
    activities is an entirely different matter. Instead of directly
    resulting in faster approval of new prescription drug products for a
    company that pays the user fee, the user fees here would be used to
    fund the agency's broad public health responsibilities for the entire
    cosmetic industry. This would raise serious public policy concerns.
                                    summary
        The cosmetic industry urges the members of the Subcommittee to
    provide $5 million in increased appropriations for the FDA regulatory
    program for cosmetics in the CFSAN Office of Cosmetics and Colors. If
    increased appropriations are not possible, we ask that you instead
    reallocate and expressly earmark $5 million for the regulatory program
    for cosmetics in the CFSAN Office of Cosmetics and Colors.
        We are grateful for this opportunity to express our views on the
    vital importance of adequate funding for this program. Thank you for
    your consideration.
                                     ______

         Prepared Statement of Samuel F. Minor, Chairman, Council for
             Agriculture Research, Extension, and Teaching (CARET)
        Thank you Mr. Chairman. I appreciate the opportunity to provide
    testimony today in support of the Land-Grant System.
        My name is Sam Minor, Chairman of the Council for Agricultural
    Research, Extension, and Teaching, commonly called CARET. CARET is a
    national focal group of lay support persons formed a number of years
    ago for the expressed purpose of enhancing national support and
    understanding of the important role played by the land-grant colleges
    in the food and agriculture systems as well as their role in enhancing
    the quality of life for all citizens of the nation.
        I take part in this activity with a great amount of pride and
    commitment, because I know first hand of the important role played by
    our land-grant institutions.
        As a dairy farmer, retail market, and on the farm restaurant owner/
    operator I have experienced the beneficial results of agricultural
    research and extension in our own business enterprise. This was
    particularly true when we, some 22 years ago, started our business from
    scratch on a hillside farm located some 25 miles south of Pittsburgh,
    Pennsylvania with nothing more than a good wife, five small children,
    and a few saved dollars.
        I do know first hand of the value of our Land-Grant Colleges such
    as Penn State to the individual farm family. Nearly everything that has
    transpired on this farm from the cropping program, to the calf raising,
    to the artificial breeding, to the milking and business management has
    been substantially based on the research and extension work from our
    land-grant university. This same statement can be said about many or
    the hundreds of thousands of farm families across this country.
    Agricultural research and education has been the basis of much of the
    development and growth that has allowed American agriculture to be the
    envy of the world.
        As a retailer of milk and other dairy products and farm fresh
    produce in our retail market and as a restaurant operator, we also have
    a great appreciation of the importance of food quality and food safety.
    The research and educational work that is being done in these two areas
    is also greatly recognized for the importance that this plays in our
    operation.
        As Secretary of Agriculture, Dan Glickman, recently said,
    ``Seventy-five percent of the progress that has been made in
    agriculture productivity and competitiveness since the second World War
    has been a direct result of the public contribution to agriculture
    research.'' Now is not the time to allow other countries to assume this
    lead in agricultural productivity and development.
        It has been the federally supported programs of research,
    extension, and teaching that have provided the scientific basis to
    allow 1.8 million U. S. farms, such as ours in southwestern
    Pennsylvania, to produce a record in excess of $200 billion of food and
    fiber. A record of nearly $60 billion of this productivity in 1996 went
    to the export market, allowing for a nearly $30 billion of positive
    contribution to the balance of trade. Although agriculture exports were
    down some this past year, they still had a very positive influence on
    narrowing the U. S. trade margin while contributing significantly to
    feeding and clothing a growing world wide population.
        This is an important time to talk about agriculture research and
    education. We are increasingly aware of the fiscal restraints and the
    changing role of the federal government in the conduct of our
    agriculture businesses. Agriculture has demonstrated that it will rely
    less upon the commodity support programs but will compete even more
    effectively in the world wide marketplace. Agriculture research and the
    implementation of these research findings has been a major factor in
    preparing for this transition. As a result of these past efforts, we
    will have an agriculture system that is even more competitive in the
    global economy.
        As a result of this research and education work, we will continue
    to have an agriculture industry that is the envy of the world. This is
    an industry that combines food and agriculture and their related
    industries to provide almost 20 percent of the jobs in this country and
    accounts for 16 percent of our gross national product. Yet, the
    consuming public spends less of their disposal income, just over 10
    percent, for their food needs than any other country in the entire
    world. These are numbers that are familiar to all of us. Yet they are
    just as significant today.
        Now, as we enter a new era in agriculture and the role that
    government plays in agriculture, we believe that the need for an
    agriculture that is based on research and science is greater than it
    has ever been before.
        We are, for many reasons, in a very rapidly changing agriculture.
    Some call it an industrialization of agriculture. We are seeing a
    consolidation of our agriculture enterprises. We are seeing a rapid
    implementation of new emerging technologies. Information, of all kinds,
    that enhances the ability to make more rapid and more correct decisions
    is increasingly available. New plant and animal species, varieties, and
    characteristics are emerging from the rapid advancement of the
    biotechnological sciences. These changes and this advancement has come
    about, to a great extent, because of the past investment in agriculture
    research and education, much of it form public sources.
        As we consider this transition in the framework of new work that is
    now being done and the new scientific advancements that are just on the
    threshold of disclosure, one has to think that our opportunities are
    greater today than they have ever been in the past. It will, however,
    take dollars to bring these opportunities to fruition. It will be a
    continuation and expansion of the federal, state, local, and private
    partnership that can best provide these dollars critically needed for
    this work. Your decisions in the coming months to increase the federal
    outlay for agricultural research can provide some much needed
    leadership for this effort. The federal funds are the heart of this
    partnership.
        Specifically, the federally-supported programs in cooperation with
    our state land-grant colleges and universities are crucial for us to
    retain and expand the U. S. competitive edge in the world wide
    marketplace. Specifically federal funding for agriculture research
    requires a balanced portfolio of base funds, special grants and
    competitive grants.
        This testimony is principally to request support for the fiscal
    year 1999 budget recommendation of the NASULGC Board on Agriculture of
    $910.3 million, an increase of 8.4 percent over the current year
    appropriation. This request is for the federal portion of the funding
    for research, extension, and higher education and federal
    administration that is, in turn, leveraged up to five times at the
    individual state and local level. While this is large amount of money,
    it is truly quite moderate in relation to the total federal
    appropriation to research or even in relation to the total agriculture
    appropriations.
        Mr. Chairman, I especially want to emphasize the importance of the
    request for the small increase in the amount appropriated for the base
    programs for research and extension. This highly successful state/
    federal base program partnership has provided critically needed stable
    on-going research. These funds are essential for leveraging external
    resources. As you are aware, these base fund levels have been eroding
    for a number of years. It is very critical that this trend be reversed.
    Base program funding is unmatched as a vehicle to foster multi-year
    programs essential to the science of agriculture. Measured rates of
    return on this investment range from 30 to 50 percent, depending on
    location and commodity. Again, I sincerely request that you begin to
    restore these very critical base program funds.
        As I am finalizing this prepared testimony, I am aware that
    Congress is right now preparing to finalize the reauthorization of the
    Research and Science portion (Title VIII) of the Farm Bill. We in CARET
    and the entire land-grant system are appreciative of the opportunity to
    have participated in this process. We are especially glad to know of
    the recognition that has been given to the addition of substantial new
    funding for agricultural research. We trust that everything possible
    will be done to assure that these new research monies will be included
    in the final form of the Title VIII reauthorization. We also trust the
    House and Senate appropriators will join in supporting this newly-
    authorized Congressional support for agricultural research, if enacted
    into law, without penalizing agricultural research through
    discretionary funding.
        The Council on Agricultural Research, Extension, and Teaching is
    very pleased to speak on behalf of the land-grant university system
    This land-grant partnership, these seventy-five universities working in
    close cooperation with the USDA Cooperative State Research, Education,
    and Extension Service, is a very important and very strong
    relationship. This is a partnership that undergirds successful
    agriculture in the United States and is the envy of the entire world.
    This is a partnership that our CARET organization believes should be
    financially supported to the fullest possible extent at both the
    federal and at the state levels. We ask that you give this request your
    fullest possible consideration this year.
        As an individual farmer and a member of the agriculture community,
    I am very proud of what this federal, state, and local partnership has
    provided to us. At the same time, agriculture research and education
    must be an important part of our long-term agricultural policy. We must
    strengthen our financial commitment to assure that these basic programs
    of the land-grant system will be prepared to meet the emerging need of
    the food and fiber sector. We in agriculture and the country as a whole
    want to be prepared to take full advantage of the further opening of
    global markets, greater deregulation of the commodity programs, and the
    promise of scientific breakthroughs. We also want to be prepared to
    address important environmental and food safety issues. These all
    provide unprecedented opportunity to put science and education to work
    in support of mankind.
        Thank you for the opportunity to provide this testimony.
                                     ______

          Prepared Statement of Sara Amundson, Doris Day Animal League
                                  introduction
        The Doris Day Animal League, on behalf of its 370,000 members and
    supporters, is a national, animal protection organization. We
    appreciate this opportunity to submit testimony supporting our
    respectful request for a specific appropriation for the Office of
    Cosmetics and Colors in the Center for Food Safety and Applied
    Nutrition at the Food and Drug Administration.
                                   background
        The Office of Colors and Cosmetics (OCC) is the primary department
    with regulatory authority for administering the cosmetics program at
    the FDA. Due to increased responsibility for regulation of food at the
    Agency, funding for the OCC has been shifted to meet new mandates. A
    significant portion of the estimated $5 million annual appropriation
    for the OCC is being absorbed, leaving the least regulated product
    under FDA open to safety concerns for consumers. The lack of commitment
    to the OCC has manifested itself in the following ways:
      --Staff for the OCC was cut by 50 percent, from 27 to 15 full-time
            employees in March 1998.
      --The Voluntary Cosmetic Reporting Program, a resource for consumers
            and industry, has been discontinued. This program provided
            information on the ingredients used in cosmetics and other
            personal care products for many years.
      --All assessments of in vitro, or non-animal test methods, to
            substantiate the safety of products have been discontinued. The
            FDA's authority on this issue of great concern to many
            Americans will be seriously undermined, as Europe progresses
            towards its legislative mandate to end animal tests for safety
            studies of cosmetics.
        Under Section 410 of the FDA Modernization Act of 1997, the Agency
    was charged with actively pursuing international harmonization of
    regulations for the products under their purview. The European Union
    has already passed a Directive to replace animal tests for safety
    assessments of cosmetics with non-animal alternative methods. In order
    to comply with the European Union when the full Directive is
    implemented, it is crucial that the OCC continue to move toward
    harmonization of United States regulations with Europe.
        With members of industry backing changes in testing methods that
    can be more accurate, faster and ultimately less expensive, it is
    important to meet the current mandate to internationally harmonize
    regulations. The FDA must ensure all of industry and consumers benefit
    by consideration of these testing methods.
        The FDA, in an era of budget cuts and shifting priorities, has
    striven to meet other mandates by absorbing a significant portion of
    the OCC's budget into other programs. However, by further cuts in a
    program already compromised by previous budget constraints the
    consumers may be negatively-impacted.
        The Doris Day Animal League urges an additional appropriation of $5
    million for the OCC, as a stable level of funding for this existing
    program, to ensure uninterrupted cosmetics regulation. If the
    additional appropriation is not possible, we ask that Senate
    Agriculture Appropriations earmark $5 million from the existing FDA
    budget.
        Thank you for this opportunity for the Doris Day Animal League to
    express the concerns of our constituents. We appreciate your
    consideration of our request.
                                     ______

         Prepared Statement of William K. Crispin, Executive Director,
                     Everglades Restoration Oversight Group
        We should most deeply appreciate your thoughtful consideration of
    this testimony that we are submitting on behalf of the Everglades
    Restoration Oversight Group (EROG). I have attached a curriculum vitae
    and a statement of disclosure concerning federal grants.
        EROG, and its organizations respectively, thank the Senate
    Appropriations Committee for its leadership in appropriating funds to
    enable the Agricultural Research Service, USDA, to establish one
    hydrologist at the Subtropical Horticulture Research Station in Miami,
    Florida. The ARS has recruited an excellent hydrologist, Dr. Reza
    Savabi, to establish this program. Dr. Savabi will focus on developing
    a farm-scale model of the movement of water under and over agricultural
    fields in relation to water levels in the canal system. These water
    levels are being raised as part of the effort to restore the
    functioning of natural ecosystems in the national parks and in coastal
    waters. There is great concern that ecosystem restoration must be
    carried out in a manner that maintains or enhances the existing water
    supply and flood control features of the Central and South Florida
    Project (C&SF).
        It is very clear that the science base has not been established to
    adequately guide the restoration program. Thus we are alarmed that the
    US Army Corps of Engineers and the US Department of Interior have
    placed the South Florida Restoration effort on a very fast track.
        In the southernmost part of the Florida peninsula, the restoration
    effort is being implemented through the C-111 Basin Project and the
    Modified Water Deliveries Project. There is great concern that these
    Projects will have a negative impact on agriculture and on rural
    communities. We believe that the long-term objectives of the Ecosystem
    Restoration thrust can be met only if: the water management scheme is
    placed on a solid scientific footing; and, sustainable agricultural
    practices are developed in a way that facilitates the economic
    viability of agriculture, as well as good land and water stewardship.
        Unfortunately, the focus of hydrological study to date has been
    within the boundaries of Everglades National Park. The Park employs
    more than a dozen hydrologists for this work. By contrast, until the
    ARS recently stationed Dr. Savabi in south Miami, only very limited
    hydrological studies were conducted that pertain to the agricultural
    areas and rural communities. Nevertheless, the University of Florida
    established an Hydrological Task Force which issued a report in 1997
    titled ``Water Management Issues Affecting the C-111 Basin, Dade
    County, Florida''. This report found that the documents produced by the
    US Army Corps of Engineers and the South Florida Water Management
    District concerning studies relevant to ecosystem restoration in south
    Florida to be ``inconsistent, both internally and with other published
    reports''. Moreover, the University found many deficiencies both in the
    models which serve as the basis for planning and in the operating
    guidelines of the canal system.
        In addition, in 1996 the University of Florida developed a
    Comprehensive 5-Year Crop Research and Extension Plan of Work that
    addresses technologies, which need to be developed, to make agriculture
    more robust and economically sustainable, and to make agriculture a
    better partner in ecosystem restoration. The University of Florida is
    addressing these needs, but the University is not able to assign
    additional faculty to accelerate this vitally important effort.
    Therefore, the University's efforts need to be augmented by a strongly-
    focused effort by the Agricultural Research Service.
        We recommend that the Congress provide the support needed by the
    ARS USDA to develop a strong Everglades Agro-Hydrology Research
    Laboratory in south Miami, Florida. This Laboratory would address needs
    from Lake Okeechobee to the Florida Keys. The Laboratory would
    establish a coordinated multidisciplinary team of scientists to conduct
    cooperative research on water management issues and on sustainable
    agricultural production systems for this region. At least three
    additional scientist positions must be added. The positions should be
    as follows:
        (1) Research Hydrologist. This position has been established
    recently. It will integrate the science information bases in a
    systematic manner to produce hydrologic models for planning and
    practical water management.
        (2) Research Soil Physicist/Engineer to produce the hydraulics
    science base that characterizes the physical systems of soil, surface
    and subsurface water flow and transport of agricultural chemicals,
    salts, etc.
        (3) Research Soil Chemist to develop the agrochemical science base
    needed to enable growers to provide sufficient crop fertility while
    guarding against environmental risks.
        (4) Research Horticulturist to provide leadership in developing
    Best Management practices and in creating improved production
    technologies.
        We request that the Congress appropriate an additional $900.000 per
    year to the Agricultural Research Service for a cooperative research
    program on agrohydrology and sustainable agriculture in south Florida.
                                     ______

    Prepared Statement of Gary Jackson, Director, and Richard Castelnuovo,
               Attorney, National Farm*A*Syst/Home*A*Syst Office
        Thank you for the opportunity to submit a written statement to the
    Subcommittee on the issue of appropriations for agricultural research,
    education and economics. From our perspective as part of a national
    office coordinating a network of state Farm*A*Syst/Home*A*Syst
    programs, we are in a unique position to provide valuable information
    on the benefits of an action-oriented approach to education that
    results in voluntary actions that effectively respond to water quality
    concerns. At the outset, we would like to acknowledge the support of
    the National Association of State Universities and Land Grant Colleges
    and in particular the Cooperative Extension Services in Michigan, New
    Mexico, New York and Wisconsin.
        Through increased support for programs such as Farm*A*Syst/
    Home*A*Syst, the federal government can effectively address important
    environmental concerns in ways acceptable to farmers, ranchers and
    other landowners. Few dispute the growing importance of these groups in
    tackling significant environmental issues such as non-point source
    pollution and safe drinking water. The disagreement comes when the
    discussion turns to issues of cost and approach. Too often government
    responds to the environmental problem of the moment by creating a new
    initiative. Rarely is this approach more cost-effective than making
    better use of programs that are proven performers. Nor does it
    necessarily result in programs that fit the needs of targeted
    audiences. In the case of Farm*A*Syst/Home*A*Syst, an incremental
    investment in this unique voluntary program would generate considerable
    benefits, building on a program awarded a 1997 USDA Group Honor Award
    for Excellence ``for outstanding leadership in building cooperative,
    interagency partnerships that encourage farmers, ranchers, and home
    owners to take voluntary action to prevent or reduce environmental
    pollution.''
        Farm*A*Syst/Home*A*Syst is not another federally-directed program.
    It is locally-controlled by individual state teams who draw strength
    and focus from national coordination and unprecedented levels of
    cooperation among government agencies, universities and the private
    sector. This special arrangement is vital to building a broad-based
    commitment to voluntary action while providing familiar sources of
    support that enable individual landowners to improve management of
    their property. At the federal level, CSREES has joined NRCS and U.S.
    EPA to support a national office that provides assistance and guidance
    to a network of Farm*A*Syst programs in nearly every state (including
    Alaska, Arkansas, Iowa, Kentucky, Mississippi, Missouri, Montana,
    Pennsylvania, Vermont, Washington, West Virginia, and Wisconsin) and
    newly-developed Home*A*Syst programs in 30 states. National
    coordination enables these state programs to respond as a system to
    pollution concerns and provides structure to conduct program
    evaluations that demonstrate impacts. Nonetheless, this framework is
    sufficiently flexible to permit states to tailor Farm*A*Syst/
    Home*A*Syst programs so they effectively address local concerns.
        State endorsements of Farm*A*Syst/Home*A*Syst reveal how states
    take advantage of this flexibility. Dr. Jimmy Bonner, Mississippi
    Extension Farm*A*Syst Program Coordinator, explains how the program
    creates opportunities to work with the private sector:

              The Delta Council, an organization of Mississippi Delta
            farmers, was looking for a way that its members could show they
            were doing the right thing environmentally. In Farm*A*Syst, the
            group saw a program that suited its needs. The Council wants to
            adapt Farm*A*Syst to address specific environmental concerns in
            the heavily row-cropped Mississippi Delta. We are ready to help
            with modification to develop materials emphasizing soil and
            water conservation, pesticide management, wildlife management,
            solid waste management and other areas to complement the
            existing Farm*A*Syst model. If all goes as planned, farmers
            will start using the materials this year.

        Meg Burgett, Alaska Cooperative Extension, knows firsthand the
    value and impact of the program:

              We are working closely with the Alaska Department of
            Environmental Conservation (ADEC) to integrate this program
            with their statewide Wellhead Protection and Groundwater
            Protection Programs to achieve maximum use of the materials.
            Alaska has approximately 85,000 households that get their
            drinking water from privately owned water wells. In addition,
            there are approximately 1700 Class A and B community water
            systems, most of which have privately-owned land in close
            proximity. Although ADEC is charged with the protection of
            drinking water for Alaskans, their role is not to regulate
            these private holdings. Educational outreach to the private
            landowners is the most effective method of reducing the risk of
            pollution to our drinking water supplies. Use of the
            Home*A*Syst materials developed for Alaska will enable
            landowners to assess pollution problems and risks on their
            property and empower them to take voluntary actions to prevent
            pollution using the best available scientifically-based
            recommendations.

        Bob Broz, Missouri State Coordinator observes, ``Like a lot of
    states, Missouri can benefit from pollution prevention. Agriculture is
    often overlooked in this effort. Farm*A*Syst offers an action-oriented
    approach that farmers feel comfortable using to take voluntary action
    to prevent pollution on their property.''
        Karen M. Blyler, Coordinator for Washington Home*A*Syst (a
    comprehensive program that reaches farmers as well as homeowners),
    provides insights concerning the tremendous growth of the state
    program:

              In a little over four years, Washington's highly successful
            Home*A*Syst program has been used in over 17 counties and in a
            wide array of educational projects. Initially proposed as a
            ``Wellhead Assessment and Protection Pilot'' for farmers,
            ranchers and rural residents, Home*A*Syst has evolved to meet
            other water quality needs, including source water protection
            and safeguarding private drinking wells. In many areas,
            Home*A*Syst has become the educational tool of choice because
            it is both voluntary and confidential.
        KY*A*Syst State Coordinator, Roger Rhodes, points to the program's
    value in satisfying an ``innovative piece of legislation'' that
    requires all Kentucky agricultural landowners of 10 acres or more to
    complete a water quality plan that covers 59 best management practices:
    ``KY*A*Syst is the most effective way to accurately assess farmstead
    pollution risks related to petroleum tanks, septic systems, and
    pesticide storage. It will result in more complete and thorough state
    water quality plans.''
        State Coordinator Les Lanyon believes that Pennsylvania Farm*A*Syst
    enables farmers to take a positive approach to protect shared resources
    through pollution prevention:

              I tend to work with small dairy farmers (40-50 cow
            operations) who are under intense economic pressure.
            Farm*A*Syst is a voluntary program that can focus on the
            positive. It lets folks who are doing a good job know that they
            are on the right track. Also it reveals opportunities for
            improvement on individual farms.

        These experiences have been replicated in state after state. To
    develop and deliver the program, each state has assembled teams that
    have successfully linked agency officials at different levels of
    government, agricultural and environmental regulators, and educators
    and technicians in cooperative enterprises to address common
    environmental concerns. In states such as Washington and Arkansas, for
    example, local staff from CSREES and NRCS are actively involved as
    agency partners, together with officials from U.S. EPA and Soil and
    Water Conservation Districts.
        These partnerships improve the effectiveness of programs such as
    NRCS's Environmental Quality Incentives Program (EQIP) by providing
    action-oriented education. Funded by an educational grant under EQIP, a
    Wisconsin team of Extension agents and others plan to use Farm*A*Syst
    with small dairy farmers, contractors and milk machine installation
    technicians in Outagamie, Shawano and Waupaca Counties to improve
    milkhouse waste treatment systems. On the western edge of the state, in
    Buffalo and Grant Counties, interagency teams are using EQIP funds to
    deliver Farm*A*Syst in two watersheds to reduce soil erosion and other
    environmental problems related to agriculture. Through the EQIP program
    in Missouri, producers will be eligible to receive a $100 payment for
    conducting Farm*A*Syst assessments and adopting management practices to
    reduce pollution risks.
        Dr. Jimmy Bonner provides this example of partnerships from
    Mississippi:

              A Farm*A*Syst pilot project involving dairy farmers in
            Mississippi's Tangipahoa Watershed developed into a two-state,
            multi-agency initiative, including NRCS, RC& D, Farm Services
            Agency, Mississippi Soil and Water Conservation Commission,
            Mississippi State Health Department and the Mississippi
            Department of Environmental Quality, as well as Louisiana
            agencies. With a strong partnership between agriculture, the
            environment and local producers, there were many opportunities
            to help producers test their drinking water, install and
            renovate animal waste lagoons and improve animal waste
            management practices. In addition, a special waste pesticides
            collection was held in the watershed resulting in the proper
            disposal of more than 6,000 pounds of waste pesticides. This
            special effort was part of a larger state-wide collection of
            over 600,000 pounds of waste from 1994-1997.

        Ties to the private sector have strengthened state teams. Tyson
    Foods has turned to Farm*A*Syst to improve management of its animal
    production operations in Arkansas. According to John Gunsaulis,
    Nutrient and Land Manager for Tyson Foods, ``Farm*A*Syst is a tool that
    allows farmers to identify any potential area of environmental concern
    and plan actions that need to be taken.'' In eight out of the 29 states
    where Farm*A*Syst/Home*A*Syst is in the advanced stages of development,
    state Farm Bureaus are actively involved. WaterSafe (West Virginia's
    version of Farm*A*Syst) is extending its outreach capacity by using an
    800 number provided by the state Farm Bureau. The Iowa State Farm
    Bureau is assuming a leadership role in launching a major initiative to
    refine Farm*A*Syst materials for Iowa and deliver the program in a
    priority watershed. Missouri has pioneered a successful training effort
    that introduces real estate brokers to Farm*A*Syst and Home*A*Syst and
    has started sharing this model with other states such as Washington.
    Through mini-grants, Montana will enable about 10 counties to explore
    ``something different'' in their delivery of Home*A*Syst, according to
    state coordinator Mike Vogel. This will create new opportunities to
    work with insurance agents, home inspectors, local health departments,
    bankers, home builder associations and Welcome Wagon in their efforts
    to deliver the program.
        Farm Cooperatives were a vital link in a Wisconsin project working
    with petroleum marketers to reach new audiences with Farm*A*Syst and
    other pollution prevention materials relating to petroleum storage.
    ``The materials were professionally done; very well put together,''
    according to Dean Hanley, energy department manager, Danco Prairie FS
    Co-op. In the words of Tom Van Arsdall, Vice President of Environment,
    National Council of Farmer Cooperatives:

              [N]ow farmers are turning increasingly to cooperatives for
            assistance in the face of growing environmental pressures.
            That's why we are excited about the Farm*A*Syst program. It
            provides an opportunity for the agricultural community to pull
            together and help farmers pursue voluntary, cost-effective
            solutions when responding to environmental challenges.

        States are applying Farm*A*Syst/Home*A*Syst to tackle their
    toughest environmental problems through voluntary action. Since every
    state needs help protecting private drinking water wells, Farm*A*Syst/
    Home*A*Syst stands out as the only national program that provides
    information and technical assistance that can help 23 million private
    well owners protect the quality of their drinking water. In Sevier
    County, Arkansas, Farm*A*Syst assessments were the first step in
    detecting and closing abandoned wells, a major pathway for pollution
    that threatens drinking water. County officials mobilized highway crews
    to close nearly 70 wells, saving an estimated $250 per closed well. In
    Whatcom County, Washington, Extension teamed with the state department
    of health and local agencies to train operators of small water supply
    systems in the delivery of the program. By working with private
    landowners to assess pollution risks, these operators were able to
    minimize contamination threats to recharge zones for public drinking
    water wells, while helping rural landowners protect their private
    wells.
        State programs have the potential to involve and motivate a wide
    range of audiences. In addition to state-specific materials developed
    for farmers and ranchers, they have access to specialized education
    tools to reach under-served groups with practical information about
    pollution prevention. They can build on successful pilot projects that
    tested simplified assessment materials with Native Americans in
    Washington and Wisconsin, Spanish-language materials with landowners in
    two states and newly-developed Home*A*Syst materials with non-farm
    homeowners in Alaska, Montana, Washington and other states.
        Increased funding can substantially improve state and local
    capacity to provide pollution prevention assistance to individual
    landowners, as the performance of Michigan Farm*A*Syst/Home*A*Syst
    shows. With a boost in funding, this state program was able to conduct
    more than 6,500 Farm*A*Syst assessments; more than 150 Field*A*Syst
    assessments; and more than 12,500 Home*A*Syst assessments. Reaching
    more people is important but changing behavior is the test of
    effectiveness.
        Farm*A*Syst/Home*A*Syst results in voluntary actions to prevent
    pollution. Clearly, a key element in this process is landowners'
    acceptance and use of the program, as information provided by Karen
    Blyler illustrates. But this alone cannot explain improvements in
    management. Changes result from a system of education, self-assessment
    and action planning in which landowners are active partners in making
    improvements. Easy-to-use worksheets provide a simple and inexpensive
    way for individual landowners to evaluate pollution risks on their
    property and serve as the essential first step in formulating plans to
    prevent pollution. Farm*A*Syst worksheets initially covered farmstead
    pollution risks, such as well condition, petroleum tanks, chemical
    storage and animal waste, but have been expanded to include field
    activities such as nutrient and pest management. These materials are
    effective and useful because they organize complex regulatory
    requirements, technical information and recommended management
    practices into a system that non-experts can apply to their property to
    prevent pollution.
        Using the process of self-assessment, landowners learn firsthand
    the consequences of pollution to their home. They are motivated to
    improve management to safeguard the health of their land and families,
    avoid environmental liability and cleanups and satisfy the concerns of
    lenders and property buyers. Based on state surveys, it is estimated
    that two of every three participants make or intend to make low-cost
    changes immediately, with higher-cost actions planned for the future.
        According to a detailed benefit-cost study of 134 Louisiana
    farmers, Farm*A*Syst/Home*A*Syst is an extremely cost-effective program
    with long-reaching economic and non-economic (educational) benefits.
    Drawing on the results of this two-year study, Farm*A*Syst produces
    benefits-over-costs ranging from at least $2.4 million to more than $15
    million. This range is calculated using three methodological approaches
    (averting expenditures, avoided costs, contingent valuation) and is
    based on an estimated 10-year implementation period.
        Nearly one in three Louisiana participating farmers had made--or
    planned to make--66 individual changes in their farming practices ``due
    to information provided by the Farm*A*Syst materials,'' changes that
    should prevent pollution to groundwater. These farmers voluntarily
    invested a total of $91,437 (approximately $682 per farmer) to make
    these changes. While these actions included low or no-cost changes in
    management, 18 percent of the changes involved construction costs over
    $500, 12 percent involved the plugging of old wells and the drilling of
    new wells and 12 percent involved the removal or replacement of
    underground petroleum storage tanks. Since petroleum storage and well
    water contamination were two of the most frequently reported high risks
    on Louisiana farms, these changes will have direct and significant
    impact in preventing pollution. In addition, the study revealed
    multiple non-economic benefits including positive changes in knowledge,
    attitude, perception and awareness of the pollution risks associated
    with farming practices.
        Results from less comprehensive studies in Alabama, Arkansas,
    Kentucky, Maine, Missouri and Washington state confirm the findings in
    Louisiana. In an Arkansas ``Emphasis'' project involving four counties
    (Sevier, Benton, Howard and Washington), 85 percent of the 330
    participants responded to a follow-up survey by saying they had taken
    more than 190 voluntary actions. In Washington, 500 evaluations
    revealed that participation helped 75 percent of the respondents
    identify a high-risk activity or practice and motivated over 75 percent
    to make at least one change in 1-3 years to reduce pollution risks. In
    addition, these surveys consistently reveal user satisfaction with
    Farm*A*Syst. Users overwhelmingly report that the program is useful,
    informative, and easy to understand.
        From these specific study results, it is not difficult to draw
    important conclusions about the nationwide impact of the program. There
    are many states that should have greater benefits than Louisiana since
    more people have participated in the program. As previously noted,
    Michigan alone has reached 19,000 landowners. Using conservative
    estimates, it is safe to assume that 80,000 assessments have been
    conducted nationwide. Based on the findings in the Louisiana study, it
    is estimated that Farm*A*Syst/Home*A*Syst activities have generated
    more than $50 million in pollution prevention investments.
        The value of Farm*A*Syst/Home*A*Syst cannot be measured simply in
    end results. The program demonstrates how Land Grant Colleges and
    CSREES can play leading roles in pollution prevention for farmers,
    ranchers and homeowners. In the tradition of Extension programs with
    strong links to research, Farm*A*Syst/Home*A*Syst can stimulate
    relevant inter-disciplinary research related to pollution prevention
    and organize research findings into educational programming that
    directly benefits landowners. During July 1997 hearings of the House
    Subcommittee on Forestry, Resource Conservation, and Research, Dr. Bob
    Robinson, CSREES Administrator, singled out Farm*A*Syst/Home*A*Syst as
    one of two efforts that bridged the gap between research and applied
    programs, ``Another notable example of a decision aid to help farmers
    is Farm*A*Syst, which is used to assess farms and farmsteads for
    potential pollution problems.'' This is a model for environmental
    programming that enables landowners to take voluntary action based on
    research-based recommendations. For farmers and ranchers, it offers an
    acceptable approach to responsibly manage their land without losing
    their competitive edge in the marketplace. For non-farmers, it offers a
    way to make significant contributions to protecting drinking water and
    preventing non-point source pollution.

         DISCLOSURE OF FEDERAL FUNDING FOR NATIONAL FARM*A*SYST/HOME*A*SYST OFFICE (FISCAL YEARS 1998 AND 1997)
    ----------------------------------------------------------------------------------------------------------------
                            Fiscal year 1998                          Funds received       Other        Forthcoming
    ----------------------------------------------------------------------------------------------------------------
    USDA/CSREES.....................................................        $209,017  ..............  ..............
    U.S. EPA........................................................          25,000  ..............        $100,000
    USDA/NRCS.......................................................          80,000         $84,450  ..............
                                                                     -----------------------------------------------
          Total.....................................................  ..............  ..............         498,467
    ----------------------------------------------------------------------------------------------------------------

    ------------------------------------------------------------------------
                Fiscal year 1997              Funds received       Other
    ------------------------------------------------------------------------
    USDA/CSREES.............................        $197,977  ..............
    U.S. EPA................................          50,000  ..............
    U.S. EPA Pesticide Environmental                  29,910  ..............
     Stewardship Program....................
    USDA/NRCS...............................          80,000         $84,450
                                             -------------------------------
          Total.............................  ..............         442,337
    ------------------------------------------------------------------------

                                     ______

     Prepared Statement of Ralph G. Yount, Ph.D., President, Federation of
              American Societies for Experimental Biology (FASEB)
        I am Ralph Yount, professor of biochemistry at Washington State
    University. I am a basic scientist who works on the mechanism of muscle
    contraction. I serve this year as the President of the Federation of
    American Societies for Experimental Biology, usually referred to as
    FASEB. Founded in 1912, FASEB is the largest organization of life
    scientists in the United States with a combined membership of more than
    52,000 researchers. Our members include scientists involved in human as
    well as animal nutrition research. These scientists hold positions in
    virtually every public and private institution engaged in nutrition-
    related research in the United States, as well as in industrial and
    biotechnology enterprises conducting nutrition and food related
    research.
        FASEB believes, as we believe this committee does, that research
    sponsored by the Department of Agriculture conducted at universities
    throughout the United States generates new knowledge that ensures an
    affordable, abundant and wholesome supply of food and fiber, and
    promotes the competitive position of U.S. agriculture in the global
    marketplace. The growth of our global population and the threat of
    food-borne pathogens require improvements in agriculture and food
    safety, as well as advances in nutrition and reduction of environmental
    pollution.
        As the leading agency in support of research on human nutrition and
    food safety, plant pathogenesis and control, and on plant genomic
    projects benefiting mankind, the USDA is the primary support of basic
    and applied research through its Research, Education, Extension budget.
    This budget supports the Cooperative State Research, Education, and
    Extension Service (CSREES) whose mission is to advance research,
    extension, and higher education in food and agricultural sciences and
    in related fields.
        The National Research Initiative Competitive Grants Program, a
    CSREES program, funds competitive extramural research projects at
    public and private universities and colleges. Research proposals are
    merit-reviewed by panels of experts, and those attaining the best
    scores are funded. The NRICGP is the largest national competitive
    research grant program in the USDA.
        FASEB's recommendations for the USDA focus principally on the
    NRICGP. Some examples of the program's recent accomplishments are:
      --Calcium homeostasis and bone turnover in adult women.--Studies show
            that healthy adult women consuming either low- or high-protein
            diets exhibited calcium and bone metabolism abnormalities, not
            observed in those on a medium-protein diet. Impaired intestinal
            calcium absorption combined with reduced bone turnover may
            result in diminished calcium incorporated into bone. These
            abnormalities could lead to decreased bone mass and/or
            increased risk of fracture. The studies suggest that in
            evaluating the recommended daily allowances (RDA's) for
            protein, the impact on calcium homeostasis and bone turnover be
            considered.
      --Enterohemorrhagic Escherichia coli (E. coli).--Strains of E. coli
            are associated with disease in humans and animals. E. coli
            O157:H7 is the predominant strain associated with food-borne
            human infection and death. Most infectious outbreaks of this
            form of E. coli have been associated with eating beef products;
            studies have shown that diets fed to cattle and sheep influence
            the shedding of E. coli O157:H from the gastrointestinal tract.
            Further research demonstrates that E. coli O157:H can survive
            in fecal matter in the environment for up to a year. Outbreaks
            of this strain have also been associated with drinking
            contaminated apple cider, and studies are underway to develop
            processes to eliminate it from cider without compromising the
            flavor.
      --Anti-shattering gene in grain.--Scientists have identified a gene
            that eliminates ``shattering,'' or seed loss, of mature grain
            crops. Cloning this gene will contribute directly to long-range
            improvement in U.S. agriculture by reducing seed losses during
            grain harvests. It will also help to accelerate
            commercialization of new crops, providing a wider range of
            options to agricultural producers by reducing both genetic and
            environmental vulnerability of the U.S. food production system.
        These are but three samples of agricultural research that mark the
    high quality productivity and achievement found in the competitive and
    merit-reviewed research programs of the NRICGP. As you can see, these
    research projects affect our basic health, our food supply and our
    reliance on the safety of the food supply. Many other significant
    achievements of NRICGP are not widely known to, or appreciated by, the
    public that finances them. It is important that the USDA continue to
    expand its efforts in publicizing research accomplishments and to
    remind investigators to acknowledge USDA support when reporting their
    findings to Congress and the public.
                                recommendations
        NRICGP.--The NRICGP's competitive and highly productive merit-
    reviewed research program is vital to the future of U.S. agriculture.
    Unfortunately, only 24 percent of applications submitted under this
    program can currently be funded. It is in my role as President of FASEB
    that I write in support of an increase in funding for USDA's National
    Research Initiative Competitive Grants Program from $97 million to $130
    million. This is the same level requested in the President's budget.
        National Needs Initiatives (NNI).--The NNI, the Graduate Fellowship
    Program of the Higher Education Office, and other USDA programs
    contribute to the USDA's training mission. The NNI is crucial for the
    recruitment, preparation, and training of the next generation of
    scientists. Therefore, FASEB specifically recommends that NNI funding
    be increased to $4 million in fiscal year 1999. FASEB also believes
    that an external review of the NNI would provide useful program
    guidance and ensure effective use of the funds in providing graduate
    training.
        Expanding USDA Office of Competitive Grants.--FASEB endorses
    efforts to expand the use of outside review to improve the research
    programs at USDA, and further recommends that new funding initiatives
    be administered by the USDA Competitive Grants and Awards Management
    Unit of CSREES. This would establish a solid, consistent merit-review
    process for these programs.
        Animal Welfare Act.--Reasonable safeguards on the sale of animals
    protect the public and allow the legitimate use of animals in research.
    USDA's Animal and Plant Health Inspection Service (APHIS) is charged by
    Congress with enforcement of the Animal Welfare Act (AWA). We recommend
    that Congress provide the APHIS with adequate funding for enforcement
    of the Animal Welfare Act in fiscal year 1999 so that it can continue
    to ensure compliance with the AWA.
        Mr. Chairman, these are FASEB's recommendations as you and the
    Committee begin the task of deciding how best to allocate funding for
    the Department of Agriculture, including the research programs of the
    NRICGP. We have also made other policy recommendations in our formal
    report of the Funding Consensus Conference for fiscal year 1999,
    distributed earlier to members of this subcommittee, which we hope you
    will review carefully.
        In conclusion Mr. Chairman, we believe this is an opportunity to
    expand our country's historic effort to improve America's health
    through nutrition using all the tools of research scientists.
    Agricultural research is the key to the improvements in agriculture
    required to feed the world, reduce environmental pollution, increase
    food safety and improve nutrition.
                                     ______

               Prepared Statement of the City of Gainesville, FL
              sweetwater branch/paynes prairie stormwater project
        On behalf of the City of Gainesville, Florida I appreciate the
    opportunity to present this written testimony to you today. The City of
    Gainesville is seeking federal funds in the fiscal year 1999
    Agriculture Appropriations bull, in order to assist our efforts to
    protect the Floridian aquifer from stormwater runoff. In particular, we
    are hopeful that the Subcommittee will provide the City with $2 million
    through the Fund for Rural America.
        In Gainesville, the Sweetwater Branch basin contains approximately
    1,710 acres and is located in the southeast central portion of the
    City. The outfall from this basin discharges into Paynes Prairie, a
    state owned preserve and park system, which eventually flows into the
    Alachua Sink, a natural sink hole that drains directly into the
    Floridian Aquifer. This Aquifer provides the majority of drinking water
    to Florida's a residents and has a direct impact on Florida Everglades.
        The Sweetwater Branch drainage basin contains urban, commercial,
    industrial, and residential area stormwater runoff. Because the branch
    runs through some of the oldest portions of Gainesville, most
    stormwater runoff is directly discharged into the Branch with very
    little flooding attenuation or pollution loading reduction. The runoff
    has the potential to affect threatened and endangered wildlife such as
    the Bald Eagle, the Woodstork, the Florida Sandhill Crane, and the
    Southeastern American Kestrel. In addition, many domestic water wells
    are used to obtain water from surficial and intermediate aquifers in
    the area. In summary, the situation has created a concern amongst
    environmentalists, business leaders, and concerned citizens throughout
    the region that Paynes Prairie and Floridian aquifer are being
    compromised.
        With this in mind, the City of Gainesville, Alachua County, St.
    Johns River Water Management District, Florida Department of
    Environmental Protection and local citizens are all seeking a
    comprehensive ecosystem management solution to the problem of
    stormwater runoff from downtown entering Sweetwater Branch, Paynes
    Prairie, and the Alachua Sink. The project devised by these groups
    would reduce or eliminate the sediment, debris, nutrients and general
    pollutants currently being discharged. Current projections are that the
    project would consist of the following three components:
      --the purchase of undeveloped property in the vicinity of State Road
            331 and Sweetwater Branch;
      --the construction of maintainable sediment and debris removal
            systems; and
      --the construction of maintainable nutrient removal systems.
        An in-depth engineering analysis of the creek system, property
    topography, associated wetlands, and other pertinent factors is needed
    to determine the optimum and appropriate scope of property purchase and
    facilities construction. The City is prepared to pay some of the cost
    for this analysis, but we are simply unable to bear the entire burden.
    As a result, we request that the Subcommittee appropriate $2 million to
    assist their efforts. Once the project construction is complete,
    Gainesville Stormwater Management Utility, a public utility, would
    provide the required annual maintenance for the facility and no federal
    maintenance funds would be needed.
        This is a critical and much needed project for the City of
    Gainesville, as well as the entire State of Florida, and we
    respectfully ask the Subcommittee for its consideration of the
    Sweetwater Branch/Paynes Prairie Stormwater Project.
                                     ______

      Prepared Statement of John DeMott, President, Dade Chapter, Florida
                       Nurserymen and Growers Association
        We should most deeply appreciate your thoughtful consideration of
    this testimony which we are submitting on behalf of the Tropical Fruit
    Growers of South Florida, Inc. and the Miami-Dade County Chapter of the
    Florida Nurserymen & Growers Association, Inc. Each of us has attached
    a curriculum vitae and a statement of disclosure concerning federal
    grants.
        We request that the House Committee on Appropriations effectively
    address two very important issues, namely (1) to re-establish a program
    to introduce tropical plant material, to improve this germplasm and to
    disseminate it throughout the United States as appropriate, and (2)
    establish a R&D program to combat harmful exotic organisms (initially
    focusing on Diaprepes) that threaten both agriculture and natural
    ecosystems in south Florida.
      re-establish program to introduce, improve and disseminate tropical
                                plant materials
        The introduction of tropical plant material began with the
    establishment of the Spanish and English colonies on this continent. In
    1790 Thomas Jefferson wrote: ``The greatest service that can be
    rendered to any country is to add a useful plant to its culture''. In
    order to provide effective institutional leadership for this vital
    activity the Congress assigned responsibility for it to the U.S.
    Department of Agriculture through the Organic Act of 1862 that created
    the Department. In order to implement this mandate on the mainland the
    USDA established a number of plant introduction stations. However only
    one of these plant introduction stations is essentially frost-free and
    suitable for conducting the needed R&D on tropical plants, i.e. the
    Subtropical Horticulture Research Station, Miami, Florida.
        We are very grateful that the Congress prevented the Agricultural
    Research Service from closing the Subtropical Horticulture Research
    Station. Unfortunately the ARS no longer employs any of the
    horticulturists who previously had introduced tropical plant material
    from abroad, and improved and disseminated it. The corresponding
    resources were redirected by ARS during the attempted close-out process
    to other programs. Thus there is a need for an annually recurring
    appropriation of $900,000 to assemble a team of three scientists plus
    technicians, field laborers, etc. needed to re-establish the program of
    introducing, improving and disseminating ornamental, tropical fruit and
    vegetable materials.
        The production of horticultural crops in the southern United States
    is under severe pressure from NAFTA. Additional developments are in the
    offing that will increase such pressures including the development of
    additional free-trade agreements with Latin America and other tropical
    and subtropical countries and the inevitable democratization of Cuba.
    Thus American producers can remain competitive only if they employ
    superior technology including better quality and higher yielding
    varieties of tropical fruit, vegetable and ornamental crops.
        The proposed budget increase request would restore three scientists
    years of horticultural research effort. This effort would be focused on
    the introduction of frost-sensitive plant material, its improvement and
    its dissemination to other US scientists and industry associations.
    This along with the plant molecular geneticist would provide a core of
    four scientist years of effort devoted to the development of sorely
    needed improved tropical fruit, vegetable and ornamental crops. At
    $300,000 per scientist year of effort, the total annually recurring
    request is $900,000.
        The Positions would be as follows:
        1. Field Research Leader (Research Horticulturist), one full time
    technician (BS or MS), two field hands and one secretary. The Research
    Leader would plan and carry out plant explorations and exchanges,
    establish plantings, make appropriate crosses and selections, and
    oversee the work of the entire Unit.
        2. Research Horticulturist/Outreach Specialist, one full time
    technician (BS or MS) and 2 field hands. This specialist would
    undertake crop improvement research, develop methods of culturing new
    plants, organize and conduct field days and other educational events,
    propagate and disseminate improved plant materials to research
    institutions and to industry associations.
        3. Research Horticulturist/Curator of Living Collections, one full
    time technician (BS or MS) and two field hands and one clerk typist.
    This horticulturist would be responsible for assembling core
    collections of living plants, developing methods of cryopreservation
    and other methods of storage of living materials, development of
    traditional and in vitro methods of propagation, and the preparation
    and maintenance of herbarium specimens of significant plant materials.
    Also this individual would work cooperatively with the Research
    Geneticist to ``finger-print'' plant materials, and to develop
    pathogen-free materials for dissemination.
        We request that the Congress appropriate $900,000 recurring
    annually to the Agricultural Research Service to re-establish the above
    program on tropical plant material.
        establish a r&d program to combat harmful exotic organisms that
    threaten both agriculture and natural ecosystems in south florida with
                         initial emphasis on diaprepes
        With the great increase in travel, trade and influx of refugees
    into south Florida in the last three decades the frequency of
    introduction of harmful exotic organisms has increased to an alarming
    level. This is of great national concern because many of these pests,
    diseases, weeds, snails, fish, etc. threaten the fundamental character
    of National Parks and Preserves, spread to other parts of the United
    States and impose an enormous burden on agricultural production and
    marketing in the affected States.
        In recent years south Florida served as the gateway to the entry of
    the devastating whitefly (Bemisia argentifolli), the insidious melon
    thrips, Thrips palm), sixteen whitefly-transmitted gemini viruses,
    which cause Bean Golden Mosaic disease, the most recent being the
    tomato yellow leaf curl virus. The latter appeared in Homestead in July
    1997, has spread to the major tomato growing areas, and is causing
    severe losses. Also several scale insects and mealybugs have arrived
    recently, and they are extremely damaging to the nursery trade and to
    homeowners.
        In past decades a number of very harmful organisms penetrated our
    quarantines. One of these is the West Indian Sugarcane Rootstock Borer
    Weevil, Diaprepes abbreviates. This insect, a native of the Caribbean
    and Latin America, has been found in central Florida for several
    decades. Losses in citrus production by this exotic pest are estimated
    at cat $72 million per year. In 1996 this pest was found in Miami-Dade
    County, and it is causing damage to fruit, vegetable and ornamentals
    crops which already exceed $1 million per year.
        Not surprisingly conditions for the pest are considerably more
    favorable in southern Florida than in Central Florida. In south Florida
    the subtropical climate allows this pest to reproduce and develop year
    round, and its native host plants occur in abundance.
        Florida Division of Plant Industry and University of Florida
    scientists have collated the pests host records. These show that
    Diaprepes attacks 270 species of plants belonging to 157 genera in 59
    plant families. Plants that have been shown to support the entire life
    cycle from egg through adult to egg include Citrus sp., peanut,
    sorghum, guinea corn, corn, Surinam cherry, dragon tree, sweet potato
    and sugarcane. Larvae have been shown to feed on 40 plant species in 20
    plant families. Host plant associations of concern to Miami-Dade County
    residents include mango, Brazilian pepper, Dahoon holly, Chinese holly,
    Burford holly, Scheffiera, silver trumpet tree (Tabebuia aurea), Geiger
    tree, gumbo limbo, black olive, silver buttonwood, black sapote,
    persimmon, live oak, avocado, acacia, orchid tree, Royal poinciana,
    Lima bean, bush beans, tamarind, Dracaena rainbow, day-lily crepe-
    myrtle, cotton, okra, neem, mahogany, banana, Simpson's stopper, guava,
    Areca palm, Phoenix palms, passion fruit, mangrove, loquat, citrus,
    carrotwood, longan, caimito, sapodilla, tobacco, eggplant, potato and
    lignum-vitae.
        Host suitability seems to vary with locality. In Miami-Dade County
    carrotwood appears to be a preferred host, but near Vero Beach
    carrotwood tends to escape infestation. In Puerto Rico Diaprepes
    attacks sweetpotato but ignores it in Florida.
        As you know, for about 20 years the Congress has appropriated about
    $400,000 per year to the Agricultural Research Service. These funds
    support research in central Florida that is conducted by the
    Agricultural Research Service and by the University of Florida.
        However no funds are ever provided by ARS for research on this
    problem in south Florida. The Miami-Dade Chapter of the Florida Nursery
    and Growers Association has been providing $20,000 per year to the
    University of Florida to conduct research on this problem as it affects
    the ornamentals industry in Miami-Dade County. However this level of
    funding is not sufficient to mount an effort that is in any way
    commensurate to the magnitude and urgency of the need. As you may know,
    only limited amounts of the technologies developed against this pest in
    central Florida have proven to be suitable for use in southern Florida.
        We request that the Congress appropriate $300,000 per year to the
    Agricultural Research Service for a cooperative research program on
    Diaprepes in south Florida. Only after satisfactory means are available
    to cope with this pest should any of the funds be diverted to research
    and development on other pest problems affecting southern Florida.
                                     ______

    Prepared Statement of Dr. Raymond E. Bye, Jr., Associate Vice President
                     for Research, Florida State University
        Thank you, Mr. Chairman, and the Members of the Subcommittee, for
    this opportunity to submit testimony. I would like to take a moment to
    acquaint you with Florida State University. Located in the state
    capital of Tallahassee, we have been a university since 1947; prior to
    that, we had a long and proud history as a seminary, a college, and a
    women's college. While widely known for our athletics teams, we have a
    rapidly emerging reputation as one of the Nation's top public
    universities. Having been designated as a Carnegie Research I
    University several years ago, Florida State University currently
    exceeds $100 million per year in research expenditures. With no
    agricultural or medical school, few institutions can boast of that kind
    of success. We are strong in both the sciences and the arts. We have
    high quality students; we rank in the top 25 among U.S. colleges and
    universities in attracting National Merit Scholars. Our scientists and
    engineers do excellent research, and they work closely with industry to
    commercialize those results. Florida State ranks seventh this year
    among all U.S. universities in royalties collected from its patents and
    licenses. In short, Florida State University is an exciting and rapidly
    changing institution.
        The Florida State University appreciates the support this Committee
    has provided for agricultural research in the past, and asks for your
    support for the President's budget proposals to increase funding for
    research, particularly for basic research performed at universities. A
    strong national research enterprise requires a balanced portfolio
    across the many scientific and engineering disciplines. We have seen,
    time and again, how research developments in one field can
    revolutionize work in others. Breakthroughs in biotechnology can lead
    to new and improved crops and higher crop yields. There are many
    examples of research investments paying very practical dividends to all
    of our citizens.
        Mr. Chairman, let me describe an important project that we are
    continuing this year involving agriculture and new ways to look at
    climate prediction. It is a major collaborative program, which focuses
    on climate variability in the State of Florida and the Southeast (SE)
    United States. Objectives include developing new applications and usage
    for climate data. The consortium draws upon the expertise of scientists
    at FSU (climate analyses and coupled ocean-atmosphere prediction
    models), the University of Miami (climate analyses and economic value
    of forecasts), and the University of Florida (agriculture) to quantify
    climate variability (e.g., the El Nino phenomena) for the SE and to
    explore the potential value and practical application of climate
    forecasts in agricultural decisions. Based upon these analyses, farmers
    will be able to make better-informed planting decisions well in advance
    of each season.
        During the initial phase of this effort, the FSU team described
    qualitatively the impact of El Nino (and the other extreme, La Nina) on
    temperature and precipitation patterns across the SE. Additionally,
    they found a geographic shift in tornadic activity associated with El
    Nino events. A new climate forecast system was created to provide
    predictions of seasonal temperatures and precipitation with longer lead
    times and improved skill in the testing phase. Improvements are due
    partly to the linking of ocean and atmosphere data in the forecast
    system. Our colleagues at the University of Florida have identified
    several crops in Florida which are vulnerable to shifts in weather
    patterns associated with El Nino and La Nina. Such information will be
    economically valuable in farming decisions.
        Continuing this collaborative work, we hope to estimate the
    economic advantages that can be achieved by incorporating climate
    forecast information into farming management systems and eventually
    work with sector representatives in developing guidance products for
    the agricultural community.
        We are seeking funding for this effort through USDA's Fund for
    Rural America. To make truly worthwhile breakthroughs in improving
    efficiencies and allowing for better and more economical decisions,
    farmers must have the best thinking and access to the newest approaches
    available. This utilization of climate data for agricultural purposes
    should be an example of supporting the best ideas through the Fund for
    Rural America. Our request of $600,000 for two years will pay
    substantial returns to the American farmer and to the public. Thank you
    for your support.
                                     ______

    Prepared Statement of the Friends of Agricultural Research--Beltsville,
                                      Inc.
        Mr. Chairman, and Members of the Subcommittee, thank you for the
    opportunity to present this statement in support of funding for
    agricultural research. We are requesting your support for programs of
    the Agricultural Research Service (ARS) and its world renowned
    Beltsville Agricultural Research Center (BARC) in Maryland.
        The Friends of Agricultural Research--Beltsville (FAR-B) is a
    private non-profit corporation dedicated to supporting and promoting
    agricultural research, especially the ARS research programs at
    Beltsville. FAR-B provides supplementary private funds for both
    research and education programs. The Friends co-sponsor symposia and
    conferences on topics of current scientific interest. Funds are
    provided to co-host important international scientists who visit
    Beltsville each year in order to discuss cooperative programs and
    exchange scientific information. This public/private partnership
    promotes excellence, helps to ensure that useful new BARC technology is
    put into practice, and is supportive of the mission of the Agency.
        The agricultural enterprise with asset of over $900 billion is one
    of the major sectors of the U.S. economy. Employment in the food and
    fiber sector generates 23 million jobs, representing about 18 percent
    of the civilian jobs in the U.S. economy. The demand for food and fiber
    products annually generates almost $1 trillion in Gross Domestic
    Product, about 16 percent of the Nation's GDP. U.S. exports of
    agricultural products rose to $60 billion in 1996. Of the 11 major U.S.
    industrial sectors, agriculture generated the largest trade surplus of
    $27.5 billion in 1996.
        The outstanding performance of the agricultural industry and the
    unprecedented gains in agricultural productivity over this century can
    be attributed in large measure to the dynamic research and development
    system in this Nation. Agricultural scientists and engineers have
    contributed a continuing stream of new knowledge, technological
    innovations, and new products to undergird the U.S. agricultural
    enterprise. Public investments in agricultural research have been
    critical to these gains. Economic studies show that such investments
    yield substantial returns on the order of 30 to 40 percent. These are
    sound investments. Future support for agricultural research will be
    critical to the economic prosperity of our Nation and the well-being of
    society.
        The Agricultural Research Service is the principal inhouse research
    agency of the U.S. Department of Agriculture. It has a lead role in
    solving high-priority problems of broad national significance. The
    Beltsville Agricultural Research Center is one of the major research
    facilities within ARS; it is among the largest and most diversified
    agricultural research complexes in the world.
                                   beltsville
        The Beltsville Agricultural Research Center was established in
    Maryland in 1910. It has a long and distinguished history of
    outstanding contributions to scientific discovery. Although it is most
    popularly known for developing the Small White Beltsville turkey which
    graces consumers' tables each Thanksgiving, BARC's contributions are
    much more extensive and profound. Beltsville scientists identified and
    supplied plant breeding centers around the world with disease-resistant
    wheat that ultimately led to the Green Revolution. Genetic concepts
    that became the foundation for modern plant and animal breeding were
    developed at BARC. Beltsville discovered the photoreceptor that
    regulates the growth and development of plants. A BARC scientist
    discovered an entirely new class of viruslike pathogens--viroids--which
    opened new avenues to understanding and controlling diseases of plants,
    animals, and humans. The first naturally occurring beneficial fungus
    approved by the Environmental Protection Agency for the biocontrol of
    plant diseases was developed at Beltsville. Chemists and entomologists
    have pioneered the discovery and synthesis of a number of attractants
    (pheromones) essential for trapping and surveying insect populations
    for integrated pest management programs. Human nutrition scientists at
    Beltsville demonstrated that decreasing animal fat and increasing the
    proportion of fat from vegetable sources significantly reduces blood
    pressure, thus reducing the risk of cardiovascular disease.
        Beltsville is a comprehensive research center with a wide variety
    of disciplines addressing diverse programs of great breath and scope.
    The ARS staff at Beltsville totals about 1,500, including over 300
    scientists. Programs are designed to systematically address the highest
    priority concerns of the Department, including food safety and human
    nutrition, natural resources and environmental quality, emerging
    diseases and exotic pests, genetic resources, climate change,
    integrated pest management, and sustainable farming systems. Research
    ranges from very basic experiments in plant and animal molecular
    genetics, physiology and chemistry to applied research in new
    instrumentation, germplasm databases and integrated systems.
        The Beltsville complex is the repository for a number of unique
    national scientific assets. Among these are important research
    collections: the National Fungus Collection, the National Parasite
    Collection, the USDA Nematode Collection, and other outstanding
    collections of insects, seeds, nitrogen-fixing bacteria, and plants.
    These collections are essential in identifying and assigning names to
    specimens and organisms, a crucial first step to reliable research and
    to effective control measures, especially for alien pests. The
    Beltsville Human Nutrition Center is home to the National Nutrient Data
    Bank, i.e., the database of the nutrient content of foods which is the
    foundation for food consumption tables throughout the world. The Center
    also has a staff responsible for the National Food Consumption Survey
    and the Continuing Survey of Food Intakes by Individuals, unique in
    understanding long-term dietary trends in the U.S. population. The
    world renowned National Agricultural Library is also located on the
    grounds of BARC.
                          modernization of facilities
        A General Accounting Office Report a few years ago found widespread
    problems with aging Federal research facilities around the country. The
    findings indicated that a massive overhaul of these facilities,
    especially those built over 50 years ago, was needed.
        Modernization of the facilities at Beltsville began in 1988. A
    systematic plan was developed to guide the modernization. USDA, the
    Office of Management and Budget, this Committee, and the Congress have
    been generous in providing annual support to upgrade and modernize
    BARC. House of Representatives Report No. 99-211 included the following
    language: ``The Committee will expect to be kept fully advised as the
    Department works to restore and upgrade the Beltsville Agricultural
    Research Center.'' (p. 31)
        Significant progress has been made in improving the facilities at
    Beltsville. Six major buildings have been modernized; a greenhouse
    complex has been renovated; a new dairy facility and composting
    research facility have been completed; and a new waste water treatment
    plant is now in operation. The infrastructure, including water lines
    and electrical service have been significantly upgraded.
        The highest priority at Beltsville is funding to upgrade the
    facilities for the Beltsville Human Nutrition Research Center (BHNRC).
    Human nutrition research is a high priority within ARS and the
    Department. The link between diet and health is intriguing. Important
    breakthroughs have been made during this century. Many debilitating
    diseases such as pellagra, pernicious anemia, rickets, and scurvy have
    been eliminated as a result of research in human nutrition. The focus
    now has shifted from prevention of nutrient deficiencies to health
    maintenance and reduced risks of chronic illnesses, such as coronary
    heart disease, cancer, and diabetes.
        The Beltsville Human Nutrition Research Center is the first of six
    such centers established in ARS. BHNRC programs focus on nutrient
    composition, nutritional quality, nutritional requirements, nutrient
    interactions, energy metabolism, and dietary strategies to delay the
    onset of nutrition-related chronic diseases. The National Food
    Consumption Survey also is an essential part of this program. For over
    30 years, BHNRC scientists have had an uninterrupted input into the
    establishment of the Federal government's Recommended Daily Allowance
    (RDA) for dietary intake by the U.S. population. The broad indepth
    scientific knowledge base at Beltsville plays a vital role in the
    creation of these highly regarded guidelines for enhanced public
    health. The Beltsville staff has close associations with the National
    Institutes of Health, especially the National Heart, Lung, and Blood
    Institute, and the National Cancer Institute.
        The ARS budget proposes a number of thrusts that would complement
    the BHNRC projects. Among these are proposals to upgrade the National
    Nutrient Data Bank that is so important to understanding the food
    choices necessary for a healthy diet. Also, support for research on
    nutrient-gene interactions, with special emphasis on the role of
    phytonutrients, is proposed.
        The human nutrition research facilities at Beltsville are among the
    oldest in the Department and are, thus, in the greatest need of
    overhaul. This Committee provided funding for the planning and design
    of new BHNRC facilities. The design is underway; funding is needed to
    complete construction in a timely manner. Costs for the new facility in
    fiscal year 1999 are estimated at $17 million for construction.
        The proposed budget includes funding in the amount of $2.5 million,
    primarily for a new poultry production facility. The purpose of this
    facility is to brood and grow turkey toms and hens, and provide breeder
    space for different strains of turkeys with a view toward healthier and
    more efficient production of a commodity destined for human
    consumption. This proposal is consistent with the long-range plan for
    upgrading the Beltsville complex.
                       other current and emerging issues
        A wide range of important issues confronts American agriculture and
    is of concern to the public. Two are of particular interest.
        Pfisteria outbreaks in the Mid-Atlantic coastal tributaries and
    estuaries have become a major issue. Recent incidents in the Chesapeake
    Bay tributaries have focused public attention on the potential role of
    agricultural nutrients in the degradation of the waters. ARS scientists
    at Beltsville are working with colleagues at the Federal and State
    levels to develop management practices that farmers could adopt to
    reduce the movement of nutrients and pathogens to surface and ground
    water. A nitrogen soil test has been developed to help minimize
    excessive applications of nitrogen. New sustainable cropping systems
    which reduce nutrient and pesticide leaching and surface loss by runoff
    are being evaluated. Improved methods for handling, composting, and
    disposing of manure from farms are being developed. And, remote sensing
    technology is being investigated as a cost-effective may of monitoring
    changes in the natural ecosystems over time and across large geographic
    areas. Approval of the fiscal year 1999 budget proposals would allow a
    stronger research program in this critical area.
        Food safety and quality are of paramount importance to the public.
    Despite the fact that the U.S. food supply is the safest in the world,
    thousands of Americans are stricken annually by illnesses caused by the
    food they consume. Consumers need to be assured of the safety of their
    food supply to prevent disruptions of normal healthy eating patterns.
    Beltsville scientists are widely involved in food safety research. New
    and improved analytical procedures for detecting antibiotic residues in
    meat and milk were developed at BARC. Industry, the Food and Drug
    Administration, and USDA's Food Safety and Inspection Service are now
    using these methods. BARC engineers are developing sensors and imaging
    technology for rapid inspection of poultry carcasses online during
    processing. Diagnostic tests and fundamental information on livestock
    parasites of human health significance are being researched, especially
    zoonotic diseases such as trichinosis, toxoplasmosis, and
    cryptosporidisis. In recent years, increased attention is being given
    to the safety of fresh fruits and vegetables, which are so essential to
    a healthy diet. The Beltsville Symposium in Agricultural Research in
    May 1998 will bring together leading world experts to review the most
    recent advances in the science related to the safety and quality of
    fresh fruits and vegetables. The proposed budget would give a boost to
    this initiative.
        Mr. Chairman, FAR-B thanks you and the Committee for your interest,
    leadership, and generous support of ARS and the Beltsville Agricultural
    Research Center. We recognize that finding funds for Federal
    agricultural research programs and facilities is a difficult challenge
    no matter how important the work is to the health, safety, prosperity,
    and well being of the Nation. This Committee has met that challenge
    over the years, and we encourage your continued efforts. We look
    forward to working with you in any way you may desire to serve the
    interests of American agriculture.
                                     ______

    Prepared Statement of Larry Bohlen, D.C. Issues Coordinator, Friends of
                                   the Earth
        support for fda consolidation at an urban, metro accessible site
        Friends of the Earth is taking an increasing interest in protecting
    the urban core and inner suburbs of cities across America. Existing
    communities are worthy of protection. In addition, making sure that
    existing communities are safe and economically viable places to live is
    one of the surest ways to protect undeveloped farms and forests from
    falling to haphazard sprawl development.
        Moves of Federal jobs outside the D.C. beltway are detrimental to
    the health of the District and the inner suburbs of D.C. A currently
    proposed move of the Food and Drug Administration to White Oak,
    Maryland would threaten the economic viability of areas inside the
    Beltway.
        To address these issues, we propose that you:
        (1) Initiate a study of consolidating the FDA within a half mile of
    a Metro-accessible site, such as the Southeast Federal Center in the
    District of Columbia. We suggest that at least $4 million be
    appropriated in fiscal year 1999 to conduct such a study.
        (2) Observe federal Executive Order 13006 directing the location of
    federal facilities in urban centers.
        Consolidation of the FDA at the Southeast Federal Center has
    several advantages:
      --it is adjacent to the Navy Yard Metro;
      --it is only one mile from the Dept. Of Health and Human Services,
            FDA's parent agency;
      --it is owned by the federal government and controlled by GSA;
      --it has more than adequate floor space for FDA's site plan and is
            currently underutilized;
      --the Southeast Federal Center site has no funds appropriated for its
            redevelopment; and
      --it is in an area of D.C. urgently in need of revitalization.
        In comparison, siting of the FDA in White Oak, Maryland, as
    proposed, has several disadvantages:
      --it is 3 miles from the nearest Metro station and has very limited
            bus service;
      --it is in a low-density sprawling neighborhood outside the
            Washington beltway, not in an urban center as directed by
            Executive Order 13006;
      --it is 10 miles from other FDA facilities that would not consolidate
            in White Oak, raising the question of just what kind of
            benefits is consolidation bringing; and
      --it would involve development of undeveloped wooded areas near a
            stream on the White Oak site whereas the Southeast Federal
            Center is already paved.
        Your consideration of this matter is greatly appreciated.
                                     ______

     Prepared Statement of R. Lawrence Coughlin, President, Friends of the
                               National Arboretum
        Mr. Chairman and Members of the Subcommittee, as President of
    Friends of the U.S. National Arboretum (FONA), I am grateful for this
    opportunity to present testimony in support of FONA's request for
    additional funding of $300,000 in fiscal year 1999 for the Gardens Unit
    of your U.S. National Arboretum.
        This funding is urgently needed to strengthen the Gardens Unit in
    anticipation of the new master plan for the National Arboretum which is
    being prepared under contract with the renowned landscape architectural
    firm of Environmental Planning & Design.
        The Gardens Unit is presently the most understaffed of all of the
    National Arboretum's Units. Yet it is central to the purpose of the
    National Arboretum. There has been a continued loss of permanent staff
    positions in the Gardens Unit and an increase in temporary staff in
    order to conform to imposed budget limitations. At the same time, new
    facilities have been added with public and private support including
    The National Bonsai and Penjing Museum and the National Grove of State
    Trees, educational outreach has been increased and greater levels of
    public visitation have occurred.
        An addition of $300,000 to the Gardens Unit in fiscal year 1999
    would provide four urgently needed new staff positions and, most
    important, allow stabilization of the staffing base in the Unit. It is
    currently experiencing a high turnover level because it cannot offer
    permanent positions to technically qualified and trained people.
    Attached as Exhibit I is a more detailed description requested by FONA
    and prepared by National Arboretum staff.
        Mr. Chairman, FONA has been working with your National Arboretum
    staff, the Agricultural Research Service and the Department of
    Agriculture on a new Master Plan for the National Arboretum. FONA's
    objective has been to modernize the Arboretum into the millennium, to
    adapt it to 21st century technology and to make it a horticultural
    educational attraction in accordance with its Congressional mandate and
    worthy of the term ``National Arboretum.''
        In its initial review, Environmental Planning and Design found that
    the National Arboretum was an outstanding pure research facility but
    was not very user friendly. Visitors sought more plant and gardening
    information. In short, from a visitor standpoint the National Arboretum
    is more a very nice park than an arboretum, and it is not adequately
    fulfilling its Congressionally mandated mission as a premier facility
    for horticultural education.
        The new Master Plan is moving forward and will address such current
    practical needs as a new entrance, improved traffic flow and better
    facilities for visitor parking. Hopefully the vision will also identify
    educational needs such as an orientation center, automated train tours,
    and interactive exhibits in the display gardens. Your National
    Arboretum should be a horticultural education attraction in Washington
    that excites interest in earth sciences.
        Mr. Chairman, the $100,000 provided to the Arboretum in fiscal year
    1998 for the Integrated Pest Management Program (IPM) has added a
    permanent technician and a second non-permanent technician to the
    Arboretum's highly successful IPM program. This stabilization of staff
    has allowed the National Arboretum to increase research and transfer
    knowledge to the landscape industry and the public as well as create
    partnerships with Federal, local and private institutions.
        Your Subcommittee should be proud that thanks to your support the
    National Arboretum is serving as a model for IPM in the urban
    landscape. It is also part of a major effort to reduce nutrient loading
    in the Anacostia River and the Chesapeake Bay.
        The National Arboretum's request for $300,000 for the Gardens Unit
    in fiscal year 1999 is also consistent with last year's unfunded
    request to expand germplasm acquisition and maintenance. The Gardens
    Unit is responsible for the maintenance of extensive germplasm of
    species and cultivars of trees and shrubs from throughout the world.
    Expanding the germplasm collection improves the overall care of
    existing plants.
        Mr. Chairman, FONA is most appreciative of your efforts and those
    of your Subcommittee on behalf of your National Arboretum. As always,
    FONA looks forward to working with you on behalf of horticultural
    research and education.
                                  [exhibit i]
                         gardens unit program concerns
        The work of the Gardens Unit is very labor intensive and highly
    visible. The Unit staff are responsible for maintaining the display
    gardens, collections, and natural areas on the U.S. National
    Arboretum's 444-acre District of Columbia campus. With visitation
    increasing each year, greater numbers of customers are reaping benefits
    from the display gardens and collections. While the Gardens Unit
    welcomes this increased interest, it must be recognized that this
    escalates the pressure on the Unit to not only maintain the current
    level of quality and service, but also to meet ever higher standard for
    garden display and information retrieval.
                        gardens unit staffing priorities
    Priority 1
        The responsibility of running the horticultural activities at the
    greenhouse area is currently shared among the curators, gardeners,
    researchers, and facilities managers. The effort could become more
    efficient if a single person was added to the staff to assume
    responsibility for the day-to-day operations of the greenhouse complex.
    Efforts are currently underway to document the needs for the daily
    running of the facility. This adjustment was recommended by the team of
    outside reviewers who undertook a 5-year review of the Gardens Unit
    Program in February 1997. ($50,000)
    Priority 2
        The Arboretum possesses a distinctive collection of Asian plant
    material which is an important source of germplasm for research and an
    integral part of the USNA's educational programming. Though the
    collection was once under the jurisdiction of a single curator,
    monetary constraints compelled the Unit to reassign this area to a
    curator with many other responsibilities. If the Asian area is to
    remain an integral and viable part of the Arboretum's research and
    educational programs, it is essential that additional funds be obtained
    for a full-time curator to oversee this significant collection.
    Preliminary data from the ongoing USNA Visitor Study indicates that the
    Asian Collections is the third most visited display area on the grounds
    (after the Bonsai Museum and the Herb Garden.) This is significant
    because the collection is located at the furthest point on the grounds
    from where visitors obtain information when entering the USNA. This
    action was recommended by the team of outside reviewers who undertook a
    5-year review of the Gardens Unit Program in February 1997. ($60,000)
    Priority 3
        The expansion of the Bonsai Museum provides an opportunity to
    generate a range of new programs for both occasional visitors as well
    as the serious bonsai scholar. The Education and Visitors Services Unit
    is doing all that it can to meet this need. Still, it is imperative
    that a museum specialist with expertise in the garden art of Bonsai be
    hired to develop and implement programming in this unique facility. The
    priceless value of this collection requires that the Museum be staffed
    seven days a week, which requires additional staff to cover the weekend
    hours, which also coincide with the highest levels of visitation.
    Preliminary data from the ongoing USNA Visitor Study indicates that the
    Museum is the most frequently visited area on the grounds. ($50,000)
    Priority 4
        The Plant Record Office, while funded by the Gardens Unit, serves
    all Units of the Arboretum. The Office provides leadership in the
    implementation, operation, and expansion of the accessioning, labeling,
    mapping, and documentation activities of the living plant collections.
    It also develops and maintains the Arboretum's computerized database of
    plant holdings. Concerted effort is being made to input the backlog of
    record data in the database. An increased effort would enable the
    generation of computerized reports which would serve as tools to the
    managers of the living collections. In addition, mapping of the gardens
    and collections is an essential aspect of the Gardens Unit mission, yet
    this cannot be done with current staff. ($35,000)
    Priority 5
        The stabilization of the staffing base is a great concern of the
    Gardens Unit. At present time, six of the nine gardener positions
    (Agricultural Science Research Technicians) are held by temporary
    employees. Regular turnover of personnel severely limits the
    effectiveness of garden and collection care and curtails program
    development from year to year. It diverts curatorial attention from
    legitimate collection concerns to personnel matters as an inordinate
    amount of time is spent in the recruiting/hiring process and in
    retraining new gardeners. At a minimum, each garden and program area
    should have at least one permanent gardener position to assure
    continuity of care in the collections. This would require providing
    additional base funding to convert five of the six temporary positions
    to permanent positions. ($25,000)
        Additionally, the Gardens Unit's need for administrative and
    facilities programmatic support services (i.e., computer support and
    engineering and construction support services) have exceeded the Unit's
    available funding. An additional $50,000 is required to fund these
    needs. Finally, all programmatic increases are assessed to fund Agency
    administrative and support initiatives. This amounts to $30,000.

                            Summary of Funding Needs

    Greenhouse Manager............................................   $50,000
    Asian Curator.................................................    60,000
    Bonsai Museum Assistant.......................................    50,000
    Plant Records Assistant.......................................    35,000
    Permanent Gardeners...........................................    25,000
                        --------------------------------------------------------------
                        ____________________________________________________

          Subtotal................................................   220,000
    Garden Unit Support Services..................................    50,000
    Agency Support Services.......................................    30,000
                        --------------------------------------------------------------
                        ____________________________________________________

          Total...................................................   300,000

        Total is based on projected personnel costs over the next 5 years.
                                     ______

      Prepared Statement of Father William L. George, S.J. and Father T.
    Byron Collins, S.J., Assistants to the President, Georgetown University
        Mr. Chairman and Members of the Committee: We are Father William L.
    George, S.J. and Father T. Byron Collins, S.J., Assistants to the
    President of Georgetown University, the Reverend Leo J. O'Donovan, S.J.
    We appreciate the opportunity to submit this testimony to the
    Subcommittee on the development of the Natural Medications Research
    Consortium Program.
                 natural medications research consortium (nmrc)
        The Senate Committee on Agriculture, Nutrition and Forestry and the
    Appropriations Subcommittee on Agriculture, Rural Development and
    Related Agencies have expressed interest in the development of new farm
    products to improve the health of the citizens of the United States. We
    are requesting an appropriation of $6 million for fiscal year 1999 for
    a consortium of the University of Mississippi, Georgetown University
    and the McKennan Health Systems in Sioux Falls, SD.
        For centuries humans have utilized the products of nature to
    maintain health and treat disease. Many of the earliest known herbal
    remedies and other natural products are still used today and are
    becoming an ever more important part of the treatment of patients with
    illnesses. It is estimated that for these products today, Americans
    spend over $14 billion, and it is a rapidly increasing portion of the
    $60 billion spent on all medications. Until recently, none of these
    treatments had been evaluated using rigorous modern testing methods to
    determine their safety or efficacy. Basic questions of stability and
    reproducibility of the content of the various formulations have made it
    difficult to assess the potential medical value of these products. The
    lack of patent protection for these products has been a disincentive
    for the pharmaceutical industry to assume a leadership role in this
    potentially valuable field of research. Although the National
    Institutes of Health has established an Institute for Alternative
    Medicines, it has only been able to support a few clinical trials.
    Concern about the safety of these products is appropriate considering
    the previous deaths and serious side effects observed with products
    such as ma huang, which contains the cardiac stimulant ephedrine,
    comfrey tea, which causes liver damage, and tryptophan, which had a
    contaminant that caused serious muscle damage and deaths.
        In order to protect and serve the public, there is a critical need
    for the creation of a consortium with the resources and expertise in
    three major areas represented by the members of the consortium. They
    are; cultivating the herbs and plants that contain potential remedies
    by the University of Mississippi, analysis, evaluation and clinical
    testing by Georgetown University, and the optimal clinical resources
    necessary to evaluate these products in humans offered by McKennan
    Health System in South Dakota.
        An important component of such an evaluation is the ready access to
    enroll patient populations that have the biologic, racial and ethnic
    diversity truly representative of the American population. Georgetown
    University and the University of Mississippi have expertise required to
    perform the needed product formulation and testing of these natural
    products. McKennan Health Systems in Sioux Falls, SD has the expertise
    in Native American natural product remedies and a clinical program
    essential for access to the diversity of populations needed for such
    clinical trials. The results would be made available to the Department
    of Agriculture to assist in the development of new crops and the public
    for more informed use of these natural products. We are requesting
    appropriation of $6 million for fiscal year 1999 to conduct a
    demonstration program for the testing and scientific evaluation of
    treatments from natural products.
                                     ______

           Prepared Statement of the Grocery Manufacturers of America
        GMA appreciates the opportunity to submit testimony on the
    President's fiscal year 1999 budget with regards to proposed food user
    fees and the food safety initiative. GMA is the world's largest
    association of food, beverage and consumer brand companies. With U.S.
    sales of more than $430 billion, GMA members employ more than 2.5
    million workers in all 50 states. The organization applies legal,
    scientific and political expertise from its member companies to vital
    food and public policy issues affecting the industry. Led by a board of
    44 Chief Executive Officers, GMA speaks for food and consumer brand
    manufacturers at the state, federal and international levels on
    legislative and regulatory issues. The association also leads efforts
    to increase productivity and efficiency in the food industry.
                                   user fees
        GMA opposes the President's fiscal year 1999 user fee proposals on
    the food industry for the following reasons:
        1. User fees imposed on the food industry are bad public policy.
    User fees, by definition, are intended to reimburse agencies for
    specific private benefits they provide to identifiable companies. The
    availability of a safe, plentiful, and affordable food supply, however,
    benefits the public generally. Consequently, regulatory activities such
    as post-market surveillance and inspection should be paid by public
    funds and not user fees. As Congress itself has repeatedly pointed out
    in previous years, these regulatory activities are designed to protect
    the public health and should not be funded by new taxes on the
    regulated industries.
        2. User fees are essentially a regressive tax on food products.
    Imposition of user fees, in effect, would constitute an inappropriate
    tax on products essential to the health and well-being of the American
    public. Although user fees would be paid by food companies, the
    ultimate cost would be born by consumers.
        3. FDA principally regulates food by taking regulatory action
    against adulterated and misbranded products, and is largely dedicated
    to enforcement activities which benefit the public at large. These
    activities are properly funded out of general revenues.
        4. Unlike new drugs, food manufacturers may change product formulas
    frequently, thus creating ``new'' products all the time. A user fee for
    food products would therefore be a virtual impossibility.
        5. The only type of food product for which any form of FDA
    premarket approval is required is for individual food additives. An
    average of one petition is filed every year for a new direct food
    additive.
                                   background
        In 1947, Congress actually enacted a user fee for meat inspection,
    which was subsequently repealed the following year because of public
    outcry that government programs should be funded by public dollars. In
    1971, the General Accounting Office published a report recommending
    that fees be imposed for new drug applications. FDA opposed user fees
    at that time, on the grounds that regulation benefits the entire public
    and not just individual companies. Although Congress and FDA
    subsequently have debated the merits of user fees, the notion of
    imposing user fees to finance FDA regulation of food products had never
    been proposed by the Administration until only a few years ago.
        GMA has always supported a strong, focused and effective FDA. In
    the last few years, Congress has enacted legislation giving FDA new
    authority in areas such as nutrition labeling, prescription drugs,
    medical devices and generic drugs, adding to the agency's already broad
    mandate. Unfortunately, additional adequate resources have not been
    provided.
        Shifting the costs of these programs to the regulated industry,
    however, is not in the public interest and would constitute an
    inappropriate and regressive tax on the food industry ultimately borne
    by consumers. In practical effect, these user fees proposed in the
    fiscal year 1999 budget would constitute a federal sales tax on food
    products, which would ultimately be passed on to the consumer.
        User fees by definition are intended to reimburse agencies for the
    particular benefits they provide to regulated companies. The courts
    have already determined the definition of a user fee. More than two
    decades ago, the Supreme Court held that the imposition of user fees on
    regulated companies for benefits enjoyed by the general public is
    nothing more than a tax on industry (National Cable Television
    Association v. United States, 415 U.S. 336, 340-341 (1974).
                     the president's food safety initiative
        GMA applauds the Clinton Administration's efforts to enhance the
    nation's food safety system. We have always supported adequate funding
    for FDA, USDA and other food safety agencies. We are pleased to see an
    emphasis on food safety education, risk assessment and research.
    Without proper research behind inspections, there is a risk that
    regulators won't be able to keep pace with the science involved in food
    safety decisions for today's food manufacturing processes. An effective
    and credible science-based standards and inspection system combined
    with food manufacturers' own safety assessment programs, will provide
    consumers with the greatest assurance that their food is safe.
    Unfortunately, the fiscal year 1999's proposed user fees will only
    leave vital FDA functions starved for resources.
                                   conclusion
        In conclusion, GMA opposes any efforts to extend the user fee
    concept to the food industry. As we've written in letters to Members of
    this Committee, GMA remains committed to a strong FDA and USDA.
    Congress should, however, provide funding to meet its statutory
    commitments to protect the public health. Although GMA appreciates the
    efforts of the Administration to provide targeted funding for food
    safety efforts, food safety is a fundamental regulatory/enforcement
    mission of FDA and it benefits the public at large, not individual food
    manufacturers. Congress has repeatedly rejected the idea of new taxes
    disguised as user fees and we ask them to do so again.
                                     ______

      Prepared Statement of the Health Industry Manufacturers Association
                            introduction and summary
        This testimony is submitted on behalf of the Health Industry
    Manufacturers Association (HIMA) and the more than 800 manufacturers we
    represent. HIMA is the largest medical technology trade association in
    the world. Our members manufacture nearly 90 percent of the $55 billion
    of health care technology products purchased annually in the United
    States and more than 50 percent of the $130 billion purchased annually
    around the world. We welcome the opportunity to comment on issues
    surrounding FDA's funding for the next fiscal year.
        We wish to highlight several key issues:
      --Enactment of landmark legislation--the ``Food and Drug
            Modernization Act of 1997'' (the ``Act'')--has created
            opportunities as well as challenges affecting resources for the
            Agency.
      --Implementation of the Act will be a key priority for both the
            Agency and the industry this year and next. Additional
            activities necessitated by implementation may strain Agency
            resources.
      --We continue to advocate stable funding for the Agency. We believe
            that all Agency programs should be held harmless from any
            funding reductions. New important initiatives such as tobacco
            regulation and food safety should carry with them additional
            funding appropriate to carry out the intent of Congress and not
            dilute other important functions of the Agency.
      --We applaud the efforts of the Subcommittee to hold FDA to a greater
            standard of accountability for allocation of resources within
            the Agency. We urge continuation of efforts to ensure that
            taxpayer dollars are spent wisely and fairly.
      --Finally, we believe the Administration's user fee proposal for the
            medical device program masks dangerous cuts in FDA's budget
            authority that could undermine the efforts of Agency personnel
            to perform their essential functions of protecting and
            promoting the public health. We strongly oppose user fees for
            the medical device industry.
             fda performance and the ``modernization act of 1997''
        Last fall, the Congress achieved a remarkable milestone in the
    history of regulation of the device industry: it enacted the ``Food and
    Drug Modernization Act of 1997.'' An enormous amount of bipartisan
    effort went into passage of this legislation, much of which was
    presaged by activities encouraged by members of this Subcommittee for
    years. Without the leadership exercised by this Subcommittee in
    conjunction with the Senate Labor and Human Resources Committee, this
    legislation may have never seen the light of day. We thank you for your
    efforts.
        The victory ultimately rests with those patients who stand to
    benefit from the wonders of modern medical technology. The efforts of
    this Congress have helped to assure a promising future for continued
    innovation directly targeted to improving patient health and saving
    lives. As the new law makes explicitly clear, FDA's mission is to
    ``promote the public health by promptly and efficiently reviewing
    clinical research and taking appropriate action on the marketing of
    regulated products in a timely manner.'' (Public Law 105-115, Section
    406)
        In enacting the new law, Congress recognized that the Agency was
    simply taking too much time to review products. Overwhelming evidence
    was presented that painted a bleak picture of patients being deprived
    of access to life-saving, life-enhancing medical products, Americans
    traveling overseas for medical procedures, U.S. companies relocating
    their research and development and clinical trial arms outside of the
    country, and the threat of increasing losses of our scientific
    infrastructure. With the new legislation, Congress has signaled the
    beginning of a new era in the regulation of medical devices--one marked
    by (1) reduced regulatory burden, (2) increased efficiency, and (3)
    greater focus on the patient.
        We know too well, however, that simply enacting a law does not
    translate into an immediate fix. Implementation of the new law will not
    happen overnight; nor will it happen without the expenditure of Agency
    staff time and resources to carry out the intent of Congress. And, our
    concern is that all the gains we achieved with enactment of this new
    legislation will be for naught without thoughtful implementation by the
    Agency, informed by industry where appropriate, and overseen by the
    Congress that created the law.
        From an appropriations perspective, the new law contains both
    resource-saving and resource-consuming provisions. The former include
    concepts such as exempting lower risk devices from the product
    clearance process (510(k)) and relying more heavily on the use of
    national and international consensus standards to provide a more
    uniform and predictable review process. The latter include new
    requirements for interactive meetings between industry and the FDA to
    enable earlier agreements on what is needed to get a product onto the
    market; another involves the review, analysis, and the potential
    recognition of a portion of approximately 30,000 national and
    international consensus standards applicable to the medical device
    industry. If FDA is to become a standards-based organization, as it has
    avowed, it must devote resources to this initiative.
        While we expect the Agency to expend resources to prepare guidance
    documents, internal operating procedures, regulations, and other
    implementing documents, we are also concerned that resources may be
    redirected away from primary review functions thus resulting in
    increased review times, negating all of our hard-fought gains.
        That being said, however, we have been pleased with the recent
    enhanced performance of the Center for Devices and Radiological Health.
    Even before the enactment of FDAMA, the center aggressively sought to
    dig itself out of the mounds of backlogged 510(k)'s and PMA's of
    several years ago through a series of effective management initiatives.
    Their efforts have paid off. The time to review 510(k)'s has
    substantially improved, and PMA's are being reviewed in a more timely
    manner as well. One indicator that the climate for innovation has
    improved is that the number of PMA's filed has increased from 39 in
    fiscal year 1995 to 63 in fiscal year 1997.
        The leadership and management initiatives so apparent at the center
    today are reflections of what the manufacturing sector of our economy
    has undergone in order to regain America's competitive edge and make us
    the most productive country in the world. It is only fitting that our
    government should embrace the same disciplines so key to successful
    companies. As we said in our testimony last year, ``We believe the
    record shows that entrepreneurial thinking and innovative management
    are the commodities the Agency needs and that improvement in
    performance are more a question of intent than of increased
    appropriations.''
        Consequently, for the past several years, we have supported level
    funding for the Agency on the basis that Agency management improvements
    can substitute for increased staff and resources. However, now the
    center is faced with a potentially devastating reduction in funding--
    one that we strongly oppose.
        At this point, let me state how difficult it is to sort out the
    labyrinthian budget documents to ascertain actual levels of funding,
    particularly for the review functions of the center. We applaud your
    efforts to hold the Food and Drug Administration to higher standards of
    accountability for the allocation within the Agency of taxpayer
    dollars. The directive in last year's conference report requiring ``a
    detailed operating plan for fiscal year 1998 . . . no later than 30
    days after enactment of this Appropriations Act'' was an important step
    in making sense out of the financial management of this key government
    function.
        We were dismayed by the FDA operating plan for fiscal year 1998. It
    was untimely and hardly responsive to the level of detail required by
    the appropriators. We support your continued efforts to spur greater
    accountability and responsiveness from FDA.
        Our understanding of the President's budget documents is that the
    level of direct appropriations (not inclusive of user fees) for
    ``Device and radiological products'' was $147 million in fiscal year
    1997, is estimated at $142 million in fiscal year 1998, and is proposed
    to be $103 million in fiscal year 1999. In addition, the fiscal year
    1999 budget proposes $39 million in ``non-additive'' user fees--user
    fees intended to substitute for, not add to, Agency appropriations
    (unlike the Prescription Drug User Fee Program which was structured to
    collect fees on top of appropriations in order to enhance Agency
    performance).
        We are very concerned about this situation. While the fiscal year
    1998 reduction appears arbitrary and unnecessary, the fiscal year 1999
    proposed budget level could devastate the device program at FDA. This
    is at least the fourth year the Administration has proposed user fees
    for the device industry. We urge you, as you have in the past, to rule
    out user fees for the device industry.
        It is important to note that the Administration's proposal to
    reduce the level of funding to $142 million for fiscal year 1998 from
    the fiscal year 1997 level of $147 million represents a reduction of
    3.4 percent. The $103 million level proposed for fiscal year 1999
    represents a reduction of 26.5 percent from fiscal year 1997 funding.
    In CDRH, where the bulk of the budget is for salaries, reductions of
    the type being proposed necessarily mean sizable reductions in staff
    positions.
        While we have every confidence that the leadership of CDRH will
    continue to find ways to work smarter and more efficiently--especially
    with the new tools provided in FDAMA, there is a limit to how many
    staff positions can be reduced without consequences. Core functions
    required to be performed by law within specific statutory time frames
    and in accordance with clear Congressional intent may not be doable
    with a ``skeleton'' staff. Such a result would be especially ironic
    considering that one of the main ``drivers'' of FDAMA was a desire on
    the part of legislators to reduce review times to speed up the delivery
    of important new technology to patients.
        If we look at the recent appropriations levels for the entire FDA,
    the amount of taxpayer dollars funding salaries and expenses for the
    Agency--without user fees--is as follows: Fiscal year 1997--
    $819,971,000; fiscal year 1998--$857,501,000. The fiscal year 1998
    direct appropriation level represents a 4.57 percent increase over the
    fiscal year 1997 level. During that same time, the device program
    suffered a reduction of 3.4 percent. While we understand Congressional
    interest in funding new initiatives such as tobacco and food safety, we
    also believe it is important for there to be sufficient appropriations
    to ensure the performance of statutorily mandated functions. If tobacco
    regulation and food safety are priorities, Congress should provide
    separate funding for those initiatives, not require the Agency to
    reduce funding for functions that are required by law.
        Accordingly, we urge the Subcommittee to enact an appropriations
    level for fiscal year 1999 that will provide device program funding at
    the fiscal year 1997 level of $147 million.
                       summary of funding recommendations
        This Subcommittee has done an excellent job over the years in
    encouraging the Agency to adopt administrative reforms. And, your
    support was key to the enactment of FDAMA last year. But we cannot rest
    on our laurels. In the spirit of continuing improvements to this key
    federal regulatory program--so important to the public health--we offer
    the following specific suggestions for funding levels and report
    language as you consider the details of the Administration's fiscal
    year 1999 budget.
    Soundly reject the Administration's medical device user fee proposal
            and send a strong signal that deep cuts in the Agency's budget
            authority for medical devices are unacceptable
        We also urge the Subcommittee to include language in its report
    expressing concern over the continued efforts of the Administration to
    include user fees in its budget proposals year after year.
    Ensure level funding for the medical device program in fiscal year 1999
            so that it has adequate resources to do the important functions
            mandated by law.
        We are concerned that the device program is shouldering
    disproportionate cuts vis a vis the rest of the Agency. While ``belt-
    tightening'' is appropriate across the board, singling out the device
    program for more than its fair share is unfair and could negatively
    affect patient health. The size of the reduction being proposed by the
    Administration translates into drastic staffing cuts and a concomitant
    increase in review times. We do not believe anyone wants to see the
    devastating scene of several years ago repeat itself. Patients will
    suffer if funding is not kept level for the device program.
    Accordingly, we request that funding for the device program be level-
    funded at the fiscal year 1997 level of $147 million.
    Ensure that any reductions in FDA funding are not made in activities
            central to the Agency's primary mission--such as device reviews
            and activities to protect patient safety
        In this age of smaller government and balanced budgets, it is
    important that the Agency focus on core activities mandated by statute
    and not spend precious resources on activities that may be interesting
    and helpful but not essential to the requirements of the law.
    Redeployment of resources--especially from the educational, scientific,
    and research arenas--should be encouraged by the Subcommittee. We
    recommend report language that urges the Agency to examine the
    allocation of resources and ensure that appropriate staff are assigned
    to product reviews and activities to protect patient safety. Goals to
    be achieved should include retaining the performance levels in the
    510(k) product review area and improving review times for PMA's. In
    addition, sufficient staff should be allocated to implementation of
    FDAMA.
    Urge the Agency to implement FDAMA in a timely manner consistent with
            Congressional intent and continue its ``re-engineering''
            initiatives
        The Agency has demonstrated a remarkable capacity to creatively
    step in new directions to improve the product review process. With re-
    engineering initiatives such as revival of the Product Development
    Protocol and the ``New 510(k) Paradigm'' together with the significant
    new tools provided in FDAMA, the Agency is indeed being ``modernized.''
    Thus far, CDRH has produced timely documents to implement the new law
    and has given the device industry every indication that it fully
    intends to continue effective implementation. Such efforts should be
    recognized and encouraged.
        We also wish to point out that, recently, the Agency has decided to
    diminish its collaborative efforts with industry to address FDAMA and
    other policy issues. This is an unfortunate decision. As the Agency
    develops documents that affect industry, it should be informed
    throughout the process by practical considerations that only industry
    is in a position to present. Constructive collaboration with industry,
    with the Agency--of course--retaining final authority, is always a more
    efficient, less time-consuming model that generally results in a better
    product. We urge the Subcommittee to encourage such a model.
        The consistent message from this Subcommittee--which has been
    heeded by the Agency--is to focus its efforts, use management tools,
    reassess core functions--in order to improve performance. This message
    should continue to be reinforced with FDA and expanded to include a
    message to work with industry to develop appropriate guidance and other
    documents.
    Continue efforts to ensure that FDA's operating plan is consistent with
            Congressional intent and improve the financial accountability
            of the Agency to Congress
        As mentioned earlier, we applaud the efforts of this Subcommittee
    to mandate greater accountability to Congress for allocation and use of
    taxpayer funds. The recent experience with the request for and
    submission of the fiscal year 1998 operating plan lays the groundwork
    for further review and analysis of Agency allocation of resources. We
    support your efforts and urge that they continue into the next fiscal
    year.
                                   conclusion
        In conclusion, Mr. Chairman, we believe the Agency is poised at the
    brink of a new era--one marked by increased efficiency, reduced
    regulatory burden, creative initiatives--with the ultimate winners
    being the patients that benefit from medical device technology. Success
    can only be achieved, however, with continued attention from you and
    your Subcommittee to ensure that (1) an appropriate level of funding--
    preferably level funding based on the fiscal year 1997 amount--is
    provided for the medical device program, and (2) those funds are
    intelligently spent to carry out the health protection and promotion
    purposes of the Federal Food, Drug, and Cosmetic Act--as most recently
    amended so wisely by the Food and Drug Modernization Act of 1997.
        Thank you for the opportunity to present our views.
                                     ______

      Prepared Statement of the Humane Society of the United States (HSUS)
                        sustainable agriculture programs
        Public interest in sustainable agriculture farming systems
    continues to grow. The HSUS supports these cost-effective yet
    environment-friendly systems which also improve the welfare of animals.
    We join the Campaign for Sustainable Agriculture in requesting funding
    for the Sustainable Agriculture Research and Education (SARE) program.
    SARE is a competitive grants program that funds high-quality, farmer-
    involved research and education on economic, agronomic, and
    environmental aspects of sustainable agriculture farming systems. We
    join the Campaign in requesting an increase of $2 million for fiscal
    year 1999 to $10 million for the SARE program.
          agricultural technology and transfer for rural areas (attra)
        The HSUS strongly supports funding for ATTRA at the level of $2
    million for fiscal year 1999. Since 1989, the caseload has more than
    tripled but has received the same level funding for years. It serves
    the entire nation with specialists who provide farmers and others with
    sustainable agriculture information, research results, and information
    based on practical experience. There is no other source of readily
    available information covering such a wide scope of sustainable
    agriculture topics. The funding level requested for fiscal year 1999,
    an increase of $700,000 over fiscal year 1998, will allow ATTRA to
    continue to perform this important function.
                          organic food production act
        For the seventh year in a row, the organic industry has continually
    grown in sales, with reasons for purchase ranging from environmental
    and health concerns to that of enhanced animal health and well-being.
    Adopting consistent national standards for organic products is very
    important, and now is a crucial time for the national organic program
    to begin full implementation. This program is on the verge of becoming
    extremely beneficial to consumers and producers alike. More staff hours
    are needed to manage comments on the proposed rule, to get the final
    rule out, enable implementation of the program and facilitate
    dissemination of program information. The HSUS requests funding of $1
    million with at least $250,000 going to offset the cost of the first
    round of accreditation.
                       animal welfare information center
        The Animal Welfare Information Center (AWIC) of the National
    Agricultural Library (NAL) was started as a Congressional mandate in
    the 1985 Farm Bill. By law, AWIC's main missions are to provide
    information that can be used for: (1) training researchers about more
    humane animal care and use and (2) improving methods of animal
    experimentation that can reduce or replace animal use or minimize pain
    or distress to animals.
        As part of the NAL, AWIC also provides information to the public.
    There are several thousand users of its services, including
    researchers, technicians, veterinarians, IACUC members, exhibitors,
    dealers, Federal agencies, educators, students, and others. Due to the
    great success of the AWIC program in the U.S., it is being duplicated
    in other countries, with farm animal welfare information included in
    those services.
        AWIC is currently operating on a staff of only 4 full-time and 2
    part-time individuals. Since it's inception, AWIC has never received an
    increase in their funding. We support the USDA's request to expand the
    mission of AWIC to include a comprehensive collection of information on
    the well-being of farm animals and to develop an inventory of and
    disseminate fact sheets and other materials on farm animal well-being
    issues. It is imperative that AWIC's funding be increased to accomplish
    these important functions recommended by the USDA.
                     packers and stockyards administration
        We support the USDA's fiscal year 1999 request for an increase of
    $1,600,000 to focus on packer competition and industry structure. This
    funding will support the Secretary's Advisory Committee on Agricultural
    Concentration recommendations that include appropriating sufficient
    resources to aggressively enforce the Packers and Stockyards Act.
        The HSUS also supports an increase of $0.8 million for poultry
    compliance requested by the Secretary's Advisory Committee on
    Agricultural Concentration. We are concerned that contract poultry
    growers have the ability to bargain with integrators and be protected
    from unfair and discriminatory practices and that the Secretary be
    provided the same administrative enforcement authority over poultry
    that currently exists for red meat.
        The HSUS also supports an increase of $0.8 million for monitoring
    and analyzing packer competitive practices and the implications of
    structural changes and behavioral practices in the meat packing
    industry. GIPSA expects to increase their investigations of livestock
    markets from 1,800 in 1998 to 1,950 in 1999. The requested increase
    will enable GIPSA to adhere to the recommendations of the Secretary's
    Advisory Committee on Agricultural Concentration.
                           animal well-being research
        Living conditions for farm animals which provide for their health
    and well-being are increasingly recognized as an important component of
    food quality, and are also of increasing concern to the public.
    Research into understanding what is required to provide for the well-
    being of these animals is needed to help address these concerns.
    However, funding of such research is virtually nonexistent in the U.S.
    We request that $29.5 million be appropriated to the Animals division
    of NRI with at least 50 percent of the funding allocated specifically
    for well-being research, thereby achieving a greatly needed balance
    between animal health and animal well-being research.
                               wildlife services
        Wildlife Services continues to be one of the most controversial
    programs in the Department of Agriculture. Its Western region in
    particular remains focused on killing wildlife, rather than solving the
    damage wildlife sometimes causes.
        Most of the federal WS appropriations are allocated to the Western
    region, where the vast majority is spent killing coyotes. Although the
    results of scientific research have shown that control of coyote
    populations, as opposed to individual offending animals, is futile and
    even counterproductive in stopping damage, this remains the primary
    approach used by WS employees. By way of example, WS still relies
    heavily on preventive aerial gunning, in which a coyote population in
    an area to be used for livestock grazing is targeted, and all animals
    destroyed, before livestock are even moved to the area. This is
    precisely the kind of non-selective and unnecessary destruction of
    wildlife that has earned WS its nefarious reputation.
        The HSUS believes that WS must change its Western program to one
    that helps livestock producers, rather than one that just kills
    wildlife. By teaching livestock producers and property managers how to
    prevent or reduce wildlife-caused problems themselves, the cost of this
    program would be substantially reduced, while its effectiveness would
    markedly increase. Only when initial efforts to prevent or reduce the
    problem fail would lethal control, under this approach, be conducted by
    the government with federal funding.
        A similar program of shared responsibility has very effectively
    reduced wildlife-caused damage in Kansas, Missouri and other states for
    a fraction of the federal share of WS' budget in most Western states.
    The HSUS recommends, therefore, that the Subcommittee direct APHIS/WS
    to undertake a shift in focus from direct control services to
    education/self-help. Lethal control would be provided by the government
    only as a last resort. With such a change, operational funding needs
    would be reduced by $10 million. We strongly urge the Subcommittee to
    reduce the fiscal year 1999 budget of WS in this manner.
        In addition, we urge that WS be directed to spend 90 percent of
    fiscal year 1999 funds allocated to WS research on the identification
    and development of non-lethal, non-injurious control methods.
                               animal welfare act
        The HSUS requests a significant increase in funding for the
    enforcement of the Animal Welfare Act (AWA). For more than 30 years,
    the AWA has failed to provide protection to animals in breeding
    facilities for the commercial pet trade, or to animals amassed by Class
    B ``random source'' dealers for sale to research facilities. The lack
    of sufficient funding in this area--which has hovered at about $9
    million for years--has exacerbated the gross inadequacies that
    characterize AWA enforcement.
        Facilities that house animals covered under the AWA are not
    inspected to a sufficiently frequent and random degree. Currently there
    are 71 inspectors covering 10,366 sites of licensed facilities,
    including 2,506 registered research facilities that house laboratory
    animals. Violations documented by inspectors must be swiftly responded
    to and acted upon in a definitive manner, in order to encourage
    compliance by all facilities in the field. The load placed upon the
    current inspection staff does not allow such response and action.
    Increased funding for additional inspectors and an expanded inspection
    program would therefore improve overall conditions of all facilities.
        The HSUS also suggests modifications to the operation of Animal
    Care that could increase government revenues. These suggestions
    include:
      --An increase in the fees for dealers, since fees for dealers have
            remained stagnant for many years.
      --The elimination of ``random source'' Class B dealers, whom APHIS
            regulatory staff spends a significant portion of their time
            trying to monitor and investigate. Although these dealers are a
            small percentage of the total number of licensees, a
            disproportionate amount of time must be spent dealing with this
            group of chronic AWA violators.
      --The imposition of strict penalties and collection of fines for all
            documented violations of the Act, including failure to be
            present or to allow for the inspection of facilities.
            Frequently, fines go uncollected or inspectors are denied
            access to facilities to verify whether licensees have complied
            with the AWA. Repeated unsuccessful visits and uncollected
            fines cost the USDA/APHIS hundreds of thousands of dollars.
        The HSUS supports current efforts to strengthen USDA regulations
    covering large-scale commercial breeding facilities. The commercial pet
    breeding trade is plagued by chronic, serious violations of the AWA,
    and USDA-licensed facilities must be brought into compliance
    immediately or eliminated if compliance with the Act cannot be
    achieved.
                             market access program
        The HSUS request that no monies under this program be allotted to
    the Mink Export Development Council or any other mink industry
    cooperative. From 1989 to 1995, more than $13 million in federal funds
    were handed over to the Mink Export Development Council. Despite this
    large commitment of funds, which were used primarily for fashion shows
    overseas, the value of mink exports declined by 33 percent and U.S.
    production dropped by more than half (Source: Fur Age Weekly). In
    addition, mink fur is purely a luxury item for which animals are
    subjected to extreme cruelty. In the last Congress, an overwhelming
    majority of the Congress agreed that the mink industry should not
    receive a government subsidy under this program. In light of these
    facts, we urge that the Congress continue to bar funding to the Mink
    Export Development Council.
                            the horse protection act
        The HSUS supports the full appropriation of funds as authorized by
    law under the Horse Protection Act. The authorization limit for the
    enforcement of the Act has been frozen at $500,000 since the enactment
    of the law in 1970. In addition to the devaluing effects of inflation,
    the actual appropriation has been drastically cut in recent years. USDA
    only received $353,000 for the Horse Protection Act program in fiscal
    year 1998, and only about $260,000 of that money was available for
    enforcement purposes.
        The HSUS requests that $500,000 be appropriated for the next budget
    year. This amount represents the absolute minimum expenditure necessary
    to carry out the provisions of the Act. It is essential to insure the
    proper training of USDA enforcement personnel in the use of
    thermovision and other diagnostic techniques employed to detect the
    illegal soring of gaited horses. It will also support some needed
    research. The full appropriation will enable USDA staff to attend a
    representative number of target horse shows (approximately 10 percent)
    and it will help to improve the training and oversight of non-
    governmental enforcement personnel (known as Designated Qualified
    Persons or DQP's.)
        The HSUS also wishes to go on record as stating that the Tennessee
    Walking Horse industry has demonstrated that they are clearly incapable
    of effective self-regulation as envisioned by the 1976 amendments to
    the Act. Industry inspectors consistently report fewer than half the
    number of violations cited when USDA personnel are in attendance. Also,
    an increasing number of walking horse shows have no inspection programs
    whatsoever. We urge prompt and full implementation of the strategic
    plan.
               commercial transportation of equines for slaughter
        The promulgation of regulations concerning the humane and safe
    transport and treatment of horses shipped to slaughter within the U.S.
    are provided for under a provision of the farm bill passed in 1996. We
    support full development and implementation of thorough regulations to
    remedy the mistreatment and inhumane conditions horses transported to
    slaughter currently endure.
        Our two year investigation and subsequent research confirmed that
    there are several areas of serious concern regarding how these horses
    are treated and transported on these long distance trips to one of the
    eight slaughter plants. These areas include, but are not limited to,
    the shipment of seriously injured, late-term pregnant mares, foals, and
    ill or incapacitated horses. In addition there are serious deficiencies
    regarding the duration of deprivation of water, food and rest during
    transport, the inappropriate interior height, design, and use of many
    livestock vehicles, the lack of segregation of horses by size, and the
    lack of segregation of fractious horses and stallions from others, as
    well as adequate protection from the elements. We are also concerned
    about the lack of any record keeping by which to establish ownership or
    track these animals. We urge full funding be appropriated for
    implementation of these regulations and specifically request $425,000,
    which is close to the amount requested by USDA. We urge that the money
    allocated include adequate funding for USDA FSIS inspectors to enforce
    these regulations.
                                     ______

       Prepared Statement of R. Max Peterson, Executive Vice President,
            International Association of Fish and Wildlife Agencies
        The International Association of Fish and Wildlife Agencies was
    founded in 1902 as a quasi-governmental organization of public agencies
    charged with the protection and management of North America's fish and
    wildlife resources. The Association's governmental members include the
    fish and wildlife agencies of the states, provinces, and federal
    governments of the U.S., Canada, and Mexico. All 50 states are members.
    The Association has been a key organization in promoting sound resource
    management and strengthening federal, state, and private cooperation in
    protecting and managing fish and wildlife and their habitats in the
    public interest.
                  natural resource conservation service (nrcs)
        The Natural Resource Conservation Service has immense
    responsibilities for implementing the conservation provisions of the
    1985 Food Security Act (FSA), the 1990 Food, Agriculture, Conservation
    and Trade (FACT) Act, and the Federal Agricultural Improvement and
    Reform (FAIR) Act of 1996.
    Technical assistance
        The USDA publication ``Geography of Hope'' identifies that the need
    for general conservation technical assistance for America's private
    landowner will continue to increase to 2002 and beyond. The Association
    supports the $38 million increase in conservation operations. This will
    be used for: updating and refining the NRI; providing incentive
    payments to state NRCS offices that leverage local funds; and hiring
    non-federal watershed coordinators.
        The Association supports the President's fiscal year 1999 request
    for an additional $1.9 million for updating and digitizing soil surveys
    and training field staff to improve technical assistance to users of
    soil survey data. These items are included in the Conservation
    Operations budget request and the Association strongly supports a $752
    million budget for this program.
        In addition to increasing general (non-programmatic) technical
    assistance, increased technical assistance funds are needed to
    implement increasingly popular provisions of the 1996 FAIR Act. The
    budget for the Wetlands Reserve Program (WRP), the Conservation Farm
    Option (CFO), Wildlife Habitat Incentives Program (WHIP), and the
    Farmland Protection Program (FPP) all include the customary 19 percent
    to 20 percent for technical assistance. The Association strongly
    supports this level of funding provided to ensure maximum agriculture
    and natural resource benefits will accrue from these programs. Notably
    absent from the list of programs providing adequate levels of technical
    assistance is the Environmental Quality Incentives Program (EQIP). The
    1998 budget provides the customary 19 percent level for technical
    assistance while the proposed 1999 budget raises EQIP from $200 million
    to $300 million which the Association applauds. It lowers however the
    percentage for technical assistance to 10 percent, a net loss of $8
    million but a functional loss of $27 million since EQIP is increased
    from $200 million to $300 million. Some Programs (CRP, WRP, CFO and
    FPP) have a technical assistance cap set by Section 11 of the CCC
    Charter Act at the 1995 spending level. No such constraint exists on
    EQIP. The Association therefore strongly urges the restoration of the
    customary 19 percent for technical assistance on EQIP.
        State Technical Committees (STC).--The 1990 FACT Act required that
    State Technical Committees (STC) be established to facilitate
    interagency cooperation and coordination of technical guidelines for
    the conservation programs. Further, the USDA 1995 Reorganization Act
    specifically exempted the STC from the Federal Advisory Committee Act
    (FACA). The 1996 FAIR Act further added additional members to the STC.
    Federal-State coordination is an ongoing normal function which is
    required with or without a formal State Technical Committee. We commend
    the strong efforts of NRCS that has ensured the establishment of the
    State Technical Committees in each State with representation from the
    respective State fish and wildlife agency.
        Wetland Determination.--We believe the need for wetland
    determination, certification, and mapping is great and urge NRCS to
    proceed as soon as possible, under the guidance of the FAIR Act of
    1996. The Association urges expeditious completion of the wetland
    determinations required to implement the Swampbuster provisions of the
    1985 FSA, 1990 FACT Act, and the 1996 FAIR Act as well as the FAIR Act
    directed interagency cooperation, whereby NRCS assumed responsibility
    for wetland designation for Section 404 (Clean Water Act) purposes on
    farmland, including tree farms, rangelands, native pasture, and other
    private lands used to produce or support the production of livestock.
    The Association and individual states wish to continue to work with
    NRCS to help achieve these goals.
        Public Law 566.--The Association generally supports the $49 million
    request for small watershed (Public Law 566) projects. That support is
    based upon continued emphasis on updated watershed planning and
    management. Such efforts could utilize and expand upon existing Public
    Law 566 plans examined in light of present day issues of wetland
    protection, water quality enhancement and fish and wildlife habitat.
    The greatest potential for these programs is for land treatment
    measures that retain the water on the land, improve infiltration,
    improve water quantity and quality, and provide fish and wildlife
    habitat. Structural and non-structural land treatment activities
    require state and local matching funds and are therefore leveraged to
    provide greater conservation benefits for each federal dollar spent
    while promoting valuable partnerships among states, local agencies, and
    other organizations.
        National Buffer Initiative.--NRCS has implemented the initiative in
    cooperation with industry and other partners. The Association is
    pleased to be a sponsor of this innovative approach. The National
    Academy of Sciences has found that buffer strips can reduce off-field
    pollution by 70 percent, thus also contributing to meeting non-point
    source remediation goals under the Clean Water Act. NRCS has committed
    special emphasis and a major effort to use the strip practices covered
    by the continuous CRP sign-up in a more targeted fashion. Unlike the
    large or whole field CRP retirements, buffer strips will require
    extensive outreach plus the much more attractive rental rate now
    available. The Association supports the allocation of increased funds
    specifically for outreach to increase participation in the various
    buffer strip practices.
        Forest Incentive Program (FIP).--The Forest Incentive Programs
    (FIP) has multiple resource values for fish, forests, wildlife, clean
    water and erosion control. The Association opposes the NRCS proposed
    intention to drop FIP funding and strongly recommends that the fiscal
    year 1998 level of $6.325 million be continued.
        Capped Program.--The Wetlands Reserve Program (WRP), Wildlife
    Habitat Incentives Program (WHIP), Farmland Protection Program and the
    Conservation Farm Option (CFO) have all reached or are near authorized
    acreage or appropriation caps. The Association continues to recognize
    and support the benefits to our natural resources from these programs.
    We believe that due to the over-whelming success, customer's acceptance
    and public benefits of this program, they should be re-authorized and
    funded at least at the 1998 level through 2002.
                           farm service agency (fsa)
        An adequately funded budget for the FSA is essential to implement
    those conservation related programs and provisions under FSA
    administration and/or in cooperation with NRCS as a result of passage
    of the Federal Agricultural Improvement and Reform (FAIR) Act of 1996.
    The Association strongly advocates that the budget include sufficient
    personnel funding to service a very active program.
        FSA programs have tremendous quantifiable impacts on natural
    resources, and yield substantial public as well as private benefits.
    Building on the provisions of the 1985 FSA, the 1990 FACT Act, and the
    1996 FAIR Act, the Association wants to ensure that each program
    accomplishes the broadest possible range of natural resource
    objectives, and encourages close cooperation between FSA, NRCS and the
    State Technical Committees in implementing the 1996 FAIR Act.
        Flood Risk Reduction Program.--We believe this program has great
    potential to mesh with the Army Corp of Engineers Rivers Ecosystem
    Restoration and Flood Hazard Mitigation Project which is a part of the
    President's Clean Water Initiative. We urge FSA to prepare regulations
    and budget for implementation and make every effort to ensure that
    language used in its easements and agreements provide a streamlined
    basis for appropriate administration and are user-friendly.
        Conservation Reserve Program.--The continued administration of CRP
    under the guidelines of the 1996 FAIR Act is a very significant and
    valuable commitment of USDA and the FSA. The Association applauds FSA
    efforts to fund and extend CRP contracts for the multiple benefits that
    accrue to the public as well as the landowner. The Association is
    especially pleased to note the commitment to reach as soon as practical
    and maintain the authorized 36 million acres in CRP. The Association
    provides special thanks to FSA for the continuous CRP sign-up of high
    value environmental practices and urges a special effort to advertise
    and increase landowner participation.
        The commitment of FSA to provide high wildlife benefits in CRP
    contracts was most obvious in the 15th and 16th sign-up. The
    Association applauds FSA in those efforts with their special emphasis
    on native grass species and enlightened pine planting and management
    strategies for maximum wildlife benefits.
     wildlife services, animal and plant health inspection service (aphis)
        The President's budget for the APHIS Wildlife Services (WS)
    Operations is $26.05 million, a net reduction of $2.436 million from
    fiscal year 1998. For Methods Development, the proposed amount is
    $9.681 million, a $543,000 decrease from fiscal year 1998. The
    Association is discouraged that the Administration continues to
    overlook the importance of the leadership role the WS program has in
    the area of wildlife damage management and recommends that Congress
    restore these funds.
        WS, a unit of APHIS, has the federal responsibility for controlling
    wildlife damage to agriculture, aquaculture, forest, range and other
    natural resources; controlling damage to property, and for protecting
    public health and safety through control of wildlife-borne diseases and
    wildlife hazards at airports. Its control activities are based on the
    principles of wildlife management and integrated damage management and
    are carried out cooperatively with state fish and wildlife agencies.
    Most APHIS operational work is cost shared between the federal WS
    program, state and county governments, agricultural producers, and
    other cooperators.
        The cooperation and support of the agricultural community are
    essential to maintaining wildlife populations because much of the
    Nation's wildlife exists on private, agricultural lands. A progressive
    wildlife damage control program which reduces the adverse impact of
    wildlife populations is necessary to maintain the support of the
    agricultural community and to counter increasing pressures for
    indemnity due to wildlife damage.
        The Association works closely with WS on numerous issues critical
    to the state fish and wildlife agencies such as the recent agreement
    between the United States and the European Community to identify and
    develop more humane traps for taking furbearing animals. The
    Association is disappointed that $450,000 was not included in the
    President's fiscal year 1999 budget for the important work of
    developing and testing more humane traps. Without necessary funding for
    trap testing, the United States will not be able to keep its agreement
    with the European Community. The Association strongly urges Congress to
    add $450,000 in the US budget for this very critical wildlife
    management, economic and trade issue.
        The Association recommends that Congress make $700,000 available in
    fiscal year 1999 to allow WS to continue implementation of their new
    Management Information Reporting system. The implementation will occur
    over a 5-year period at a total cost of between $6-8 million. The
    current system is outdated, uses obsolete hardware, and is limited in
    the amount of data collected. The new system will allow WS to provide
    specific information on resources protected, damage levels, trend
    information, cooperator employed methods, and data on measurements and
    outcomes now required by the Government Performance and Results Act.
        The President's budget also directs implementation of a cost-share
    arrangement requiring states and other cooperators to pay at least 50
    percent of the program cost in each state. Problems involving wildlife
    damage are unpredictable and extremely varied. The Association strongly
    objects to such a rigid cost-share arrangement and urges Congress to
    maintain maximum flexibility for cost sharing.
        With the success of the recent wolf reintroductions in Yellowstone
    and the resulting expansion of their range, the reintroduction of the
    Mexican wolf in Arizona, and the natural dispersion of wolves into new
    areas in Minnesota, Wisconsin, and Michigan, the agency's present
    funding level to deal with wolf problems is inadequate. As wolf
    populations continue to increase, so do wolf conflicts and requests
    from the public for assistance. The Association recommends that
    Congress provide an additional $275,000 to WS for fiscal year 1999 to
    deal with the increasing workload related to resolving wolf conflicts
    in order to facilitate this important recovery effort.
        A significant problem exists with regard to brucellosis which
    affects domestic livestock and other animals and is present in elk and
    bison in the Greater Yellowstone area. ASPHIS has a key role in working
    to resolve issues related to this problem. We strongly urge that
    funding be included in the Service's budget to meet the needs in
    veterinary services, research, and operational funding for the
    quarantine facility to allow the Service to meet its responsibilities
    in resolving this issue.
        We commend Congress for recognizing the need to relocate the WS
    research facility from Denver to Ft. Collins, Colorado. However, the
    Association urges the Congress to finish what it has begun and provide
    the necessary $20.5 million to complete this $37.7 million state-of-
    the-art facility. The future of an effective wildlife damage management
    program depends on the identification and development of more effective
    and socially acceptable control methods. The only source of new methods
    is through research.
        The Association is pleased with the accomplishments of the Berryman
    Institute at Utah State University in Logan, Utah. However, the
    activities have seemed to reach a plateau, and we would like to see the
    Institute enhance its capabilities to conduct social science research,
    expand continuing education programs, and start a new high-quality
    scientific journal for wildlife damage management that would be
    patterned after other established journals. To reach these new goals,
    the Association supports an increase of the funding to the Berryman
    Institute by an additional $236,000.
      cooperative state research, education and extension service (csrees)
        The Association recognizes that the research and educational
    programs of the CSREES and its Land Grant Partners effect relevant
    positive changes in attitudes and implementation of new technologies by
    private landowners, managers, community decisionmakers, and the public.
    This results in significant benefits to individuals and to the Nation
    through building and sustaining a more viable and productive natural
    resource base and a competitive and profitable agriculture. Since over
    two-thirds of our lands, approximately 1.35 billion acres, are
    controlled by over 10 million private landowners and managers, it is
    most appropriate that the CSREES Land Grant System, with its grass
    roots credibility and delivery system, be adequately funded to
    translate and deliver research-based educational programs and new
    technologies to help the Nation's private landowners and managers move
    towards a more sustainable society. However, we are disappointed that
    the President's fiscal year 1999 budget reflects very little emphasis
    on natural resources research and education directed toward helping
    these clientele.
        The Association recommends that the fiscal year 1999 budget for
    CSREES should be redirected to accomplish the following goals:
        The Association recommends that the Renewable Resources Extension
    Act be funded at a minimum level of $9.5 million in fiscal year 1999.
    The RREA funds, which are apportioned to State Extension Services,
    effectively leverage cooperating partnerships at an average of about
    four to one, with a focus on the development and dissemination of
    useful and practical educational programs to private landowners (rural
    and urban) and continuing education of professionals. The increase to
    $9.5 million would enable the Extension System to accomplish the goals
    and objectives outlined in the 1991-1995 Report to Congress. The need
    for RREA educational programs is greater today than ever because of the
    fragmentation of ownerships, the resultant increase in small farm
    numbers, the diversity of landowners needing assistance, and the
    increasing environmental concerns of society about land use. It is
    important to note that RREA has been reauthorized through 2002. It was
    originally authorized at $15 million annually; however, even though it
    has been proven to be effective in leveraging cooperative state and
    local funding, it has never been funded at that level. An increase to
    $9.5 million would enable the Extension Service to expand its
    capability to assist over 500,000 private landowners annually to
    improve decision-making and management on an additional 35 million
    acres while increasing productivity and revenue by $200 million.
        The Association recommends that Smith-Lever 3(b)&(c) base program
    funding be increased by 9 percent to a level of $280,950,770 with an
    appropriate portion of this increase targeted to Extension's Natural
    Resource and Environmental Management programs (NREM). The President's
    fiscal year 1999 budget requests a reduction of $10,740,000 funding for
    Smith-Lever 3(b)&(c) funds from the fiscal year 1998 level. The
    Association appreciates that Smith-Lever 3(b)&(c) base programs provide
    ``Block Grant'' type funds for land grant universities to provide
    essential educational outreach based on local needs assessment. This
    will enable NREM programs to develop the critical mass of expertise at
    the state and local levels to redirect and leverage limited funding to
    address critical existing and emerging natural resource and
    environmental issues that are directly affecting small landowners and
    farmers in both rural and urban communities nationwide. The nation is
    rapidly becoming a suburban society and these new landowners are ripe
    for education at the urban and rural interface. Expanding Extension
    programs in natural resource education on such issues as forest health,
    wetlands, endangered species, and human/wildlife interactions, as well
    as to strengthen its programs in urban and community forestry and
    environmental education is essential to address natural resource issues
    that are relevant to the sustainability of these critical resources.
    Such an increase, targeted appropriately, would help producers better
    understand and implement the changes in the 1996 Farm Bill Conservation
    Provisions. Moreover, we are concerned that appropriate positions in
    the Natural Resources and Environment Unit have not been retained to
    provide needed national leadership for critical interdisciplinary
    resources such as range management.
        The Association encourages continued close cooperation between
    State CES and the State Fish and Wildlife agencies, as well as other
    appropriate state and federal agencies and conservation organizations.
    Extension 4-H Youth natural resource programs and projects continue to
    increase with over 1,350,000 youngsters presently enrolled from both
    urban and rural communities across the Nation. Increased Smith-Lever
    funds targeted appropriately will enable CSREES to carry out its
    environmental education and NREM National Strategic Plan obligations
    nationwide.
        The Association recommends restoration of the Rangeland Research
    Grants $500,000 budget for fiscal year 1999. The Association is
    disappointed that the practical and applied problems addressed by the
    Rangeland Research Grants (RRG) program were zeroed out in the
    President's 1998 budget and totally ignored in this fiscal year 1999
    budget. The elimination of the only federal competitive grants program
    for rangelands has serious implications for wildlife, watersheds, and
    other natural resources. Modest appropriations for RRG in the past have
    supported some of the most important rangeland research conducted over
    the past decade, and wildlife issues on rangelands will present some of
    the more critical rangeland research problems over the next decade.
    This would help increase the interdisciplinary capacity of research and
    educational programs to help landowners better manage their land.
        The Association recommends that an appropriate portion of the Pest
    Management budget should be dedicated to educational programs for
    prevention and control of vertebrate pests in urban and rural
    communities and to address invasive exotic species and noxious weed
    problems on rangelands. The Association notes that a combined total
    increase of almost $15.5 million has been recommended in the
    President's budget for Pest Management and related research and
    extension programs over and above increases received in fiscal year
    1998. The Association strongly supports this increased commitment of
    funds. Vertebrate pests and invasive species have been identified in
    many states as posing the most significant problems, now and in the
    future, that agricultural and related crop producers and private
    landowners face. This targeting of Pest Management funds for research
    and educational programs would advance the knowledge and capability of
    landowners to reduce significant losses to vertebrate pests and
    invasive species.
        The Association recommends that the Hatch and McIntire-Stennis
    funds be restored to fiscal year 1998 levels and, if necessary,
    redirected from the substantial $32,800,000 proposed increase in NRI
    funding. The Association is pleased that the Administration proposes a
    $9.5 million increase in basic research identified under the National
    Research Initiative as Natural Resources and the Environment; however,
    what is proposed under this ``Area of Special Emphasis'' clearly does
    not address critical natural resource research needs that the Natural
    Resource Community and the public are vitally concerned about. The
    Association is alarmed at the significant reduction in both the Hatch
    Act and Mclntire-Stennis research programs of over $15.5 million. Both
    of these research programs, conducted by Land Grant University partners
    and other educational institutions, are crucial to addressing natural
    resource and environmental issues critical to agriculture and natural
    resource sustainability now and in the future.
                                     ______

             Prepared Statement of Luie Fass, International Seafood
        Mr. Chairman, I appreciate the opportunity to submit this statement
    for the record.
        I am submitting this statement to you to request the Committee's
    assistance on a legislative matter that will assist the commercial
    fishing and seafood industry in Virginia and other portions of the
    Atlantic coast. The issue involves the inclusion of seafood products
    within the current export credit assistance programs administered by
    the Foreign Agricultural Service (FAS) of USDA.
        Senator Ted Stevens authored an amendment in 1990 that authorized
    seafood as a commodity that could be financed through USDA's GSM
    (General Sales Manager) credit programs. Seafood has been financed
    infrequently in recent years through this mechanism. I understand that
    it is a discretionary decision on which commodities to include in each
    year's program.
        The Asian financial troubles have caused a tremendous reduction in
    seafood exports, which for some U.S. commercial fishermen is their main
    source of revenue. As you may know, the Department of Commerce has
    imposed restrictive quotas on popular fishery species to the extent
    that the industry will expire without the export market. The exported
    seafood consists of species (skate) and products (shark fins and tails)
    for which there is no domestic demand, but for which there is a viable
    and strong Asian market.
        I represent a number of commercial fishermen and seafood processors
    and exporters who are in the same position: We are no longer able to
    export seafood products to Asia because the Asian importers cannot
    obtain credit to finance their operations. If the FAS program were to
    include seafood as a product on the approved list for this year, the
    U.S. export of seafood could resume.
        We ask that in your fiscal year 1999 Appropriations action you
    instruct the Department of Agriculture to include seafood and seafood
    products on the approved list for the FAS-GSM export financing
    programs.
        Thank you again for the opportunity to present this statement for
    the record.
                                     ______

           Prepared Statement of the Intertribal Agriculture Council
        The Intertribal Agriculture Council (IAC) is an organization of
    dues paying member Tribes who together control over 80 percent of the
    54 million acres held in trust by the United States for Indian people.
    Founded by 84 tribes in 1987 to promote improvement in Native American
    and Alaskan Native agriculture, IAC is governed by a Board of Directors
    elected by the Tribes from each of the twelve regions of Indian Country
    reflecting the diverse character of Indian agriculture. We appreciate
    the opportunity to provide written testimony on the Department of the
    Agriculture budget request for fiscal year 1999.
        For the past eight years, the IAC has repeatedly submitted written
    comments and oral testimony which attacked the USDA budget request and
    pointed out areas where we felt there were significant deficiencies
    reflecting poor priorities for existing budget dollars. We have
    repeatedly sought increased funding for the Extension Indian
    Reservation Program authorized at $8 million but funded at only $1.6
    million. We have sought to increase direct farm lending in Farm Service
    Agency (formerly Farmers Home Administration) as critically necessary
    to our people who are unable to obtain bank loans due to jurisdictional
    and land ownership issues. We have sought improved participation in the
    new conservation programs collectively lumped under the Environmental
    Quality Incentives Program, and we have sought improved prioritization
    of the elements of the 1990 Fact Act collectively called Title 2501.
        In this year we have the uncommon pleasure of not attacking the
    Department's budget request but applauding the revised priorities for
    existing budget dollars. The recent USDA undertakings in both civil
    rights and small farms issues have included direct participation by the
    actual targeted users of USDA programs. USDA should be commended for
    listening and making adjustments in priorities as reflected in this
    budget request.
        The areas of primary budget concern for the membership of the
    Intertribal Agriculture Council are listed below.
                         cooperative extension service
        Cooperative Extension Service Agents serve in the critical role of
    community liaison to all USDA and Land Grant University Agriculture
    Programs, supervise youth activities such as 4-H, and coordinate
    education and training programs. Until 1990, Indian reservations were
    excluded from this service. For the past several years the Intertribal
    Agriculture Council has worked with the Department of Agriculture to
    enhance Indian participation in Extension Service programs as a
    cornerstone to improving USDA/Indian relations.
        The Extension Indian Reservation Program (EIRP) is authorized in
    Section 1677 of the 1990 FACT Act, and spearheads the IAC efforts at
    improving USDA involvement with American Indian communities. We in the
    IAC are proud of our participation in the effort to establish this
    critical Reservation Extension Agent program and are thankful that the
    department recommends increasing funding for this successful and cost
    effective program. The program started with the authorization and an
    appropriation of one million dollars in the 1991 budget. As a result of
    that authorization and appropriation, the Cooperative Extension
    Service, working in concert with Indian Tribes and State Extension
    Directors, implemented a program which in its first year resulted in
    the establishment of 13 fully operational Reservation Extension
    Projects with a total staff of 34, half of which were American Indians.
    In addition, each dollar of Federal seed money attracted $0.37 in
    Tribal Government support, and $0.41 in State Government support.
    States and Tribes hired nine individuals, in addition to the extension
    personnel, to assist in these projects. In that first year, during the
    start-up phase of this new program, the Extension Service received more
    than 75 proposals submitted jointly by cooperating States and Tribes to
    provide Extension services to the Indian communities. These cooperative
    proposals totaled more than 16 million dollars, for which only 1
    million was available.
        Congress recognized the value of this program and increased its
    funding by $500,000 in fiscal year 1992, and another $250,000 in fiscal
    year 1993. Since then, and despite great support among the Department,
    Congress and Indian leaders, the budget situation has prevented
    continuing expansion toward the full performance goal estimated at $8
    million. Increasing costs, CSREES overhead costs and budget rescissions
    have caused the already tiny program to cut back repeatedly in recent
    years, with the cuts resulting in fewer programs and smaller budgets
    for the remaining Extension Agents. Since 1994 the program has had to
    reduce from a high point of 34 on-reservation projects to the current
    level of only 26 programs. Even so, and without a national program
    leader or other oversight, 26 extension programs are providing valuable
    and formerly unavailable services to Indian Communities in 20 states
    from Florida to Alaska, including especially the valuable 4-H programs
    for our next generation.
        Funding requested by the Tribes and States for continuing the
    existing 26 projects at minimum levels was $1,872,600 in 1998. Only
    $1.6 million was available, resulting in an average shortfall of
    $11,000 for each on-site project, a reduction of over 17 percent below
    established need levels. The proposed funding level of $5 million in
    fiscal year 1999 will provide adequate funding to meet the needs of the
    existing projects and expansion to include another 26 or so
    reservations in this valuable Federal/State/Tribal cooperative effort.
    Although below full-performance levels, the proposed increase is a
    reasoned approach to build upon past success without overburdening the
    system within fiscal year constraints. We strongly support this
    initiative of the USDA.
                    farm service agency, farm loan programs
        The decision of the USDA to ask for budget levels which reflect the
    full authorized level of Direct Farm Ownership Loans at $85 million and
    Direct Farm Operating Loans at $500 million will be of great service to
    millions of American farmers and ranchers who, for a number of reasons,
    are unable to obtain direct bank financing. This is especially
    important for American Indian farmers and ranchers on Indian
    reservation lands because private sector commercial banks are
    frequently unwilling or unable to make loans using Indian trust
    property as collateral. However, these issues are not a factor in
    direct federal lending programs.
        It has taken great courage for the Farm Service Agency to seek the
    full appropriation, in part because the published past performance of
    FmHA Direct Loans has been poor. However, it must be pointed out that
    the reported deficiencies cannot be compared directly with similar data
    for commercial banks or other lenders. There are two reasons for this
    discrepancy. First, the reported delinquency rate is cumulative,
    including all delinquent loans dating from the origination of the
    program, while excluding all past loans which performed fully and were
    paid off--a commercial financial institution would dispose of non-
    performing loans on a yearly basis, reporting at most the three current
    years. Second, the direct loan program was used in the late 1970's and
    early 1980's as an instrument of federal efforts to mitigate the high
    inflation and recession affecting the country during that period. Fully
    three quarters of the direct loan deficiencies are ``Economic
    Emergency'' loans made during this period to provide an infusion of
    federal dollars to rural communities through increased lending to
    farmers. These loans have not been made since 1984, so 75 percent of
    the delinquencies are more than 15 years old and result from federally-
    sponsored emergency efforts at economic recovery, not from poor
    borrower or agency performance.
        Given the strength and historical contribution of the direct
    lending programs to America's agriculture base, we strong support the
    USDA's request to fully fund these critical programs.
                        indian land acquisition program
        The Indian Land Acquisition Program is listed under Farm Service
    Agency, Farm Loan Programs. It was created by Congress as a first
    effort at finding solutions to the jurisdictional and managerial crises
    facing Indian reservations which result from fractionated land-heirship
    and checker-boarded land-ownership patterns. This program has provided
    Tribes with the ability to purchase allotted lands within their
    jurisdictional area to consolidate ownership and management functions.
        Congress raised the authorization for the Indian Land Acquisition
    program from $2 million to $8 million in the 1990 FACT Act. In recent
    years, the Department has funded this program at one million dollars,
    and reports limited activity. However, we are told by our member Tribes
    that FSA State officials have repeatedly turned away Tribal applicants
    by stating that no funds are available. Actually, the funding level has
    been so low that in many years a single loan to a single Tribe has
    taken the entire appropriation. Turning away potential applicants and
    operating a program in which a single loan may require the entire
    appropriation explains the low activity level.
        The proposed 1999 budget again requests less than $0.5 million in
    budget authority for this important source of land consolidation
    assistance. We are requesting that Congress direct the Department to
    utilize the full authorization of $8 million for the purpose for which
    it was intended, the solution of long-standing land-ownership problems
    on Indian reservations. Since the Farm Service Agency has resources
    extending well into the billions of dollars we are not requesting an
    additional appropriation. We are requesting that the Committee and the
    Congress mandate that $8 million of the total budget in Farm Loan
    Programs be earmarked specifically for the Indian Land Acquisition
    Program as authorized in the 1990 FACT Act.
            outreach for socially disadvantaged farmers and ranchers
        A widely based coalition of minority, rural and American Indian
    organizations sought the support of Congress for the development of an
    improved outreach and service delivery system for disadvantaged
    agricultural producers. Section 2501 of the FACT Act is the result.
    This section contains specific direction in developing the program and
    lists Tribally Controlled Community Colleges among organizations
    eligible to participate in USDA education and outreach programs.
        Improved education of our people has long been the over-riding
    priority for our Tribes. This relatively simple and straight forward
    section of the FACT Act finally recognizes this priority. For the first
    time since the passage of that authorizing legislation, the Department
    has included a full authorization budget request to implement this
    important outreach program for Americans everywhere. We strongly
    support this move by the Department to finally implement this
    Congressionally-mandated program.
                    environmental quality incentives program
        The combination of the various conservation programs previously
    administered by the USDA into the newly created Environmental Quality
    Incentives Program (EQIP) through the 1996 FAIR ACT has required some
    adjustment at the local and regional level during the implementation
    phase. Initially, most reservation lands were excluded from the special
    emphasis areas, largely due to a lack of Indian participation on the
    various state committees which set-up the original implementation
    plans. However, in several states with large Indian landownership and
    populations, including Arizona, Colorado, Montana and Nevada, the NRCS
    has placed special emphasis on the historically unmet needs of Indian
    reservation lands. Coupled with national office adjustments to include
    Indian lands, NRCS is making major progress in bringing its important
    conservation programs and expertise to previously underserved
    populations.
        The response of the agriculture and landowner community to the
    opportunities presented to improve long term conservation through the
    EQIP program has stretched the ability of this program to accomplish
    its identified task. For this reason, and in specific response to the
    inclusion of Indian owned lands in the EQIP programs, we strong support
    the USDA's request to expand the program by $100 million, nationwide.
        The Board of Directors of the Intertribal Agriculture Council, on
    behalf of our member Tribal governments, are grateful for the
    opportunity to submit written comments on these issues of importance to
    the Indian Agriculture community. We believe the USDA's decision to
    request reprioritizing its existing appropriation levels through the
    budget process is an excellent example of a federal agency which
    listened and acted upon its own special task force recommendations. The
    proposed budget will more directly meet the actual needs of America's
    farmers and ranchers than any budget in recent years, and will help
    solve serious problems affecting rural communities throughout America.
                                     ______

     Prepared Statement of Dr. Kenneth E. Quickel, Jr., President, Joslin
                                Diabetes Center
        Mr. Chairman and Members of the Subcommittee, we at the Joslin
    Diabetes Center in Boston appreciate the opportunity to provide a
    statement for the record about an innovative and cost-effective project
    of potential benefit to rural Americans throughout the country.
                                    diabetes
        The facts about diabetes among Americans are these:
      --Sixteen million people have diabetes:
      --Diabetes is much more prevalent among some growing minority
            populations:
      --The prevalence of diabetes is increasing 7 percent each year;
      --Diabetes is the leading cause of blindness among working-aged
            Americans;
      --Diabetes and complications from diabetes are among the five leading
            causes of death in the United States; and
      --Half of those who have diabetes are not yet aware they have
            diabetes, which may first become known only when serious
            complications arise.
                             joslin diabetes center
        Joslin Diabetes Center, since 1898, has been the world's leader in
    the study of diabetes and in providing care for individuals with
    diabetes. With a staff of over 400 and an annual budget of $41 million,
    Joslin's clinical arm handled 65,000 patient visits in 1997. Joslin
    investigators contributed 108 original papers to the scientific
    literature in 1996. Joslin is affiliated with the Harvard Medical
    School and has trained over 900 diabetes specialists now practicing
    medicine and conducting research in 40 countries around the world.
        Joslin has established thirteen Affiliated Centers across the U.S.
    in which Joslin physicians and staff train medical personnel in
    hospitals and clinics in the techniques Joslin employs for diabetes
    detection, prevention, and care. These thirteen Centers handled an
    additional 85,000 patient visits in 1997.
                                project proposal
        We propose a two-state demonstration project that will institute
    pilot programs of diabetes detection, prevention and care at a very
    modest cost. The objectives involve a training and technology transfer
    exercise of Joslin's expertise utilizing proven Telemedicine
    technologies, and an education and information program that utilizes
    the existing Extension Service system. We believe that the project
    should be at least two years in duration in order to place the
    equipment and train the personnel and access a sufficient proportion of
    the population to develop a viable model for application in other
    locations. The initial year of the project, fiscal year 1999, will cost
    an estimated $950,000. Second-year funding will be considerably less.
        The two objectives of the project are (1) Screening for diabetes
    and diabetic eye disease among rural patient populations in Washington
    and Hawaii, using an innovative technology and low light camera; and
    (2) providing existing, extensive information on diabetes prevention
    and care for dissemination in the states of Washington and Hawaii.
        We have begun a similar project with the Departments of Defense and
    Veterans Affairs for the current fiscal year. We are linked with TATRC,
    the Telemedicine & Advanced Technology Research Center at Fort
    Dietrick, Maryland. We have learned a great deal about providing
    training and technology to Federal agencies, and feel confident that
    the proposal we are advancing in this testimony can be accomplished by
    non-medically trained personnel.
        The proposal involves two components that we have worked years to
    develop, refine, and operationalize through our research and clinical
    applications: The Joslin Vision Network (JVN) and the Information and
    Education component.
                          joslin vision network (jvn)
        JVN provides the technology platform for accessing all diabetic
    patients into a program of high quality eye and diabetes care. The JVN
    utilizes a low light, non-invasive imaging of the retina. A technician,
    not medically trained, can be trained to use the camera to acquire
    retinal images in less than 30 minutes. The camera--it can be carried
    by one person and transported by automobile--can transmit the readings
    by telephone or satellite communications to a distant reading center to
    be interpreted by experts. The resulting retinal images are transmitted
    to regional centers of excellence for diagnosis and treatment plans.
    The process provides rural residents who may have or be prone to the
    development of diabetes access to diagnostic techniques and
    sophisticated equipment normally found only in urban settings where
    patient volume and traffic demand and can afford such highly
    specialized technology.
                      information and education component
        Joslin has developed a comprehensive and extensive body of
    educational, informational and self-training (for those with diabetes)
    materials that are used with patients and those who have been found to
    be at risk for diabetes. These materials can be distributed to the
    population at large to educate and inform citizens of the warning signs
    and symptoms of diabetes. Many of the research findings that have
    practical, everyday applications to the sixteen million Americans who
    have diabetes are not known simply because the educational
    infrastructure is not in place. This brings me to why we are proposing
    this project for application within the Department of Agriculture. The
    Extension Service, the educational arm of USDA, provides millions of
    Americans valuable information that extends far beyond farming and soil
    conservation practices. The Extension Service has always been an active
    component of community life through such programs as the 4-H clubs and
    Home Economics activities. The Expanded Food and Nutrition Education
    Program seeks to improve nutritional intake through better educated
    consumers. Joslin's information and educational materials are the next
    step in the Extension Service mission of improved nutrition and better
    health. Joslin proposes to make available to the Extension Service in
    Washington and Hawaii materials that can be disseminated through
    Extension Service mailings, public awareness campaigns and other
    community activities that will result in a better educated public on
    the nature of and dangers of diabetes.
                                     costs
        We have prepared a preliminary budget to carry out this project in
    the two states of Hawaii and Washington. We selected these two states
    because Joslin has Affiliated Centers in each: Straub Clinic and
    Hospital in Honolulu and Swedish Hospital in Seattle. This will help
    keep costs at a moderate level and allow sufficient on-site monitoring
    on a regular basis.
        We have estimated the costs to be $950,000 for the first year:
    $475,000 per state. The per state costs are comprised of the following:
    $260,000 for equipment and $215,000 for Joslin costs associated with
    travel, training, and monitoring for each state in the first year. The
    equipment costs are one-time, nonrecurring expenditures that will
    result in lower second year costs. The equipment and the right to use
    the equipment become USDA's for continued use in these two states, or
    they can opt for a regional use of the equipment as the positive
    results of the project become proven.
        Mr. Chairman, that concludes my brief statement. Thank you for this
    opportunity to place Joslin's statement in the hearing record for
    consideration by Members of the Subcommittee.
                                     ______

                  Prepared Statement of Quon Y. Kwan, D. Crim.
                appropriation for the study of fda consolidation
        I am a resident of Rockville, Maryland. Although I am Secretary and
    Transportation Chairman for the Manor Lake Civic Association, I am
    writing as a private individual. I am currently employed as a senior
    environmental scientist for Energetics, Inc., a contractor for the U.S.
    Department of Energy, Assistant Secretary for Environment, Safety and
    Health. Neither my company nor I have received or will be receiving any
    contracts or grants from the Food and Drug Administration (FDA).
        My interest in the FDA consolidation stems from my involvement as
    Vice-President for Action Committee for Transit (Montgomery County) for
    the past and current years. Again, my views do not represent the
    official position of Action Committee for Transit. I was opposed to the
    siting of the consolidated FDA campus at exurban Clarksburg primarily
    because of the lack of supporting infrastructure (especially, access to
    transit) and the commuting hardship posed on low-income and minority
    workers. My other reasons for opposing the Clarksburg site included the
    adverse impact in furthering sprawl development and the further
    deterioration on the inner city and urban areas. As you are well aware,
    the FDA abandoned Clarksburg as a potential site due to public outcry.
        The FDA now seems to be focusing on the former Naval Surface
    Weapons Center at White Oak as a site for its consolidated campus.
    White Oak is also a poor choice for a number of similar reasons. My
    primary objection is the inadequacy of public transportation serving
    the White Oak site. Although it has bus service, workers would be using
    Metrobus service (route K6) and Ride-On service (route 22) to/from
    White Oak in the counterflow direction (AM northbound and PM southbound
    on New Hampshire Avenue). The frequency of counterflow bus service (on
    either route) is every 30 minutes even during rush hours. In my
    comments on the draft and final environmental impact statement for the
    proposed FDA consolidation at White Oak, I noted that such frequency of
    bus service is wholly inadequate to accommodate even 10 percent of the
    6697 employees that would work at the site. The FDA misled the public
    by listing 19 bus routes and 4 rail lines that serve the study area,
    when in fact only the two aforementioned bus routes were within
    reasonable walking distance (\1/4\ mile of the site. The closest rail
    station is the Silver Spring stations for the Metrorail Red Line and
    MARC Brunswick Line, which is three miles away. I noted that the no-
    action alternative (i.e., to keep the FDA at its existing locations)
    was better because the dispersed FDA sites are located near Metrorail
    stations and have far better access to public transportation than White
    Oak.
        My second primary objection to the White Oak site is its location
    in the residential suburbs. The FDA consolidated campus does not belong
    in a residential suburb but in the inner city or central business
    district. President Jimmy Carter signed an Executive Order 12072,
    ``Strengthening the Nation's Cities,'' which is codified by the General
    Service Administration into the Federal Property Management Regulations
    at 41 CFR 101-19.002. This Order calls for Federal agencies to site
    their facilities and utilize space in such a way as to strengthen the
    nation's cities. This Order has been upheld in Federal courts (rf City
    of Reading, PA v. Austin [816 F.Supp. 351 (E.D. Pa. 1993)]). Why does
    this Order make good sense? Abandoning the inner city for the suburbs
    causes deterioration of the inner city and exacerbates sprawl
    development in the suburbs. This in turn has the unintended adverse
    effect of furthering division between socio-economic classes and
    between races, with of course, the low-income and minorities--the less
    mobile--remaining in the inner city and the more affluent and majority
    white--the more mobile--fleeing to the suburbs. When Federal agencies
    as well as private sector businesses take flight from the inner city to
    the suburbs, they create a prodigious redistribution of wealth. The
    inner city loses its tax base and becomes enveloped in a downward
    spiraling cycle of decreasing job growth and abandoned buildings
    accompanied by increasing alienation, poverty, and crime. On the other
    hand, the suburbs grow in their tax base and become enveloped in an
    upward spiraling cycle of increasing job growth and construction but
    accompanied by cookie-cutter gated communities and sterile industrial
    parks that exclude ``undesirables'' and oppose diversity. We need
    cities because we need identifiable, physical centers of commerce and
    culture. We need cities because they provide diversity; places that
    thrive with diversity breed new ideas for exchange, growth, and
    prosperity. Cities--not suburbs--are where the poor can rub elbows with
    the rich, the blacks with the whites, the humble with the powerful, and
    the public with the government. These are the places where Federal
    agencies belong--inner cities and central business districts--not in
    the exurbs or suburbs. Cities are vital for democracy. The Federal
    government should set the example and take the lead in strengthening
    the inner cities.
        As an alternative to the White Oak site, the FDA should be
    consolidated at a site in the city, Washington, D.C. (consistent with
    Executive Order 12072), and preferably near a Metrorail station. There
    are several sites that would fit this criterion. One is at the
    Southeast Federal Center, which is adjacent to the Navy Yard Metrorail
    Station and is no more than about a mile from the Hubert H. Humphrey
    building, headquarters of the Department of Health and Human Services,
    the department to which FDA belongs. The other advantages of the
    Southeast Federal Center are that it is already owned by the Federal
    government (General Services Administration) and it has adequate floor
    space to meet FDA's needs. Furthermore, the Southeast Federal Center is
    located in an economically depressed area of the District of Columbia
    that is in urgent need of revitalization. As you are quite aware, D.C.
    has lost many employers, including Federal agencies, and the President
    has directed his cabinet secretaries in March 1997 to not contribute to
    the economic decline of D.C. by not allowing any more Federal agencies
    to abandon D.C. Moreover, the National Capital Planning Commission's
    Plan for Washington's Monumental Core (March 1996) under the subject of
    economic development proposes that the Southeast Federal Center and
    adjacent Navy Yard be transformed into a lively urban water front of
    offices, restaurants, shops, and marinas.
        In conclusion, it would behoove the Subcommittee to appropriate an
    amount of approximately $5 million for studying the feasibility of
    consolidating the FDA administrative and laboratory facilities at the
    Southeast Federal Center site.
                                     ______

      Prepared Statement of Helen Hooper, Director of Public Policy, Land
                                 Trust Alliance
        On behalf of the more than 1,100 land trusts across the country,
    the Land Trust Alliance (LTA) would like to submit this statement as
    testimony for the record on the fiscal year 1999 appropriations for the
    conservation programs of the U.S. Department of Agriculture.
        Land trusts are independent grassroots organizations dedicated to
    protecting land and the quality of life in their communities through
    private, voluntary action. Working within a cooperative, incentive-
    based strategy, these groups have helped save more than 4 million acres
    of wetlands and wildlife habitat, productive farm and forest lands, and
    other significant resources.
                                funding requests
        (1) Support the President's fiscal year 1999 request for the
    following programs that help interested private landowners conserve
    their farmland:
      --Environmental Quality Improvement Program (EQIP)
      --Wildlife Habitat Improvement Program (WHIP)
      --Wetlands Reserve Program (WRP)
      --Conservation Reserve Program (CRP)
      --Conservation Farm Option Program (CFO)
        (2) Include funding for the National Natural Resources Conservation
    Foundation created under the 1996 Farm Bill.
        (3) Support the reauthorization of the Farmland Protection Program.
                environmental quality improvement program (eqip)
        LTA supports the administration's request of $300 million for EQIP
    from the Commodity Credit Corporation. This voluntary conservation
    program provides technical, financial, and educational assistance to
    farmers and ranchers for environmental land management measures that
    address serious threats to soil, waters, and other natural resources.
    EQIP promotes locally-led conservation by encouraging interested
    citizens to determine program focus in their communities. EQIP has
    generated a great deal of support among farmers, ranchers, local
    conservation officials, and other residents.
                  wildlife habitat improvement program (whip)
        LTA supports the administration's request of $20 million for WHIP
    from the Commodity Credit Corporation. This voluntary program provides
    technical and financial assistance to farmers to improve wildlife
    habitat on their land. WHIP funds often complement the activities of
    other USDA programs such as the Conservation Reserve Program or the
    Wetlands Reserve Program, increasing the overall effectiveness of the
    USDA's conservation efforts.
                         wetlands reserve program (wrp)
        LTA supports the administration's estimated request of $123.7
    million for WRP from the Commodity Credit Corporation and urges the
    committee to not institute any new acreage caps or restrictions in
    fiscal year 1999. The administration's estimate would be used to enroll
    164,214 new acres in the program. WRP is a program with a proven track
    record of successfully restoring farmed, converted, or other degraded
    wetlands on current or former agricultural land. LTA would like to
    stress the importance of permanent WRP conservation easements. A
    perpetual agreement is the best way to ensure that the efforts of the
    USDA and the landowner, as well as the taxpayers' investment, are not
    wasted by future actions that may degrade the wetland area that was
    restored with WRP funds.
                       conservation reserve program (crp)
        LTA supports the administration's estimated request of $1.694
    billion for CRP from the Commodity Credit Corporation and urges the
    committee to not institute any new acreage caps or restrictions in
    fiscal year 1999. CRP conserves precious top soil and promotes water
    quality by paying farmers to retire highly erodible lands from crop
    production for 10 to 15 years and providing cost-share funds to convert
    these areas to perennial vegetation. The program enjoys a tremendous
    level of support among the farmers it is tailored to, as demonstrated
    by the overwhelming response to the USDA's latest sign-up period.
                     conservation farm option program (cfo)
        LTA supports the administration's request of $25 million for CFO
    program from the Commodity Credit Corporation. This voluntary pilot
    program provides producers of wheat, feed grains, cotton, and rice with
    a one-time consolidated payment if they agree to implement farm
    management plans that address the conservation of soil, water, and
    related resources, water quality, wetlands, and wildlife habitat on
    their farmland.
               national natural resources conservation foundation
        LTA strongly supports including $1 million in fiscal year 1999 for
    start-up funds for the Foundation as authorized under the 1996 Farm
    Bill. Congress authorized this foundation to serve a role for the
    USDA's Natural Resources Conservation Service similar to that served by
    the National Fish and Wildlife Foundation for the U.S. Fish and
    Wildlife Service. This nongovernmental, charitable non-profit
    organization would raise private funds and accept gifts of real
    property to promote public-private partnerships, conduct educational
    and demonstration projects, and encourage innovative solutions to the
    conservation of natural resources on private agricultural lands.
    Unfortunately, to date no funds have been appropriated to the
    Foundation.
                       farmland protection program (fpp)
        LTA supports the reauthorization of the Farmland Protection
    Program. This program, created under the 1996 Farm Bill, helps farmers
    keep their land in agricultural production by supporting the
    acquisition of conservation easements or other interests in farmland
    that is subject to substantial development pressure. In the program's
    first full year of operation it successfully conserved over 9,000 acres
    of threatened farmland in 10 states across the country. A much greater
    volume of farmland is expected to be enrolled in fiscal year 1998.
    After fiscal year 1998, all authorized FPP funding will have been
    consumed, but the need for the program will continue to increase. We
    ask that you support legislation to reauthorize this valuable program
    that helps keep threatened farmland in production.
        We greatly appreciate your past and future support of USDA's
    conservation programs. We hope that you will keep in mind the views of
    LTA and the 1,100 volunteer citizen conservation organizations that
    make up the nation's private land trust movement as you make your
    funding decisions for the coming fiscal year.
                                     ______

         Prepared Statement of Gary A. Glenn, President, Massachusetts
            Foundation for Excellence in Marine and Polymer Sciences
        Mr. Chairman, and Members of the Subcommittee, thank you for the
    opportunity to submit a statement for inclusion in outside witness
    hearings. My statement concerns USDA funding for research on new
    biological methods for treatment of liquid wastes in rural America. On
    behalf of research partners in Mississippi, Alaska, and Hawaii, I
    request that USDA fund construction and testing of ``living machines''
    in fiscal year 1999 at a level of $3.15 million.
                                living machines
        Living machines are ecologically engineered systems for treating
    various kinds of wastes, especially waters. Living machines have been
    tested and proven effective in urban and industrial settings, and in
    particular locations. Living machines are ideal for small and localized
    applications such as are found in rural areas.
        There is a need to test living machines in real-world settings.
    Data from specific rural demonstration sites will be collected and
    distributed so that large numbers of applications can take place. This
    data will enable local officials to confidently decide on adoption of
    living machine use for wastewater and other treatments, including reuse
    of waters.
                        need for geographical diversity
        Living machines rely on plants and animals to purify wastewater;
    most of the plants used in a particular living machine are locally
    obtained. Living machine systems are therefore geographically and
    climatically specific. There is an urgent need to test and demonstrate
    living machines under regional conditions, where multiple applications
    exist. Specific locations in the United States where living machines
    have never before been tested or demonstrated include the following:
    rural Deep South, northern coastal, and sub-tropical.
                        selection of demonstration sites
        In response to recommendations from program designers and
    ecological scientists, the following sites appear to be ideal for
    demonstration purposes:
        Northern Coastal.--The region around Kodiak, Alaska is climatically
    similar to thousands of miles of sparsely population coastline in
    California, Oregon, Washington and Alaska. It is planned that a
    demonstration living machine will be installed in Kodiak, which will
    show how ecological technology can be adapted to rural areas in Alaska
    and elsewhere.
        Southern.--Rural Mississippi, especially in the northern and
    eastern parts of the state, offers excellent opportunities for
    demonstration of living machine technology for rural areas, in part
    because of current economic transformations in the region, and in part
    because of new public concerns over appropriate levels of wastewater
    treatment and regulation. This location can serve as a central
    geographical demonstration site for many applications throughout the
    South.
        Sub-tropical.--A living machine application is needed for sub-
    tropical and island areas, so a living machine will be constructed and
    operated in Hawaii as a demonstration for the state of Hawaii as well
    as for many other applications in United States territories such as
    Guam, Samoa, and Puerto Rico, and for Pacific Island usages such as the
    Northern Marianas.
                 construction and operation of living machines
        So that data collected from the demonstration sites identified in
    this description can conform to accepted standards of scientific and
    engineering specifications, the design and construction engineering
    tasks will be carried out under the management of the organization that
    has previously funded and supervised living machine research, the
    Foundation for Excellence in Marine and Polymer Sciences. This
    Foundation has more than 10 years experience with living machine
    technology, and has previously managed urban area applications. The
    Foundation will work directly with host institutions in each of the
    geographical locations identified in this testimony, who will actually
    carry out the research needed to confirm the parameters for living
    machine utilization.
                            financial considerations
        A total of $3.15 million is requested for fiscal year 1999, which
    will cover design, construction and operations costs for living
    machines in Alaska, Mississippi, and Hawaii.
                                     ______

       Prepared Statement of the Metropolitan Water District of Southern
                                   California
        The Metropolitan Water District of Southern California (MWD)
    appreciates the opportunity to submit testimony regarding the U.S.
    Department of Agriculture's (USDA) fiscal year 1999 budget, for the
    Hearing on Agriculture, Rural Development, Food and Drug Administration
    and Related Agencies Appropriations. MWD is a public agency created in
    1928 to meet supplemental water demands of those people living in what
    is now portions of a six-county region of southern California. Today,
    the region served by MWD includes nearly 16 million people living on
    the coastal plain between Ventura and the Mexican border. It is an area
    larger than the State of Connecticut and, if it were a separate nation,
    would rank in the top ten economies of the world.
        Included in our region are more than 225 cities and unincorporated
    areas in the counties of Los Angeles, Orange, San Diego, Riverside, San
    Bernardino, and Ventura. We provide more than half the water consumed
    in our 5,200-square-mile service area. MWD's water supplies come from
    the Colorado River via the district's Colorado River Aqueduct and from
    northern California via the State Water Project's California Aqueduct.
                                  introduction
        MWD continues to favor USDA implementation of conservation
    programs, and is especially encouraged by the new actions identified in
    the recently released Clean Water Action Plan. The Clean Water Action
    Plan fosters integration of efforts by USDA, the U.S. Environmental
    Agency, and other Federal agencies to improve water quality. MWD firmly
    believes that inter-agency coordination along with cooperative
    conservation programs, that are incentive-based and facilitate the
    development of partnerships are critical to addressing natural
    resources concerns, such as water quality degradation, wetlands loss
    and wildlife habitat destruction. It is vital that Congress provide
    USDA with the funding necessary to successfully carry out its
    commitment to natural resources conservation.
        Our testimony focuses on USDA's conservation programs that are of
    major importance to MWD. In particular, MWD urges your full support for
    funding for USDA's Environmental Quality Incentives Program (EQIP).
    Full funding for this program is essential for achieving Colorado River
    Basin salinity control objectives through the implementation of
    salinity control measures as part of EQIP. In addition, MWD requests
    your full support for the Wildlife Habitat Incentives Program,
    Conservation Reserve Program, Wetlands Reserve Program, Integrated Pest
    Management and related programs, and the Water and Waste Disposal Loans
    and Grants program. Sufficient federal funding for these USDA programs
    is necessary to achieve wildlife habitat restoration and source water
    quality protection objectives in the Colorado River Basin and in
    California's Sacramento/San Joaquin Bay-Delta (Bay-Delta) estuary.
                    environmental quality incentives program
        The Environmental Quality Incentives Program provides cost-sharing
    and incentive payments, technical assistance and educational assistance
    to farmers and ranchers for the implementation of structural practices
    (e.g., animal waste management facilities, filterstrips) and land
    management practices (e.g., nutrient management, grazing management)
    that address the most serious threats to soil, water and related
    natural resources. EQIP is to be carried out in a manner that maximizes
    environmental benefits per dollar expended. This assistance is focused
    in conservation priority areas identified by the Natural Resources
    Conservation Service's State Conservationists, in conjunction with
    state technical committees and Farm Service Agency personnel. MWD does
    have some concern with respect to this aspect of EQIP. Beginning with
    the first full year of EQIP funding in 1997, USDA's participation in
    the Salinity Control Program has significantly diminished. The
    mechanism by which funding has been allocated by USDA to date
    inherently overlooks projects for which benefits are interstate and
    international in nature. Clearly, Colorado River salinity control has
    benefits that are not merely local in nature, but continue downstream
    and EQIP as it is currently administered by USDA does not address
    national priorities. MWD supports the recommendation of the Colorado
    River Basin Salinity Control Forum as a way to remedy this situation.
    In Public Law 104-127, Congress amended the Colorado River Basin
    Salinity Control Act to direct the Secretary of Agriculture to carry
    out salinity control measures in the Colorado River Basin as part of
    EQIP. Sufficient federal funding for implementation of EQIP is critical
    in order to achieve Colorado River Basin salinity control objectives as
    well as source water quality protection and ecosystem restoration
    objectives in the Bay-Delta estuary and watersheds tributary to the
    Bay-Delta.
        The Colorado River Basin Salinity Control Forum (Forum), the
    interstate organization responsible for coordinating the Basin states'
    salinity control efforts, issued its 1996 Review, Water Quality
    Standards for Salinity, Colorado River System (1996 Review) in June of
    1996. The 1996 Review found that additional salinity control was
    necessary with normal water supply conditions beginning in 1994 to meet
    the numeric criteria in the water quality standards adopted by the
    seven Colorado River Basin states and the U.S. Environmental Protection
    Agency. For the last four years (1994-97), funding for USDA's salinity
    control program has not equaled the Forum-identified funding need for
    the portion of the program the Federal Government has the
    responsibility to implement. It is essential that implementation of
    Colorado River Basin salinity control efforts through EQIP be
    accelerated to permit the numeric criteria to be met again under
    average annual long-term water supply conditions, making up the
    shortfall. The Basin states and farmers stand ready to pay their share
    of the implementation costs of EQIP.
        The President's proposed fiscal year 1999 budget contains funding
    of $300 million for implementation of EQIP. MWD supports this level of
    EQIP funding which is also consistent with the USDA actions called for
    under the Clean Water Action Plan. The Forum has determined that
    allocation of $12 million in EQIP funds in fiscal year 1999 is needed
    for on-farm measures to control Colorado River salinity. This level of
    funding is necessary to meet the salinity control activities schedule
    to maintain the state adopted and federally approved water quality
    standards. MWD urges you and your Subcommittee to support full funding
    for EQIP as requested in the President's fiscal year 1999 budget for
    USDA, with the specific allocation to the Salinity Control Program. MWD
    also recommends that the Colorado River Basin be designated as a
    national priority area for salinity control.
                      wildlife habitat incentives program
        Wildlife Habitat Incentives Program (WHIP) is a voluntary program,
    providing technical assistance and cost-sharing, to help landowners
    develop habitat on their properties that will support wetland wildlife,
    upland wildlife, threatened and endangered species, fisheries, and
    other types of wildlife. WHIP offers an opportunity to encourage
    development of improved wildlife habitat on eligible lands by providing
    assistance to landowners who wish to integrate wildlife considerations
    into the overall management of their operations.
        WHIP cost-sharing assistance could be utilized to support ongoing
    interim conservation efforts both in the Bay-Delta estuary and for the
    Lower Colorado River Multi-Species Conservation Program. The CALFED
    Bay-Delta Program is a cooperative effort among state and federal
    agencies and the public to develop a long-term, comprehensive solution
    to ecosystem and water supply problems in the Bay-Delta. One of the
    main objectives of the CALFED Bay-Delta Program is to improve and
    increase aquatic, wetland and riparian habitats so that they can
    support sustainable populations of wildlife species, by implementing a
    system-wide ecosystem restoration approach. WHIP could benefit this
    program by providing cost-share assistance for the development of
    wildlife habitat on private lands in the Bay-Delta watershed.
        The Lower Colorado River Multi-Species Conservation Program (LCR
    MSCP) is a broad-based partnership of state, federal and private
    entities in Arizona, California, and Nevada. Participants include
    water, hydroelectric power and wildlife resource management agencies,
    Tribal governments, and environmental organizations with interests in
    the Lower Colorado River. The LCR MSCP is focusing on the conservation
    of over 100 threatened, endangered and sensitive species and their
    habitats. WHIP would allow the combination of federal cost-sharing
    dollars and voluntary agricultural land-use practices to enhance
    habitat for listed and sensitive species of interest in the Lower
    Colorado River. This could be a valuable vehicle for gaining further
    agricultural support for conservation efforts and the goals of the LCR
    MSCP.
        The President's budget requests $20 million for WHIP for fiscal
    year 1999. MWD recommends that you and your Subcommittee support WHIP
    at the level requested in the President's fiscal year 1999 budget for
    USDA.
                          conservation reserve program
        Continued support for the Conservation Reserve Program (CRP) is
    necessary in order to build on the past successes of this USDA
    conservation program. Under the CRP, incentive payments are provided to
    producers to remove highly erodible and other environmentally sensitive
    land from production. This program helps protect the quality of
    drinking water supplies and facilitates ecosystem restoration efforts
    by reducing soil erosion, improving water quality, protecting wildlife
    habitats, and achieving other natural resource conservation measures.
    The National Buffer Initiative program will further maximize
    environmental benefits per dollar expended, and we are supportive of
    this effort.
        Enrollment of eligible agricultural lands that are located in the
    Bay-Delta estuary and tributary watersheds in the CRP, could provide
    water quality improvement benefits for this important source of
    drinking water. We note, however, that the method which determines the
    rental rate for CRP enrollments effectively precludes the enrollment of
    much irrigated agriculture land and land with high value crops. As a
    result, states in the arid west do not benefit from the CRP in
    proportion to their contribution to agricultural production. While MWD
    urges you and your Subcommittee to support the President's budget
    request for the CRP of $1,718 billion for fiscal year 1999, we also
    strongly request that you review the method for rental rate
    determination We understand that one of the key actions under the Clean
    Water Action Plan is to review and increase, where appropriate, the
    incentives available for conservation buffers. Such review should also
    be undertaken for the CRP overall.
                            wetlands reserve program
        The Wetlands Reserve Program (WRP), first authorized in 1990, is a
    voluntary program providing incentives to landowners for the
    restoration and protection of wetlands with long-term or permanent
    easements. Wetlands restoration provides important water quality
    improvement and wildlife habitat restoration benefits that are
    important to the Bay-Delta estuary. MWD urges you and your Subcommittee
    to support appropriation of $124 million for the WRP in fiscal year
    1999, as requested in the President's budget. Full support for the WRP
    is necessary to achieve the Administration's goal of enrolling an
    additional 164,000 acres into the program currently, for a cumulative
    enrollment of approximately 825,000 acres by the end of 1999 and
    975,000 acres by the end of calendar year 2000.
                integrated pest management and related programs
        The USDA's Integrated Pest Management (IPM) Initiative provides for
    the research and development of IPM practices and the coordinated
    implementation of IPM programs at the local level. The development and
    application of proven IPM practices offers the potential to reduce
    reliance on chemical pest controls and minimize the adverse water
    quality effects of pesticide use. Implementation of IPM programs could
    provide source water quality protection benefits in both the Bay-Delta
    estuary and the Colorado River Basin. The President's fiscal year 1998
    budget includes funding for a variety of research and assistance
    programs contributing to the overall objectives of the IPM Initiative.
    MWD urges your full support for the $267 million included in the
    President's fiscal year 1999 budget for IPM and related programs.
                   water and waste disposal loans and grants
        The President's fiscal year 1999 budget includes funding for a
    number of USDA programs that provide loan, grant and technical
    assistance to rural communities. Of particular interest to MWD is the
    Water and Waste Disposal Program. This program provides loans and
    grants to small rural communities for water infrastructure projects, in
    order to assist those communities with drinking water quality and
    supply problems and help them achieve compliance with federal drinking
    water standards. MWD requests you and your Subcommittee to support the
    President's request of $1.339 billion for fiscal year 1999 for water
    and waste disposal loans and grants.
                                   conclusion
        Thank you for your consideration of our testimony. We believe our
    comments emphasize the importance of continued funding for USDA's
    agricultural conservation programs. The USDA's conservation programs
    are critical for achieving Colorado River Basin salinity control
    objectives, as well as broader wildlife habitat restoration and source
    water quality protection objectives in the Colorado River Basin and the
    Bay-Delta estuary.
                                     ______

    Prepared Statement of Rudy K. Rice, President, National Association of
                             Conservation Districts
        The National Association of Conservation Districts is a nonprofit,
    nongovernment organization that represents the nation's 2,950
    conservation districts and more than 16,000 men and women who serve on
    their governing boards. Established under state law, conservation
    districts are local units of state government charged with carrying out
    programs for the protection and management of natural resources at the
    local level. Conservation districts work with nearly two-and-half
    million cooperating landowners and operators each year and provide
    assistance in managing and protecting nearly 70 percent of the private
    land in the contiguous United States.
        For more than sixty years, conservation districts and state
    conservation agencies have worked in close partnership with U.S.
    Department of Agriculture agencies to provide technical and financial
    assistance to help farmers, ranchers and other landowners and operators
    protect and enhance our land and water resources. This partnership has
    been carried out primarily with the Natural Resources Conservation
    Service (NRCS), but has also involved other agencies such as the Farm
    Service Agency, the Forest service and the Extension Service. The
    partnership bonds NRCS with local conservation districts and state
    conservation agencies and is recognized as an efficient and effective
    system for delivering conservation assistance to the nation's private
    landowners and operators.
        The ``Federal Agriculture Improvement and Reform Act of 1996'' (the
    Farm Bill) strengthened USDA's conservation mission by expanding
    existing conservation programs and creating several new initiatives
    that significantly broaden the scope of the department's natural
    resource management responsibilities. It also reinforced Congress'
    commitment to building voluntary, locally driven conservation
    partnerships among private landowners and operators and the local,
    state and federal agencies that serve them. The Farm Bill programs,
    along with other USDA conservation programs, operate in tandem with
    myriad state and local conservation programs to address the nation's
    most serious natural resource problems.
        NRCS's Conservation Technical Assistance Program, delivered through
    local conservation districts to cooperators and other land users, is
    the nation's foremost private lands pollution prevention program. It
    provides landowners and operators with much needed help in planning and
    applying conservation treatments to control erosion and improve the
    quantity and quality of soil resources; improve and conserve water;
    enhance fish and wildlife habitat; conserve energy; improve woodland,
    pasture and range conditions; and protect and enhance wetlands. Many
    federal and state agencies also rely upon the technical expertise
    unique to NRCS to carry out other conservation programs that complement
    the NRCS effort not only in the agricultural areas, but in rural,
    suburban and urban communities as well.
        Conservation districts believe that the federal government must
    provide a base level of technical assistance funding to maintain its
    commitment to support locally led conservation initiatives that
    complement federal efforts to ensure a safe and productive environment.
    A federal technical presence such as NRCS is vital to ensuring that
    sound technical standards are maintained in our nation's conservation
    programs. It is also critical in the actual implementation of needed
    conservation practices.
        This NRCS technical presence, along with federal cost-share
    programs, leverages a tremendous investment in conservation by state
    and local governments. State and local governments contribute nearly $1
    billion in personnel and cost-share funding each year to support
    conservation programs carried out by the partnership. This is roughly
    equal to NRCS's annual budget and does not include the volunteer time
    of district officials. Many states are also working to increase this
    support, but depend on the federal government to provide its fair
    share.
        In developing funding recommendations for specific agencies and
    programs, we recognize our own responsibilities to contribute a fair
    share of resources. Our recommendations on federal funding are based on
    information from our members, discussions with program managers and
    estimates based on workloads mandated by federal, state and local
    program authorities. Our recommendations are stated, in part as
    responses to selected items in the President's proposed budget for
    NRCS, as well as recommendations for selected other agency programs.
        The Clinton Administration's fiscal year 1999 budget proposal
    includes $742.231 million for NRCS Conservation Operations (CO). It
    also includes several proposals that would make fundamental changes in
    the way NRCS delivers conservation services through conservation
    districts and state conservation agencies.
        The President proposes $579.110 Million for America's Private Land
    Conservation (APLC), the Administration's new designation for
    Conservation Technical Assistance. Conservation technical assistance is
    the cornerstone of most NRCS programs, supporting activities such as
    the Farm Bill, as well as other programs to address state and local
    program priorities. The highest priority of the conservation
    partnership remains that of meeting the planning and technical
    assistance needs of farmers, ranchers and other land managers.
    Conservation districts recommend $580 million for Conservation
    Technical Assistance for fiscal 1999.
        The President's proposal includes $20 million for ``Competitive
    Partnership Grants'' to locally based institutions, including watershed
    councils, cooperatives, etc., to enhance institutional capacity. In
    particular, it advocates hiring non-federal watershed coordinators
    (350) to develop watershed partnerships. It makes no mention of
    conservation districts, which are the legal entities established under
    state law for the specific purpose of coordinating and carrying out
    natural resource management programs. Every district in the nation has
    a Mutual Agreement with the Secretary of Agriculture that documents its
    unique working relationship with USDA. Further, each district also has
    a Cooperative Working Agreement with NRCS that outlines how
    conservation assistance will be delivered cooperatively to local
    landowners and operators.
        This partnership delivery system should continue to be used for
    delivering conservation technical assistance on private lands. We
    strongly recommend that any such grants be channeled through
    conservation districts rather than putting in place an unneeded new
    delivery mechanism that would duplicate the current conservation
    district program delivery system.
        The President's proposal also includes $20 million for ``Incentives
    to States'' to encourage them to increase their contributions to
    conservation programs. Of this amount, $10 million would be awarded to
    states to use for geographic information system and digital photo
    purchases. Conservation districts support the ``Incentives to States''
    concept, but it should not result in a decrease in funding for NRCS
    technical assistance.
        Under the President's proposal, NRCS would collect $10 million in
    user fees for providing certain technical assistance and data services
    to its clients. While we could support such fees for services and
    products provided to other federal agencies, conservation districts
    oppose NRCS's charging user fees for assistance and services provided
    to the agency's traditional clients and non-federal partners. We
    believe the imposition of fees for services would discourage landowners
    from seeking assistance and decrease the application of needed
    conservation practices. It is important to point out that this $10
    million is embedded in the President's proposal as an offset and should
    be restored when funding the CO account.
        The budget proposes $70.983 million for a new ``Water Resources
    Assistance'' line item and would decrease the Watershed Protection and
    Flood Prevention account by $52 million from the fiscal year 1998
    appropriated level. This would effectively transfer the technical
    assistance funding from the watershed program account to the new line
    item under CO. Conservation districts oppose shifting technical
    assistance out of the Watershed and Flood Prevention Operations
    account. We believe that action would be the first step toward
    dismantling this important program and that Public Law 566 funds would
    likely disappear in future budget proposals.
        We believe it is critical for NRCS to continue providing technical
    assistance for the more than 500 watershed projects established under
    Public Law 566, the authorizing legislation for the Watershed and Flood
    Prevention Operations program. Many of the projects, which have created
    an $8.5 billion infrastructure, are nearing the end of their evaluated
    lives. Approximately 5,000 of the floodwater retarding structures are
    30 years old and many are in need of repair, rehabilitation,
    replacement or decommissioning. Project sponsors need design and
    construction assistance, as well as technical assistance for
    rehabilitating, upgrading or decommissioning aging structures. In order
    to address these needs, NACD recommends funding Watershed & Flood
    Prevention Operations at $120 million in fiscal year 1999, with at
    least $60 million of that amount directed to technical assistance.
        Conservation districts are concerned over references in the
    President's proposal to focus NRCS activities on setting standards and
    providing certification, rather than directly implementing most
    activities. We believe this would exacerbate the trend toward targeting
    NRCS assistance to federal priorities while shifting more natural
    resource management responsibilities to state and local governments
    without providing adequate resources to address non-federal priorities.
    Conservation districts oppose this shift since conservation programs
    provide significant public benefits with responsibility shared at all
    levels of government.
        The President's proposal requests no funding for the Forestry
    Incentives Program (FIP) because it ``promotes timber production on
    private lands and is incompatible with the agency (NRCS) strategic
    plan, which is focused on water quality and habitat goals.'' Congress
    transferred FIP from the Farm Service Agency to NRCS as part of a major
    program restructuring in the Federal Agricultural Improvement and
    Reform Act of 1996 in recognition of NRCS as the Department's private
    lands management agency. Its technical assistance is used primarily to
    assist America's farmers in production agriculture as are other USDA
    cost-share programs. USDA recognizes private lands forestry as a
    farming activity, and the Internal Revenue Service treats forestry
    cost-share payments as such. Conservation districts urge Congress to
    fund the Forestry Incentives Program at $10 million for fiscal year
    1999.
        Through the Resource Conservation and Development Program (RC&D),
    NRCS provides needed assistance to rural communities. Resource
    management and rural development initiatives undertaken by local RC&D's
    help revitalize economically disadvantaged rural areas. The President's
    budget proposes funding the RC&D Program at $34.377 million, the same
    level as for fiscal year 1998. Conservation districts support
    increasing RC&D funding to $40 million in fiscal year 1999 to fulfill
    outstanding applications for new RC&D areas. New funding should be
    directed towards expansion of the current RC&D program to meet locally
    identified needs.
        The President's budget proposes enrolling 165,000 acres in the WRP
    during fiscal year 1999, to be funded through the Commodity Credit
    Corporation (CCC). Of the $127 million, roughly $11 million would be
    available for technical assistance. Conservation districts recommend
    funding the WRP at $163.597 million in 1999, which would allow for
    enrolling approximately 220,000 acres. At least $24 million of this
    amount should be available for technical assistance.
        The Environmental Quality Incentives Program (EQIP), which replaced
    most existing USDA conservation cost-share programs in 1996, is a
    broad, multi-purpose national conservation financial incentives
    program. It is premised on local leadership and a voluntary, incentive-
    based approach. Conservation districts support using the locally led
    conservation paradigm, with leadership by conservation districts, as
    the model for carrying out EQIP and all USDA natural resource
    conservation programs.
        The President's budget requests an additional $100 million per year
    ($300 million total per year) to support implementation of the recently
    unveiled Clean Water Action Plan: Restoring and Protecting America's
    Waters. This increase was also cited in the USDA CRAT report for
    outreach to socially disadvantaged producers. Conservation districts
    strongly support increasing EQIP funding to $300 million for fiscal
    year 1999. We also urge Congress to direct that, of this amount, at
    least $57 million must be used to provide adequate technical assistance
    to implement the program. Our long-range target is to increase EQIP
    funding to $500 million per year by 2004.
        The President's proposed budget seeks $1.7 billion for CRP in
    fiscal year 1999 to bring enrollment up to 34 million acres--the
    current level is 28 million acres. In order to build upon the
    environmental investment and benefits from the CRP, conservation
    districts support achieving and maintaining full enrollment of 36.4
    million acres in the CRP.
          other recommendations not included in the president's budget
    Grants to Districts
        The buying power of federal budgets has declined dramatically
    during the past ten years resulting in a decline in the number of NRCS
    employees at the field level. In addition to the decline in numbers,
    the federal work force has been redirected to focus efforts at targeted
    areas at the expense of local problems that affect national
    conservation priorities. Many conservation districts have offset this
    part of this decline by adding district employees financed with state
    and local funds. Much of the state and local funding is being diverted
    to help implement federal natural resource programs, often at the
    expense of local conservation priorities.
        To help meet these ever-increasing demands being placed on the
    conservation partnership, NACD recommends that $100 million be budgeted
    through the NRCS Conservation Operations account for direct grants to
    conservation districts. This is one of conservation districts' highest
    legislative priorities in 1998. This action would help NRCS offset some
    of the costs of carrying out federal conservation programs and enhance
    conservation districts' ability to address national conservation
    concerns and priorities at the community level. We fully expect that
    state and local governments will step in and provide matching funds
    under grants program.
    Private Grazing Lands
        The capacity of the nation's rangeland to satisfy values and
    produce commodities is threatened or, in some cases, may have been lost
    nearly 60 percent of the nation's rangeland because of one or more
    resource problems such as brush, weeds and water or wind erosion. The
    amount of rangeland in a deteriorating trend increased from 15 to 22
    percent since 1992 and nearly half of our permanent pastureland needs
    treatment to sustain or enhance resource values and production. In many
    cases, technical assistance to help landowners and land managers
    develop and implement improved grazing management is all that is needed
    to solve resource problems and improve or maintain grazing land health.
    Preventing degradation before it occurs is extremely important on
    grazing lands because, once damaged, the cost of restoring these lands
    can exceed its economic value.
        Section 386 of the 1996 Farm Bill authorized the Secretary of
    Agriculture to establish a voluntary program to provide technical,
    educational, and related assistance to owners and managers of private
    grazing land. The program, to be carried out through local conservation
    districts, will help landowners address resource problems that cannot
    be solved easily by individual efforts without technical and financial
    assistance. To help meet this need, NACD recommends that the
    Conservation of Private Grazing Lands Program be funded at $20 million
    as a new line item in the NRCS budget.
    funding for cooperative state research, education and extension service
        Several Extension programs represent critical components are
    significant in USDA's natural resource management delivery system. For
    example, the Renewable Resources Extension Act provides educational
    assistance to help private landowners manage their lands to meet
    commodity demands and needs. At the same time it provides many public
    values associated with the forests and rangelands of our nation
        Research also remains one of the keys to the continued vitality of
    agriculture and effective management of the nation's resource base.
    U.S. competitiveness in world markets is contingent an aggressive
    research and development program for agricultural conservation and
    production techniques. We also recognize that conservation,
    environmental quality and production research needs vary across the
    United States. America's conservation districts support maintaining
    strong research programs in NRCS, the Agricultural Research Service,
    the Cooperative State Research, Education and Extension Service and
    other agencies as needed.
        Attached to this statement is NACD's fiscal year 1999 Agriculture
    Appropriations Funding Resolution for Selected Programs Funded by the
    House and Senate Agriculture Appropriations Subcommittees. Conservation
    districts' fiscal year 1999 funding proposals will begin to build a
    deeper commitment to land and water stewardship in America. We have
    also cast an eye toward the future by forecasting the investment we
    will need to make five years from now to protect our resource base.
    Recognizing that currently we spend less than two percent of the
    federal budget on resource protection, we recommend doubling the
    overall funding for NRCS conservation programs by the year 2004.
        We appreciate the opportunity to share our recommendations with the
    subcommittee.
                                     ______

    Prepared Statement of Mary Carlson, President, National Association of
                       Farmers' Market Nutrition Programs
        On behalf of the 30-state membership of the NAFMNP, I am writing to
    urge your support for an appropriation of $15 million to permit
    continued expansion of the WIC Farmers' Market Nutrition Program (FMNP)
    in fiscal year 1999. We greatly appreciate the leadership you have
    provided in the past on behalf of this small but valuable program, and
    we can assure you that strong interest exists across the country for
    its further growth.
        Thirty-five states and Indian Tribal Organizations (ITO's) have met
    the challenge of the Subcommittee's endorsement of a substantially
    increased funding level for the FMNP in fiscal year 1998--a 73 percent
    increase from $6.75 million to $12 million. Collectively, FMNP
    participating states and ITO's, including five new states--Alaska,
    Arkansas, Florida, Georgia, and Mississippi--requested over $12.2
    million in federal funds for this year's program.
        However, even with the higher funding level and broadened
    participation by WIC recipients and farmers, only an estimated 15
    percent of the nation's nearly 7.5 million WIC participants and less
    than 50 percent of its farmers' markets will be able to participate in
    the FMNP in 1998. The Administration's proposed funding goal of $15
    million, we believe, will allow for a reasonable and measured expansion
    toward the goal of making the program available nationwide.
        The Administration's budget request would also shift the source of
    FMNP funding from the WIC Program account to the Commodity Assistance
    Program account. We believe this is a positive step that would provide
    fiscal security for the FMNP and allow funds to flow to state
    agriculture, health, and other FMNP agencies in a more timely fashion
    to assure proper program planning and operations. Under current
    appropriations language, funds can be made available for the FMNP only
    if USDA certifies they are ``not needed to maintain current WIC
    caseload levels.'' This has resulted in chronic uncertainty on the part
    of farmers, farmers' markets, WIC families, and state and local
    agencies regarding the FMNP's year-to-year existence. Moreover, the
    program's contingent status can delay USDA's FMNP funding decisions
    until late Spring--as occurred in 1997--making it difficult for
    participating states to effectively plan their programs and fully
    utilize their allocation requests. Because the proposed decoupling of
    WIC and FMNP funding streams would be mutually advantageous for the
    FMNP and for WIC, we ask that you support it.
        The FMNP is of critical importance to over 8,000 small farmers, who
    redeemed more than $9 million in FMNP coupons in fiscal year 1996, for
    the more than 1,200 participating farmers' markets, many in
    disadvantaged urban and rural communities, and for the nearly 1.1
    million low-income women and children participants who now have
    increased access to high quality, locally grown fresh fruits and
    vegetables. As a result of the FMNP, 88 percent of the participating
    farmers increased their sales of fresh produce and 43 percent increased
    their production. In addition, 71 percent of the WIC participants
    increased fruit and vegetable consumption due to the FMNP, with 82
    percent indicating they plan to eat more fresh produce year-round as
    well. These are surely impressive results from a small program with an
    annual federal benefit level of no more than $20 per WIC participant!
        Thank you again for your past support of the FMNP. We hope you will
    support our request to expand and secure the FMNP so that its success
    in improving maternal and child nutrition--and fostering agricultural
    and rural economic development--can be broadened again in 1999.
                                     ______

    Prepared Statement of Dr. Albert Vogt, President, National Association
             of Professional Forestry Schools and Colleges (NAPFSC)
        The National Association of Professional Forestry Schools and
    Colleges (NAPFSC) represents the 67 universities that conduct the
    Nation's research, teaching, and extension programs in forestry and
    related areas of environmental and natural resource management. We
    appreciate this opportunity to comment on the three programs
    administered by CSREES which greatly enhance the abilities of our
    member institutions to effectively address forest and natural resource
    issues facing our nation: the McIntire-Stennis Cooperative Forestry
    Research Program (McIntire-Stennis), the Renewable Resources Extension
    Act (RREA), and the National Research Initiative (NRI). All three of
    these programs have stimulated the development of vital partnerships
    involving universities, federal agencies, non-governmental
    organizations and private industry.
        NAPFSC submits the observation to the Committee that we are rapidly
    approaching a crisis situation in the nation in terms of the need for
    more university forestry research and extension.
                the case for enhanced forestry research funding
        The forests and other renewal natural resources of this country are
    primary contributors to the economic health of the nation; are
    reservoirs of biodiversity important to the well-being of our citizens;
    are significant to the maintenance of environmental quality of our
    atmosphere, water, and soil resources and provide diverse recreational
    and spiritual renewal opportunities for a growing population.
        Tremendous strains are being placed upon the nation's private
    forest lands by the combination of increasing demands for forest
    products coupled with dramatic changes in timber policies concerning
    our national forests. Because of the changes in federal forest policy,
    private forest lands in the United States are now being harvested at
    rates not seen since the beginning of the 20th century.
        Non-industrial private forest (NIPF) landowners provide a large
    array of goods and services throughout the country. Their contribution
    to market goods may actually be proportionately the largest in the
    West, where the public lands already provide great amounts of public
    recreation and amenity values. In the East, NIPF's are projected to
    increase their timber harvests almost 30 percent from the 1986 levels
    until 2010. Hardwood timber harvests on NIPF lands in the South are
    actually projected to increase more than 60 percent from 1986 to 2010.
    These spectacular increases will require large investments, higher
    prices, enhanced public educational programs--and hopefully much more
    regeneration and intensive timber management--at a scale never before
    realized on NIPF lands in the U.S.
        The country's nine million private timberland owners control nearly
    two-thirds of all timberland in the country. And it has been to the
    universities, with strong support from CSREES, that landowners
    traditionally look for new information about managing their lands. The
    combination of research conducted by the forestry schools, combined
    with the dissemination of that research through the cooperative
    extension network, has never been more essential.
        Until recently, wood and wood fiber demands have been met in
    significant part from federal lands. The changes in federal forest
    timber harvesting policy means the bulk of supply requirements has
    shifted to privately owned forest lands. To meet this challenge,
    research priorities must be adjusted to better address the needs of
    private landowners, and to specifically enhance the productivity of
    such lands through economically efficient and environmentally sound
    means. Increased fiber imports are not a viable option as the Nation
    cannot afford the trade imbalance, loss of jobs, or the importing of
    potentially serious plant, animal, and human diseases and pests. These
    challenges, however, can be met by the university community through the
    building of integrated research and extension programs assisted by
    McIntire-Stennis, RREA, and NRI.
        The non-industrial private landowners are not prepared to practice
    sustained forest management so critical to the health of our
    environment and economy. Enhanced forestry research and extension
    activities at the nation's universities are needed now! Although the
    McIntire-Stennis, RREA, NRI and Fund for Rural America programs address
    these concerns, there is need to increase funding for these programs
    within CSREES.
        NAPFSC is very concerned about the three percent reduction proposed
    in President Clinton's fiscal year 1999 budget for the McIntire-Stennis
    forestry program. That is the wrong direction in light of the important
    challenges requiring enhanced forest resource research and extension.
    While much of the President's budget calls for increases in federal
    research and development funding, agriculture and forestry research
    were targeted for decreases. We believe that reducing the McIntire-
    Stennis program to the proposed level of $19,882,000 is unwise and
    short-sighted. The National Association of State Universities and Land-
    Grant Colleges (NASULGC) has recommended a McIntire-Stennis funding
    level of $21,665,000. We also support funding at least at this level.
        For more than 25 years, McIntire-Stennis funds have been a critical
    part of University-based forestry research. McIntire-Stennis funds
    leverage significant additional state and private support and assure
    long-term forest resource research, graduate training, and outreach
    across the country. Each dollar in federal appropriations has been
    leveraged by a factor of nearly five in non-federal dollars in support
    of research programs having state, regional, and national significance.
                 importance of forestry research and extension
        Research has improved the understanding of (1) the biology of
    forest organisms; (2) the structure and function of forest ecosystems;
    (3) human-forest interactions; (4) wood as a renewable raw material;
    (5) economics, environmental policy, and business management related to
    the forest industry; and (6) international trade, competition, and
    cooperation. McIntire-Stennis programs have advanced our knowledge of
    the forest ecosystem including the basic chemical, physical, and
    biological forces that influence forest health and productivity. At the
    same time, they have expanded the marketing horizons for
    environmentally friendly and renewable wood and fiber-based products.
    Very recent work has examined the economic and ecological benefits of
    combining agricultural and forestry practices into integrated land-use
    systems termed ``agroforestry.'' Furthermore, these programs have
    significantly aided the development of new forest management systems
    for multiple-uses including timber, water, wildlife, grazing,
    recreation, and aesthetic purposes. The following two projects are
    recent examples of the benefits of McIntire-Stennis funding:
      --Agroforestry--the practice of grazing cattle, growing agronomic
            crops and growing trees on the same land can help landowners
            earn a higher return per acre from their land while seeing
            environmental benefits (such as less erosion). One Coastal
            Plain study showed returns per acre from grazing were
            approximately $9 per acre, but when trees were added to the
            land, timber profits were more than $80 per acre. To make the
            most out of alley cropping (where cattle can graze in and
            around the trees) producers need legumes and grasses that
            perform well under shade. University of Missouri scientists
            have identified appropriate species.
      --North Carolina State University's Forest Nutrition Cooperative
            discovered that present levels of pine productivity are more
            than 50 percent below the biologic and economic potential in
            the southeastern United States, that poor nutrition and not
            water is the principal factor that limits pine production,
            defined nutrient requirements for a desired level of
            production, and developed silvicultural systems that include
            fertilization. Thanks to these research results, fertilization
            of loblolly pine plantations has increased from 100,000 acres
            in 1989 to over a million acres in 1997. The increased wood
            production due to fertilization in 1997 alone will exceed four
            million cords over the next eight years.
        The Renewable Resources Extension Act (RREA) provides funds for
    technology transfer and technical assistance to ensure that the
    benefits of forestry research are made available to private timberland
    owners and forest industries through CSREES. NASULGC has recommended
    funding RREA at a level of $4 million for fiscal year 1999. President
    Clinton recommended a funding level of $3,192,000 in his fiscal year
    1999 budget. We urge the Committee to support the NASULGC request.
        RREA funds have created programs and provided expertise that
    benefit private timberland owners and the timber industry throughout
    the country. For example:
      --In Arkansas, over $5 million has been estimated to have been earned
            or saved by timberland owners and the forest products industry
            because of RREA educational programs.
      --In Virginia, 98 percent of the 341 landowners who participated in
            ecosystem management field days indicated that they would use
            ecosystem management practices to improve their own land. Those
            landowners collectively own 68,000 acres.
        Similar stories can be found in all 50 states. It is vital that
    Congress continue proper funding for this important program for
    distributing the knowledge gained through our research institutions to
    the private landowners.
        Lastly, we urge your support of the Competitive Grants Program
    administered under the National Research Initiative of the USDA. Peer
    competition for grants is at the heart of the university system and
    this program has become very important to natural resource scientists
    working within NAPFSC institutions. Research funds from NRI enable
    NAPFSC institutions to build upon the base provided by McIntire-
    Stennis. President Clinton's budget calls for a funding level of $130
    million for fiscal year 1999, a level also recommended by NASULGC, and
    we urge your Subcommittee to fund the program at the requested level.
        The House and Senate Agriculture Committees recently completed work
    on the reauthorization of the Research Title of the Farm Bill. Both
    committees called for increased programs and activities for forestry
    research to address the increasing challenges facing the non-industrial
    private forests. The Senate bill encourages the Forest Service to
    allocate a greater share of its future research budget for
    collaborative research conducted by the land-grant universities, and
    urges the development of new cooperative programs between CSREES, the
    Forest Service and the land-grant universities. The House bill also
    directs the USDA to focus more attention and resources on efforts to
    increase the productivity of non-industrial private forest lands.
        We are delighted that the authorizing committees have recognized
    the importance of expanding forestry research. However, the current and
    proposed levels of McIntire-Stennis and RREA funding are well below
    their authorized levels of one-half the Forest Service research budget
    (McIntire-Stennis) and $15 million (RREA) respectively. Congressional
    action to increase these two important sources of federal support to
    universities toward their authorized levels would enable universities
    to address the expanded research and educational needs for privately
    owned forest lands.
                                 who benefits?
        Forestry research provides many direct and indirect benefits to
    society by increasing forest productivity, improving forest health, and
    providing diverse employment opportunities--all while enhancing
    environmental quality and improving environmental protection. Forests
    contribute substantially to the economic well-being of the United
    States. Forestry related employment constitutes a large sector of our
    work force, including manufacturing, research, and recreation. Forest
    product companies alone employed 1,580,000 people in 1988, representing
    8.5 percent of the Nation's manufacturing work force. Many of these
    benefits accrue in rural areas of the United States where economic and
    social viability remain a widespread concern. Private timber landowners
    depend on the generation of critical forestry research information and
    its accessibility through extension to support and improve the wide
    range of public and private benefits arising from their investments.
    Society as a whole benefits from the improved recreational
    opportunities and amenity values provided by healthy forests. By
    increasing our understanding of forest ecosystems, the forestry
    research-extension partnership also improves our ability to protect the
    environmental amenities associated with forest lands, including the
    protection of biodiversity and the improvement of water and air
    quality.
        The past, present, and future success of forestry research and
    extension activities arising from the NAPFSC member institutions
    results from a unique partnership involving federal, state, and private
    cooperators. Much of the funding of forestry and forest products
    research comes from the private industrial sector. However, such
    funding is commonly allocated for research within the companies
    themselves and is typically focused on near-product development where
    the benefits of investments are readily captured. Federal agencies have
    concentrated on large-scale national issues while state funding has
    emphasized applied problems and state-specific opportunities.
    University research in contrast, with the assistance of federal, state
    and private support, has been able to address a broad array of applied
    problems related to technology development and fundamental biophysical
    and socioeconomic issues and problems that cross ownership, state,
    region, and national boundaries. Schools and colleges with programs in
    forestry, forest products, and natural resources have the expertise in-
    house to address a broad range of problems and opportunities related to
    the forest resource and its utilization.
        We encourage continued federal participation in this partnership
    with NAPFSC institutions through McIntire-Stennis, RREA, and NRI. We
    respectfully urge you to fund the McIntire-Stennis Cooperative Forestry
    Research Program, the Renewable Resources Extension Act, and the
    National Research Initiative at the levels requested by NASULGC for
    fiscal year 1999 and respectfully suggest increasing McIntire-Stennis
    and RREA to their maximum authorized funding levels.
                                     ______

       Prepared Statement of the National Association of State Foresters
        Thank you for the opportunity to present this testimony regarding
    the Agriculture Appropriations bill. We thank the Subcommittee for
    their support of our priorities in recent years, and we will need your
    help this year to correct yet another serious mistake on the part of
    the Administration in requesting the elimination of the Forestry
    Incentives Program. We are also supporting several other programs which
    are designed to ensure future timber supplies and improve the
    management of the Nation's non-Federal Forests.
        As you know, these forests make up over 70 percent of the country's
    forested land base, and non-industrial private forests account for well
    over half of the Nation's timber supply. As you are also no doubt
    aware, the level of harvest from Federal lands has dropped
    precipitously in recent years, while demand for wood fiber has not.
    Several programs within this bill are critical to ensuring that the
    shift of demand to these non-industrial private lands doesn't impair
    their ability to produce forest resources sustainably over the long-
    term.
        Most critically, programs such as the Forestry Incentives Program
    (FIP) are needed more now than ever. With its clear focus on
    reforestation, it is capable of helping keep large acreages of land in
    continuous forest cover, ensuring long-term timber supplies while
    protecting soil productivity and enhancing water quality. We strongly
    oppose the Administration's request to eliminate the Forestry
    Incentives Program and reject their rationale that the program is not
    compatible with the Natural Resources Conservation Service's strategic
    plan. Keeping lands forested, and assisting landowners in overcoming
    these serious obstacles to reforestation, most certainly will help NRCS
    meet its objectives of protecting watersheds and soils. We also note
    that Congress specifically reauthorized FIP during the 1996 Farm Bill,
    and the NRCS has a statutory responsibility to carry out the program.
        We also note a great deal of concern amongst State Foresters over
    the NRCS administration of the FIP program. While the State Forestry
    delivery mechanism remains fundamentally sound, we are concerned that
    NRCS is not committed to making the program a success. We would
    encourage the USDA to re-evaluate the transfer of this program from the
    Farm Services Agency to NRCS, and to consider either returning the
    program to the FSA or transferring it to the Forest Service.
        In fiscal year 1997, FIP helped plant trees on over 141,000 acres,
    and performed timber stand improvement on more than 22,000 acres. The
    program has been under-funded at around $6 million for the past several
    fiscal years. NASF opposes the Administration's request to eliminate
    the program and urges you to fund it at $10 million, its historic
    level.
        We are happy to see that the Administration has requested renewed
    funding for the Renewable Resources Extension Act program (RREA), and
    we applaud the action of this subcommittee in restoring that program in
    spite of the Administration's request to eliminate it last year. NASF
    strongly supports this program, which we believe can help reach
    landowners, loggers, and foresters with sound advice that can help
    improve the productivity and management of the Nation's non-Federal
    Forests.
        A particularly important function of this program is funding the
    Logger Education to Advance Professionalism (LEAP) program. While
    professional resource managers are involved in only a relatively small
    percentage of timber sales, loggers are involved in every timber sale,
    and it is critical that we reach as many of them as possible to ensure
    that these sales are conducted in an environmentally sensitive manner.
        NASF is pleased that the Administration has included funding for
    this program in their fiscal year 1999 request. However, we urge the
    Subcommittee to fund the program at its full authorization level of $7
    million, above the continuing level suggested by the Administration.
        NASF is also pleased to offer support for the Resource Conservation
    and Development program at slightly higher than the continuing level
    proposed by the Administration. This program has enormous potential to
    help develop sustainable business opportunities that can take advantage
    of underutilized forest resources.
        NASF would also like to submit the following recommendations for
    forestry-related research programs that are funded through this
    appropriations bill:
        Cooperative Forestry (McIntire-Stennis) Research.--This program
    supports forestry and wood fiber related research conducted by the
    Nation's public universities. University-based research is an important
    and growing part of the collaborative research effort involving
    Federal, State, and industry scientists. It is critical to the creation
    of new technologies that will increase the efficiency and productivity
    of forest management on all forest ownerships. McIntire-Stennis
    Research funds are granted directly to public colleges and universities
    on a matching basis. This program has provided an important foundation
    of funding for research that has not been supported through other
    means. NASF recommends increasing McIntire-Stennis Research to $25
    million, to reflect the high priority we place on forest research that
    will help us meet fiber demands in a sustainable fashion.
        National Research Initiative.--This competitive grants program
    funds research on key problems of national and regional importance in
    biological and environmental sciences. The NRI awards grants on a
    matching basis to university researchers using modern biological,
    environmental, and engineering sciences to address critical problems in
    agriculture and forestry. NASF strongly supports at least 20 percent of
    the NRI funds being dedicated to natural and renewable resources
    research.
        Figures for NASF's Budget Recommendations are listed below. Thank
    you for considering our requests.

    ----------------------------------------------------------------------------------------------------------------
                                                                                       Fiscal year--
                                                                     -----------------------------------------------
                                                                       1998 enacted     1999 admin.      1999 NASF
    ----------------------------------------------------------------------------------------------------------------
    NRCS Conservation Programs:
        Forestry incentives.........................................           6.000  ..............          10.000
        RC&D Program................................................          34.377          34.377          35.000
    CSREES Forestry Related Programs:
        RREA........................................................           3.400           3.400           7.000
        Mc-Stennis Coop. Res........................................          21.000          20.000          25.000
        NRI.........................................................         105.700         130.000         115.000
    ----------------------------------------------------------------------------------------------------------------

                                     ______

         Prepared Statement of Charles G. Scalet, President, National
    Association of University Fisheries and Wildlife Programs, South Dakota
                                State University
        The National Association of University Fisheries and Wildlife
    Programs (NAUFWP) submits this statement on the proposed fiscal year
    1999 budget for the Cooperative State Research, Education, and
    Extension Service (CSREES), U.S. Department of Agriculture.
        Members of NAUFWP include 53 Universities. We seek to enhance
    public understanding of the needs for improving natural resource
    management and to advance the science and practice of sustainable uses
    and management of the resource base. Our efforts focus on cooperative
    work with partners and customers to advance research, education, and
    extension to benefit people and communities throughout the country.
    This service and outreach are among the most time-tested, successful,
    community-based conservation efforts in the U.S.
        These proven research, educational, and extension programs of the
    CSREES and its Land Grant University partners initiate relevant,
    positive changes in attitudes, and stimulate constructive actions to
    implement new technologies and sound approaches and practices by
    private landowners, resource managers, community decision-makers, and
    other members of the public. Accumulated experiences show that
    investments of funds and time yield significant benefits to individuals
    and to the states and nation by building and sustaining a more viable
    and productive natural resource base and a competitive and profitable
    agriculture industry.
        The pressing challenge is to have the CSREES/Land Grant University
    System, with its grass roots credibility and delivery system, reach
    more of the approximately 10 million private landowners and managers
    who control more than two-thirds of the U.S. lands, or approximately
    1.35 billion acres. Regrettably, the proposed fiscal year 1999 budget
    for CSREES is far less than adequate to help private landowners and
    managers move forward in achieving sustainable uses of the resource
    base. More emphasis on proper uses of natural resources is needed to
    achieve a more sustainable society, thereby avoiding costly restoration
    efforts.
        In view of these shortcomings, NAUFWP strongly recommends that the
    following five adjustments be made in the proposed fiscal year 1999
    budget.
        1. That the Renewable Resources Extension Act (RREA) be funded at a
    minimum of $9.5 million in fiscal year 1999. This level of funding (1)
    is less than the $15 million authorized level, and (2) is essential to
    enable the Cooperative Extension Service system to accomplish the goals
    and objectives set forth in the mid-1990's Report To Congress. Needs
    for RREA educational programs continue to mount as land holdings become
    more fragmented, more landowners need information, and concerns of
    society grow for managing natural resources on a sound basis to enhance
    water quality, fisheries, wildlife, and human health, while sustaining
    the productive capacity of the resource base. Among the resource
    management needs is outreach of information to ensure continuation of
    the flow of goods and services from the 490 million acres of nonfederal
    forests owned by millions of nonindustrial private forestland owners.
    Responses to these accumulating needs are supported by state and local
    partners who contribute an average of $4.00 to each RREA $1.00.
        Making $9.5 million available would permit the Cooperative
    Extension Service to expand its outreach services to assist more than
    500,000 private owners to improve their decisions and management on an
    additional 35 million acres, while increasing productivity and revenue
    by an estimated $200 million.
        2. That Smith-Lever 3(b)&(c) base program funds be increased to
    $280,950,770 (+9 percent), with at least one-third of this increase
    targeted to Extension's Natural Resource and Environmental Management
    (NREM) programs. This adjustment in the proposed fiscal year 1999
    budget is needed to provide more adequate ``block grant'' funds for
    Land Grant Universities to extend essential educational outreach based
    on assessments of local needs. An increase in these funds is required
    to develop the critical level of NREM staff services at state and local
    levels to focus and leverage limited funds to address critical natural
    resources situations that involve farmers and small landowners in both
    rural and urban communities nationwide.
        Among pressing needs for Extension's attention and services are a
    host of natural resource management challenges and public issues,
    including forest health, wetlands maintenance and restoration, water
    quality, endangered species, and people/wildlife interactions. More
    adequate Extension responses to these topics and others have been
    called for in the 1990 FACT Act, as well as in various Farm Acts.
        Continued close cooperation among the State Cooperative Extension
    Service, State Fish and Wildlife Agencies, and other appropriate state
    and federal agencies, conservation organizations, and local people is
    critical to build responses to pressing needs in managing natural
    resources on a sustainable basis. One cooperative effort, the Extension
    4-H Youth Natural Resources program and its many projects, continues to
    attract participants, with more than 1,350,000 young people from both
    urban and rural communities presently enrolled. Additional Smith-Lever
    funds targeted appropriately would enable CSREES to respond to more of
    its goals and responsibilities, especially those in the NREM National
    Strategic Plan.
        3. That $500,000 be restored to the fiscal year 1999 budget for
    Rangeland Research Grants. Elimination of the only federal competitive
    grants program for rangelands, as proposed in the fiscal year 1999
    budget, has serious adverse implications for watersheds, water quality,
    fisheries, wildlife, and other natural resources. Restoration of funds,
    as recommended, is necessary to focus some needed practical attention
    on the more than half of the U.S. land area in rangeland. Modest
    appropriations for Rangeland Research Grants prior to fiscal year 1998
    supported some of the most important rangeland studies and services
    carried out in the past decade. Many additional situations requiring
    evaluation and technical services deserve immediate attention.
        4. That at least 25 percent of the total increase in funds for Pest
    Management be directed to technical services and educational outreach
    programs to prevent damages and control vertebrates, such as deer and
    other animals, in urban and rural communities, and to address invasive
    exotic species and noxious weed problems on rangelands and elsewhere.
    This focus on vertebrates and invasive species in pest situations has
    been identified by private landowners, including agricultural
    producers. Merely increasing funds for pest management would provide no
    assurance that the most pressing problems are addressed. Targeting a
    percentage of the Pest Management funds for vertebrate and invasive
    species would help ensure that research and educational programs
    advance the knowledge and capability of landowners and managers to
    prevent and reduce losses in situations involving these species. These
    programs require strengthening to restore, manage, and sustain the
    biological integrity of the U.S. natural resource base upon which our
    agricultural and natural resource economies depend.
        5. That the Hatch and McIntire-Stennis funds be restored to at
    least fiscal year 1998 levels by adding $15,677,000 to the proposed
    fiscal year 1999 budget. Both of these research programs, conducted
    through Land Grant University partners and other educational
    institutions, are essential to address natural resource situations and
    issues important in achieving sustainability in agriculture and other
    uses of the resource base.
        We are pleased that the Administration has proposed a $9.5 million
    increase for natural resources and the environment studies through the
    National Research Initiative (NRI) Competitive Grants. However, what is
    proposed to be done under this ``Area of Special Emphasis'' does not
    address critical natural resource research needs of deep concern to the
    natural resource community and the public. In view of this mismatch,
    and if necessary, redirect funds from the total increase for NRI to
    fund the Hatch and McIntire-Stennis programs at fiscal year 1998
    levels.
                                    summary
        Based on considerations outlined above and to strengthen community-
    based conservation and management of natural resources, the National
    Association of University Fisheries and Wildlife Programs recommends
    the following for the CSREES fiscal year 1999 budget.
        1. Fund the Renewable Resources Extension Act at least at $9.5
    million;
        2. Increase funding for the Smith-Lever 3(b) and (c) base program
    by 9 percent ($23,197,770);
        3. Restore $500,000 for Rangeland Research Grants;
        4. Designate at least 25 percent of the total increase in funds for
    Pest Management for prevention and control of damages by vertebrates
    and invasive species; and
        5. Restore Hatch and McIntire-Stennis funds at least to fiscal year
    1998 levels.
        These funding levels would help in responding to current public
    needs and legal responsibilities, and assist in carrying out programs
    more effectively. NAUFWP respectfully requests that the Appropriations
    Committee approve these adjusted figures.
                                     ______

     Prepared Statements of the Association of American Veterinary Medical
     Colleges and the National Association of State Universities and Land
                                 Grant Colleges
        This testimony represents the concerns of both the Association of
    American Veterinary Medical Colleges (AAVMC) and the NASULGC Board on
    Veterinary Medicine.
        The AAVMC coordinates the affairs of the 27 U.S. veterinary medical
    colleges, the four Canadian colleges of veterinary medicine,
    departments of veterinary science and comparative medicine and the
    animal medical centers. In addition, the Association fosters the
    membership's teaching, research and service missions both nationally
    and internationally. The principal goal of the AAVMC is improving the
    quality of life for both humans and animals. The AAVMC realizes this
    goal by addressing the needs of both consumers and the producers of
    food and fiber, as well as the needs of all animal owners.
        The Board on Veterinary Medicine is a component of the Commission
    on Food, Agriculture, and Renewable Resources within the National
    Association of State Universities and Land Grant Colleges. Membership
    on the Board on Veterinary Medicine is comprised of colleges of
    veterinary medicine located at land-grant institutions. This includes
    25 of the 27 United States Colleges of Veterinary Medicine. Heads of
    departments of veterinary science, comparative medicine, or
    pathobiology in NASULGC member institutions also are members of the
    Board on Veterinary Medicine. The purpose of this board is to address
    the concerns of animal health and disease, animal welfare, public
    health and regulatory medicine, zoonotic diseases, environmental
    issues, public policy related to the use of animals and products for
    the benefit of animals, public policy related to funding of higher
    education, and other issues as identified by any of veterinary
    medicine's diverse constituencies.
        Within the AAVMC and the Board on Veterinary Medicine, we believe
    that these comments will highlight and support priorities set forth by
    the advisory board, particularly those dealing with environmental
    stewardship, emerging animal issues, national agricultural genome
    research, food safety research, and education and outreach. We also
    believe that many of the implied goals of the priorities can be met
    through a number of initiatives that will be discussed later.
        Food safety is an issue of paramount importance, not because it is
    currently a popular political topic, but because it affects each and
    every person in this room and in this nation. In terms of food safety,
    everyone is a stakeholder, the grower, the producer, the packer and
    finally the consumer. While in many cases food safety concerns are
    traced to improper handling by the consumer, we can and should do more
    to assist farmers and ranchers produce food that minimizes food borne
    illness at the consumer level. We need to develop a body of knowledge
    from applied on-farm research that will prepare producers, extension
    specialists, and veterinarians to be better ``applied practitioners''
    of food safety for on-farm interventions. These on-farm interventions
    are important to all stakeholders and especially to veterinarians,
    extension specialists, and the producer themselves.
        Another major theme that should be considered is the development of
    integrated solutions to problems of air and water quality. Solutions
    can come from multidisciplinary research in Veterinary Medicine, Animal
    Science, and Environmental Science. The integration of these fields
    will allow for many types of possible breakthroughs that will benefit
    all agricultural stakeholders, both producers and consumers. This type
    of research program should include species specific issues allowing a
    focusing on the uniqueness of production and pathogens to that
    individual species.
        At this time we will briefly mention four proposals by the AAVMC
    and the BOVM that will address the priorities of major importance to
    us.
        First, a major new programmatic thrust is needed in animal health
    and disease, under section 1433 contained within Title VIII of the
    Federal Agriculture Improvement and Reform Act of 1996. This new
    programmatic effort, will be to insure the production of healthy
    animals for a healthy food supply. We are calling this initiative
    animal health to healthy humans. Due to the increasing realization that
    biological systems are ultimately linked in some form or fashion, it is
    timely to approach problems in a multi-disciplinary manner. The causes
    of and the methods to control food borne illness have become
    perspicuous examples of this fact. The agricultural industry is going
    to increasingly be asked to step up and shoulder responsibility for the
    food safety aspects of public health. Therefore a national commitment
    by Congress, funded through the Department of Agriculture, dedicated to
    the continual goal of identification, control, and elimination of food
    borne illness is a moral if not an economic must for those involved in
    production agriculture. The establishment of a new animal health to
    healthy humans initiative that is continuously funded under animal
    health and disease research base funding is indicated. The described
    new initiative should be established with the addition of five million
    in new funding awarded to Section 1433, which is the continuing Animal
    Health and Disease Research Program, with yearly increases over a three
    year period up to a sustained 15 million dollar level.
        Base funding that supports ongoing research efforts into the
    ecosystem of infectious agents, such as Salmonella and E. coli O157:H7,
    that pose a serious hazard to human health via contamination of food
    stocks, is needed. In addition, improvement of on-farm and
    environmental knowledge of these known pathogens and understanding the
    methodologies to control these food borne pathogens will become
    increasingly important to protect U.S. export markets. The increase
    funding initiative for Animal Health and Disease will facilitate the
    gaining of an improved understanding of microbial ecology as it relates
    to the contamination of food supplies. With the information derived
    from this newly focused animal health to healthy human research effort,
    a foundation of knowledge will be in place to support new training
    programs, both at the professional and graduate levels, so that
    adequate numbers of people with backgrounds working with HACCP systems,
    ISO-9000 standards, and Sanitary/Phytosanitary Standards. The
    fundamental knowledge as well as the programs creating experts in food
    safety intervention methodologies are in high demand and sorely needed
    for U.S. agriculture. The creation of a new animal health initiative in
    the form of ongoing national core funding is warranted considering the
    global marketplace.
        Our second proposal is to develop on-farm pre-harvest food safety
    systems for each of the five major animal product commodities,
    including eggs, poultry, dairy, beef, and swine. We recommend that this
    initiative be funded by a $25 million-dollar increase in the National
    Research Initiative (NRI), on a sustained basis, split between the two
    mission areas of animal systems and natural resources and the
    environment. This new emphasis in the NRI should dedicate at least $2
    million for work in each described animal commodity area. Collaborative
    studies need to be carried out with a variety of experts and
    disciplines studying on-farm systems to develop strategies for
    understanding the ecology of pathogens and avoiding contamination of
    animals and animal products before they leave the farm gate.
    Information gained in the study of microbial ecology will assist in the
    development of HACCP procedures or other on farm intervention
    procedures that result in risk identification and assessment, and risk
    management of pathogens in each commodity area. This type of
    collaborative research that encompasses multi-disciplinary approaches
    to problem solving is increasingly necessary. It is important to
    realize the problem solving capabilities that can be derived from
    integrative biology approaches. Therefore, funds are needed to support
    ecosystem studies by veterinarians, animal scientists, and
    environmental scientists. Development of sustainable systems for
    intensive food animal production that result in minimal impact on the
    quality of air and water and result in a safe food supply are the
    goals. We are concerned that the draft research priorities do not
    adequately address the need for on-farm, pre-harvest research and
    application of knowledge at this stage of animal production
        Thirdly, we recommend that we protect our domestic food supply and
    prevent non-tariff trade barriers to our export markets by using
    knowledge generated by research on foreign animal diseases and new and
    reemerging diseases. Funds required for this type of research could
    flow intramurally as well as extramurally through ARS and CSREES.
    Considering the global economy and increasing recognition that foreign
    animal diseases may not be so foreign, it is paramount that we ready
    ourselves for challenges that may threaten entire domestic animal
    agricultural sectors, whether they be a real epidemiological problem or
    just politically based. On the export side, the General Accounting
    Office (GAO) has recently cited a USDA survey estimating up to $5
    billion in legitimate US agricultural exports have been prohibited
    because of non-tariff trade barriers.\1\ One of the best ways to
    prepare ourselves for issues of a sanitary or phytosanitary nature,
    whether they be import or export, is via knowledge. This nation's
    research mission can and should advance this knowledge. An increased
    awareness represented by specific funding of research into foreign
    animal disease, as well as those diseases that qualify as new and
    reemerging, is fundamental in order to protect markets and maintain a
    favorable balance of trade for this nation's agriculture. Our medical
    colleagues that work only on one species, the physicians, have
    recognized for years there is no such thing as exotic or foreign
    disease in human medicine. All human ailments fall on to a single list
    with various levels of concern attached to them because anyone of those
    ailments can end up in the middle of this country with one airplane
    ride. This is becoming the case for our animal agriculturists.
    Remember, the days of our animal agriculture isolation are quickly
    disappearing. Therefore research funding directed toward understanding
    and preparation for new and emerging animal disease threats is not only
    warranted, it is a proper use of public funds and should be considered
    a form of national defense.
    ---------------------------------------------------------------------------
        \1\ GAO Report/NSIAD-98-32, Agricultural Exports, January 1998. pp.
    9.
    ---------------------------------------------------------------------------
        Proposal number four is a recommendation to determine the food
    safety impact of various animal production management strategies so
    that sustainable practices with the lowest possible risk to consumers
    will be widely used. The Fund for Rural America would be a logical
    avenue of funding for this type of applied learning research. Research
    is needed that fairly evaluates various production techniques for
    effects on human health, such as animal feeding of low level
    antimicrobial agents and the development of antimicrobial resistance.
    Furthermore, research that may elucidate the need for cultural and
    management modifications to traditional animal production systems will
    potentially be more widely accepted if publicly funded on a national
    level. We include under this proposal those genomic studies that would
    enable rapid identification of microbes through molecular
    fingerprinting. This is an example of collaborative efforts at the
    applied level. Development of molecular fingerprinting strategies for
    microbe identification would be an essential element to management
    systems for livestock, and natural resources and the environment. This
    type of knowledge is paramount if pathogenic organisms, including
    Salmonella and E. coli O157:H7, are to be controlled or even eliminated
    in the human food supply.
        In conclusion, we would like to thank the Subcommittee for giving
    the AAVMC and the BOVM this opportunity to discuss stakeholder issues
    in this forum. We hope that our comments will be helpful to you in
    prioritizing research initiatives within the USDA.
                                     ______

    Prepared Statement of Dr. James H. Mortensen, Associate Dean, Resident
     Instruction, Pennsylvania State University, on behalf of the Academic
              Programs Committee on Organization and Policy (ACOP)
        Mr. Chairman, members and staff of the subcommittee, I appreciate
    the opportunity to address the important issue of science education in
    the United States and the 1999 budget for USDA. Few issues are of more
    importance to the well being of our country and the future of our food
    and agriculture system.
        Over the last several years, three White House reports and three
    presidential administrations have called for more emphasis by federal
    agencies on undergraduate education and K-through-twelve science
    education. In 1992, the Federal Coordinating Council for Science,
    Engineering, and Technology (FCCSET) recommended that federal agencies
    should examine the impact of federal research support on university
    undergraduate and graduate education and identify strategies to ensure
    against unintentional degradation of the educational mission and
    excellence of the research-intensive universities. In the same year,
    the President's Council of Advisors on Science and Technology (PCAST)
    recommended that federal agencies should ensure that their programs
    encourage universities to reemphasize education rather than discourage
    them. President Clinton called for increased emphasis on education at
    all levels in his 1997 State of the Union message and placed even
    greater emphasis on education in his 1998 State of the Union address.
        Federal agency involvement with higher education is especially
    critical to American agriculture. The great size of the American food
    and agricultural system and its very favorable competitive position in
    the world economy is due in large measure to our ability to substitute
    scientific knowledge for natural resources and labor. Theodore Schultz,
    using agriculture as his model, won the Nobel Prize in economics for
    demonstrating that the return on human capital was much higher than the
    return on physical capital.
        The Board on Agriculture Budget Committee of the National
    Association of State Universities and Land-Grant Colleges carefully
    constructed a list of priorities for funding of USDA programs in
    research, education and extension. Preeminent again in this list is the
    Higher Education Challenge Grants Program administered by the Science
    and Education Resources Development unit of the Cooperative State
    Research, Education, and Extension Service.
      --This program is a matching program, generating dollar-for-dollar
            non-federal funds, thereby doubling the federal investment.
      --It is a highly competitive program, assuring only the most
            appropriate, highest quality projects will receive funding.
      --It supports innovative and model projects that can and are
            transferred to other campuses throughout the system.
      --It promotes partnerships among universities and colleges as well as
            with private industry.
      --It promotes faculty development in order to be better able to serve
            student educational needs in the biological and social science
            area.
      --The program allows us to enrich curricula to meet needs of
            potential scientists,technicians, and future informed non-
            science citizens.
        A multitude of outstanding examples of successful Challenge Grants
    can be cited, however, noting but two illustrates the innovative nature
    and important role these grants play in our agriculture and natural
    resource system.
        New Mexico State University.--Improving Undergraduate Science
    Education in Horticulture and Agriculture Education.
        Iowa State University.--Web-Based Education: Creating Authentic
    Learning Environments in Agriculture.
        Present funding for this Higher Education Challenge Grants Program
    is $4.35 million. The Academic Programs Section and the Board on
    Agriculture Budget Committee of NASULGC recommend funding for fiscal
    year 1999 of $7.0 million This increase will allow the agency to award
    more and larger grants which will encourage cooperative grant proposals
    from participating schools. The percentage of submitted proposals
    funded in the life of this program is about 20 percent. This year, the
    number of proposals submitted has increased from 117 to 171, indicating
    the tremendous need for the increased funding.
        The Challenge Grants Program is the cornerstone of the higher
    education effort of the USDA. This program complements and enhances the
    successful efforts of the 1890 Capacity Building Program and the new
    programs for the 1994 land-grant institutions.
        The very successful Institution Capacity Building Grants Program
    for 1890 Institutions strengthens the linkages among historically
    minority institutions and other colleges and universities, the U. S.
    Department of Agriculture, and private industry. This program is
    presently funded at $9.2 million. The Academic Programs Section and the
    Board on Agriculture Budget Committee recommended fiscal year 1999
    funding at $10 million. Building and enhancing the capacity of the 1890
    institutions to educate undergraduates in agriculture and natural
    resources provides a sound base from which these institutions can
    enrich their programs through the Higher Education Challenge Grants
    Program. Similarly, the 1994 land-grant institutions are building and
    enlarging their capacity to educate Native American students in
    agriculture and natural resources, primarily through the 1994 Education
    Equity Grants Program and the interest from the Native American
    Endowment Fund. In addition, the 1994 land-grant institutions have
    authorization for a $1.7 million Capacity Building Grants Program to
    further develop their educational capacity and encourage cooperation
    with 1862 and 1890 institutions. These programs, aimed at substantially
    improving educational efforts of the 1994 institutions, many of which
    are only 20 years old and all with a scarce resource base, complement
    perfectly the Higher Education Challenge Grants Program. The Higher
    Education Challenge Grants build upon the educational foundation
    provided by the 1994 Education Equity Program, Endowment, and Capacity
    Building Programs. The Academic Programs Section and the Board on
    Agriculture 1998 Budget Committee recommends full funding for all of
    these necessary programs.
        The Hispanic Education Partnership Grants Program is a highly
    competitive program that helps bring educational opportunity and
    innovation to institutions and is heartily endorsed by the Academic
    Programs Section. Projects such as that funded at Miami Dade Community
    College to create a Food and Beverage Export curriculum in conjunction
    with the Caribbean Basin Agriculture Trade Association, the World Trade
    Center, the Miami Free Zone and other partners is an example of the
    liaisons created to serve our students. The partnership between Rancho
    Santiago College, California Polytechnic State University, and the
    United Agribusiness League to promote diversity in Food Systems
    Education is also an example of public/private cooperation to better
    serve students in agriculture. The Academic Programs Section and the
    Board on Agriculture Budget Committee recommends funding at $2.5
    million.
        Another cornerstone of this educational effort is the Multicultural
    Scholars Program. This program allows institutions to encourage a
    variety of educationally outstanding minority students to enter the
    field of agriculture and natural resources. Again, it further extends
    the cooperation between 1862, 1890, and 1994 land-grant institutions.
    Presently, the program is funded at $1 million, with funds carried over
    to allow for a $2 million program every other year. We recommend
    continued funding for this important program.
        The Graduate Training Fellowships is the only federal program
    targeted specifically to the recruitment and education of pre-doctoral
    students for critical food and agricultural science positions in areas
    identified as having a shortage of expertise. The Academic Programs
    Section and the Board on Agriculture Budget Committee recommend funding
    at $4 million.
        The above-mentioned programs have been extensively reviewed by the
    USDA-land-grant partnership members and have received a high priority
    ranking by both the Academic Programs Section and the Board on
    Agriculture of the National Association of State Universities and Land-
    Grant Colleges.
        We appreciate the opportunity to submit this testimony and
    encourage your positive response to these prioritized requests.
                                     ______

    Prepared Statement of Dr. James J. Zuiches, Chair, National Association
                 of State Universities and Land Grant Colleges
        Mr. Chairman, I am James J. Zuiches, Dean of the College of
    Agriculture and Home Economics at Washington State University, and
    Chair of the National Association of State Universities and Land-Grant
    Colleges' fiscal year 1999 Budget Committee. I represent the 75
    universities that work in close cooperation and partnership with the
    USDA Cooperative State Research, Education, and Extension Service.
    These universities comprise the State Agricultural Experiment Stations,
    Cooperative Extension, and Academic Programs of the land-grant
    universities, representing the 1862, 1890, Tribal Colleges, and
    Hispanic-serving institutions. We employ over 24,000 professional staff
    who directly affect over 40 million Americans annually through our
    Cooperative Extension Service, educate more than 100,000 students in
    colleges of agriculture and life sciences, and conduct research
    projects central to the Nation's interests in food, agriculture,
    natural resources, and the environment.
        My colleagues and I appreciate the support that the land-grant
    university system has received from this Subcommittee in the past; and
    I expect that the continued investment in agricultural research,
    extension, and education programs will continue to benefit both farmers
    and consumers.
        Our programs are designed, in cooperation with USDA and the
    constituencies who support our programs from the state, county, and
    private sector.
        Our goal is to maintain a strong American agriculture. Through
    research and education, we support the U.S. food, fiber, and
    environmental system.
        Unfortunately, the research and development funding for agriculture
    has eroded in the last decade. The funding for Agricultural Research
    and Extension programs, the lifeblood of our food supply system has
    shrunk by 8 percent in constant dollars. The President's proposal for
    USDA for fiscal year 1999 continues this deterioration of funding for
    agricultural research and extension. Comparatively, the research and
    development for space exploration, the environment, basic science
    research, and health research has increased in constant dollars from 23
    to 58 percent over the last ten years.
        NASULGC is requesting an 8 percent overall increase in support of
    research and education for the food system.
           base funds--formula funds: the core support of the system
        Federal funds, appropriated as Hatch, McIntire-Stennis, Animal
    Health, Smith-Lever (3b and c), Evans-Allen (1890) and 1890 Colleges
    and Tuskegee Extension are critical base funding of the partnership.
    These funds leverage state, county, and grant funds, and support the
    faculty and staff to address urgent problems facing agriculture and
    consumers.
        NASULGC is specifically requesting a 5.7 percent increase in base
    funds to invest in long-term food security, global competitiveness, and
    environmental quality. Our request contrasts sharply with the
    President's budget request for fiscal year 1999. Unfortunately, the
    President's request proposed reductions in Hatch, Smith-Lever, and
    McIntire-Stennis, and no increases in other areas. These base funds
    have eroded by 16 percent in the last decade. Secretary Glickman's
    recent analysis confirms this erosion. Yet, these are the funds that
    leverage over $4.00 of state, county, and private sector money for
    every dollar of federal funds. Without this critical funding to conduct
    research on everything from pest management to controlled atmosphere
    storage, we are putting the world's most abundant and safe food supply
    at risk to new diseases, new pests, and less efficient storage and
    handling techniques. We are also putting at risk our competitiveness in
    international markets.
        The investment in agricultural research and extension through these
    mechanisms, has resulted in the cheapest and safest food supply on the
    planet. When compared with our discretionary income, Americans spend
    only 11 percent of our disposable income on food. This is the result of
    research and extension for a food system which enables the consumer
    dollar and the welfare families' food stamps to purchase inexpensive,
    safe, and nutritious food. This is a food system that creates jobs,
    competes worldwide and conserves its natural resource base.
             accomplishments of agricultural research and extension
        The scientists and educators involved in agricultural research and
    extension have contributed to the expansion of food exports and the
    creation of new jobs, both on- and off-farm. Specific examples include
    the opening of the Japanese market for U.S. beef and apples. In Brazil,
    imported apples are now accepted from the United States. Seed crops are
    sold worldwide because the United States farmers' ability to meet seed
    health standards of countries.
        Every year, millions of individuals are affected by food-borne
    diseases. The research conducted at land-grant universities has
    contributed to the development of the Hazard Analysis and Critical
    Control Point System (HACCP). Recent federal regulations require meat
    and seafood processors to use HACCP to identify processing points where
    bacterial contamination is likely to occur and can be prevented. Land-
    grant university faculty are helping food processors, producers, and
    handlers to implement HACCP programs.
        A specific example of food contamination that was solved by
    Washington State University occurred in 1997 when over 90 cases of
    salmonella thypherium DT-104 were experienced in Yakima Valley. The
    median age of cases was 4 years old and 91 percent of the illness
    occurred in the Hispanic community. We discovered the cause was
    homemade soft cheese made from unpasteurized milk. Developing an
    alternative recipe and communicating it to the Hispanic community
    through volunteers resulted in a 90 percent reduction in salmonella
    infections. Support from federal Smith-Lever and EFNEP funds, state and
    county funds, and the private sector made this food safety success
    story possible.
        The challenge to agriculture is also to reduce and eliminate waste
    and protect the air, soil, and water quality on which agriculture
    depends. Collecting and disposing properly of unwanted pesticides and
    their containers, managing wood waste, composting, and wastes of
    agricultural by-products, as well as bio-solids, have all contributed
    to reduced costs to cities, consumers, and farmers. These efforts have
    also helped protect the environment from improper disposal of wastes.
        These success stories are a result of the ongoing research funded
    through the base programs.
             national research initiative competitive grants (nri)
        NASULGC supports the continued and expanded funding for the NRI.
    Special emphasis will be given to plant, animal, and microbial genomics
    and food safety in support of the President's initiatives and consumer
    demands. The food genomics effort, or agricultural genomics more
    generally, would complement funding by the National Science Foundation,
    NIH, and the Department of Energy. This food genomics program would
    focus on understanding the genes responsible for economically important
    traits in plants, animals, and microbes that are essential to
    agriculture. The program would also support preservation of diverse
    germplasm necessary to meet changing environmental and market needs
    while insuring biodiversity. Our specific request is to raise the NRI
    from $97.2 million to $130 million by expanding the funding for each of
    the program areas and adding the agriculture (food) genomics program.
        Priorities for Higher Education in USDA.--Funding science education
    in food, agriculture, and natural resources is essential to attracting
    students from diverse backgrounds. These programs in higher education,
    in particular the institutional challenge grants, build the curriculum
    and local instructional capacity. Other programs provide student
    scholarships. We are requesting an increase for priorities for higher
    education to $27.65 million. I have attached the specific budget
    requests for each program area.
        The NASULGC community supports the President's budget request to
    address the USDA Civil Rights action team recommendations. These
    programs strengthen research, education, and extension assistance to
    minority and limited resource populations.
        Targeted priority areas.--Major national priorities in food safety,
    pest management, water quality, and sustainable agriculture are joint
    research and extension efforts. Research investigates and discovers
    ways to improve the food production system and protect agriculture's
    natural resource base. Extension programs increase consumer awareness
    and understanding of national priorities. Other areas that deserve
    continued support include farm safety education to reduce farm
    accidents and deaths; managing risk issues in a changing agriculture;
    studying global change and soil quality; supporting rural development
    and economic development; and assisting children, youth, and families
    at risk.
        The crux of successful agriculture is going to be the management of
    pests, whether diseases, weeds, or insects. Increased support for
    integrated pest management (IPM) and pesticide clearance (IR-4) is
    essential. The pest control strategies will also support the re-
    registration process for use of pesticides on minor crops and the
    registration of safer and more environmentally compatible pesticides.
    The successful re-registration or registration of new pesticides are
    necessary to meet the requirements of the Food Quality Protection Act.
    The pest management alternatives and expert IPM decision support
    systems programs continue to identify lists of crops/pests/control
    combinations where only one or limited number of controlled options are
    available. Finally, the pesticide applicator training program educates
    growers, commercial applicators, and home owners about IPM practices.
        Other on-going programs.--USDA's research and extension efforts on
    rangeland issues, aquaculture, renewable resources, supplemental and
    alternative crops, tropical and subtropical agriculture reflect the
    diversity of agriculture in the United States. Communicating these
    programs also requires support from the agricultural telecommunication
    system, called A*DEC at $900,000. The Expanded Food and Nutrition
    Education Program (EFNEP) is essential nutrition education program used
    in all 56 states and territories. EFNEP continues to be a vital and
    necessary way to teach low-income families about diet, nutrition, and
    financial decisions concerning food and health.
        Finally, the federal administration category includes development
    of a new management information system to increase accountability and
    assessment efforts.
        I have submitted the detailed request for fiscal year 1999 in each
    of these areas for your consideration.
        The leaders of agricultural research and extension are extremely
    proud of the role that we have played in keeping agriculture
    competitive worldwide, in protecting the environment, and in combating
    food-borne illnesses. As I indicated in my opening comments, the USDA
    and Agricultural Research and Extension system, in partnership with the
    land-grant universities, is the heart of the U.S. food system. Our
    budget request recognizes the continued concerns of the public and
    agriculture to remain competitive and successful. Base funding,
    competitive funding, and targeted programs represent multiple vehicles
    to achieve the goals of a successful agriculture that keeps our
    nation's food system productive, safe, and competitive.
        Thank you for this opportunity to communicate our concerns and
    needs. Thank you for your consideration of our request.
                                     ______

       Prepared Statement of Dr. Thomas L. Payne, Director, Agricultural
     Research and Development Center, Ohio State University, on Behalf of
      the Experiment Station Committee on Organization and Policy (ESCOP)
        Mr. Chairman, members of the committee, we, The State Agricultural
    Experiment Station System, representing fifty-nine State and
    Territorial Experiment Stations, sixty-three Schools and Colleges of
    Forestry, seventeen 1890 Land-Grant Institutions and Tuskegee
    University, twenty-seven Colleges of Veterinary Medicine and forty-two
    Schools and Colleges of Home Economics, need your help! Our research
    programs are vital to our nation's agriculture, and yet federal support
    of those programs has declined 16 percent in real dollars over the past
    decade. Now, in the Executive Budget for fiscal year 1999, our base
    programs a slated for more reduction. I can't understand this. Our
    research programs are one of the best investment money can buy.
    Estimates range from $1.30 to $1.60 in return benefits for every dollar
    invested in our research. We need your help to re-instate the
    reductions and provide needed increases. (Please refer to research
    budget details in the NASULGC fiscal year 1999 Budget included in the
    testimony of Dr. James Zuiches, Chair, Board on Agriculture Budget
    Committee).
        Our fiscal year 1999 budget request was developed through a
    partnership with our stakeholders, federal research partners and our
    Extension partners. The budget focuses on our responsibilities as the
    state partners to assist and support the food and fiber systems of our
    nation. These systems face challenges unparalleled in our nation's
    history. The realities of NAFTA and GATT coupled with proposed changes
    in farm programs are creating an environment of revolutionary, not
    evolutionary, change in American agriculture. The products of research,
    including new and innovative technologies, are needed more than ever
    before. These research products must reduce economic and environmental
    risks, improve competitiveness in the international marketplace,
    develop ways to add value to raw agricultural products, maintain and
    enhance a safe and nutritious food supply, and increase that food
    supply to meet the demands of our ever-increasing human population
    around the world.
        The fiscal year 1999 request for research focuses on the following
    critical areas targeted for increases:
      --Base Programs;
      --National Research Initiative;
      --Food Safety;
      --Pest Management Control Strategies: Pest Management Alternatives
            (IPM)/Biological Control, Minor Crop Pest Mgt.-IR-4;
      --Soil Quality Initiative;
      --Water Quality Initiative;
      --Sustainable Agriculture; and
      --Small Farms Initiative.
        Base Programs.--Our budget request includes a 5.7 percent increase
    in base programs. It is our number one priority! Base programs form the
    foundation on which all of our research efforts are built. The base
    programs, by analogy, are the fire departments and trucks of research
    standing ready for immediate response to agricultural needs at the
    state, regional and national levels. We support the need for
    competitive grants programs, but such programs do not provide support
    for immediate response. We are able to respond quickly to the crises of
    disease and pest threats to our crops, for example, because of the
    infrastructure available through base program funding. The crops would
    be gone if before we could respond if our scientists had to write a
    grant proposal, wait for the review and eventual funding. These
    programs are very important!
        This priority has broad-based support from the customers of the
    system, and the research conducted under these programs undergoes
    review by scientists and administrators. And very importantly, the
    research priorities are determined based on input from customers at the
    local, state and national level.
        National Research Initiative.--Our budget shows a significant
    increase for the National Research Initiative. It continues to be a
    high priority as we ask for your support in reaching the authorization
    level of funding. The program is the vital competitive of federal
    research support for agriculture. Included in the program is the new
    initiative for Agriculture (Food Genomics). The Food Genome program
    will support research to identify and develop a functional
    understanding of genes responsible for economically important traits in
    plants, animals, and microbes of importance to agriculture. Knowledge
    of genome organization and gene function is critical to ensuring future
    genetic improvement of agriculturally important genes. The program also
    will support preservation of diverse germplasm important to meeting the
    changing environment and market needs while ensuring biodiversity. It
    is essential for this to be funded if our nation is to continue to
    maintain its lead and global competitiveness in the development of
    biotechnology in agriculture.
        Food Safety Initiative.--Our budget request reflects the need for
    increased research on food safety. Research shows that 90 to 95 percent
    of foodborne illnesses can be prevented by proper food handling and
    preparation. Yet each year in the United States, food-borne illnesses
    affect some 33 million people. Most susceptible are the young, and the
    old and people with compromised immune systems. The cost of health care
    associated with these illnesses ranges from $2.9 billion to $6.7
    billion. The USDA/Land-Grant partnership is providing a holistic,
    ``field-to-fork'' approach to reducing food-borne illness.
        Pest Management Control.--We request increases in the Pest
    Management Control Strategies categories to support the USDA IPM
    initiative that has as its goal farmer implemented IPM methods on 75
    percent of total crop acreage by the year 2000. These programs identify
    the Land-Grant university system, both research and extension, as major
    entities in the development and implementation of this program. IPM
    places emphasis at the regional and local levels with major involvement
    of producers and private industry to set the priorities for research
    and technology transfer.
        Soil Quality Initiative.--We request support for a new research
    initiative on Soil Quality. This initiative is proposed in support of
    efforts toward whole farm and ecosystem level planning. Understanding
    of the role of soil in forest, range, and pasture, crop and wetland
    ecosystems is critical in the development of management plans on these
    lands. Currently, resources are not available to conduct the needed
    research.
        Water Quality Initiative.--This national initiative addresses the
    major research and educational concerns relating to water quality and
    management. Sufficient high-quality water is often taken for granted,
    yet recent threats to its stability profoundly affect the future of
    agriculture, the economy, and the health of our population. Research
    programs examine the roles of forestry and agriculture as suppliers,
    users, polluters, and recyclers of both surface and ground water.
    Scientists are developing methods to restore contaminated aquifers and
    prevent additional contamination. Using research information, extension
    specialists provide educational programs and demonstrations on water
    quality and management options for soils, pesticides, nutrients, and
    animal wastes that will provide safe drinking water supplies. Resources
    are used to increase Extension's educational programs in 74 hydrologic
    zones and 16 demonstration sites in a coordinated multi-agency effort
    at the state and national level.
        Sustainable Agriculture Initiative.--This program relates to and
    complements food safety, integrated pest management, water quality and
    other environmentally-related activities, and rural development.
    Sustainable agriculture is a systems framework of technologies,
    practices, and procedures that provides for continuing productivity.
    Sustainable agriculture systems are site-specific and require skillful
    management. Sustainable practices that are effective will be based on
    all factors that affect a specific site, such as soil type and
    fertility, cropping history, microclimate conditions, surrounding
    vegetation and pest pressures. The goal for sustainable agriculture is
    to develop systems that are economically sound, socially acceptable,
    and environmentally benign.
        Small Farms Initiative.--Also in our budget is a request for
    funding to initiate an integrated small farm research and education
    program to address the resource constraints experienced by small farm
    producers and those of diverse ethnic and racial origin. The new
    program is designed to help these producers to operate their farms more
    efficiently and in an environmentally sound manner.
        Our budget was developed with our USDA partners and reflects
    recommendations of a system-wide joint planning effort. The research
    planning process, leading to the development of the research budget,
    involved more than 200 ``Customer Input Groups'' including commodity
    and farm organizations, professional and scientific societies,
    institutes, foundations and councils (both public and private), and
    policy makers. Research partners included USDA/Cooperative State
    Research, Extension, and Education Service, USDA/Agricultural Research
    Service, and Schools and Colleges of Veterinary Medicine, Forestry, and
    Home Economics.
        The Federal/State partnership through the combination of research
    programs in this budget proposal, when coupled with state and non-
    federal support, continues to provide the flexibility to address a wide
    array of issues and has resulted in the high rate of return on public
    investment in agricultural research ranging from 30 to 65 percent.
    These data are based on independent studies of return on investment in
    agricultural research and development. Research programs of the
    Agricultural Experiment Station System perform approximately 68 percent
    of all public funded agricultural research in support of the $600
    billion agricultural industry. The federal investment represented in
    this budget is leveraged by approximately $1.5 billion in state and
    non-federal funds.
        Thank you for the opportunity to provide this testimony on behalf
    of the Board on Agriculture of the National Association of State
    Universities and Land-Grant Colleges. The 109 year partnership of state
    and federal research, along with the support of Congress, will continue
    to meet the challenges of the future and create opportunities for
    agriculture. I strongly encourage you to consider and adopt this budget
    recommendation. Your continued support is appreciated and we are
    committed to continue playing a major role in sustaining a strong
    agriculture for the benefit of all citizens of this country and people
    of the world.
                                     ______

    Prepared Statement of Richard D. Wootton, Associate Dean and Associate
    Director, Cooperative Extension Service at Kansas State University, on
      Behalf of the Extension Committee on Organization and Policy (ECOP)
        Mr. Chairman, I am Richard D. Wootton, associate dean and director
    of the Cooperative Extension Service at Kansas State University. I
    present this statement as the chair of the fiscal year 1999 Budget
    Committee of Cooperative Extension System and its leadership throughout
    our Nation.
        The Cooperative Extension System has a rather extensive and
    intensive process for program priority setting; the budget represented
    in this statement has been through this same scrutiny. Our budget
    development committee is comprised of representatives from all regions
    of the country, as well as representation from our citizen advisory
    committee, the Council on Agricultural Research, Extension and Teaching
    (CARET). Each line item in this budget was carefully examined. We have
    focused on issues which require a solid research base and applied
    education. We have strengthened our resolve and commitment not only to
    agriculture, but to the entire food and fiber system while maintaining
    strong programs in family, youth and community issues.
        Considering the fiscal climate in which we make this budget
    presentation, we have limited our requests for increases to a few key
    critical areas. However, based on the fiscal problems in many states,
    reductions in the Extension budget at the federal level are not apt to
    be offset by state, county or private funding partners. These partners
    now provide over seventy percent of the Extension System's annual
    budget across the nation. Thus, each federal dollar is very important
    because it leverages several more dollars from state, local, and
    private sources and serves as the ``glue'' of this unique partnership.
                                 base programs
        Smith-Lever 3(b)(c).--The highest priority for the Cooperative
    Extension System is a 5.7 percent increase in the funding for base
    programs. We are requesting a funding level of $283.8 million or $15.3
    over fiscal year 1998. Base program funds, along with matching state
    and local funds, provide the nucleus for maintaining the scientific and
    community-based network which is critical to the implementation of the
    base programs and the national initiatives. This increase will help to
    maintain a strong base for Extension programming across the country and
    provide the important funding to undergird the national initiatives,
    such as Integrated Pest Management, Food Safety and Quality, and Youth
    and Families at Risk.
        The network of faculty and staff of 74 land-grant universities
    represents an intellectual resource unmatched by any other country of
    the world. No other national education system has the capabilities of
    reaching citizens in some 3,150 counties in the United States. In
    addition, nearly three million trained volunteers work with the
    Cooperative Extension System in areas such as health, nutrition,
    gardening, financial planning and youth development.
        1890 Colleges and Tuskegee University.--The requested 5.7 percent
    increase in base funding for these institutions is also a top priority.
    These institutions maintain base programs geared to the needs of
    culturally diverse audiences, especially those limited in resources.
    Funds provided these institutions have helped them prioritize highly
    essential educational initiatives focused on families, community
    leadership, small scale farms and youth programs. These programs are
    designed to address new directions for what has become a large audience
    of people at risk and generally out of the mainstream of society. This
    5.7 percent increase for the 1890's would enhance programming
    capabilities in key areas.
                         national priority initiatives
        Significant increases are requested for three currently funded
    national priority initiative programs: Water Quality, Food Safety and
    Quality, and Integrated Pesticide Management.
        Water Quality.--We are requesting a $2.0 million increase for the
    Water Quality initiative to focus specifically on assisting farmers,
    ranchers and homeowners identifying environmental risks and taking
    voluntary action to prevent pollution. The increased funding would be
    used to expand a proven program called Farm*A*Syst/Home*A*Syst that
    helps people conduct pollution prevention assessments on their property
    and take appropriate voluntary action. These assessments involve well
    water protection, agricultural compliance assistance, livestock waste
    management, and related factors that can impact environmental
    surroundings. This program is conducted in coordination with a number
    of other state and federal agencies with responsibilities for water
    quality and other environmental issues.
        Integrated Pest Management.--We request that funding be increased
    for Integrated Pest Management (IPM) from $10.783 million to $15.0
    million. Pesticide use in agriculture, as well as in urban America,
    continues to be a major public issue. IPM programs set the stage for
    innovative crop protection programs that meet economic and
    environmental needs. Additional resources are needed if the goal of
    establishing effective IPM practices on 75 percent of the crop land is
    to be achieved by the year 2000. The increase will address this concern
    and supports the Department of Agriculture's initiative.
        Food Safety.--A safe food supply is of utmost importance to
    consumers as well as food producers, processors and distributors.
    Public concern about food contamination has escalated during the last
    decade. Even so, information about the causes and prevention of food-
    borne illnesses is still very limited. Furthermore, much of the current
    knowledge is inadequately applied and practiced. Extension education
    programs focus on protecting the safety of food from production to
    consumption. These programs assist food producers and processors, food
    service establishments and consumers in understanding safe production,
    handling and preparation practices. The HACCP (Hazard Analysis Critical
    Control Point) model is used as the primary basis for these educational
    programs. We are proposing $7.365 million for fiscal year 1999; the
    fiscal year 1998 appropriation was $2.365 million.
        Reservation Extension Agents.--The support of Congress to assist
    with the placement of Extension agents on the Indian Reservations as a
    collaborative effort between the Tribal Councils and the State
    Cooperative Extension Services is going very well. The limiting factor
    is the number of agents does not meet the tremendous demand for this
    expertise on each of the Reservations. Thus, in accord with a plan
    jointly developed by representatives of the Tribal Councils and State
    Extension Services it was determined an appropriation of $5.0 million,
    which is $3.0 million more than the current appropriated amount, was a
    realistic fiscal need. These monies are awarded on a competitive basis.
        Extension Services at the 1994 Institution.--This program is in its
    second year of operations and progressing well. The initial
    appropriation of $2.0 million in fiscal year 1998 has been allocated
    and being put to use in a very high need education arena. The 29 Native
    American Institutions of higher education are targeting agriculture,
    forestry, human nutrition and health, and economic development. A $1.5
    million increase is requested for fiscal year 1999 to build on the base
    Extension staffing at these 29 Native American Institutions, which is
    being done in full collaboration with the State Cooperative Extension
    Services.
        Other National Priority Programs we are requesting a very modest
    increases are:
        Children, Youth and Families at Risk.--The Extension System uses
    preventive educational programs to help youth and families become
    healthy, productive, financially secure, and responsible members of
    their community. Extension has built linkages and networks with many
    agencies that provide services to children and families. Currently, 49
    states and six territories conduct Youth-at-Risk programs. The federal
    Youth-at-Risk appropriation of $9.55 million leverages an additional
    $40 million and captures the support of nearly 37,000 volunteers for
    its programs. We request that the $9.55 million appropriation be
    increased to $10.0 million, so this important work of salvaging and
    rebuilding human capital may reach more youth and families.
        1890 Facilities.--The annual amount of funding for this facilities
    program has been level or declining each of the past several years. The
    facility needs at the 1890 institutions still needs considerable
    attention for renovation and new construction to fully capitalize on
    the partnership between the USDA and these Historically Black Colleges
    and Universities. Thus, an increase of about $4.5 million above the
    fiscal year 1998 appropriation is requested.
        Renewable Resources.--We request that the Renewable Resources
    Extension Act funding be increased from the current level of $3.214
    million to $3.3 million. Public forests and rangelands now emphasis
    production of non-commodity values and commodity production has
    decreased. Concurrently, federal requirements for environmental
    protection on private lands have increased (Endangered Species Act,
    Wetlands Protection). Private landowners are, therefore, challenged to
    provide both increased commodity output to meet the nation's needs and
    increased environmental protection. Intensive management of non-
    industrial private forests for greater profitability, commodity
    resource output and environmental protection will be enhanced by this
    expanded educational effort. The impact on currently declining rural
    communities will be positive.
                            new program initiatives
        Funding is requested for two new program initiatives: Pesticide
    Application Training and Managing Change in Agriculture:
        Pesticide Applicator Training.--The funding for this program is a
    collaborative effort between the Department of Agriculture and the
    Environmental Protection Agency. Each is requesting $1.5 million to
    support, in part, the training the users of restricted use pesticides
    so they can be certified users. This is a very demanding program
    because of the number of people that require training each to become
    certified or recertified. The participants needing this training are
    growers, commercial applicators and homeowners. The total cost of
    operating this program exceeds $9.0 million a year. Thus, other state
    and local public funds and private funds are heavily committed.
        Managing Change in Agriculture.--This program addresses how the
    Cooperative Extension System can assist the U.S. agricultural sector in
    managing in a dramatically changing global and domestic economic and
    environmental policy environment. These changes include public concerns
    and expectations for production and processing of safe food at
    reasonable prices, while protecting the environment; rapid
    technological advances; accelerated industrialization of agriculture;
    globalization of markets; and declining governmental ``safety nets.''
        Within the agricultural sector, the forces of change are causing
    significant shifts in how business is done. These include: structural
    integration of input suppliers, producers and processors through
    increased use of contracts, alliances and other linkages; more product
    specificity driven by consumer tastes and preferences, and
    technological advances in the distribution and retailing of food and
    fiber products; and the rise of a new class of entrepreneurs who focus
    on the assembly and distribution of inputs and products without being
    centrally involved in the production processes.
        The Cooperative Extension System, in concert with the agricultural
    private sector, will provide the leadership for the initiative. Funding
    will be sought from three sources; $2.0 million through your committee,
    Mr. Chairman, with matching funds from the state government and private
    sector. This will leverage the initiative into a $6.0 million plus
    program.
                               specified programs
        We are recommending level funding at the fiscal year 1998 level for
    the following budget items:

    Sustainable Agriculture.................................      $2,365,000
    EFNEP...................................................      58,695,000
    Rural Development Centers...............................         908,000
    Pesticide Impact Assessment.............................       3,313,000
    Farm Safety/Agribility..................................       2,855,000
    Agricultural Telecommunications.........................         900,000

        Mr. Chairman and Members of the Committee, the Cooperative
    Extension System is mindful of the significant economic, technological,
    and societal changes happening in our nation. Thus, we have redirected
    programs to better serve the needs of agriculture and rural America, to
    address directly the growing needs of children and families facing
    difficult situations, and to help communities work for a better future.
    We are focused on issues of national importance, identified at the
    grass roots level. We very much appreciate your past support and urge
    your continued support to keep our base programs strong and to continue
    to invest in initiatives of national importance.
        We thank you for the opportunity to present this statement about
    our fiscal year 1999 budget needs.
                                     ______

       Prepared Statement of Dr. Richard L. Guthrie, Associate Dean and
    Director, International Programs in Agriculture, Auburn University, on
    Behalf of the International Committee on Organization and Policy (ICOP)
        I am the Associate Dean and Director of International Programs in
    Agriculture at Auburn University. I am also the current the chair of
    the International Committee on Organization and Policy. I testify here
    in support of the fiscal year 1999 Agriculture Appropriations. Our
    committee is particularly interested in several programs, including the
    Markets, Trade & Rural Development program under the National Research
    Initiative (NRI) and the National Needs Competitive Grants program
    under Higher Education.
        These programs will contribute significantly to an increased U.S.
    capacity to compete in the global economy. The GATT, NAFTA and other
    international free trade agreements are designed to increase trade and
    investment flows between nations. I submit that they provide a
    compelling rationale for these programs.
        As we all know, the world has witnessed radical transformations in
    recent decades. Mass communication technologies, transportation
    networks and the disappearance of major ideological cleavages in the
    world have led to greater interdependence in the world economy. The
    globalization of markets for agricultural products has been a major
    consequence of them.
        The failure of centrally planned economies has increased the
    significance of market economies of the West. These economies,
    including ours, now form a global system through which agricultural
    products are increasingly moving. Furthermore, the nature of these
    products is rapidly changing from raw materials to value added
    products.
        We currently export over thirty percent of our agricultural output.
    This represents a very significant contribution to the U.S. balance of
    payments. Furthermore, our agribusiness interests consider these
    markets to be critical to their future. The health of the U.S. food
    system, including the farm sector, will depend in large measure on how
    well we compete in overseas markets. Alabama farmers, food industries
    and consumers are increasingly aware of the significance of these
    trends. They are increasingly asking our universities to respond to the
    challenges represented by them. They are demanding from us the
    knowledge base and training that will help make them better
    participants. Our College of Agriculture at Auburn University has made
    globalization of its programs a priority objective.
        Free trade agreements imply that production efficiencies, adding
    value to export products, and increasing the ability of our
    agribusinesses to participate effectively in international markets will
    be major determinants of successful competition. We need to strengthen
    science and technology and human capital development in ways which
    strengthen these factors. These investments must be part and parcel of
    the research, extension and higher education agenda.
        Land grant universities, as partners with the U.S. Department of
    Agriculture, have been major contributors to the incredible success of
    our food system. Teaching, research and outreach products have ensured
    a steady flow of quality human capital and technology to this sector.
    However, the genius of the land grant university system, namely its
    focus on state constituencies, has greatly limited its scope of
    activity to their immediate, everyday concerns. Media and
    transportation dimensions of the technological revolution experienced
    by us now require that we give greater attention to broadening its
    focus to global markets.
        The National Research Initiative and the National Needs Competitive
    Grants programs are designed to help us expand our capacity to increase
    production and marketing efficiencies, and to extend them to users in
    the food system. The Globalizing Agricultural Science and Education
    Program for America (GASEPA) agenda, which is sponsored by our
    Committee, focuses specifically on how to harness available land grant
    university resources, including those to be provided through the NRI
    and the National Needs Competitive Grants, to increase our capacity to
    compete in these global markets. I would like to end my formal
    presentation by briefly reviewing the major components of the GASEPA
    agenda.
        Under the GASEPA agenda, U.S. land grant universities will work
    with various agencies of the U.S. Department of Agriculture to jointly
    internationalize our staff and programs. We will seek ways to use
    existing program funds to promote these outcomes.
        The GASEPA agenda also proposes to provide sustainable, core
    funding to initiate and to strengthen globally relevant and useful
    agricultural teaching, research and outreach programs at land-grant and
    other qualifying institutions. Specific objectives are:
      --Enhancing global competitiveness of U.S. agriculture through human
            resource development;
      --Development and dissemination of information about market, trade
            and business opportunities;
      --Mutually beneficial collaborative global partnerships;
      --Promoting trade through global economic development; and
      --Promoting global environmental quality and stewardship of natural
            resources.
        Access to these funds will be through a competitive grants
    framework, administered by an agency of the U.S. Department of
    Agriculture. This framework will ensure that quality standards are
    maintained and that program activities are integrated with those of
    other related initiatives.
        Examples of types of activities that will be supported under the
    GASEPA agenda are those which will: increase the international content
    of teaching programs; provide university faculty and staff with cross-
    cultural, professional experiences in areas related to their expertise;
    increase the ability of faculty and staff to adapt agricultural
    technologies developed overseas for use in the U.S.; increase faculty,
    staff and student ability to support the marketing of U.S. agricultural
    products and services overseas; help U.S. agribusinesses identify
    overseas opportunities; and provide students in agriculture and related
    fields with study and work experiences related to international
    competitiveness.
        The GASEPA agenda will enable U.S. land-grant colleges to extend
    instructional, technology and marketing outputs to clientele, including
    students and agribusinesses, in ways which will increase the
    competitiveness of U.S. agribusinesses in global markets. We are eager
    to serve our public. We are eager to address global issues that will
    become increasingly important to our future national prosperity.
        Thank you.
                                     ______

     Prepared Statement of Dr. McArthur Floyd, Research Director, Alabama
            A&M University, on Behalf of the 1890 Research Directors
        Senator Thad Cochran, Chairman, and distinguished members of the
    Committee, The Association of Research Directors (ARD) strongly
    supports the budget recommendations for fiscal year 1999 submitted by
    the Budget Committee, Board on Agriculture, NASULGC. The top priorities
    recommended by the NASULGC for fiscal year 1999 are to strengthen the
    base programs for research, extension and higher education, and to
    sustain current high-priority initiatives and to mount a few new
    programs in much needed critical research areas. A modest increase of
    5.4 percent in base funds for research is being requested. These
    programs represent the long-term commitment of Land-Grant Universities
    to maintain a stable research base including personnel and facilities
    in the food and fiber and agricultural and environmental sciences, and
    natural resources.
    1890 Evans-Allen Research Program ($29,316,000)
        We strongly support the recommendation for an increase of 5.4
    percent in base funds for the Evans-Allen Program for the 1890
    institutions in fiscal year 1999. These funds provide the primary and
    principal support to conduct basic and applied research to ensure a
    safe, economical and adequate food supply, promote a sustainable
    environment, conserve the natural resource base, and contribute to the
    improvement of the socio-economic well being and overall quality of
    life of diverse rural and urban populations. These funds also
    contribute to the development of professional expertise (especially,
    minority persons) in the food and agricultural sciences through focused
    programs.
    1890 Capacity Building Grants Program ($10,000,000)
        We strongly support the recommendations for funding the 1890
    Capacity Building Grants Program at $10,000,000 in fiscal year 1999.
    This program is critical in enhancing teaching and research programs at
    the 1890 Land-Grant Colleges and Universities and in advancing
    partnerships with industry, USDA agencies and other institutions of
    higher education. This is a highly competitive program which helps to
    build greater capacity in research and teaching in food and
    agricultural sciences at these Institutions.
    1890 Research and Extension Facilities Grants Programs ($12,000,000)
        We strongly support the 1890 Extension and Research Facilities
    Grants Program at a funding level of $12,000,000. The facilities
    program enables the 1890 Institutions to develop state-of-the-art
    facilities and acquire needed equipment for scientific research and
    outreach for training of students.
    Rural Economic and Social Development--1890 ($2,000,000)
        We also strongly support the initiative for 1890 Institutions on
    Rural Economic and Social Development at $2,000,000 in fiscal year 1999
    which is included in the Small Farm initiative for $4,000,000. Over 55
    percent of the rural poor 97 percent of the rural black poor live in
    the South. Targeted research is needed that will specifically address
    the disadvantaged and underserved communities and families in the
    following areas: barriers to family and community development;
    incentives for new linkages and partnerships; infrastructure needs;
    business and job opportunities; enhanced development of human capital
    and leadership; use of natural resources for community development; and
    new markets for agricultural products.
        Mr. Chairman, on behalf of the ARD, I wish to express our thanks to
    you and the distinguished members of the Committee for this opportunity
    to submit this testimony.
                                     ______

     Prepared Statement of Teresa Maurer, Project Manager, National Center
                       for Appropriate Technology (NCAT)
        Summary: I am offering testimony today in support of USDA's
    proposed $2 million appropriation for the ATTRA program.
        Full text of testimony: Farmers, ranchers, agricultural information
    providers and other members of the agricultural community continue to
    seek greater and more convenient access to information on sustainable
    agriculture production and marketing practices. Since its inception as
    a unique public-private partnership in 1987, the ATTRA (Appropriate
    Technology Transfer for Rural Areas) program has responded to more than
    118,000 requests for information from callers across the U.S. The
    program is funded through Rural Business-Cooperative Service (RBS) and
    is operated by the National Center for Appropriate Technology (NCAT).
    NCAT is a private, nonprofit organization, which provides information
    and technical assistance in the areas of sustainable agriculture,
    energy conservation, and resource-efficient housing. The USDA budget
    requests $2 million for the ATTRA program for fiscal year 1999, which
    we urge you to support.
        Through a national toll-free telephone line, ATTRA receives
    requests and then provides written or electronic delivery of unique
    combinations of diverse sustainable agriculture resources. In answer to
    questions posed by a variety of farmers, ranchers, information
    providers, extensionists, state and federal agency staff and others,
    ATTRA synthesizes and summarizes innovative practices and research
    results. User requests cover a wide range of topics, including crop,
    livestock and horticultural practices, and may include aspects of
    production, soil fertility, pest management, enterprise additions, etc.
        In addition to preparing materials on frequently requested topics,
    staff also research specialized questions from producers. Responses
    draw from studies, publications and experiences spanning the spectrum
    of hundreds of sources including: (a) individual, innovative farmers,
    extensionists and researchers from a national network that we have
    developed (b) grassroots organizations (c) specialized sustainable
    agriculture publications (d) electronic communications (e) funded
    research and education from a variety of agencies and programs inside
    and outside USDA. Much of this information is not readily available
    from a single source, so ATTRA helps link and provide keys to this
    information in a timely way. ATTRA also seeks to extend the reach of
    SARE, NAL, Integrated Farming Systems and Cooperative Extension, who
    often refer their clients to the ATTRA program.
        ATTRA was initially authorized in the 1985 Farm Bill and was first
    funded in 1987. Compared with request levels around 4,000 per year
    (fiscal year 1989), program staff now respond to 18,000-22,000 requests
    annually. ATTRA has been level funded at $1.3 million for the last 7
    years. We have seen increased interest particularly in: marketing
    methods for sustainably produced crops and animals (including organic
    production), pest management options, and farmer-generated, experience-
    based information. Our callers are more frequently seeking electronic
    or other round the clock access to ATTRA's resources and training
    materials.
        Improved efficiency in request handling helped to meet a portion of
    the demand, but request volume continues to outstrip the gains made.
    While a Website was opened in fall, 1997, and increases some of ATTRA's
    capabilities, it also requires specialized skills to maintain, reformat
    or develop suitable new materials for that outreach method. Because
    many rural callers, and especially small and minority farmers, still
    have limited electronic access, ATTRA will remain committed to
    providing information on paper to caller's mailboxes or by using other
    technologies or outreach which does not require the caller to have
    expensive equipment or specialized computer knowledge. The recent
    report of the USDA National Commission on Small Farms (A Time to Act,
    January, 1998): (1) recognized the special value and accessibility of
    the ATTRA program, and (2) recommended a role for ATTRA in providing
    feedback to USDA on research and education needs of small farmers, and
    (3) recommended an annual funding level of $3 million.
        However, at the present time, we ask support for the proposed USDA
    funding level of $2 million. It is the minimum required to meet demand
    for additional diversity and access for ATTRA's services. It would
    support a very modest staffing increase which we project would give us
    the capability to respond more effectively to an increased variety of
    topics and service requests. The Website has already enhanced exposure
    to ATTRA's work, with thousands of visits in the few months since it
    opened in September, 1997. However it will also clearly require more
    specialized attention to respond effectively to the requests and
    feedback that the Website is generating, both in calls and electronic
    responses. The program has also been severely understaffed for the last
    4 years in the areas of: agronomy, pest management, marketing, general
    technical writing, and computer and information management support
    services. Questions that we receive now, compared to early years of the
    program, include more sophisticated questions from farmers and require
    a greater range and depth of expertise.
        A small portion of the proposed increase would allow completion of
    upgrading in phone, addition of voice mail, and computer hardware and
    software. This would result in more diverse access for callers varying
    from those with no computer resources to educators and extensionists
    who may have both the computer access and ability to multiply ATTRA's
    information. It would also allow better organization and access to
    thousands of materials (include many collected nowhere else nationally)
    in ATTRA's resource center and response archives.
        The program offers callers from across the US a unique, cost-free,
    1-stop access point to information about ways to farm with innovative
    techniques and technologies that combine environmental and economic
    benefits. With recent changes in farm legislation, farmers want
    information on more diverse options for what they produce, how they
    produce it, and how they can add value and market their products.
    Farmers also continue to look for practices that help them keep more of
    their farming income by reducing production costs. The written
    materials provided by ATTRA's 25 staff members meet those informational
    needs and bring choices right to the mailbox or computer, which can
    help them make their own important farming and economic decisions.
        We are convinced that ATTRA provides a national service that is
    very valuable to broadening the acceptance of more sustainable and
    profitable approaches to agriculture. We appreciate the past support
    that Congress has provided, which enables this unique service to
    continue to provide information that helps farmers with the many
    choices they face. We urge you to continue to support this work at the
    USDA proposed level of $2 million, and we pledge to continue to improve
    the efficiency of the program, as well as the quality and usefulness of
    information we offer to farmers.
                                     ______

       Prepared Statement of Margaret S. Maizel, Principal Investigator,
                    National Center for Resource Innovations
        As ever, we appreciate this opportunity to provide testimony to the
    Senate Appropriations Subcommittee on Agriculture and Related Agencies.
        The National Center for Resource Innovations (NCRI) was established
    in 1990 through a joint private/federal initiative in an appropriation
    to USDA's Cooperative State Research, Extension and Education Service
    (CSREES). The consortium now includes seven sites (including one added
    this year at the Southwest Indian Polytechnic Institute, Albuquerque,
    NM) and an administrative office in Rosslyn, Virginia. Each site in the
    consortium contributes unique expertise to this national program. NCRI
    capabilities include integration of large data sets in a Geographic
    Information Systems (GIS) framework from the national level down to the
    farm field as well as weather analysis, land use planning, resource
    management at state and local levels, and support for public and
    private policy development.
                              the mission of ncri
        The mission of NCRI is to provide collaborative and innovative
    transfer of geographic information systems technologies to support
    local government and other public policy development and decision
    making.
          ncri funding history, matching funds and cost effectiveness
        In the past, NCRI has consistently requested $1.8 million annually
    for minimum program operations. 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; fiscal year 1994,
    $1,011,000; fiscal year 1995, $877,000; fiscal year 1996, $939,000;
    fiscal years 1997 and 1998, $844,000.
        NCRI has matched federal funds or had to reduce program objectives.
    The total non-federal support generated for fiscal years 1990 to 1998
    was in excess of $5,500,000. The total federal appropriated amounts for
    the same period were $8,600,000. In fiscal year 1997, NCRI prepared at
    the request of Congressman Joe Skeen, a cost-benefit study. Results
    showed that for every federal dollar invested, $7.40 in benefits
    through innovative projects was realized.
                    ncri site expertise and accomplishments
        The advantage of the consortium of seven regional centers that
    makes up NCRI is that each site has unique expertise and shares
    technical support with other sites. In this way, projects are
    strengthened through shared resources and the experience needed to
    build complex and comprehensive information systems. Site-to-site
    technology transfer and networking build NCRI's overall capabilities,
    aids in problem solving and facilitates consistency.
                         joint activities (seven sites)
        All of the NCRI sites plan to engage in two major activities this
    year: a Distance Learning Program at the Southwest Indian Polytechnic
    Institute site April, 7th and a Resources Technology Fair on Capitol
    Hill on April 21 in the House Science Committee Room. Congressmen and
    Senators are being invited to act as sponsors for the fair, which will
    include exhibits by the seven NCRI sites as well as by federal agencies
    and private sector companies who have been partners in technology
    implementation with NCRI sites.
    NCRI-Great Lakes, University of Wisconsin-Madison, Madison, Wisconsin
        The NCRI-Great Lakes project site is located at the Land
    Information and Computer Graphics Facility (LICGF) in the College of
    Agriculture at the University of Wisconsin. The Facility was instituted
    in 1993 to function as a research, teaching, and outreach resource in
    land and geographic information systems (LIS/GIS). Researchers at LICGF
    explore uses of LIS/GIS for local and regional land and resource
    planning to support social, economic, and environmental decision making
    processes.
        During 1998 and 1999, NCRI-Great Lakes has established the
    following objectives:
      --Conduct seminars for the Wisconsin Land Council to develop citizen-
            based land use planning and the use of Land Information Systems
            to facilitate such efforts.
      --Work with rural governments to develop reliable and cost-effective
            access to LIS/GIS technology to address locally defined land-
            use and watershed management problems.
      --Accelerate the use of GIS technology by governments with coastal
            zone jurisdictions.
      --Update existing data to prepare the state of Wisconsin for the 2000
            Census and subsequent redistricting.
    NCRI-Chesapeake, Inc., Rosslyn, Virginia
        NCRI-Chesapeake builds cooperative integrated information systems
    ``from the nation to the neighborhood'' with federal and state
    agencies, universities and others to provide new information for better
    decision-making. These systems focus first, on the farm, productivity
    and the farmers in their own very specific neighborhoods as related to
    natural systems and their socio-economic position in the landscape.
    NCRI-Chesapeake has established the following goals for 1998-1999:
      --Conduct continuing research in the Northeast States, and in the
            Delmarva Peninsula in particular, of impacts of animal manure
            on water quality, evaluation of agro-ecoindices, and assessment
            of watershed priorities.
      --Conduct expanded studies in North Carolina, the Washington-
            Baltimore metropolitan area, and other urban areas of the
            country regarding the impact of urban sprawl on ecosystems.
      --Determine the effects of future land use planning on economic and
            agricultural resources, potential impacts on other natural
            resources.
    NCRI-Northwest Central, Washington University, Ellensburg, Washington
        NCRI-NW continues to concentrate on the local and regional resource
    issues of the Yakima Valley and eastern Washington. These issues
    include irrigation of agricultural lands, county planning needs, Native
    American interests, and the management of inter-mixed public and
    private lands. The site works in close cooperation with the faculty and
    staff of Central Washington University as well as the GIS lab.
        NCRI-NW plans for 1998-1999 include:
      --Work with the Natural Resources Conservation Service to speed the
            delivery of digital soils maps to GIS users, precision farmers,
            and others.
      --Cooperate with USGS to complete digital hypsography (contour lines)
            for the state.
      --Continued assistance to the Kittitas Reclamation District for data
            development and data exchange.
    NCRI-South West, University of Arkansas, Fayetteville, Arkansas
        NCRI-SW has been based at the University of Arkansas at
    Fayetteville since its inception in May of 1990. Through university
    support and hardware and software grants, the program has a fully
    equipped research, training, and outreach facility capable of
    demonstrating a wide range of software for geographic information
    systems, remote sensing, spatial statistics, and database management.
    In the fall of 1994, expansion of Center facilities was completed to
    include five state-of-the-art teaching and research laboratories, ten
    offices, and a library/reading room. A variety of advanced computer
    equipment now facilitates the center's teaching, outreach, and
    cooperative project capabilities. NCRI-SW continues to focus on
    technology transfer through training, the development of statewide GIS
    databases and representative projects demonstrating the cost benefits
    and efficiency of GIS technology.
        NCRI-South West has proposed the following objectives among those
    to be achieved in 1998-1999:
      --Provide technical support to the Arkansas Land Records Modemization
            Board as well as serving as a member of the Board.
      --Participate with a consortium of private and public sector partners
            to initiate the Seamless Warehouse of Arkansas Geodata (SWAG)
            so that users will be able to access any selected area of the
            state with the data provided over the net in OGC Simple
            Features Format.
      --In conjunction with the Natural Resources Conservation Service,
            develop a web accessible ``County Soil Survey'' that will
            provide information comparable to the traditional county soils
            survey publication.
    NCRI-North Central, University of North Dakota, Grand Forks, North
            Dakota
        NCRI-NC's interdisciplinary research and technology transfer
    programs are located and supported at the University of North Dakota
    Regional Weather Information Center. From this facility, NCRI-NC is
    linked to the UND Aerospace Scientific Computing Center which houses a
    CRAY 190. The resource issues in the region are related to the
    enhancement and protection of farming and ranching, which are principal
    contributors to the region's economy. The work performed by NCRI-NC and
    the Regional Weather Information Center has resulted in their being
    recognized by the Ford Foundation as a semifinalist in the 1995
    Innovations in American Government Awards Program.
        During 1998 and 1999, NCRI-NC has set the following objectives:
      --Provide decision support to precision agriculture and other forms
            of farm management by providing GPS data and implementing a
            farm specific rainfall model derived from Doppler radar.
      --Participate in flood recovery of the city of Grand Forks by
            providing technical assistance in the development of the
            combined Grand Forks City GIS system.
      --Participate in the North Dakota Weather Network program.
    NCRI-South East, South Georgia Regional Development Center, Valdosta,
            Georgia
        NCRI-SE's program is an integral component of the South Georgia
    Regional Development Center--a regional agency that supports local
    governments across ten counties. NCRI-SE's primary objective is to
    encourage the use of geographic information for ecologically
    responsible decisionmaking in this primarily rural region. ``Real
    world'' presentations by NCRI-SE using actual local geographic data
    have proven to be an effective method of demonstrating the value of
    GIS. This, coupled with the experience gained by NCRI-SE personnel from
    implementing GIS for local governments, has proven invaluable to
    government managers in the South East region. NCRI-SE also provides
    direct technical and Hands on. advice and training for any regional
    entities working in the GIS realm.
        NCRI-SE's goals include:
      --Demonstrate the value of GIS to local governments using information
            that applies directly to their own situations, using the
            existing regional database and GIS applications built by NCRI-
            SE.
      --Provide leadership in the GIS development process by promoting
            local government cooperative agreements in order to increase
            involvement and defray costs, and to promote standards that
            allow simple transfer of GIS data among state, local and
            federal agencies.
      --Continue to refine data and databases for regional wetlands.
    NCRI-Native Americans, Southwest Indian Polytechnic Institute,
            Albuquerque, New Mexico
        NCRI-SIPI is the newest of the NCRI sites, having been added in
    1997. SIPI is a National Indian Community College, funded by the
    federal government. Nearly 50 percent of all American Indians live
    within a 500-mile radius of the school. SIPI's overall objective is to
    provide technology transfer through distance education in conjunction
    with the development of precision farming on the SIPI campus and on
    Indian reservation lands in New Mexico and southern Colorado.
        For fiscal year 1999, SIPI has the following objectives:
      --Undertake a pilot project to develop GIS curricula with the
            Southern Ute Tribe using distance learning telecommunications.
      --Develop and begin the implementation of a precision farming
            demonstration project to be used as part of the GlS/GPS-
            Precision Agriculture technology transfer curriculum.
      --Offer GIS and GPS training/short courses locally for tribal
            personnel.
                                   conclusion
        The current level of funding for NCRI (fiscal year 1998) is
    $844,000. We request that the level of funding through USDA/CSREES be
    restored to $1.2 million for fiscal year 1999. This provides uniform
    funding levels for all seven NCRI sites, and allows NCRI-Native
    Americans American (SIPI) to join the NCRI consortium as a fully funded
    project site.
        The NCRI Consortium appreciates this opportunity to provide
    testimony to the Senate Appropriations Subcommittee on Agriculture,
    Forestry, Nutrition and Related Agencies.
                                     ______

      Prepared Statement of Gordon Miller, President, National Commodity
                  Supplemental Food Program (CSFP) Association
        Mr. Chairman and Subcommittee members, I am Gordon Miller,
    President of the National Commodity Supplemental Food Program (CSFP)
    Association. The Association of State and Local CSFP operators has
    worked diligently with the Department of Agriculture Food and Consumer
    Service to insure a quality supplemental nutrition assistance commodity
    food package program for mothers, infants, children and elderly men and
    women. The program, which was authorized in 1969, serves 400,000
    individuals monthly in 19 states and the District of Columbia.
        During fiscal year 1997 there were two significant steps forward:
      --Revision of the food package to provide more nutrients and cheese
            with a budget-neutral effect on funding.
      --A new Regulation for a combined caseload for Mothers, Children and
            Seniors which will give local and state agencies a better
            opportunity to fully use assigned caseload.
        The President's budget for fiscal year 1999 requests $96 Million
    for CSFP. We ask that your subcommittee recommend $105 Million so that
    the CSFP may provide for:
      --New states who already have approved state plans but no funds.
      --Additional mothers, children and seniors on waiting lists in
            existing programs.
        Again, Mr. Chairman and Subcommittee members, the National CSFP
    Association wants to thank the Subcommittee for its past support. It is
    our signal you recognize that CSFP is the most cost-efficient,
    nutritionally designed food package program of the food and Nutrition
    Service. The program uses foods purchased with wholesale dollars or
    donated foods, requires low administrative funds stretched by many
    volunteer labor hours and facilities, and reaches the most vulnerable
    mothers, children and seniors who otherwise would not receive nutrition
    assistance.
                                     ______

      Prepared Statement of W. Ron Allen, President, National Congress of
                                American Indians
                                  introduction
        Good morning Chairman Cochran, Vice-Chairman Bumpers and
    distinguished members of the Appropriations Subcommittee on
    Agriculture. Thank you for the opportunity to present testimony
    regarding the President's budget request for fiscal year 1999 Indian
    programs and services. My name is W. Ron Allen. I am President of the
    National Congress of American Indians (``NCAI''), the oldest, largest
    and most representative Indian advocacy organization in the nation, and
    Chairman of the Jamestown S'Klallam Tribe located in Washington State.
    The National Congress of American Indians was organized in 1944 in
    response to termination and assimilation policies and legislation
    promulgated by the federal government which proved to be devastating to
    Indian Nations and Indian people throughout the country. NCAI remains
    dedicated to advocating aggressively on behalf of the interests of our
    230 member tribes on a myriad of issues including the critical issue of
    adequate funding for Indian programs.
                the president's fiscal year 1999 budget request
    Department of Agriculture
        In 1996, Congress passed and the President signed into law the
    Federal Agriculture Improvement and Reform Act of 1996 (FAIR) (Public
    Law 104-127). This law provides new mandates for the Department of
    Agriculture's Rural Development Mission on infrastructure, housing, and
    business needs in remote areas. FAIR also recognizes the needs of
    tribal governments for capital and infrastructure and authorizes a 3
    percent set-aside for tribal infrastructure, housing, and related rural
    development projects.
        Mr. Chairman, as you well know, Indian country is very poor with
    the great majority of tribal communities characterized by severe
    unemployment, high poverty rates, ill-health, poor nutrition, and sub-
    standard housing. The availability and condition of reservation
    physical infrastructure is similarly lagging behind non-Indian
    communities. Indian communities lack roads and highways, electricity,
    potable water and other utilities, and most other physical
    infrastructure and this, in turn, serves as a strong disincentive to
    employers and investors who demand basic infrastructure prior to making
    investment commitments.
        As a direct result, Indian people are suffering because they lack
    these basic necessities and also because the lack of infrastructure
    keeps reservations economies mired in poverty and hopelessness. The
    tribal set-aside in the FAIR Act could unlock critical resources to
    being the long-term rebuilding of sustainable tribal homelands.
        In fiscal year 1999, the Administration proposes to give tribes
    more flexibility in how they use Department of Agriculture's rural
    development grants and loans for business and critical infrastructure
    businesses, a proposal NCAI fully supports. The fiscal year 1999 budget
    proposes $715 million for the Rural Community Advancement Program from
    which the set-aside to tribes is approximately $21.45 million. Securing
    adequate appropriations for these programs is the key to their success
    in Indian country. NCAI urges this subcommittee to ensure that these
    funds are appropriated.
                                   conclusion
        Mr. Chairman, we urge the Congress to fulfill its fiduciary duty to
    American Indians and Alaska Native people and to uphold the trust
    responsibility as well as preserve the Government-to-Government
    relationship, which includes the fulfillment of health, education and
    welfare needs of all Indian tribes in the United States. This
    responsibility should never be compromised or diminished because of any
    Congressional agenda or party platform promises. Tribes throughout the
    nation relinquished their lands as well as their rights to liberty and
    property in exchange for these on-going services as well as this trust
    responsibility. The President's fiscal year 1999 budget is a positive
    step towards acknowledging the fiduciary duty owed to tribes.
        We ask that the Congress consider the funding levels in the
    President's budget as the minimum funding levels required by Congress
    to maintain these services and the federal trust responsibility. The
    consensus of Indian country is that the federal government's budgetary
    process has failed to provide for effective services and minimum to
    raise the living standards of Indian communities consistent with non-
    lndian communities. In order for federal government to reasonably
    expect tribal government to truly achieve the self-determination, self-
    governance and self-sufficiency goals mutually identified by the
    federal government and the tribal governments will not be achieved
    unless meaningful increases are provided for Indian programs and
    services.
        Mr. Chairman, this concludes my statement. Thank you for allowing
    me to present for the record, on behalf of our member tribes, the
    National Congress of American Indians' initial comments regarding the
    President's fiscal year 1999 budget.
                                     ______

      Prepared Statement of Russell C. Notar, President and CEO, National
                        Cooperative Business Association
        Mr. Chairman, members of the committee, we appreciate the
    opportunity to present testimony as you prepare to consider
    appropriations for the Department of Agriculture for fiscal year 1999.
    I would like to discuss the Grants for Rural Cooperative Development
    program and the centers for cooperative development that receive
    funding from that program; and I intend to offer some strong arguments
    for increasing funding for the Grants program.
        The National Cooperative Business Association (NCBA) is proud of
    its role in assisting the creation of a network of rural cooperative
    development centers across the country. We know that Congress is
    equally as proud of its role in fostering a cooperative development
    support network throughout rural America. Congress and this
    Administration recognize the vital role that cooperatives play in
    providing economic opportunity to rural Americans.
        The program I am referring to was originally authorized by section
    2347 of the 1990 farm bill as a program of Grants for Technology
    Transfer and Cooperative Development. In fiscal year 1993, this
    committee began to provide funding for the program, and report language
    over the years has indicated your strong support for the concept of
    using this funding for the purpose of creating a network of centers for
    rural cooperative development.
        NCBA's members, along with other supporters of cooperatives around
    the nation, joined together as the National Rural Cooperative
    Development Task Force to advocate for support for a national network
    of centers and to develop the linkages among the centers and between
    the centers and local partners to sustain the network's development.
    NCBA also launched the CLUSA Institute for Cooperative Development to
    coordinate our development efforts and focus resources on cooperative
    economic development. The CLUSA Institute is now working with ten
    regional centers providing vital technical assistance and support for
    the development of cooperative enterprises in rural America. The CLUSA
    Institute also signed a partnership agreement last year with USDA's
    Cooperative Services program to coordinate strategies to assist rural
    cooperative development.
        In 1996, Congress demonstrated its strong commitment to the centers
    approach when it passed the FAIR Act, also known as the 1996 farm bill.
    The program is now called Grants for Rural Cooperative Development in
    section 747(c)(4) of Public Law 104-127. The program focuses on
    supporting ``nonprofit institutions for the purpose of enabling the
    institutions to establish and operate centers for rural cooperative
    development.'' It is authorized to provide funding at $50 million per
    year. The new statutory language defines the goals of these centers as
    ``facilitat[ing] the creation of jobs in rural areas through the
    development of new rural cooperatives, value added processing, and
    rural businesses.''
        With the support of funding received from the program over the past
    few years, the rural cooperative development centers we work with have
    demonstrated quantifiable results. Centers in different regions of the
    country have given crucial help to the formation of farmer cooperatives
    building value added processing facilities, community development
    credit unions, partnerships among cooperative financial institutions,
    flexible manufacturing networks, and cooperatives providing housing and
    child care for impoverished farmworkers.
        This coming year, centers will be involved in replicating successes
    they have achieved and breaking new ground in areas where cooperative
    development is needed. The electricity industry is rapidly being
    deregulated in every part of the country. Consumer-owned rural electric
    cooperatives have provided reliable and affordable electricity to rural
    Americans since the rural electrification program began directing
    federal resources for them in the 1930's. Once again, a small federal
    investment can provide essential assistance to develop consumer-owned
    energy purchasing cooperatives so that Americans are able to provide
    themselves with access to electricity. Centers are providing the
    opportunity for people to own and control these cooperative businesses.
        Other cooperative development projects include the formation of new
    value-added agricultural cooperatives, new child care cooperatives, and
    cooperative housing projects. Value-added agricultural cooperatives
    give farmers more of the consumer dollar. Child care cooperatives
    provide former welfare recipients and other low-income people the
    opportunity to reduce the cost of child care and give them control over
    how their child care facilities are operated. Cooperative housing gives
    seniors and others in rural areas the chance to save money on their
    housing and live in safe communities.
        The President's budget request has proposed allocating $1.7 million
    to this program. This would represent four straight years of level
    funding at a very low level indeed. In fiscal year 1996, 87 proposals
    submitted for program funding qualified for approval under USDA's
    selection criteria. The total amount of funding requested for these
    meritorious applications was $13 million. Last year, fewer applications
    were submitted because of an unusually short application period.
    However, a Cooperative Value-added Program within the Fund for Rural
    America drew 104 eligible applications totalling $19.4 million. Only
    $1.1 million could be distributed to 18 of those worthy projects.
        USDA's National Commission on Small Farms recently recommended that
    this program ``be increased by $10 million annually up to $20
    million.'' The Commission's report calls the program ``one of the few
    that supports rural cooperative development at the grassroots level.''
    The program is authorized to be funded at $50 million annually.
        We urge this committee to do what over 100 organizations are urging
    Congress and the Administration to do: increase funding for this
    valuable program. Mr. Chairman, I ask that the letter signed by those
    organizations be included in the record of this hearing along with my
    testimony.
        NCBA is a national cross-industry membership and trade association
    representing cooperatives--over 100 million Americans and 47,000
    businesses ranging in size from small buying clubs to businesses
    included in the Fortune 500. Founded in 1916 and known for many years
    as the Cooperative League of the USA (CLUSA), NCBA's membership
    includes cooperatives in the fields of housing, health care, finance,
    insurance, child care, agricultural marketing and supply, rural
    utilities and consumer goods and services, as well as associations of
    cooperatives. NCBA's mission is to develop, advance, and protect
    cooperative enterprise.
                                     ______

          Prepared Statement of the National Corn Growers Association
        We appreciate this opportunity to provide the Subcommittee with our
    views on the fiscal year 1999 agricultural appropriations bill. The
    National Corn Growers Association (NCGA) represents 30,000 corn growers
    in 47 states. For the fiscal year 1999 agricultural appropriations
    bill, the NCGA supports the Administration's budget request for
    increased funding for plant and animal genomics, especially the request
    for $10 million for the creation of a new, Food Genome, competitive
    grants program. The NCGA, also, supports the Administration's request
    for increased funding for ARS genomics research and increased funding
    for genomics under the National Research Initiative (NRI) competitive
    grants program. The plant component of these funds will be used for
    USDA's participation in the multi-agency National Plant Genome
    Initiative.
        While many Federal agricultural programs are important to the
    Nation's corn growers, the National Corn Growers Association believes
    that the future of the corn industry is written in corn's genetic code.
    The NCGA believes that the most important appropriations issue for
    fiscal year 1999 is funding for coordinated, plant genomics research.
    Genomics consists of mapping, sequencing, and analyzing genomes to
    determine the function of genes. The complete genetic makeup of any
    organism is known as its genome.
        In January 1998, the National Science and Technology Council issued
    an Interagency Working Group report on the National Plant Genome
    Initiative. The report stated that the time was right for the
    implementation of a comprehensive, five-year National Plant Genome
    Initiative to meet the major challenges that will face mankind in the
    21st Century. In the transmittal letter accompanying the report, the
    President's science advisor, Dr. John H. Gibbons, stated the following:

              The timing of this initiative is critical, since our
            international private sector partners are moving forward
            aggressively. A significant public sector program . . . carried
            out in partnership with industry will ensure plant genome data
            and materials are openly accessible to all scientists. It is a
            critical step toward promoting future scientific breakthroughs
            in plant biology and their practical application.

        To accomplish the short-term goals of the National Plant Genome
    Initiative that focus on building plant genome research infrastructure,
    the Interagency Working Group on Plant Genomes estimated that $400
    million in funding was needed, over five years, to meet the anticipated
    needs of the Initiative. The Administration's budget request for
    increased funding for USDA plant and animal genomics will help to
    ensure that the short-term and long-term goals of the National Plant
    Genome Initiative are met.
        The National Plant Genome Initiative will help scientists,
    geneticists, and plant breeders identify and utilize genes from corn
    and other economically significant crops that control important traits,
    such as nutritional value, stress tolerance, and resistance to pests.
    The far-reaching benefits of this Initiative include:
      --Protection of U.S. interests and access to important biotechnology
            and gene patents;
      --Revitalization of rural America due to a more robust agricultural
            sector;
      --Expansion of plant-based renewable resources for energy and raw
            materials;
      --Significant reductions in crop losses and reliance on pesticides
            through improved biological methods to control and alleviate
            serious industrial threats and targeted pests;
      --Improved yields and reduced crop losses caused by adverse
            environmental conditions such as heat, drought, and salt;
      --Improved nitrogen-use efficiency, thereby, limiting the potential
            for nitrates in the water supply;
      --Reduced environmental problems confronted by livestock producers,
            such as modifying the digestibility of phosphorous in feed corn
            to reduce the amount of phosphorous that enters our ground
            water;
      --Improved animal nutrition leading to healthier meat and increased
            meat productivity;
      --Reductions in the occurrence of mycotoxin contamination by
            significantly improving resistance to fungal infection;
      --Development of tailored hybrids with valuable specialty starches,
            oils, and protein content; and
      --Reduced worldwide malnutrition due to higher yielding and more
            nutritious crops.
        The National Plant Genome Initiative is critical to the long-term
    viability of U.S. agriculture. To compete in the global market, the
    U.S. must continually strive to efficiently and economically improve
    production capabilities--to maximize yield and combat serious threats
    from disease, pests, and climate changes--without harming the
    environment. Genomics research holds the key to achieving this goal.
        The National Corn Growers Association urges you to provide
    increased funding for plant and animal genomics research at USDA to
    ensure that our growers have the tools to meet the challenges and
    demands of the 21st century.
        We appreciate the opportunity to present our views and look forward
    to working with you.
                                     ______

          Prepared Statement of the National Cotton Council of America
     cotton industry funding--brief background on request for fiscal year
                                      1999
        Boll Weevil.--The industry requests fiscal year 1999 funding which
    would allow APHIS to provide up to 30 percent federal cost share for
    the operation of the eradication program. The industry also requests
    sufficient funds so USDA's Farm Service Agency can provide up to $50
    million in loans for boll weevil eradication activities in fiscal year
    1999. We also request funding be made available on a no-year basis. The
    industry's request for funding and loan authority will fill needs
    resulting from operation and continued expansion of the highly
    successful boll weevil eradication program. The industry also renews
    its request that the Committee instruct USDA to collect and make
    available statistics on acreage planted to cotton to ensure producer
    assessments can be collected fairly and efficiently.
        The accelerated plan for eradication of the boll weevil was
    initiated in fiscal year 1995. The plan calls for cost-share programs
    to be operated simultaneously in the Southeast, Mid-South and Texas-
    Oklahoma-New Mexico regions. In addition, the plan provides for
    completion of the eradication effort in Alabama/Middle Tennessee and
    Texas' Southern Rolling Plains zone.
        Funding for fiscal year 1997 was reduced from $18.084 million to
    $16.209 million in part because of the discontinuation of the program
    in east Mississippi and the Lower Rio Grande Valley. Funding for fiscal
    year 1998 was maintained at $16.209 million. For fiscal year 1999, the
    industry requests sufficient funding be provided to restore the federal
    cost share to as close to 30 percent as possible. The fiscal year 1998
    appropriation allowed APHIS to contribute an average of approximately
    10 percent cost share, however some areas did not receive any cost
    share. With declining prices and narrow margins, growers are struggling
    to finance the program. The 30 percent federal/70 percent grower cost
    share arrangement was critical to the timely completion and lasting
    success of the program in the Southeastern states and Arizona. Since
    1997 producers have approved referenda to restart the program in east
    Mississippi, to initiate the program in two additional regions of
    Mississippi and Southwest Tennessee, to initiate the program in the Red
    River Valley of Louisiana along with Southwest Arkansas, to initiate
    the programs in South Texas/Wintergarden and Texas' Rolling Plains
    Central zone. New Mexico and Oklahoma have passed referenda and plan to
    begin programs in the Fall of 1998. Arkansas producers in all but 4
    northeast counties have passed a vote to begin eradication with
    Mississippi's Delta and north Louisiana. Referenda covering additional
    areas of Mississippi's delta and Louisiana narrowly missed achieving
    the necessary 2/3's approval and will be reviewed for possible revotes
    in the future.
        To succeed, the program requires a highly coordinated program
    supplied with equipment and trained personnel. USDA/APHIS/PPQ, the
    federal action agency with unique expertise for conducting such
    programs, has been invaluable ever since the 1978 eradication trial in
    Virginia and North Carolina by providing leadership, experience, and
    direction to the Boll Weevil Eradication Program. Their involvement now
    is more important than ever as multiple overlapping programs are
    initiated.
        Elimination of the boll weevil places U.S. cotton producers in
    position to be cost competitive with any other cotton producing
    country. A strong cotton economy means strong state and local economies
    with more jobs and an increased tax base. The program is credited with
    generating $12 in economic activity for every $1 expended. It has also
    been documented to significantly reduce the cost of production and
    improve producer income. The environmental benefit has been documented
    in the Southeast by reduction of insecticide use by 40-85 percent. With
    the introduction of worm resistant Bt cotton, elimination of the boll
    weevil takes on added significance--particularly in the Delta regions
    of Mississippi, Louisiana and Arkansas and in Texas.
        Thanks to cooperation between regional Boll Weevil Eradication
    Foundations who coordinate program operations, and with APHIS, limited
    funds have been invested as effectively as possible. While the loan
    program initiated in 1997 to supplement the short fall in direct
    Federal cost share contributions has been helpful and is needed again
    in fiscal year 1999, some areas are under severe stress. In fact, some
    eradication zones are operating with little or no Federal cost share
    and minimal loan funds. Virtually all programs are operating with
    significantly less than the 30 percent Federal cost-share which was
    available to earlier program areas. According to calculations, the
    current average Federal share is approximately 10 percent.
        There has been excellent cooperation from FSA in initiating and
    operating the loan program. It would be extremely helpful if the loan
    program could be available on a no year basis so that any unused
    authority will not be lost. We also request that the Committee increase
    the available loan authority for fiscal year 1999 since expanded
    operations in Tennessee, Louisiana, Arkansas, Texas and New Mexico are
    expected to begin in Fall of 1998.
        The Committee included language in the fiscal year 1997
    appropriations measure urging USDA to assist with collection of acreage
    data so collections of boll weevil assessments could be made
    effectively, fairly and at the least possible cost. As of March 1998,
    USDA has not advised the Foundations that it would assist with the
    collection of acreage data. The Foundations lack the necessary
    facilities and resources to carry-out this function and ask the
    Committee to renew its instructions to USDA to provide assistance to
    the Foundations in collecting data critical to the administration and
    collection of assessments.
        Pink Bollworm Programs.--The pink bollworm is a serious economic
    pest in West Texas, New Mexico, Arizona and the southern desert valleys
    of California. California growers for more than two decades have joined
    USDA/APHIS in a cost share partnership known as the cooperative pink
    bollworm containment program. Through comprehensive cultural and
    biological controls, pink bollworm infestation has successfully been
    prevented in the San Joaquin Valley. Sterile moth releases are an
    essential component of this program. Use of bio-rational methods
    includes sterile adult moths, pheromone traps and cultural methods
    which allow control of the pink bollworm without use of pesticides.
    Over 6 million moths are reared and sterilized each day in Phoenix
    facilities owned by California producers. Equipment, methods and
    partial support for rearing and operations are furnished by APHIS.
        Investments in new rearing capacity will provide opportunities for
    USDA/APHIS/ARS, state organizations, and producers to demonstrate area-
    wide management of pink bollworm infested areas by integrating
    genetically engineered Bt cotton, cultural controls, making disruption
    with pheromones and sterile moth releases. Eradication is feasible
    using this technology in a highly coordinated, area-wide basis. The
    Council's Pink Bollworm Action Committee has endorsed the area-wide
    approach, and is currently developing an action plan to be used to
    communicate to producers about the proposed area wide pink bollworm
    management program.
        Funding for USDA/APHIS/PPQ pink bollworm programs has been cut by
    over 50 percent compared to fiscal year 1994 levels resulting in delays
    in completing area-wide demonstration programs in southern California.
    Demonstration of wide area control technology is essential before
    producers can consider expansion of the program into other infested
    areas in the U.S. Area wide management of the pink bollworm with
    maximum suppression, possibly eradication, is becoming a reality. The
    goal of reduced pesticide use, optimum use in Integrated Pest
    Management (IPM), and reduced production costs are within reach if the
    partnership between states, the Federal government and producers can be
    continued. California producers in the lower Colorado River Basin area
    will, in cooperation with USDA APHIS, California Department of Food and
    Agriculture, and California Cotton Pest Control Board, conduct a trial
    pink bollworm maximum suppression program including Bt cotton, cultural
    controls, pheromone treatments, and sterile moth releases during this
    growing season. Producers in other areas will carefully observe the
    results from this trial.
        The industry requests that fiscal year 1999 base funding be
    maintained at fiscal year 1998 level of $1.069 million. If producers
    continue to request assistance for conduct, supervision and cost
    sharing for areawide pink bollworm programs, the industry will request
    an increase in funding likely beginning in fiscal year 2000.
        Silverleaf Whitefly.--The whitefly is a cotton pest of significant
    importance, particularly in Arizona, California and Texas, causing
    yield, disease, grade and contamination losses for growers. Sticky
    cotton, caused by whitefly honeydew is a serious problem for textile
    mills who at the least impose price discounts and in some cases will
    refuse cotton originating in areas with whitefly infestation. The
    Council strongly supports funding the continuation and extension of
    USDA's Whitefly Research, Action and Technology Transfer Plan which
    calls for a multi-disciplinary approach consisting of basic research,
    biological controls, integrated pest management, plant breeding for
    resistance, and insecticide controls with expedited technology
    transfer.
        Market Access Program (MAP) and Foreign Market Development (FMD).--
    The cotton industry has consistently employed a long-term export market
    development strategy. Cotton Council International, the overseas
    promotion arm of the U.S. cotton industry, is a participant in the
    Market Access Program (MAP) and Foreign Market Development Program
    (FMD). Activities carried-out under MAP and FMD have been responsible
    for increased export sales of raw cotton and cotton products including
    cotton textiles. The U.S. cotton promotions have not only increased
    sales, they have generated more than $2.50 in matching contributions
    for every $1 spent. In operating programs under MAP, the industry
    insists on the following: (1) purchases of U.S. cotton and textile
    products must be documented, (2) sales impact must be well-documented,
    (3) no funds are provided to foreign or domestic firms, (4) matching
    contributions must be documented, and (5) no funds may be used to
    promote exports to the United States.
        Raw cotton exports now average over 8 million bales annually and
    approach $4 billion in value. Exports of value-added cotton products
    have quadrupled and add another $4 billion to the value of overall
    cotton exports--creating thousands of jobs. The cotton industry urges
    that $90 million be made available for MAP for fiscal year 1999. We
    also urge that FAS be provided sufficient funds so the FMD program can
    be operated at the same level in fiscal year 1999 as in fiscal year
    1998. The FMD program is an important long-term component of a
    successful market development effort for U.S. agriculture. CCI utilizes
    FMD funds to conduct education activities which help build long term
    relations with potential customers for U.S. cotton and cotton products.
    The industry also strongly supports adequate funding so cover
    activities of FAS personnel who carry-out important export enhancement
    functions at headquarters and abroad.
        Export Credit Guarantee Programs.--Congressional foresight in
    authorizing use of $5.9 billion for GSM-102 export credit guarantees
    and USDA's timely employment ofthat program has allowed U.S. exporters
    to preserve sales to Asia. Cancellation ofthese sales would have had a
    devastating effect on exporters and farmers. For fiscal year 1999, GSM-
    102 will again play a critical role in facilitating U.S. export sales.
        Valued Added/Quality Cotton Textile Research.--The competitiveness
    of agriculture depends not only on efficient production, but value
    added processes as well. ARS labs have been forced to sharply reduce
    support staff, equipment purchases, and scientist positions due to
    rising costs and shrinking budgets. The industry urges continuation of
    value-added quality oriented research at the SRRC in New Orleans and at
    Clemson University.
        Germplasm Enhancement.--The United States cotton germplasm
    collection is maintained at the ARS Southern Crops Research Laboratory
    in College Station, Texas. This collection serves public and private
    researchers nationwide as they attempt to meet increasingly serious
    challenges for yields, quality and solutions to environmental problems.
        The ARS has developed a long-range comprehensive plan for
    revitalizing the germplasm enhancement program at College Station.
    While we fully support the overall ARS plan, the most urgent need is
    for support of the germplasm enhancement and evaluation program for
    winter increases.
        To meet crucial short term operational needs for the germplasm
    program, ARS has temporarily shifted funds for other high priority
    research projects.
        Oilseed Processing and Quality Research.--The USDA ARS Southern
    Regional Research Center (SRRC) in New Orleans has a long history of
    research for adding value to commodities including improvements in
    processing and utilization of cottonseed and its products. In addition
    to its fiber research, the ARS has developed, in cooperation with the
    crushing industry, a set of goals for improving process efficiency,
    maintaining product quality and enhancing food safety.
        Specifically, research at the SRRC is working in three areas
    important to cotton and other oil seeds. First, is research to remove
    gossypol, a naturally occurring component of cotton seeds which is
    toxic at high levels to some animals. Removing gossypol from cotton
    seed and its products is technologically feasible, however research is
    needed to determine optimum processes of removal. The ability to market
    a high quality protein product for animal consumption is a key
    ingredient to enhancing markets of U.S. cotton products at home and
    abroad.
        Aflatoxin control is also an important part of the SRRC research
    goals. Eliminating food and feed risks of the mold which produces
    aflatoxin is a high priority for cotton, peanuts, corn, tree nuts and
    other crops. Pioneering research conducted by researchers in New
    Orleans is leading the way to solving this multi-million dollar problem
    of U.S. agriculture.
        Finally, work to enhance processing efficiency while assuring
    environmental responsibility is the third component of the SRRC mission
    in oilseed utilization research. Developing new and novel approaches
    for extraction of oil while meeting new environmental objectives is
    important for cotton and other oil seed commodities.
        We request that Congress continue to recognize the USDA/ARS work at
    the Southern Regional Research Center for its contribution to
    agriculture and ask that the unit continue to be funded at least the
    current level.
        Plant Science Research.--Agricultural Research conducted by the in-
    house program of USDA's ARS and the State Agricultural Experiment
    Stations with CSREES support is essential for the long term viability
    of agriculture. While we are strongly supportive of the ARS and CSREES
    we also recognize the benefits of the basic research--sometimes at the
    molecular level--made possible by the National Research Initiative
    (NRI). The NRI is a key component of the USDA's research portfolio and
    complements other programs in the ARS and CSREES.
        We appreciate your strong record of support for vital plant science
    research made possible through the NRI, the ARS and CSREES.
        PM-10.--A variety of studies allege that agriculture is a major
    source of PM-10 emissions. The cotton ginning industry is already
    making significant investments to reduce emissions and develop air
    quality compliance plans. The research conducted by USDA is critically
    important to assist Sinners and producers in making cost effective
    decisions. We urge funding for CSREES' PM-10 programs be continued at
    not less that fiscal year 1998 levels.
        CRP, WRP, EQIP.--The new farm bill extends authority for the
    operation of the CRP and WRP. It also authorizes a new program, EQIP,
    to provide assistance for projects designed to protect water, soil and
    related resources. We urge funding be made available at levels
    necessary to operate these important programs without threatening other
    important cotton specific programs.
        FSA Offices.--The industry is concerned that the ability of FSA to
    deliver critical services could be impaired by further office closures
    and personnel reductions. USDA has already implemented a significant
    re-organization as a result of 1994 legislation. The cotton industry
    urges the Secretary to consult with all affected parties to ensure that
    further consolidation, closures and personnel reductions do not
    jeopardize the agency's ability to deliver services to farmers.
        Ginning Labs (ARS).--The industry requests the Committee to urge
    ARS officials to provide sufficient funds to the ginning labs at
    Stoneville, Mesilla Park and Lubbock so the important work at these
    facilities can be continued and enhanced. Each lab conducts research
    which is important to gins and producers. Each lab has unique
    capabilities and care has been taken to ensure there is no duplication
    of effort. The fiscal year 1998 appropriations measure provided funds
    specifically to improve research capabilities at the Lubbock lab. We
    ask that language be included in the fiscal year 1999 legislation to
    ensure ARS continues to make these funds available to the Lubbock
    facility.
        Office of Pest Management Programs.--NCC supported the role USDA
    was given when the new Food Quality Protection Act was passed. We were
    encouraged that the Department announced the creation of the Office of
    Pest Management Policy, but continue to be concerned that
    responsibilities under FQPA are not being met expeditiously enough to
    assure cotton producers do not lose access to important crop protection
    tools (such as the organophosphate insecticides) unnecessarily. The
    OPMP should be funded at the $2.6 requested and to assure the greatest
    efficiency all requirements, including the Integrated Pest Management
    Coordinators, should be coordinated through that office.
                                     ______

              Prepared Statement of the National Dry Bean Council
                             ndbc executive summary
        Phaseolus beans are a unique short season, high value food crop
    that niche will into shorter production seasons of the northern and
    intermountain states, providing vital alternatives to growers where
    crop options are limited. Dry beans are grown on 2M acres with an
    annual production of 32M hundred weight in 1991 valued at $650M. Snap
    beans, both processed and fresh market, are produced on 300,000 acres
    with an estimated value of $200M.
        Beans offer the consumer a healthy, tasty inexpensive food choice
    as either dry bean seed or green bean pods (snap beans). Dry beans are
    a protein rich source of complex carbohydrates and fiber, available in
    a variety of canned and dry products differing in color, size, shape,
    and flavor. Snap beans are rich in vitamins and minerals but low in fat
    and calories. Clinical studies have documented that the soluble fiber
    of dry bean seed can reduce serum cholesterol, and the National
    Research Council suggests that beans will be the fiber food of the
    1990's. Beans are currently endorsed by the American Heart Association,
    the American Cancer Society, and the American Diabetes Association.
    Sixty percent of the U.S. dry bean crop is processed as canned baked
    beans with a value of $900M. Currently 40 percent of U.S. production is
    exported, with certain commercial classes grown exclusively for export.
    Their value as an acceptable protein staple in famine relief is being
    recognized.
        The research to improve beans is achieved through a highly
    integrated system involving state, federal, and industry scientists.
    Currently states furnish 24 scientist years (SY's) and the federal
    Agricultural Research Service (ARS) furnishes 5 SY's. Industry
    contributes very significantly to snap bean research, but it is also
    actively involved in dry bean improvement.
        Beans need to be improved in three primary research areas:
    pathology, quality genetics, and biotechnology, if they are to remain a
    viable crop alternative and industry in the 20 production states. The
    research must remain multidisciplinary, occur across geographic areas,
    and continue to foster collaboration among states, ARS, and industry.
    Three critical USDA-ARS positions involved in two of the primary
    research areas; bacteriology (E. Lansing, MI), culinary and canning
    quality genetics (E. Lansing, MI), and fungal pathology (Beltsville,
    MD); need additional funding. A new ARS position, located in the Plains
    states, focusing on molecular technology for bean improvement would
    address the third research area.
        To achieve these critical research goals, the National Bean
    Research Task Force recommends:
        1. No further reduction in current level of ARS support to bean
    research.
        2. Maintain the current ARS bean vieral pathology position at
    Prosser, WA.
        3. Appropriate an additional $80,000 in fiscal year 1999 for the
    under funded ARS bean fungal pathology position at Beltsville, MD.
        4. Appropriate an additional $300,000 in fiscal year 1999 for the
    ARS Sugar Beet and Bean Research Unit, Michigan State University, East
    Lansing, MI.
        Implementation of these recommendations would be a positive
    commitment to the future of bean research and the bean industry in the
    U.S. It would create more cooperation between federal, state, and
    private sections in their goal towards bean production improvement and
    utilization. The ultimate beneficiaries would be the American consumer
    with a reliable economic and nutritional food source and the American
    taxpayer with positive returns on balance of trade.
                     strategic plan for u.s. bean research
        Dry & Snap bean (Phaseolus vulgaris L.) are versatile short season,
    high value food crops that niche well into shorter production seasons
    of the northern and intermountain states, providing vital alternatives
    to growers where crop options are limited. Beans offer the consumer a
    healthy, tasty and inexpensive food choice as either low fat, low
    calories vitamin/mineral rich green bean pods or as a protein rich
    source of complex carbohydrates and fiber in a variety of canned and
    dry bean products differing in color, size, shape, and flavor. Clinical
    studies have documented that the soluble fiber or pectin content of dry
    bean seed has potent effects in the prevention and treatment of chronic
    medical conditions such as cardiovascular disease, diabetes mellitus,
    and obesity, hypertension, cancer and diseases of the digestive tract.
    Beans are currently endorsed by the American Heart Association, the
    American Cancer Society, and the American Diabetes Association. The
    beans are touted by these Agencies as the fiber food of the 1990's. The
    canning and freezing industry for both seed and pod types is diverse
    and located across the country offering employment outside the 20 major
    production states. The same processing industry which cans over half
    the dry bean crop as beans in either clear brine, sauce with pork, or
    chili has seen an increase in production in the last 10 years of 10
    million cases. This volume represents an increase of $160 million to a
    current value in excess of $900 million.
    Production:
        Phaseolus dry edible beans are planted on approximately 1.5 million
    acres (1.1-2.6) in the U.S. Production fluctuates around 26.7 million
    hundred weight (cwt) annually, ranging from 19 million cwt in 1988 to
    over 32 million cwt in 1990, 1991, and 1995. On-farm value of this crop
    ranges from $350 to $700 million, depending on the season and price.
    The major production states ranked in order of acreage are: ND, MI, CO,
    NE, CA, ID, MN, WY, WA, NY, and KS. Ten dry bean commercial classes are
    produced in the U.S. and these are differentiated by color, size and
    shape of the bean.
        In addition to production of phaseolus dry beans, green bean, or
    snap bean production occurs in several regions of the U.S.
    (approximately 220,000 acres), with an estimated value of $110M
    annually. States leading in snap bean production for processing are WI,
    OR, IL, MI, NY and ID. Snap beans for fresh market are grown primarily
    in FL, with smaller acreage in NJ, AR, and TN. Snap beans for fresh
    market are grown on approximately 80,000 acres nationwide with an
    additional value of $80 million annually.
    Utilization and Exportation:
        Approximately 60 percent of the total U.S. dry bean production is
    consumed nationally. Over 90 percent of the navy bean crop is processed
    as canned baked beans, while only 20 percent of the pinto bean market
    class is processed as a canned food. Dry bean consumption has increased
    from 5.7 to 7.2 lbs since 1984. This represents a 26 percent increase
    which is largely due to the recognition of the food and health value of
    beans.
        A large share of the U.S. dry bean production is now targeted at
    export markets. Exports peaked in the early 1980's at over 12 million
    cwt. Currently, 40 percent of the U.S. production is exported with
    certain commercial classes grown exclusively for export. Cultural
    preferences in certain export markets for specific commercial classes
    of dry bean allows for diversification of U.S. dry bean agricultural
    production. Bean exports have played an important role in reducing the
    balance of payment deficit the U.S. suffers in world trade. Bean
    exports are becoming increasingly important because they are an
    indispensable protein source in Latin America and many developing
    countries particularly those in East Africa. Their value in famine
    relief in these countries is vital. The array of seed types currently
    grown in the U.S. makes beans an important choice to meet the energy
    and protein needs of estimated 21 million people at risk of death from
    starvation and disease in Central Africa.
                      current scope of u.s. bean research
        A major strength of the U.S. economy is its agricultural
    production. Stable U.S. agriculture production helps maintain a vibrant
    economy because food costs to consumers can be kept low yet still
    profitable to the producer. In addition, agricultural exports
    contribute substantially to reduce trade deficits. Continued U.S.
    dominance in agriculture will require major efforts to improve both
    crop productivity and quality while stabilizing or improving the
    physical environment. This process will allow U.S. agriculture to
    supply both domestic and world markets with affordable, high quality
    products and preserve precious natural resources for future
    generations. These efforts can only be accomplished by investing in
    strong agricultural research technologies. Beans can only continue to
    be a vital part of the U.S. agricultural economy if research to keep
    them competitive with other commodities continues.
        The number of state and federal scientist years (SY's) devoted to
    bean research in the U.S. in all disciplines is approximately 27 (20
    SY's--dry beans, 7 SY's--snap beans). The specific locations of the
    larger programs are shown on the attached table, along with the
    agencies involved, SY's, and primary research emphasis at each
    location. A network of federally-supported USDA positions were
    established through the Agricultural Research Service (ARS) in the
    1920's to support both public and private programs dedicated to dry
    bean and snap bean research. The ARS research mission for beans is to
    solve specific high priority problems of a national scope. A national
    research mission cannot be addressed by any single Agricultural
    Experiment Station. Moreover, since the bean industry is regionalized,
    ARS is in a better position to develop the necessary research teams to
    address problems that extend far and beyond state and regional
    boundaries. The national leadership extended by ARS scientists in areas
    of pathology, germplasm maintenance and enhancement and food quality
    genetics has strengthened the entire bean industry nationally. The
    present national bean research effort is operating at a minimal level
    but is effective because of the unique collaboration among state,
    federal and industry partners, fostered in part by the Western Regional
    W-150 project and nurseries and the Phaseolus Crop Advisory Committee.
        A National Bean Research Task Force (NBRTF) has been formed to
    identify needs and concerns within the research community and to make
    recommendations to correct the deficiencies. The task force recognizes
    and appreciates the continued federal support for the ARS bean research
    positions at Prosser, WA; Beltsville, MD; and Mayaguez, PR, and for the
    increase in funding for the ARS food quality genetics position at E.
    Lansing, MI, but NBRTF is concerned by the lack of critical research
    areas of bean pathology. New and more virulent strains of bean
    pathogens have made a major onslaught in several bean production areas.
    There is critical need for research to characterize the new pathogens
    and develop strategies for resistance in the plant.
        The NBRTF requests that the National Dry Bean Council (NDBC) lobby
    for support for federally supported research programs which are
    currently under funded and for the creation of a new position to solve
    critical problems caused by foliar, bacterial and fungal pathogens.
    usda-agricultural research service bean research workers and facilities
    Goals and Recommendations for fiscal year 1999:
        The National Dry Bean Council (NDBC) is urging Congress to approve
    funding in fiscal year 1999 for the USDA Agricultural Research Service
    (ARS) Plant Science Program that increases funding from fiscal year
    1998 levels to the $300,000 required by ARS to fund a CRIS project.
    This will enable the ARS to provide adequate support for these bean
    scientists.
        Specifically, the NDBC is recommending Congress address the
    following priority needs in bean research.
    Operations Budget:
        1. Maintain the current ARS bean viral pathology position at
    Prosser, WA with the $300,000 level of funding required by ARS to
    maintain a viable CRIS project. This position will enable ARS to
    effectively conduct research on common bean virus problems and
    resistance breeding and expand activities on bean root rots and allow
    ARS to address critical needs pertaining to disease resistance in the
    major bean seed production area in the U.S.
        2. Appropriate an additional $80,000 in fiscal year 1999 for the
    under funded ARS bean fungal pathology position at Beltsville, MD. The
    appropriation will bring the funding of this position up to the
    $300,000 level required by ARS to maintain a viable CRIS project and
    enable the scientist to effectively conduct his research on bean rust
    pathology and genetics and expand activities on bean golden mosaic
    virus recently introduced into the U.S. and allow the ARS to
    successfully refill the position upon the retirement of the scientist.
        3. Appropriate an additional $300,000 in fiscal year 1999 for the
    ARS Sugar Beet and Bean Research Unit, Michigan State University, East
    Lansing, MI to correct a critical federal need in bean pathology,
    particularly in the area of foliar bacterial and fungal pathogens
    namely common blight, halo blight, bacterial brown spot, anthracnose,
    and white mold disease pathogens. The appropriation will enable the
    hiring of a bean bacteriologist/microbiologist to conduct the needed
    work pursued formerly by the late Dr. Saettler in the area of bean
    pathology. This critical position has been vacant for several years.
    Background:
        A well-balanced approach to the nations's bean research needs
    requires the maintenance of a team of ARS bean research workers in
    diverse disciplines including genetics, germplasm enhancement,
    germplasm evaluation, pathology, quality, and molecular biology. In
    order to maintain an adequate team of ARS bean research workers, it is
    important that ARS research workers presently engaged in bean research
    not be redirected to other crops and that vacancies created by
    retirements and deaths be filled and these programs maintained for bean
    research.
        During the period from 1970 to 1990, the number as USDA-ARS bean
    research workers declined substantially, from 13.0 to 5.0 positions, a
    decrease of 56 percent. This decline severely hampered the ability of
    ARS to meet national bean research needs, and the SAES to meet state
    bean research needs.
        The total ARS budget increased by 67 percent from fiscal year 1980
    to fiscal year 1990 while the bean appropriation remained constant at
    just under $1.6M. Total bean appropriations as a percent of total ARS
    budget in fiscal year 1980 was 0.43 percent which dropped to 0.25
    percent by fiscal year 1990.
        Unfortunately, the number of ARS bean researchers is again on the
    decline, due to the untimely death of Dr. Saettler in East Lansing, MI
    and the impending retirements of incumbents at the USDA, Prosser, WA
    and Beltsville, MD facilities. Action by Congress is needed to restore
    the national ARS bean research team to a level that can meet the
    nation's bean research needs.
        In a real sense, the bean industry (dry and snap beans), although
    vitally important in specific other geographic regions, does not have
    the resources of the major crops to establish pathological or basic
    mission oriented expertise in every region where beans are grown. The
    USDA can mend this void by maintaining the vital network of scientists
    currently working and dealing with important regional pathogens,
    problems and opportunities which are of a national importance.
         usda/ars bean pathology research position, prosser, washington
        The ARS BEAN Project at Prosser, Washington has been long standing
    with a presence under the legacies of D.W. Burke and M.J. Silbernagel.
    Under the leadership of these scientists, programs were developed to
    study the pathogenic variability of common bean mosaic virus (BCMV) and
    the introgression of diverse resistance genes into snap and dry bean
    germplasm, and the development of screening techniques for germplasm
    enhancement of root rot complex pathogens. The ARS Prosser, WA bean
    project has released over 10 snap bean lines and 18 dry bean lines in
    six distinct market classes. A number of the dry bean lines have become
    successful dry bean varieties in the West and Intermountain states (CO,
    ID, and WA) and the upper-Midwest (ND). The dry bean varieties
    developed by ARS, Prosser, WA have generated about $1 billion in income
    to farmers in the Pacific NW over the past 20 years. Othello pinto bean
    is grown on about 50 percent of the pinto acreage in the west and
    intermountain region and has generate $68 million revenue in the state
    of Idaho in the last 5 years. The ARS Prosser, WA bean project is
    currently under the leadership of Dr. Phillip Miklas who in addition to
    screening for root rot and introgressing genes form diverse germplasm,
    is conduction basic genetic studies on the resistance to different
    strains of BCMV, bacterial blight, rust and white mold. Mr. Miklas has
    developed effective cooperative research efforts with ARS and SAES
    scientists at several locations in the U.S. and Puerto Rico, and
    commercial plant breeders in CA and ID. Over 90 percent of the
    foundation and certified bean seed (dry and garden) is produced in
    California, Washington and Idaho. The ARS bean project at Prosser, WA
    has saved the Western bean seed industry considerable sums of money
    that could have been lost to disease epidemics. Over the years the
    facilities at Prosser, Washington have evolved to a point where there
    is an excellent infrastructure in which dry bean disease and germplasm
    enhancement research is conducted productively, efficiently, and has
    garnered a wide customer base. A rapport has been established with this
    customer base that is extremely supportive of ARS research efforts. In
    addition, nurseries have been established that facilitate long term
    research on the complex of bean root rot organisms and curly top virus.
    Recommendation:
        In order to meet the President's budget requirements for ARS in
    fiscal year 1998, the Vegetable & Forage Crops production Research unit
    has been slated for closure. Under this plan, there is talk of moving
    bean research to Pullman, WA. The NDBC calls on ARS to maintain bean
    research at Prosser, WA and fund this project at $300,000, the ARS
    guideline for programs. Prosser is near the bean production area and
    several long term nurseries have been established at or near Prosser to
    conduct bean pathology research. Many of the facilities at the Prosser
    Station have been developed to conduct bean research and are highly
    suitable to conduct the ``cutting-edge'' research that is fundamental
    to Dr. Mikias' CRIS. There are sufficient greenhouses to conduct the
    genetic introgression work and disease screening efforts.
        The NDBC thinks its at a ``water shed'' in regards to federal
    support for bean research. Over the years ARS bean research positions
    have eroded to the point the NDBC wonders whether a critical mass of
    federal scientific expertise exists in the USA to conduct the type of
    research vitally needed to keep our industry healthy.
        The NDBC urges Congress to maintain this vital ARS position and
    insure funding at $300,000 in fiscal year 1999 for this position.
     usda/ars bean fungal pathology research position, beltsville, maryland
        Dr. J.R. Stavely, full-time ARS Research Plant Pathologist at
    Beltsville, devotes 100 percent of his research effort to the study of
    fungal pathogens attacking beans. Historically, Dr. Stavely has studied
    the foliar fungal pathogen causing rust disease in dry and snap beans.
    Dr. Stavely has developed important technologies for introgressing rust
    resistant genes into adapted and useful germplasm. He is also studying
    the new viral disease, Bean Golden Mosaic Virus, introduced in 1993 in
    South Florida. This disease has the potential to ``wipe-out'' the snap
    bean industry in Florida.
        This highly productive ARS project has released 43 processing and
    15 fresh market snap beans and 24 dry bean germplasm lines in three
    market classes. Research has focused on the introgression and
    pyramiding of resistance genes into both snap and dry beans as the most
    effective control of the variable rust pathogen. This long-term
    germplasm enhancement project involves identification of novel sources
    of resistance present in the USDA Plant Introduction collection,
    incorporation of these resistance genes, both individually and as
    groups, into snap bean and several dry bean market classes, and field
    evaluation of elite material in major production areas. In addition,
    basic plant pathological studies on the epidemiology and genetics of
    the rust fungus are conducted. The current project leader cooperates
    effectively with other USDA scientists, SAES researchers in at least
    nine states, and commercial plant breeders. This position serves the
    national needs for bean research in the area of fungal pathogens
    attacking beans and provides leadership to SAES and industry and snap
    bean breeding efforts.
        Dr. Stavely's position is currently under funded, with a major
    portion of the funding utilized for salaries and greenhouse rental,
    leaving very little for research operating costs. An increase
    appropriation of $80,000 is needed to enable Dr. Stavely to effectively
    conduct his research, by bringing his CRIS into line with the $300,000
    level of funding required by USDA.
    Recommendation:
        The NDBC calls on ARS to maintain the program in bean rust
    pathology germplasm enhancement research at Beltsville, MD and expand
    the program into anthracnose disease pathology and study the bean
    golden mosaic virus disease. Increased funding to current ARS level of
    $300,000 per year would allow this project to perform at optimum
    efficiency to develop improved rust, anthracnose, and bean golden
    mosaic resistant germplasm lines. An increased emphasis on the genetics
    of pathogen virulence will offer insights on the development of
    strategies needed to obtain stable rust and broad based genetic
    resistance to variable fungal and viral pathogens.
        The NDBC urges Congress to appropriate an additional $80,000 in
    fiscal year 1999 for this position to bring the funding level to the
    $300,000 required by ARS to maintain a CRIS.
       usda/ars bean pathology research position, east lansing, michigan
        There is a urgent need to create a new position in bean pathology
    at E. Lansing, MI recognizing that an increase in bacterial diseases is
    negatively affecting bean production in the Midwest and intermountain
    areas. An ARS Plant Pathology position addressing national problems
    caused by foliar bacterial pathogens was closed-out in 1992 due to the
    untimely death of then incumbent (Dr. A.W. Saettler). There are no
    funds to ``backfill'' this position. Dr. Saettler worked to determine
    the molecular and genetic basis of host and non-host resistance to the
    bean common bacterial blight pathogen, Xanthomonas campestris pv.
    phaseoli, develop molecular and immunological diagnostics to determine
    the epidemiology and population biology of common and halo bacterial
    blights, and design alternative control strategies, including
    biological, chemical, and cultural practices that will complement the
    move toward sustainable agricultural practices.
        Dr. Saettler was an international expert on foliar bacterial
    pathogens of beans. he was the only bean pathologist in the USA (either
    SAES or Federal) that had an active and comprehensive research program
    on foliar bacterial pathogens of beans. Dr. Saettler's research
    contributed positively and significantly to several of today's highest
    national priorities as established by the National Research Council. In
    that position at E. Lansing, Dr. Saettler contributed to the
    development of 17 dry bean cultivars in five major market classes and
    he actively cooperated with other state and private bean research
    programs. The bean research community needs a pathologist working full
    time on foliar bacterial pathogens. The work could best be done by ARS
    because of the national scope of the problem. This position must be
    funded at the $300,000 level to meet ARS guidelines for CRIS positions.
    Recommendation:
        The NDBC calls on ARS to create a new position in bean pathology at
    East Lansing, MI, at the level of funding commensurate with ARS
    guidelines. A qualified scientist should be recruited to fill the bean
    bacteriology position as soon as possible.
        The NDBC urges Congress to appropriate an additional $300,000 in
    fiscal year 1999 for the creation of the new position.

      LOCATION OF DRY AND SNAP BEAN PROGRAMS, SCIENTIST YEARS (SY) INVOLVED, AND KEY WORDS FOR MAJOR RESEARCH AREAS
    ----------------------------------------------------------------------------------------------------------------
                  Location                      Agency         SY                  Major research areas
    ----------------------------------------------------------------------------------------------------------------
    Dry Beans:
        Beltsville, MD..................  ARS..............     0.5  Pathology, Rust Variability.
        Davis, CA.......................  State............     2.5  Breeding, Mapping, Agronomy, Pathology.
        E. Lansing, MI..................  ARS..............     1.0  Quality Genetics State.
                                          State............     1.5  Breeding, Processing Quality, Agronomy.
        Fargo, ND.......................  State............     3.0  Breeding, Pathology, Quality, Molecular.
        Ft. Collins, CO.................  State............     2.0  Breeding Pathology.
        Gainesville, FL.................  State............     0.4  Molecular Mapping.
        Ithaca, NY......................  State............     0.4  Processing Quality.
        Lincoln, NE.....................  State............     2.0  Breeding, Pathology.
        Madison, WI.....................  State............     0.3  Pathology, Molecular.
        Mayaguez, PR....................  ARS..............     1.0  Germplasm Enhancement State.
                                          State............     1.5  Breeding, Genetics, Pathology.
        Pullman, WA.....................  ARS..............     0.4  Germplasm Collection State.
                                          State............     0.3  Nutrition.
        Prosser, WA.....................  ARS..............     0.5  Pathology, Breeding.
        Scottsbluff, N. Platte, NE......  State............     0.7  Agronomy, Pathology.
        St. Paul, MN....................  State............     0.4  Genetics, N-fixation.
        Twin Falls, ID..................  State............     1.5  Breeding, COB Nursery, Pathology.
    Snap Beans:
        Beltsville, MD..................  ARS..............     0.5  Pathology, Rust Variability.
        Charleston, SC..................  ARS..............     0.5  Breeding, Adaptation Nursery.
        Corvallis, OR...................  State............     2.0  Genetics, Interspecific, Breeding.
        Gainesville, FL.................  State............     1.2  Breeding, Pathology.
        Geneva, NY......................  State............     1.0  Breeding, Genetics, Pathology, Mapping.
        Madison, WI.....................  State............     1.0  Breeding, Molecular.
        Prosser, WA.....................  ARS..............     0.5  Breeding, Pathology.
        St. Paul, MN....................  State............     0.4  Genetics.
                                                            --------
          Total.........................  ARS..............     4.9
                                          State............    22.1
    ----------------------------------------------------------------------------------------------------------------

                                     ______

             Prepared Statement of the National Easter Seal Society
      easter seal recommendations for usda agrability program fiscal year
                              1999 appropriations
        The National Easter Seal Society appreciates the opportunity to
    report on the notable accomplishments of the USDA Cooperative State
    Research, Education, and Extension Service (CSREES) AgrAbility Program
    and recommend that funding for the AgrAbility Program be increased to
    $4.6 million in fiscal year 1999.
        The AgrAbility Program is an essential, unduplicated, hands-on
    resource for farmers, ranchers, and farmworkers with disabilities. It
    is the only USDA program dedicated exclusively to helping disabled
    agricultural producers. It demonstrates the value of public-private
    partnership by securing donations of funds, talent, and materials to
    magnify the impact of a modest federal investment. Small, but damaging,
    reductions in funding over the past two years resulted in a fiscal year
    1998 appropriation of $1.91 million, down from $2.0 million in 1995.
        Your colleagues on the Agriculture Committee expressed strong
    bipartisan support for this important program in the ``Agricultural
    Research, Extension, and Education Reform Act of 1997'' that is
    currently in conference. The Committee included language, that while
    strongly supportive of the work of AgrAbility, expressed dismay at the
    increased waiting lists, strain on staff members, and unserved states
    that still seek funding every year and are unable to offer AgrAbility
    services due to funding limitations. In the 1990 Farm Bill, a funding
    floor of $150,000 per state was set to assure that the state programs
    were successfully implemented. However, because funding has not
    approached the $6 million authorized level, state projects have been
    funded at only $85,000 per state. In the reauthorization, the Committee
    reaffirmed a commitment to that $150,000 per state floor, and Easter
    Seals strongly supports the need to fully fund state programs to assure
    that they continue to be effective for farmers with disabilities.
    Without a concurrent increase in appropriations, fully funding state
    projects at $150,000 per state would result of a loss of almost half of
    the existing AgrAbility projects. The fiscal year 1999 request of $4.6
    million would bring all current states up to the $150,000 level and
    would allow seven currently unserved states to implement AgrAbility
    programs.
                            disability & agriculture
        Agricultural production is one of the nation's most hazardous
    occupations. Each year, approximately 200,000 people working in
    agriculture experience injuries that limit their ability to perform
    essential farm tasks. Tens of thousands more become disabled as a
    result of non-farm injuries, illnesses, other health conditions, and
    the aging process. Nationwide, approximately 500,000 agricultural
    workers have physical disabilities that prevent them from performing
    one or more essential farm tasks.
        For many of these individuals, the presence of a disability
    jeopardizes their rural and agricultural futures. Rural isolation, a
    tradition of self-reliance, and gaps in rural service delivery systems
    frequently prevent agricultural workers with disabilities from taking
    advantage of growing expertise in modifying farm operations, adapting
    equipment, promoting farmstead accessibility, and using assistive
    technologies to safely accommodate disability in agricultural and rural
    settings. Yet, with some assistance, the majority of disabled
    agricultural workers can continue to earn their livelihoods in
    agriculture and participate fully in rural community life.
                    agrability's role and record of success
        The AgrAbility Program was established under the 1990 Farm Bill in
    response to the needs of farmers with disabilities. The Farm Bill
    authorizes the Secretary of Agriculture to make grants to Extension
    Services for conducting collaborative education and assistance programs
    for farmers with disabilities through state demonstration projects and
    related national training, technical assistance, and information
    dissemination. Easter Seals is proud to be a partner with Purdue
    University's Breaking New Ground Program in providing the national
    training and technical assistance portion of AgrAbility. Thousands of
    people in states with and without state AgrAbility projects are aided
    through this initiative. For example, in New Mexico, 38 farmers and
    agricultural and disability professionals have received direct
    assistance and information on farming and disability in 1997 from the
    national project.
        AgrAbility combines the know-how of Extension Service and national
    disability organizations to provide people with disabilities working in
    agriculture the specialized services that they need to safely
    accommodate their disabilities in everyday farm operations. AgrAbility
    received strong bipartisan support during the 1996 Farm Bill
    reauthorization, and was extended through fiscal year 1997. The $6
    million authorization level for AgrAbility was continued and is
    expected to be included in the current reauthorization of the USDA-
    CSREES.
        Under the statute, state and multi-state AgrAbility projects engage
    Extension Service agents, disability experts, rural professionals, and
    volunteers in offering an array of services, including: identifying and
    referring farmers with disabilities; providing on-the-farm technical
    assistance for agricultural workers on adapting and using farm
    equipment, buildings, and tools; restructuring farm operations:
    providing agriculture-based education to prevent further injury and
    disability; and, upgrading the skills of Extension Service agents and
    other rural professionals to better promote success in agricultural
    production for people disabilities.
        In 1997, USDA received an allocation of $1.91 million to support
    eighteen projects in nineteen states: Idaho, Illinois, Indiana, Iowa,
    Kentucky, Minnesota, Mississippi, Missouri, Montana, Nebraska, New
    Jersey, New York, North Carolina, North Dakota, Ohio, Pennsylvania,
    South Dakota, Tennessee, and Wisconsin. The 1998-1999 grant cycle is
    nearly complete and USDA will be announcing the list of funded states
    for this year within the next two weeks. Easter Seals understands that
    the USDA received applications from twenty states for the fourteen
    available AgrAbility project slots in the 1998 grant cycle.
        AgrAbility provides customized assistance to farmers, ranchers, and
    farmworkers with disabilities and their families. The nature and degree
    of assistance depends on the individual's disability needs and
    agricultural operation. For example:
        Kenneth Stennett, a 45-year-old poultry and beef farmer from
    Waynesboro, Mississippi, has paraplegia due to a spinal cord injury two
    years ago. He was unable to use many of his farm buildings and
    equipment. The Mississippi Department of Rehabilitation Services
    referred Kenneth to the newly formed Mississippi AgrAbility project.
    Project staff are now providing support to help make his farm
    accessible. A major problem for Kenneth was his inability to use his
    workbench or hand tools to perform general maintenance activities.
    AgrAbility staff organized a community workday with the Cattleman's
    Association to recruit volunteer carpenters who lowered his workbench
    and made other changes to make his shop accessible. AgrAbility staff
    also referred him to the T.K. Martin Assistive Technology Center to get
    information on modifications for his hand tools. AgrAbility staff are
    also working with local limestone dealers to fill areas of the farm
    terrain with crushed limestone to enable Kenneth' to maneuver his
    wheelchair more easily and safely. Finally, AgrAbility worked with
    Kenneth to locate a padded seat with armrests and a seat belt for his
    tractor so that he would be more stable while driving it, and to
    prevent pressure sores. Kenneth is paying for many of these
    modifications himself, so AgrAbility staff helped him develop a
    comprehensive list of needs and prioritize these needs and
    modifications to make the best use of his resources.
        A third generation farmer, Don Wolford of Franklin County, Iowa,
    farms about 1,100 acres, raises 40 head of beef cows, finishes 560 head
    of hogs, and maintains a 24-stall farrowing building. In 1992, he had
    surgery to remove a tumor along his spine, which left him with
    paraplegia. AgrAbility staff first met with him in the hospital and
    showed him videos of farmers with disabilities using modifications, and
    advised him of modifications that he could make to his operation. After
    he returned home, AgrAbility staff wrote a proposal that helped get
    funding for Don to purchase an all-terrain vehicle that was adapted for
    him using a kit from the manufacturer. This vehicle allows him to move
    equipment and supplies on his farm. A friend designed hand brakes for
    his tractors and pick-ups. AgrAbility provided him with plans for
    installing a lift on his tractor. Local welders were then able to use
    the plans to install the lift. Since his injury, Don has been elected
    president of the Franklin County Farm Bureau and named 1997 Franklin
    County Master Pork Producer. He also volunteers his time as an
    AgrAbility peer counselor to other farmers with disabilities in similar
    situations.
        Dave Kemper, a dairy farmer from Huntington County, Pennsylvania,
    thought he would not be able to remain in farming after a car accident
    left him with a severe neck injury and degenerative bone disease. His
    doctors referred him to an AgrAbility for Pennsylvanians workshop,
    where Dave saw that it was possible for him to continue farming.
    AgrAbility staff assessed Dave's farm and educated him about possible
    modifications to his buildings and equipment that would allow him to
    tend his dairy herd. AgrAbility then worked with the state Department
    of Vocational Rehabilitation to obtain an overhead milking system that
    reduces his need to bend or carry heavy milk containers, and other
    equipment that minimizes heavy lifting.
        Since 1991, twenty-eight states have been served by AgrAbility
    projects. In the aggregate, AgrAbility is estimated to have:
      --Provided direct on-farm assistance to more than 5,000 farmers,
            ranchers, and farmworkers with disabilities and their families.
      --Provided information and advice to 10,000 persons with disabilities
            employed in agriculture and related occupations.
      --Educated more than 100,000 agricultural, rehabilitation, and rural
            health professionals on safely accommodating disability in
            agriculture.
      --Recruited and trained more than 1,000 volunteers to assist
            agricultural producers with disabilities and their families.
      --Reached approximately 6.1 million people through 3,200 exhibits,
            displays, and demonstrations to increase awareness of the
            challenges affecting and resources available to people with
            disabilities who work in agriculture.
                        impact of current funding levels
        For too long, AgrAbility projects have been underfunded relative to
    need and objective. At $85,000 per state, only a few staff can be hired
    to provide state-wide education and assistance to disabled farmers,
    educate rural professionals, recruit volunteers, and work with rural
    businesses on disability-related issues. Rising demand for services and
    the great distances that must be traveled to reach farmers and ranchers
    severely strains even the most dedicated of AgrAbility's outstanding
    staff.. Easter Seals fears that failure to invest wisely in this
    worthwhile program will ultimately cause it to falter.
        One of the consequences of limited funding is that in every grant
    cycle, some states that have existing AgrAbility programs, and can
    demonstrate a legitimate need for services, are not renewed and forced
    to discontinue services to farmers with disabilities in that state and
    often have difficulty getting the access to the limited state and
    private funding sources that the federal seed money granted them. More
    than a dozen states have sought AgrAbility funding without success.
    Other states, including Colorado, Louisiana, Michigan, New Hampshire,
    South Carolina, and Vermont, had USDA-funded AgrAbility projects in the
    past and seek to re-establish their programs. Each of these states can
    demonstrate significant unmet needs among farm and ranch families
    affected by disability that AgrAbility could potentially address.
    Beginning with the 1998-1999 grant cycle that commences April 1, it is
    Easter Seals' understanding that projects in Ohio, New York, Idaho/
    Montana, and New Jersey will cease to receive federal support. This
    loss will greatly affect farmers with disabilities in these states for
    whom AgrAbility is the primary resource through which they seek
    information and assistance on farming with a disability. For example:
        David Biehl has spent his life working the family wheat and barley
    farm near Helena, Montana. When a spinal infection, six years ago, left
    him with paraplegia, weakness in his hands, and low vision, he started
    searching for a way to remain in farming. His case management nurse
    referred him to the Montana/Idaho AgrAbility project. AgrAbility staff
    member Tom Scott, helped David remodel his home for wheelchair
    accessibility, modify his farm equipment, and find equipment to make it
    possible for him to drive the family truck. Together, David and the
    AgrAbility staff developed creative solutions to obstacles facing him.
    For instance, instead of purchasing an expensive mechanical lift for
    his tractor, David learned to use the leg braces he had unsuccessfully
    tried to walk in during his rehabilitation, to safely board his
    tractor. David expresses the importance of AgrAbility when he says,
    ``It was very important for me not to give up. Tom understood how I
    felt and was able to help me find ways to be part of things.''
    Unfortunately, the Montana/Idaho program was not successful in the USDA
    competition for renewal of funding in fiscal year 1998. Effective April
    1, 1998, the project is no longer a resource to David and other farmers
    with disabilities in Montana and Idaho.
        The need for AgrAbility services has never been greater, and its
    accomplishments to date are remarkable by any standard. The National
    Easter Seal Society is proud to contribute to the ongoing success of
    the USDA-CSREES AgrAbility Program. Please support the allocation of at
    least $4.6 million for AgrAbility in fiscal year 1999 to ensure that
    this valuable public-private partnership continues to serve rural
    Americans with disabilities and their families. Thank you for
    considering Easter Seals' views and recommendations.
                                     ______

      Prepared Statement of the National Pharmaceutical Alliance and the
                  Generic Pharmaceutical Industry Association
        Mr. Chairman and Members of the Subcommittee, the National
    Pharmaceutical Alliance and the Generic Pharmaceutical Industry
    Association are pleased to have the opportunity to present these
    comments on the fiscal year 1999 budget requests for the Food and Drug
    Administration, on behalf of their members. Medicines developed,
    manufactured, and marketed by the approximately 200 members of both
    organizations account for more than 75 percent of all generic
    prescriptions dispensed annually in the U.S.
       cost benefits are provided by the generic pharmaceutical industry
        Generic drugs represent one of the most cost-effective means of
    controlling U.S. healthcare costs. For example, consumers, insurance
    carriers, and the U.S. government spent an estimated $81.17 billion on
    approximately 2.5 billion drug prescriptions in 1997 alone.\1\ About
    half of those prescriptions were filled with generic versions of the
    prescribed drug,\2\ which typically enter the market at 30 percent
    below the brand price, and within two years decline to 60-70 percent of
    the brand price.\3\ Moreover, brand drug retail prices rose an average
    of 4.3 percent in 1997, while generic prices declined by approximately
    7.6 percent in the same period.\4\ In addition to the price discount
    obtained when compared to the brand product, competition within the
    generic pharmaceutical industry results in declining prices that create
    a substantial savings to taxpayers, insurance providers, and
    consumers--especially senior citizens, the 40 million Americans without
    health insurance, and the underinsured.
    ---------------------------------------------------------------------------
        \1\ See The Plymouth Group/IMS America, Ltd. ``Year-in-Review
    1997'' prescription pharmaceutical data, presented at NPA Annual
    Meeting on February 26, 1998, and cited in Post-1990 Launches Represent
    43 percent of Rx Market, IMS Says, F-D-C Reports, Inc. (``The Pink
    Sheet''), Mar. 9, 1998, at 9, and Bristol-Myers Squibb Swallows No. 1
    Spot in U.S. Drug Sales, Medical Industry Today, Mar. 2, 1998.
        \2\ See The Plymouth Group/IMS America, Ltd. ``Year-in-Review
    1997'' prescription pharmaceutical data, presented at NPA Annual
    Meeting on February 26, 1998.
        \3\ See ``Economic Impact of GATT Patent Extension on Currently
    Marketed Drugs,'' PRIME Institute, College of Pharmacy, University of
    Minnesota, March 1995, at Executive Summary.
        \4\ See The Plymouth Group/IMS America, Ltd., ``Brand vs. Generic
    Price Changes, Prescription Pharmaceuticals, 1997.''
    ---------------------------------------------------------------------------
        While cost-effective generic pharmaceuticals have reduced health
    care costs in this country, these savings could be even greater if FDA
    took final action on generic applications within the statutorily
    required six months.\5\ Due in large part to the leadership of the
    Appropriations Committee, OGD has been able to take the first steps in
    augmenting its resources to meet its statutory requirements. While the
    fiscal year 1998 Operating Plan has not been completely implemented, it
    is our understanding that the plan will include between $400,000 and
    $700,000 in additional funds for OGD.\6\ These funds will give OGD the
    opportunity to begin a modest expansion of its resources.
    ---------------------------------------------------------------------------
        \5\ Under the law, FDA, through the Office of Generic Drugs, must
    review generic applications within 180 days. 21 U.S.C. Sec. 355(j)(4).
    In 1997, the median time to approval for ANDA's was 19.6 months--more
    than three times the length mandated by statute. See NDA/PLA Approvals
    on First Review Increase to 44 percent. The Pink Sheet, Dec. 15, 1997,
    at 7 (citing Janet Woodcock, M.D., Director of FDA's Center for Drug
    Evaluation and Research).
        \6\ See FDA Budget Would Keep Generics Staff Level, Generic Line,
    Jan. 14, 1998, at 1.
    ---------------------------------------------------------------------------
        The additional fiscal year 1998 funding for OGD is a watershed
    event. Instead of a continual focus on retaining its already inadequate
    resources, OGD will be able to direct its attention to speeding generic
    drug approvals. Yet, the foundation for a properly funded OGD must be
    continued with additional funding in fiscal year 1999, in order to
    substantially improve OGD's system of generic drug approvals.
             npa and gpia recommend an increase in funding for ogd
        We recommend that the Appropriations Committee build on the fiscal
    year 1998 initiative and provide additional funds that will allow OGD
    to continue its progress toward compliance with the six month statutory
    period for final agency action on generic drug applications.
    Specifically, NPA requests that the Subcommittee take the following
    actions:
        1. Appropriate $3 million directly for the Office of Generic Drugs,
    in addition to its fiscal year 1998 funding level;
        2. In the alternative, re-allocate $3 million to OGD from FDA
    Administrative Offices that usually do not direct programs with
    statutorily required deadlines;
        3. At a minimum, ensure that OGD and its programs maintain fiscal
    year 1998 funding levels in fiscal year 1999, despite the
    Administration's fiscal year 1999 budget request.
        4. In addition, continue to insist that FDA provide detailed
    information about agency expenditures for, and by OGD.
        In addition, we would like to highlight several challenges
    confronting OGD that could be addressed with the appropriations
    recommended above. We believe that additional funding in fiscal year
    1999 could be used productively to:
      --increase the number of reviewers to help OGD meet its statutory
            requirements;
      --add scientific and legal personnel to address the issues related to
            the use of the citizen petition process to delay generic drug
            approvals; and
      --provide funding to assist OGD in educating consumers, health care
            providers, and state legislative and regulatory officials about
            generic equivalence and the generic drug approval process.
       appropriations are needed for additional reviewers to meet ogd's
                               increased workload
        Among the most pressing needs at OGD is one for additional staff
    members to review generic applications. OGD continues to experience a
    steady increase in ANDA filings, which went up from 404 in 1996 to 462
    in 1997.\7\ Yet, of these 1996 and 1997 filings, OGD annually approved
    only 340 and 404, respectively.\8\ This increase in workload, and the
    backlog that it creates, must be addressed by hiring reviewers.\9\ Even
    with the infusion of funds under the fiscal year 1998 FDA Operating
    Plan, however, it is unclear how many additional reviewers will be
    added to OGD's staff. Given the current situation, NPA maintains that
    increased appropriations for additional reviewers is paramount.
    ---------------------------------------------------------------------------
        \7\ See FDA fiscal year 1999 Justification of Estimates for
    Appropriations Committees and Performance Plan, at 153.
        \8\ See id.
        \9\ Other resources that would help to improve ANDA review times
    are statistical analysts, computer professionals, and computer software
    and related information technology.
    ---------------------------------------------------------------------------
      additional scientific and legal staff are needed to address citizen
                                   petitions
        In addition, OGD's priorities must be expanded to address a
    specific challenge to FDA's generic drug approval authority: citizen
    petitions. Over the past few years, brand drug firms have increased
    their use of citizen petitions to challenge FDA's bioequivalence
    determinations and other scientific decisions related to ANDA's.\10\
    The petitions usually request that FDA refrain from approving a
    competing generic product until the ``scientific'' questions have been
    resolved. Unfortunately, FDA has taken, on average, 17 months to
    resolve the issues raised in the 40 citizen petitions that have been
    filed since 1990.\11\ The addition of senior scientists and/or lawyers
    would assist OGD in managing these administrative challenges, most of
    which are ultimately denied by the agency.\12\
    ---------------------------------------------------------------------------
        \10\ A detailed chart describing the 40 citizen petitions that NPA
    has catalogued from FDA's Dockets Management Branch is available on
    request. It is titled, ``Citizen Petitions That Have Resulted In A
    Delay To The Approval Of Generic Drug Applications (ANDA's), 1990-
    Present.''
        \11\ Id. As evidenced by NPA's chart on citizen petitions, 13 of
    the 40 petitions filed since 1990 were pending at the agency for over
    two years before receiving a final disposition. Of those 13, three
    petitions remained unresolved for three years, and two petitions
    remained unresolved for four years.
        \12\ Id.
    ---------------------------------------------------------------------------
      ogd resources should be directed to educating the public and state
                      officials about generic equivalence
        OGD also must take up a second challenge to FDA's authority; that
    is, the efforts of brand drug firms to undermine the agency's
    therapeutic equivalence decisions. They do this by arguing to state
    legislators, boards of pharmacy, and drug formulary committees that the
    substitution of generic drugs for pioneer drugs raises a patient health
    risk.\13\ To counter this misinformation, additional funds could be
    used by OGD to educate consumers and health care providers and to
    dispatch qualified spokespersons to the affected state entities.\14\
    These agency spokespersons would be instrumental in presenting accurate
    information to the states about the scientific integrity of the ANDA
    review process and the fitness of FDA's therapeutic equivalence
    evaluations.\15\ In addition, OGD has worked effectively with academic
    experts and the industry in forums such as the Product Quality Research
    Initiative to solve difficult scientific issues. Expanding FDA's
    participation in PQRI would be a constructive use of additional
    appropriations. Regardless of the use(s) to which additional
    appropriations are put, it is imperative that this Subcommittee
    continue its support of the generic drug approval process by allocating
    necessary funds.
    ---------------------------------------------------------------------------
        \13\ A detailed chart describing the state lobbying initiatives
    that NPA has catalogued from public sources is available on request. It
    is titled, ``Anti-Generic Challenges Before State Formularies (Other
    Than Coumadin'/NTI Challenges).''
        \14\ NPA continues to advance the position that legislation is
    needed to amend the Federal Food, Drug, and Cosmetic Act to provide for
    the express preemption of state generic substitution laws and
    regulations that impose standards different from or in addition to
    FDA's generic bioequivalence and therapeutic equivalence
    determinations.
        \15\ The agency has noted a need for increased communication
    between FDA and state entities. In response to questions posed by state
    formularies about the bioequivalence of generic drugs, FDA's Roger
    Williams replied, ``We've got to do a better job of communicating [to
    the health care practitioners and state agencies] about how well and
    how hard we work together to control the quality of these [generic]
    products.'' Narrow Therapeutics Need to be Identified in Phase II, The
    Pink Sheet, Mar. 23, 1998, at 20-21.
    ---------------------------------------------------------------------------
     increased efficiencies are not sufficient to accelerate approval times
        With limited resources, OGD has made Herculean efforts to speed up
    its review times, through a combination of diligent effort and
    increased efficiency. Specifically, generic drug median approval times
    have improved from 28.2 months in 1995 to 19.6 months in 1997.\16\
    System advances also were made, despite a reduced budget and staff,
    including the streamlining of OGD's approval process and a reduction in
    the number of review cycles.\17\ Program improvements, some of which
    were industry recommendations, have included implementing electronic
    data filing, publishing bioequivalence protocol reviews, and
    establishing efficient labeling procedures.
    ---------------------------------------------------------------------------
        \16\ See FDA fiscal year 1999 Justification of Estimates for
    Appropriations Committees and Performance Plan, at 154.
        \17\ FDA reports that, ``[a]s a result of OGD's initiative to
    contact applicants that undergo two or more major deficiency cycles,
    the Office has seen a drop in the number of review cycles needed to
    approve abbreviated applications,'' from 4.0 cycles in fiscal year 1995
    to 2.9 cycles in fiscal year 1997. Id. at 153.
    ---------------------------------------------------------------------------
        Nevertheless, improvements in generic approval times cannot be
    sustained with tireless staff efforts and streamlining initiatives. OGD
    continues to fall short of its statutory responsibility to take final
    action on generic drug applications within six months. Our position has
    not changed: this delay is unacceptable. While NPA and GPIA will
    continue to cooperate with OGD to implement additional program
    improvements, our members maintain that further efficiency measures
    will not significantly impact approval times. Although the fiscal year
    1998 FDA Operating Plan funding for OGD is a good beginning, OGD
    requires additional funding and staffing to function effectively.
        summary: a rationale for appropriating additional funds for ogd
        We maintain that Congress must continue to guide FDA's priorities
    by appropriating and allocating resources directly to OGD. Only
    Congressional mandates can ensure that FDA will continue to invest the
    resources necessary to ensure timely generic approvals. Once again, the
    Administration has incorporated as-yet unauthorized user fees into its
    fiscal year 1999 budget request to cover OGD's responsibilities.
    Specifically, the Administration has proposed $12.4 million in generic
    drug user fees. Yet, according to FDA, this $12.4 million in user fees
    will enable OGD to review and act upon only 60 percent of generic
    applications within the six months required by statute.\18\ Regardless
    of the generic drug industry's position on the suitability of user
    fees, the above request clearly establishes that current appropriations
    are inadequate to meet FDA's obligations with respect to generic drug
    approvals. In sum, the ability of safe and effective generics in
    reducing healthcare costs for this nation cannot be fully realized
    without direct OGD appropriations.
    ---------------------------------------------------------------------------
        \18\ See id. at 56.
    ---------------------------------------------------------------------------
        In closing, Mr. Chairman, the NPA and GPIA would like to thank you
    and the Subcommittee for its time and attention concerning this
    critical aspect of FDA's fiscal year 1999 budget requests. We look
    forward to continuing our work with you and members of the Subcommittee
    to bring safe, effective and more affordable pharmaceuticals to
    consumers.
                                     ______

      Prepared Statement of Chuck Gunnerson, Vice President, Legislative/
                  Government Affairs, National Potato Council
        My name is Chuck Gunnerson. I am a potato farmer from Minnesota and
    current Vice President Legislative/Government Affairs for the National
    Potato Council (the Council). On behalf of the Council, we thank you
    for your attention to the needs of our potato growers.
        The Council is the only trade association representing commercial
    growers in 50 states. Our growers produce both seed potatoes and
    potatoes for consumption in a variety of forms. Annual production in
    1996 was 498,600,000 cwt with a farm value of $2.4 billion. Total value
    is substantially increased through processing. The potato crop clearly
    has a positive impact on the U.S. economy.
        The potato is the most popular of all vegetables grown and consumed
    in the United States and one of the most popular in the world. Annual
    per capita consumption was 143 pounds in 1996 up from 107 pounds in
    1962 and is increasing due to the advent of new products and heightened
    public awareness of the potato's excellent nutritional value. Potatoes
    are considered a stable consumer commodity and an integral, delicious
    component of the American diet.
             the council priorities for fiscal 1999 appropriations
        The National Potato Council strongly urges that the Congress: (1)
    support Agricultural Research Service (ARS) base funding for potatoes
    at fiscal year 1998 levels, with the addition of $150,000 for the
    replacement of Dr. Joe Pavek, retiring plant breeder, at Aberdeen,
    Idaho, continue to include report language urging that the ARS work
    with the National Potato Council in determining priorities, and oppose
    the USDA budget proposal to close ARS facilities at Prosser,
    Washington, and Orono, Maine. Much of the USDA research at Prosser has
    focused on reducing pesticide use through the development of pest
    resistant plants with genetic engineering. Eliminating USDA research at
    Prosser would appear to conflict with President Clinton's goal of
    helping minor crop producers find new ways to control pests while
    reducing pesticide use. The ARS lab in Orono is the only one in the
    northeast that approximates Maine's unique soil types and climatic
    conditions which are different from most other potato-producing areas.
    Maine is a humid area rather than arid with less than 10 percent of its
    production under irrigation. Closure of this facility would be
    disruptive to current research and marketing activities of the
    northeast. Considering current budget constraints, it is critical that
    the ARS, working with potato growers, be able to adjust current
    research to meet agreed upon priorities. This would allow for better
    program streamlining and effectiveness; (2) appropriate additional
    funds for a special grant under the Cooperative State Research
    Education and Extension Service (CSREES) to accelerate national efforts
    in breeding and varietal development to among other things eradicate or
    manage late blight disease. We urge that the CSREES Special Grant
    Program be increased from $1.2 to $1.4 million. We also support the
    Administration's budget request for the continuation of the USDA-IPM
    initiative and funds to meet the data requirements of the new Food
    Quality Protection Act; (3) appropriate at least fiscal year 1997 level
    of $444,000 in funds to the Animal and Plant Health Inspection Service
    (APHIS) to continue the Golden Nematode quarantine program, without
    which the industry would be subjected to probable export trade
    restrictions by importing nations; and (4) not restrict funding for the
    Market Access Program.
                  agricultural research service (ars) funding
        For fiscal year 1999, in order to maintain the current level of
    research, the National Potato Council seeks at least the 1998 base
    level of funding for all programs, the addition of $150,000 to maintain
    a breeder position in Aberdeen, Idaho, and flexibility by ARS for
    potato research priority projects which would include more research on
    late blight. The Council specifically urges that the Appropriations
    Committee report also include language directing ARS to continue to
    work with the National Potato Council in determining priorities. We
    also hope that you will encourage the ARS, as potato base research
    funds come up for review, to direct more of such base funds into agreed
    upon higher priority research projects.
        As you recall, the National Potato Research Proposal was the result
    of an intensive effort begun in 1984 between the Council and the ARS to
    identify national priority research issues of concern to the potato
    industry. Based on these identifiable research needs, the National
    Potato Research Proposal received initial funding from the Congress for
    ring rot diseases; early dying disease; marketing; aphids; potato
    beetle and varietal development.
        The monies provided to the ARS have been greatly appreciated and
    the potato growers definitely see results from this research program.
    As a result of ARS research, potato varieties have been developed that
    are resistant to aphids which carry the potato leafroll virus. This
    virus limits potato yields and marketability by causing spotting and
    discoloration inside potatoes. The development of these resistant
    varieties should translate into reduced use of crop protection
    chemicals to control aphids on potatoes. We are getting feedback on
    research results back to the producer by having researchers speak at
    seminars and by making available to the potato industry a written
    summary of all research underway.
        Potato growers recognize that, in order to remain a viable and
    competitive industry, we must constantly strive to improve production
    efficiency and market quality while reducing the use of pesticides.
    Through carefully planned and coordinated research, we believe we can
    continue to offer an excellent high-value product and maintain a viable
    and competitive industry in the United States.
        The National Potato Council has agreed to work with USDA, EPA and
    FDA in the Pesticide Environmental Stewardship Program (PESP). Our
    growers will work toward pest management practices that further reduce
    risk to humans and the environment. Through this program the NPC has
    developed a national IPM protocol so potato growers can better judge
    their progress in IPM. Flexibility by the ARS in allocating potato
    research funds will greatly facilitate this effort.
        It is important to note that representatives of the Council have
    held annual meetings with ARS officials, the most recent in December of
    1997, to discuss the distribution and use of research funds. In
    response to this Committee's direction, the Council has worked closely
    with the ARS to ensure that the research conducted is meaningful and
    addresses industry problems in the most thorough, expeditious, and cost
    effective manner. The Council looks forward to continuing its close
    partnership with ARS to maximize the use of these important funds as
    this subcommittee has directed.
                          csrees special grant request
        The Council has also been working with CSREES on priorities for
    potato research and extension.
        We request $1.4 million (an increase of $200,000 over last year)
    for a special grant under the CSREES and urge that the Committee report
    again include the following report language: ``Potato research--The
    conferees expect the Department to ensure that funds provided to CSREES
    for potato research are utilized for varietal development/testing.
    Further, these funds are to be awarded competitively after review by
    the Potato Industry Working Group.''
        CSREES received 15 excellent proposals totaling almost $2 million
    for variety development and testing in 1998, but due to funding
    limitations only about 8 can be funded. Although the proposals are all
    from different states, the Potato Industry Working Group has encouraged
    the various established breeding programs to move rapidly toward
    cooperating on a regional basis. The additional $200,000 will assure
    this cooperation will go forth and many of the current state proposals
    will be funded within this regional approach.
        The Council will continue to work closely with USDA and will report
    annually to the Congress on the progress of current research and, once
    USDA's reviews are completed, the need for new research efforts.
                     golden nematode quarantine and survey
        The Animal and Plant Health Inspection Service assures that
    potatoes are protected from the importation of harmful pests and
    diseases and works with potato growers in assuring that potatoes meet
    phytosanitary export requirements.
        The Golden Nematode is a significant pest which has been
    quarantined by USDA-APHIS for over 50 years, and this pest has been
    confined to a few locations in New York state. Its commercial hosts are
    potatoes, tomatoes, and eggplants. It is important to our domestic
    industry and to our export market that this quarantine be continued and
    be effective. We are informed that federal budget reductions over the
    past several years have raised concerns over the future of this
    program. Funding for this program has dropped from almost $900,000 in
    fiscal year 1992 to $444,000 in fiscal year 1997 and $435,000 in fiscal
    year 1998. The fiscal year 1999 budget request would further reduce
    funding to $417,000. We strongly urge that at least the 1997 level of
    $444,000 be provided and used for regulation enforcement and survey
    work so that this program can continue in order to avoid jeopardizing
    domestic production and eliminating export markets.
                             market access program
        The Foreign Agricultural Service (FAS) assists U.S. potato growers
    in the export market and administers funds provided to the National
    Potato Promotion Board under the Market Access Program (MAP). MAP and
    its predecessor program have been particularly successful since 1986 in
    helping potatoes gain greater access and product recognition in foreign
    markets and is legal under the new GATT agreement.
        Industry research shows that there is a direct correlation between
    receiving MAP funds and the ability to effectively market overseas.
    With MAP assistance, the U.S. Potato Board has developed long-term
    markets for U.S. potato exports and created an outlet for surplus
    potatoes grown domestically, helping stabilize farm gate prices
    throughout the U.S. industry. As a direct result of promotional
    campaigns made possible by the pooling of industry monies and
    government MAP funds, U.S. potato exports have reached record volumes
    and values. Since 1986, total U.S. potato exports have increased three-
    fold in volume terms and almost six-fold in value, reaching an export
    value of over $618 million in 1997. In fiscal year 1997, U.S. frozen
    potato exports alone were valued at over $320 million, a 12 percent
    increase over 1996. Exports for 1986 were valued at $64 million.
    Exports account for 10 percent of U.S. production. With MAP, U.S.
    potato exports have expanded to new markets in Asia and South America
    and the industry has diversified its marketing activities to include
    trade advertising, trade seminars, restaurant and food service
    promotions, industry orientation tours, merchandising, and research and
    evaluation.
        During the recent Farm Bill debate, the U.S. potato industry in
    cooperation with a coalition of agricultural commodity groups fought to
    preserve the current MAP program. It was our industry's position then
    and remains our position today that substantive changes made to the MAP
    program by the 1993 Omnibus Budget Reconciliation Act and the 1996
    Agricultural Appropriations Bill, which our industry supported, fully
    addressed the concerns raised by some in the Congress and others about
    program efficiencies and management. Those changes imposed minimum
    contribution amounts for nonprofit participants, required that all
    participants certify that funds supplement but do not supplant industry
    funds, imposed a five-year limit on the use of brand MAP funds in a
    given country, and gave priority funding to small U.S. entities and
    cooperatives under the branded program. Additional changes to the
    program made by the 1996 Farm Bill, which preclude direct MAP funding
    to large corporations and to foreign entities for foreign-produced
    products, ensure that the real beneficiaries of the MAP program will be
    U.S. farmers, cooperatives, and U.S. agricultural products.
        One remaining concern about the MAP program relates to annual
    funding levels, which have been reduced by Congress over the last
    several years and again last year by the 1996 Farm Bill. U.S. potato
    growers were discouraged that the 1996 Farm Bill reduced program
    funding from its previous authorized level of $110 million to $90
    million annually, and strongly believe that finding should eventually
    be restored to its previously high level of $200 million to take full
    advantage of the WTO-legal program.
        Despite funding cuts, we nevertheless are encouraged that Congress
    recognized the importance of continuing this fully accountable and
    result-oriented program for U.S. farmers. At a time when U.S.
    agriculture is struggling to compete with subsidized foreign
    competition and foreign governments are increasing GATT/WTO-legal
    promotional assistance to their agricultural sectors, we encourage
    Congress to keep in tact and extend greater funding to the one USDA
    program that has truly helped U.S. agricultural products compete in the
    global marketplace.
        This concludes our statement and we would be pleased to respond to
    questions or provide further information for the record.
                                     ______

     Prepared Statement of John F. O'Neal, General Counsel, National Rural
                              Telecom Association
                         summary of testimony requests
        Project involved.--Telecommunications lending programs administered
    by the Rural Utilities Service of the U.S. Department of Agriculture
        Actions proposed.--Supporting loan levels for fiscal year 1999 in
    the same amounts as those contained in the Fiscal Year 1998 Agriculture
    Appropriations Act (Public Law 105-86) for hardship, cost-of-money,
    Rural Telephone Bank and guaranteed loan programs and the associated
    subsidy to support hardship and Rural Telephone Bank loans at existing
    levels. Also supporting funding for $150 million in loan and $15
    million grant authority designated for distance learning and
    telemedicine purposes as requested in the President's budget.
    Supporting an extension of the language removing the 7 percent interest
    rate ceiling on cost-of-money loans for fiscal year 1998. Supporting
    continuation of the restriction on retirement of Rural Telephone Bank
    class A stock in fiscal year 1998 at the level contained in Public Law
    105-86 and an extension of the prohibition against the transfer of
    Rural Telephone Bank funds to the general fund. Opposing the proposal
    contained in the budget to transfer funds from the unobligated balances
    of the liquidating account of the Rural Telephone Bank for the bank's
    administrative expenses and loan subsidy costs.
        Mr. Chairman, Members of the Committee: My name is John F. O'Neal.
    I am General Counsel of the National Rural Telecom Association. NRTA is
    comprised primarily of commercial telephone companies which borrow
    their capital needs from the Rural Utilities Service of the U.S.
    Department of Agriculture (RUS) to furnish and improve telephone
    service in rural areas. Approximately 1000, or 71 percent of the
    nation's local telephone systems borrow from RUS. About three-fourths
    of these are commercial telephone companies. RUS borrowers serve almost
    6 million subscribers in 46 states and employ over 30,000 people. In
    accepting loan funds, borrowers assume an obligation under the act to
    serve the widest practical number of rural users within their service
    area.
                               program background
        Rural telephone systems have an ongoing need for long-term, fixed
    rate capital at affordable interest rates. Since 1949, that capital has
    been provided through telecommunications lending programs administered
    by the Rural Utilities Service and its predecessor, the Rural
    Electrification Agency (REA).
        RUS loans are made exclusively for capital improvements and loan
    funds are segregated from borrower operating revenues. Loans are not
    made to fund operating revenues or profits of the borrower system.
    There is a proscription in the Act against loans which would duplicate
    existing facilities providing adequate service and state authority to
    regulate telephone service is expressly preserved under the Rural
    Electrification Act.
        Rural telephone systems operate at a severe geographical handicap
    when compared with other telephone companies. While almost 6 million
    rural telephone subscribers receive telephone service from RUS borrower
    systems, they account for only four percent of total U.S. subscribers.
    On the other hand, borrower service territories total 37 percent of the
    land area--nearly 1\1/2\ million square miles. RUS borrowers average
    about six subscribers per mile of telephone line and have an average of
    more than 1,000 route miles of lines in their systems.
        Because of low-density and the inherent high cost of serving these
    areas, Congress made long-term, fixed rate loans available at
    reasonable rates of interest to assure that rural telephone
    subscribers, the ultimate beneficiaries of these programs, have
    comparable telephone service with their urban counterparts at
    affordable subscriber rates. This principle is especially valid today
    as the United States endeavors to deploy telecommunications
    ``information superhighway'' technology and as customers and regulators
    constantly demand improved and enhanced services.
        At the same time, the underlying statutory authority which governs
    the current program has undergone significant change. In 1993,
    telecommunications lending was refocused toward facilities
    modernization. Most of the subsidy cost has been eliminated from the
    program. The subsidy that remains has been targeted to the highest
    cost, lowest density systems. Other loans are made at Treasury's cost-
    of-money or greater.
        We are proud to state once again for the record that there has
    never been a default in the RUS/REA telephone program! All loans have
    been repaid in accordance with their terms with interest. As of
    December 31, 1997, well over $4 billion of principal and $5 billion in
    interest had been paid by telephone borrowers.
               need for rus telecommunications lending continues
        The need for rural telecommunications lending is great today,
    possibly even greater than in the past. Technological advances make it
    imperative that rural telephone companies upgrade their systems to keep
    pace with improvements and provide the latest available technology to
    their subscribers.
        These rapid technological changes and federal policies of
    competition and deregulation in the telephone industry, as evidenced by
    passage of the ``Telecommunications Act of 1996'', underscore the
    continuing need for targeted assistance to rural areas. The inherently
    higher costs to serve these areas have not abated. Regulatory trends
    encouraging competition among telephone systems increase pressures to
    shift more costs onto rural ratepayers. Interstate subscriber line
    charges have already shifted substantial costs to local exchange
    customers. Pressures to recover more and more of the higher costs of
    rural service from rural customers to foster urban competitive
    responses will further burden rural consumers. And, as rural rates
    rise, small telephone systems will tend to lose confidence that they
    can recover the investments for costly network upgrades.
              1996 telecommunications act effect on rural america
        Congress passed the Telecommunications Act of 1996 as the
    culmination of more than a decade of debating national
    telecommunications policy and balancing many diverse needs and
    interests. The 1996 Act responded to a number of rural needs and
    differences with a series of safeguards to ensure that rates, services
    and network development in rural America will be reasonably comparable
    to urban telecommunications opportunities.
        The process of implementing the new law continues to raise
    troubling uncertainties and concerns about whether the FCC and the
    states will honor the balance Congress achieved in its policy, as
    regulators (a) radically revise the mechanisms for preserving and
    advancing ``universal service,'' (b) adjust the cost recovery
    responsibilities and allocations of authority between federal and state
    regulation, (c) effectuate the Act's somewhat different urban and rural
    ground rules for how new companies and incumbent universal service
    providers connect their networks and compensate each other and (d) peel
    back layers of regulation developed over a century. So far, the FCC has
    been overzealous in expanding the Act's market-opening provisions to
    give new entrants a regulatory head start and advantage at the expense
    of the Act's rural development and universal service provisions. The
    FCC is trying to usurp the role of competition by dictating a whole
    new--and wholly inadequate--way to measure the costs of modern,
    nationwide telecommunications access to information. Congress and the
    courts must carefully supervise the FCC's implementation to achieve the
    rural access to information and an evolving modern public network
    intended by Congress, as well as the benefits of deregulation and
    genuine competition.
          expanded congressional mandates for rural telecommunications
        Considerable loan demand is being generated because of two
    additional mandates for enhanced rural telecommunications standards
    contained in the authorizing legislation enacted in 1993 by Congress in
    Public Law 103-129.
        First, Congress expanded the definition of a ``rural area'' to
    include towns up to 5,000 population from the previous standard of
    1,500 which had the effect of qualifying substantial additional
    geographic areas of the country for loans. Second, as a prerequisite to
    eligibility for insured and Rural Telephone Bank loans, RUS, has
    approved a telecommunications modernization plan for each state which
    meet certain minimum statutory objectives for the deployment of modern
    telecommunications technology. Implementation of these plans will
    generate additional loan demand as rural telephone systems strive to
    meet these increased service objectives in the rural areas they serve.
        These two Congressional mandates coupled with the need for stable
    financing sources to meet the infrastructure demands envisioned for
    rural areas by the new telecommunications act amply demonstrate the
    continuing need for this important program at the levels established in
    the fiscal year 1998 appropriations act. They are:

    5 percent Hardship Loans................................     $75,000,000
    Cost-of-Money Loans.....................................     300,000,000
    Guaranteed Loans........................................     120,000,000
    Rural Telephone Bank Loans..............................     175,000,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................     670,000,000

        The President's budget request for fiscal year 1999 for this
    program closely parallels fiscal year 1998 enacted loan levels with one
    exception: Despite substantial ongoing demand, the President proposes
    to reduce hardship loans $25 million next year. The savings which would
    be achieved are only about $2.5 million dollars. Based on figures
    supplied by RUS, at the end of the first quarter, the agency had
    already approved almost all of the entire authorization of $75 million
    for this fiscal year and expects to carry over an additional $79
    million in completed applications into the next fiscal year. We believe
    that the needs of this program balanced with the minimal cost to the
    taxpayer argue for its continuation at enacted levels given the fact
    that it provides funding for the neediest borrower systems serving the
    highest cost areas.
                          specific additional requests
    Continue the Removal of the 7 percent Cap on Cost-of-Money Loans
        Again this year we are supporting removal of the 7 percent ceiling
    on cost-of-money loans. This Committee included language in the fiscal
    year 1996 act to permit borrower interest rates on cost-of-money loans
    to exceed the 7 percent per year interest rate ceiling contained in the
    authorizing act. The language has been continued in subsequent acts. We
    support an extension of this provision in the fiscal year 1999 bill.
    Long-term Treasury interest rates might exceed 7 percent in fiscal year
    1999. In that event, the cost-of-money loan program could be disrupted
    and loan levels not achieved since adequate subsidy would not be
    available to support the program at the authorized levels. For this
    reason, we believe it is important to incorporate this language in the
    bill again this year.
    Continue the Restriction on Retirement of Class A Government Stock in
            the Rural Telephone Bank (RTB) and also Continue the
            Prohibition Against Transfer of RTB Funds to the General Fund
        The Committee should continue the restriction on retirement of the
    amount of class A stock by the Rural Telephone Bank in fiscal year
    1999. The Bank is currently retiring the government's stock as required
    under current law. We believe that this process which began in fiscal
    year 1996 should continue to be an orderly one as contemplated by the
    retirement schedule enacted two years ago and continued in last year's
    bill to retire no more than 5 percent of the total class A stock in one
    year. We also urge the Committee to continue the prohibition against
    the transfer of any unobligated balance in the bank's liquidating
    account which is in excess of current requirements to the general fund
    of the Treasury along with the requirement that the bank receive
    interest on those funds. The private Class B and C stockholders of the
    Rural Telephone Bank have a vested ownership interest in the assets of
    the bank including its funds and their rights should not be abrogated.
    Reject Budget Proposal to Transfer Funds from RTB Liquidating Account
            for Administrative and Subsidy Costs
        In this same vein, we are also opposed to the proposal contained in
    the President's budget that the subsidy cost associated with Rural
    Telephone Bank loans be funded by a transfer from the unobligated
    balances of the bank's liquidating account rather than by a traditional
    appropriation from the general fund of the Treasury which has been the
    funding mechanism utilized for the bank since enactment of the federal
    credit reform act in 1990. Requiring the bank to fund the subsidy cost
    of its loans would dilute the interests of the bank's stockholders. By
    definition, the bank's unobligated balances are not federal funds but
    are subject to the respective ownership interests of all the
    stockholders of the bank. Previous appropriations acts, including the
    fiscal year 1997 and fiscal year 1998 acts, have recognized the
    ownership rights of the private class B and C stockholders of the bank
    by prohibiting a similar transfer of the bank's excess unobligated
    balances which otherwise would have been required under the federal
    credit reform act. This cost is more properly funded through a regular
    appropriation from the general fund of the Treasury.
        The President's budget also proposes that the bank assume
    responsibility for its administrative costs also by a transfer of funds
    from the unobligated balances of the bank's liquidating account rather
    than through an appropriation from the general fund of the Treasury.
    This recommendation is contrary to the RTB enabling act. Under Sec.
    403(b) of that act, until the ownership, control and operation of the
    telephone bank is converted (or privatized). . . .

            in order to perform its responsibilities under this title, the
            telephone bank may partially or jointly utilize the facilities
            and the services of employees of the Rural Electrification
            Administration or of any other agency of the Department of
            Agriculture, without cost to the telephone bank''. (emphasis
            supplied)

        The budget language acknowledges that neither proposal would result
    in budgetary savings. No justification for these recommendations is
    contained in the budget. Both proposals would require consideration by
    the authorizing committees and enactment of new authorizing legislation
    as a prerequisite to an appropriation. As of this date, no such
    legislation has been transmitted by the Administration or is under
    consideration before the authorizing committees.
    Loans and Grants for Telemedicine and Distance Learning
        The President's budget requests $150 million in loan authority for
    fiscal year 1999 and $15 million in grants specifically devoted to
    telemedicine and distance learning purposes. Loans are made at the
    government's cost-of-money. The purpose is to accelerate deployment of
    telemedicine and distance learning technologies in rural areas through
    the use of telecommunications, computer networks, and related advanced
    technologies by students, teachers, medical professionals, and rural
    residents.
        We believe this program specifically designated for distance
    learning and telemedicine purposes is particularly important.
    Continuing to target funds in this manner spurs deployment of this
    important new technology which is vital for the survival of rural
    schools, hospitals and the rural communities they serve. At the same
    time, we believe the level proposed strikes a cost effective balance
    for the taxpayer.
                                   conclusion
        Thank you for the opportunity to present the association's views
    concerning this vital program. The telecommunications lending programs
    of RUS continue to work effectively and accomplish the objectives
    established by Congress at a minimal cost to the taxpayer.
                                     ______

      Prepared Statement of the National Telephone Cooperative Association
                                    summary
        Considering the current telecommunications demands being made by
    the Administration, Congress, and rural Americans, it is clear that the
    need for the Rural Utilities Service (RUS) telecommunications lending
    has never been greater. In this context, the National Telephone
    Cooperative Association (NTCA) strongly supports the continuation of
    the RUS telecommunications loan program. For nearly 49 years, the RUS
    and its predecessor, the REA, has carried out its mission, of both
    providing and improving rural telephone service, with distinction.
    Appropriately funded, it will continue to do so well into the future.
    In short, RUS financing is critical to ensuring that rural Americans
    enjoy the benefits of the information revolution currently sweeping the
    nation.
                                  introduction
        It is a pleasure to discuss the current financing needs of the
    rural local exchange carrier (LEC) industry. In light of all that is
    occurring on the telecommunications front, this discussion is urgently
    needed. NTCA is a national trade association representing 500 small,
    rural cooperative and commercial telephone systems. These locally owned
    and operated LEC's are situated throughout our nation. More than 80
    percent of NTCA's member systems have benefited from the RUS/REA
    telecommunications loan program.
        NTCA's members, like most of the country's independent LEC's,
    evolved to serve high cost rural areas of the nation. There can be no
    doubt regarding the high cost of providing telecommunications services
    to rural America. Just considering that this account for approximately
    40 percent of the nation's geographic area is convincing enough. In
    addition, when we consider that rural subscribers account for only 4.3
    percent of the nation's total population, it quickly becomes clear why
    rural America is so costly to serve.
        Congress recognized this unique financing dilemma confronting
    America's rural LEC's as early as 1949. It was in that year that it
    amended the Rural Electrification Act (RE Act) to create the REA
    telephone loan program. Congress planned for the future and fully
    understood that rural America's telecommunications financing needs
    would be ongoing. It charged the REA with the responsibility for making
    low interest loans to both ``. . . furnish and improve . . .'' rural
    telephone service.
        In keeping with it mission, Congress has periodically amended the
    RE Act to ensure that the original mission of the program is met. In
    1971, the Rural Telephone Bank (RTB) was created as a supplemental
    source of direct loan financing. In 1973, the REA was provided with the
    ability to guarantee Federal Financing Bank (FFB) and private lender
    notes. In 1993, the Congress established a fourth program lending
    facet, the REA treasury-cost fund. Most recently, the reorganization of
    the U.S. Department of Agriculture facilitated consolidation of the
    Department's utility development programs through transferring the
    telecommunications loan and technical assistance programs of the REA to
    the Rural Utilities Service (RUS).
        The infrastructure being deployed by a majority of rural LEC's
    today is capable of providing state-of-the-art services such as two-way
    interactive video links and internet access. These services are
    changing the destiny of rural America. Through this technology, rural
    Americans are assured of improved education, health care access, and
    business and government services. The RUS's telecommunications loan
    program is financing a significant portion of such infrastructure
    enhancement.
           responsibilities confronting the industry are substantial
        The success of private/public partnership represented by NTCA's
    members' use of the RUS telecommunications loan program is substantial.
    This partnership boasts infrastructure of a highly sophisticated
    quality. With the assistance of RUS capital and technical standards,
    NTCA's members are leaders in modernizing their telecommunications
    capabilities for their communities. This financing partnership fosters
    a true commitment to rural residents. Compared to their urban
    counterparts, rural communities are faced with higher poverty rates,
    lower income levels, and higher costs of delivering modern
    infrastructure.
        These rapid changes are underscored by recent actions taken with
    passage of the ``Telecommunications Act of 1996.'' As we enact federal
    policies of competition and deregulation, the high costs associated
    with providing modern telecommunications services in rural areas will
    not diminish. Moreover, the mandated provisions for an evolving
    definition of universal service serves to emphasize the need for
    targeted assistance to rural areas. Two years into the implementation
    of the act, the FCC's interpretation of the law has held little regard
    for congressional intent particularly with respect to rural provisions
    that are vital to rural incumbent LEC's. This is evidenced by the 25
    percent federal/75 percent state split in universal service funding.
    These important provisions include universal service language mandating
    a national commitment to geographic toll rate averaging and consumer
    access to quality services at reasonable and affordable rates;
    interconnection exemption, suspension and modification language to
    spare rural LEC's from excessive new regulatory burdens; infrastructure
    sharing language requiring large carriers to engage in such sharing
    upon request of a facilities based universal service designee that
    lacks resources; as well as other provisions important to the rural
    industry.
        It is clear that without appropriate strong national safeguards,
    the transition to a competitive and deregulatory telecommunications
    environment would damage the ability of rural Americans to full
    participate in the information age. Today, RUS borrowers average only 6
    miles per subscriber compared to 37 per mile for the larger, urban-
    oriented, non-RUS financed systems. This results in an average plant
    investment per subscriber that is 38 percent higher for RUS borrowers.
    Without the availability of affordable capital financing to compete and
    provide adequate, up-to-date services in an unfavorable environment,
    building adequate telecommunications infrastructure in rural
    communities will be untenable.
                  rus: connecting rural america to the future
        Clearly, the RUS telecommunications loan program is helping extend
    benefits of the information superhighway to rural America. RUS
    telecommunications lending creates public-private partnerships that
    work to create telecommunications infrastructure. These federal
    resources have stimulated billions of dollars in private capital.
        For example, in fiscal year 1997 a subsidy of just $3.6 million
    generated $670 million in federal loans and loan guarantees. For every
    dollar in government money invested, 4.5 private dollars were invested.
    RUS financing in 1996 involved the construction or rebuilding of an
    estimated 9,472 route miles of line (including fiber optic facilities)
    and other plant facilities to provide initial or improved service to
    72,874 subscribers.
        The RUS is also making a difference in our rural schools,
    libraries, and hospitals. Since 1993, the RUS Distance Learning and
    Telemedicine (DLT) Grant and Loan program has funded 192 projects in 41
    states totaling over $52 million for interactive technology in rural
    schools, libraries, hospitals, and health clinics. This program has
    provided unprecedented educational opportunities for rural students and
    enhanced health care for rural residents.
        As a result of this program, thousands of rural students will gain
    access to additional classes and advanced curriculum. The RUS reports
    that previously unavailable courses such as calculus, physics,
    chemistry, and accounting are now being made to 550 rural schools in 33
    states. In addition, telemedicine facilities which provide cost-
    effective services such as 24 hour access to trauma specialist,
    continuing medical education, and distance consultations for
    pediatrics, obstetrics, cardiology, and oncology will be made available
    to 438 hospitals and clinics in 23 states. Simply stated, this critical
    program is allowing our rural citizens to overcome the isolated nature
    of their rural areas through the power of modern telecommunications.
        At the end of 1997, about $4 billion in principal and $5 billion in
    interest had been paid by borrowers. We are proud to claim that there
    has never been a loss for U.S. taxpayers through borrower default or
    abuse in 49 years of RUS telecommunications lending!
              recommendations for the subcommittee's consideration
        RUS Telecommunications Loan Program.--Increasing demand for
    expanded telecommunications services and infrastructure upgrades
    indicates the level of need. The RUS has indicated that as of the end
    of the second quarter of fiscal year 1998, all of the 5 percent
    Hardship loan funds have been allocated and are expecting a backlog of
    $60-100 million in hardship loan requests this year. To allow for this
    demand to be met, NTCA recommends that the committee consider the
    following RUS Telecommunications loan levels for fiscal year 1999:

    5 percent Hardship Loans................................     $75,000,000
    Treasury-rate Loans.....................................     300,000,000
    FFB Loan Guarantees.....................................     120,000,000
    Rural Telephone Bank Loans..............................     175,000,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................     670,000,000

        These loan levels are the same as the current fiscal year's funding
    provided by this committee and represent a genuine commitment to rural
    telecommunications needs.
        Removal of Interest Rate Cap on Treasury-rate Loans.--We are also
    requesting that the committee include language removing the 7 percent
    interest rate cap on Treasury-rate loans. This provision was included
    in this year's Fiscal Year 1998 Agriculture Appropriations Act (H.R.
    2160), and it prevents the potential disruption of the program in the
    case where interest rates exceed 7 percent and insufficient subsidy
    cannot support authorized lending levels. It is a continuation of
    current policy and supports the viability of this critical loan
    program.
        Prohibition of the Transfer of Unobligated Balances of the Rural
    Telephone Bank Liquidating Account.--NTCA also recommends that the
    subcommittee continue the prohibition against the transfer of any
    unobligated balances of the Rural Telephone Bank liquidating account to
    the general fund of the Treasury. This language was first introduced in
    the Fiscal Year 1997 Agriculture Appropriations Act (H.R. 3603) to
    protect the private Class B and C stockholders ownership rights to the
    assets of the bank. Restatement of this language will ensure that RTB
    borrowers are not stripped of the value of this required investment.
        Fund the Rural Telephone Bank's Loan Subsidies and Administrative
    Expenses through Traditional Appropriation from General Funds of the
    Treasury.--The Administration's fiscal year 1999 budget proposal would
    fund the Rural Telephone Bank's loan subsidies and administrative
    expenses out of unobligated balances in the bank's liquidating account
    rather than out of the general fund of the Treasury as normally
    appropriated. NTCA urges the subcommittee to reject this proposal for
    three reasons.
        Specifically, the proposal would require new authority in the
    authorizing act as a prerequisite to an appropriation. Current law
    under the Rural Electrification Act provides for the use of facilities
    and services of employees of the Department of Agriculture, without
    cost to the Rural Telephone Bank until the ownership, control and
    operation of the telephone bank is converted or privatized.
    Additionally, the proposal appears to be in conflict with the intent of
    the Federal Credit Reform Act (Public Law 101-508). The Subcommittee
    should also recognize that this proposal will not result in budgetary
    savings. Because of the aforementioned concerns, NTCA requests the
    subcommittee to fund the RTB's loan subsidies and administrative
    expenses through the general funds of the Treasury.
        Rural Telephone Bank Privatization Proposal.--Under the President's
    fiscal year 1999 budget proposal, the Rural Telephone Bank is proposed
    to ``become a Performance Based Organization to establish its financial
    and operational independence prior to its being privatized within ten
    years.'' At this time, it is difficult to support, or evaluate any
    privatization proposal without first obtaining an answer to the
    critical question of who own the assets of the bank--the federal
    government or the stockholders of the RTB. Without a definitive and
    official determination of this central issue, it is not possible to
    formulate an informed position regarding privatization of the bank.
        NTCA believes any privatization plan should be well conceived
    before implementation. At the very least, privatization should proceed
    in an orderly fashion with a full accounting of the various financial
    and legal implications involved. Congress, RTB Stockholders, and the
    rural telecommunications industry deserve the benefit of having RTB
    privatization reviewed thoroughly. In addition to having a high
    concentration of NTCA members as stockholders of RTB stock, NTCA itself
    maintains a substantial interest in RTB stock. As the RTB possess
    nearly $2 billion in assets, it continues to play a critical role in
    the modernization of rural telecommunications infrastructure throughout
    the United States, and its future will continue to be closely monitored
    by the rural telecommunications industry.
        RUS Distance Learning and Telemedicine Program.--The RUS Distance
    Learning and Telemedicine Grant program has proven to be an
    indispensable tool for rural development. In this regard, NTCA urges
    the Committee to provide adequate funding for this critical program.
    NTCA supports the exciting initiative included with the enactment of
    the 1996 Farm Bill. The legislation authorized a $100 million Distance
    Learning and Telemedicine and Grant cost-of-money loan and grant
    program that began in fiscal year 1996. NTCA encourages the
    subcommittee to continue funding for this critical program for the
    purpose of extending benefits of modern telecommunications to rural
    America.
                                   conclusion
        The RUS telecommunications loan program bears a proud record and
    should remain in place to continue assisting the rural LEC industry to
    meet its service commitment to rural Americans. As changes to the
    nation's telecommunications policy are on the horizon, the continuation
    of the RUS telecommunication loan program is a critical necessity to
    ensure the highest standard of modern service in rural America. The
    rural segment of the nation's telecommunications infrastructure is
    critical to the national objective of universal telecommunications
    service. The RUS and the rural LEC industry are natural partners in
    linking all Americans to the ``information superhighway.''
        As the nation faces substantial economic and technological
    challenges in the near future, rural areas must be equipped with the
    appropriate tools needed to manage those challenges. The RUS
    telecommunications loan program has carried out its mission for more
    than 49 years with distinction and unrivaled financial reliability.
    Congress willing, the RUS can do the job necessary to connect rural
    America to the future!
                                     ______

       Prepared Statement of Dr. Robert C. Shearman, Executive Director,
                     National Turfgrass Evaluation Program
        On behalf of the National Turfgrass Evaluation Program (NTEP), I
    appreciate this opportunity to provide the Subcommittee with the
    turfgrass industry's perspective in support of restoration of the
    $55,000 appropriation for the National Turfgrass Evaluation Program
    (NTEP) deleted in the President's fiscal year 1999 budget request for
    the Agricultural Research Service (ARS).
        The National Turfgrass Evaluation Program (NTEP) has been unique in
    that it provides a working partnership that links the federal
    government, turfgrass industry and land grant universities together in
    their common interest of turfgrass cultivar development, improvement,
    and evaluation. The National Turfgrass Evaluation Program is the
    primary means by which cultivated varieties of turfgrass are evaluated
    in this country. It provides unbiased information on turfgrass cultivar
    adaptations, disease and insect resistance, and environmental stress
    tolerance. The public and private sectors of the turfgrass industry use
    this information to develop cultivar recommendations for home owners,
    sod producers, sports turf managers and golf course superintendents.
        At a time when this nation's awareness of environmental
    considerations is increasing, and because of the multiple benefits
    provided by turfgrass, as well as the advancements that are being made
    to further improve them through integrated pest management programs,
    recycling, and other means, the USDA has before it a unique opportunity
    to take positive action in support of the turfgrass industry, and
    similarly enjoy a tremendous return for what must be considered, in
    relative terms within USDA's budget, a minuscule investment of
    Department funds.
        While the vast majority of the USDA's funds have been and will
    continue to be directed toward traditional ``food and fiber`` segments
    of U.S. agriculture, it is important to note that turfgrasses (e.g.,
    sod production) are defined as agriculture in the Farm Bill and by many
    other departments and agencies. Further, it is estimated by the
    Economic Research Service that the turfgrass industry, in all its
    forms, is a $30-$35 billion industry. It should also be noted that the
    turfgrass industry is the fastest growing segment of U.S. agriculture,
    while it receives essentially no federal support. There are no subsidy
    programs for turfgrass, nor are any desired.
        For the past 70 years, the USDA's support for the turfgrass
    industry has been modest at best. The turfgrass industry's rapid
    growth, importance to our urban environments, and impact on our daily
    lives warrant more commitment and support from the USDA. Failing to
    support the National Turfgrass Evaluation Program would be a tremendous
    oversight of a major opportunity. USDA's support of the NTEP at the
    $55,000 level does not cover all cost. In fact, NTEP represents an
    ideal partnership of the public and private sectors in terms of program
    cost sharing . The NTEP relies most heavily on turfgrass industry
    (i.e., public sector, end-users) support. However, it is essential that
    the USDA maintain its financial support and work closely with NTEP. The
    turfgrass industry relies heavily on NTEP for unbiased findings.
    Discounting this support will also eliminate a highly reliable and
    credible level of objectivity that is associated with the NTEP program.
        I respectfully request that the Subcommittee restore this vital
    $55,000 appropriation for the National Turfgrass Evaluation Program
    (NTEP) in the fiscal year 1999 budget for the Agricultural Research
    Service.
        Thank you very much.
                                     ______

    Prepared Statement of Lino DeAlmedia, Jr., President, National Utility
                            Contractors Association
        Mr. Chairman and members of the subcommittee, my name is Lino
    DeAlmeida, Jr. I am president and chief executive officer of
    Consolidated Construction Management Services, Inc., in Colts Neck, New
    Jersey. I am pleased to submit written testimony on behalf of the
    National Utility Contractors Association (NUCA).
        Every day my colleagues and I see firsthand the consequences of
    failed or nonexistent water and waste disposal infrastructure. We can
    also attest to the positive public health, environmental, and economic
    benefits of infrastructure investment in rural communities. We are
    proud of the vital public services that we provide to rural communities
    across the country, whether it's the construction of a new drinking
    water treatment facility or upgrades to existing plant and pipework.
    The USDA Rural Utilities Service (RUS) has played a critical role in
    helping these communities finance basic water infrastructure needs.
                           fiscal 1999 recommendation
        NUCA supports the Administration's fiscal 1999 request for $629
    million in budget authority to support RUS Water and Waste Loans and
    Grants totaling $1.34 billion. The request represents a modest $66
    million increase over fiscal 1998. The proposed increase is well
    justified when you consider that RUS had $3.7 billion worth of unfunded
    applications on hand as of January 1998.
                           rural infrastructure needs
        Many small, rural communities find it difficult to maintain safe
    and affordable drinking water supplies and provide sanitary waste
    disposal. Lack of access to conventional financing, inadequate
    technical resources, and a limited tax base are significant reasons why
    small communities struggle to meet basic water infrastructure needs.
    Federal regulatory requirements under the Clean Water and Safe Drinking
    Water Acts pose additional financial burdens.
        Last fall, the U.S. Environmental Protection Agency (EPA) revised
    its assessment of publicly owned wastewater treatment needs. The survey
    found more than $139 billion in wastewater collection and treatment
    needs over the next twenty years, including $13.8 billion for
    communities with fewer than 10,000 residents. These small communities
    represent 11 percent of the nation's total documented need, including
    $3.9 billion for secondary treatment and $6.6 billion for sewer pipe
    repair, replacement, and new construction.
        Drinking water infrastructure needs are equally alarming. A 1996
    study by the USDA (Water 2000) estimated that as many as 8 million
    people have drinking water quality problems and that approximately 1.1
    million people lack indoor plumbing.
        A 1997 EPA drinking water infrastructure survey found that more
    than $138 billion is needed over the next twenty years for transmission
    and distribution lines, water treatment plants, and water storage and
    supply facilities. Small systems serving 3,300 or fewer people reported
    more than $37 billion in construction needs. As we noted in our fiscal
    1998 testimony before the subcommittee, rural households represent the
    largest per-household need and are burdened with the highest per-
    household cost.
                    rural infrastructure investment benefits
        Numerous benefits accrue when a small community builds a new
    drinking water treatment plant or makes repairs to leaking water and
    sewer pipes. Foremost, water infrastructure investment improves public
    health and safety, by reducing the incidence of disease and mortality
    and enhancing fire protection. Capital investment also yields economic
    benefits, such as new jobs and better labor productivity. New
    businesses are attracted to improved communities, and over time the
    local tax base grows and provides more financial stability.
                                   conclusion
        The RUS Water and Waste Disposal Loans and Grants are an important
    source of financing for small, rural communities that have been turned
    down by more conventional lenders. The program has a solid track record
    in terms of loans repaid and maximum use of appropriated dollars. The
    need for continued federal investment in rural America is evident and
    worth every penny. We urge the subcommittee to fully support the
    Clinton Administration's fiscal 1999 request for the RUS water and
    waste disposal loans and grants.
        Thank you for the opportunity to provide this recommendation.
                                     ______

       Prepared Statement of Ben F. Bowden, Chairman, National Watershed
                                   Coalition
        The National Watershed Coalition (NWC) is pleased to present this
    testimony in support of some of the most beneficial water resource
    conservation programs ever developed in the United States. The
    Coalition recognizes full well the very difficult financial situation
    our nation faces. That makes the work of this Subcommittee very
    important. It also makes it imperative that the federal programs that
    are continued are those that provide real benefit to society, and are
    not programs that would be nice to have if funds were unlimited. We
    believe that the Small Watershed Program (Public Law 83-566) and the
    Flood Prevention Operations Program (Public Law 78-534) are examples of
    those rare programs that address our nations vital natural resources
    which are critical to our very survival, do so in a way that provide
    benefits in excess of costs, and are programs that serve as models for
    the way all federal programs should work.
        The National Watershed Coalition is an alliance of national,
    regional, state and local organizations that have a common interest in
    advocating the use of the watershed when dealing with natural resource
    issues. We also support the use of total resource management principles
    in planning. We are advocates of both the Small Watershed Program and
    the Flood Prevention Operations Program administered by USDA's Natural
    Resources Conservation Service (NRCS), formerly the Soil Conservation
    Service (SCS). These resource protection programs deserve much higher
    priority than they have had in the past. Even in difficult financial
    times, their revitalization would pay dividends in monetary and other
    benefits, and jobs! The disastrous 1993 Midwest floods should have
    taught us something. If one examines the Report of the Interagency
    Floodplain Management Review Committee that studied that event, we see
    that flood damages were significantly reduced in areas where Public Law
    566 projects were installed. The requests for disaster assistance were
    also less.
        The watershed as the logical unit for dealing with natural resource
    problems has long been recognized. Public Law 566 offers a complete
    watershed management approach, and should have a prominent place in our
    current federal policy emphasizing watersheds and total resource
    management based planning. Why should the federal government be
    involved with these watershed programs?
      --They are programs whose objectives are the sustaining of our
            nations precious natural resources for generations to come.
      --They are not federal, but federally assisted. They do not represent
            the continued growth of the federal government.
      --They are locally initiated and driven. Decisions are made by people
            affected, and respect private property rights.
      --They share costs between the federal government and local people.
            Local sponsors pay between 30-40 percent of the total costs of
            Public Law 566 projects.
      --They produce net benefits to society. The most recent program
            evaluation (1987) demonstrated the actual ratio of benefits to
            costs was approximately 2.2:1. The actual adjusted economic
            benefits exceeded the planned benefits by 34 percent. How many
            other federal programs do so well?
      --They consider and enhance environmental values. Projects are
            subject to the discipline of being planned following the
            National Environmental Policy Act (NEPA), and the federal
            ``Principles and Guidelines'' for land and water projects. That
            is public scrutiny.
      --They are flexible programs that can adapt to changing needs and
            priorities. Objectives that can be addressed are flood damage
            reduction, watershed protection (erosion and sediment control),
            water quality improvement, rural water supply, water
            conservation, fish and wildlife habitat improvement,
            recreation, irrigation and water management, etc. That is
            flexibility.
      --They are programs that encourage all citizens to participate.
      --They can address the needs of low income and minority communities.
      --And best of all--they are programs the people like!
        The National Watershed Coalition commends the Congress for the
    support given these programs over the years, and hopes that the outcome
    of the fiscal year 1999 appropriations process will enable this vital
    work to continue and expand as we seek to preserve, protect and better
    manage our nation's water and land resources. Every State in the United
    States has benefited from the Small Watershed Program.
        In order to continue this high priority work in partnership with
    states and local governments, the Coalition recommends a fiscal year
    1999 funding level of $250 million for Watersheds and Flood Prevention
    Operations, Public Laws 566 and 534. The allocation between these two
    programs is best left to the ARCS. Of this amount, we would suggest
    that $50 million be used for structural rehabilitation and replacement,
    and $10 million be used for wetland acquisition as authorized by the
    1990 Farm Bill. We recognize that in these difficult financial times,
    the Congress may not find it possible to provide that amount, but we
    also believe that we are not doing our job of helping you recognize the
    true need if we continually recommend the federal share of these needed
    funds be less. We would hope that everyone understand these federal
    funds are only a part of the total that are committed to this vital
    purpose. The local project sponsors in these ``federally assisted''
    endeavors have a tremendous investment also. Additionally, the
    Coalition supports $10.5 million for watershed planning, $13.0 million
    for River Basin Surveys and Investigations. We also suggest that the
    Emergency Watershed Program (EWP) be provided with $20 million to allow
    the NRCS to provide rapid response in time of natural disaster.
        The issue of the current condition of those improvements
    constructed over the last fifty years with these watershed programs is
    a matter of great concern. A USDA study published in 1991 estimated
    that in the next ten years, $590 million would be needed to protect the
    installed works. That figure is likely larger today. Of that amount,
    $100 million would come from local sponsors as their operation and
    maintenance contribution. That is the reason we are recommending
    starting with $50 million for the work necessary to protect these
    installed structures. If we don't start to pay attention to our rural
    infrastructure needs, the ultimate cost to society will only increase,
    and project benefits will be lost. This is a serious concern. We are
    pleased that NRCS and some Members recognize this issue.
        In addition to offering our thoughts on needed conservation program
    budget levels, we would like to express our great concern with the way
    in which the Administration's budget proposes to change the watershed
    program funding in fiscal year 1999. The Administration again proposes
    taking $71 million from the Public Law 83-566 Small Watershed Program,
    and putting it in the NRCS Conservation Operations account, leaving
    only $49 million for actual on the ground implementation. While the
    Administration's budget suggests this approach simply combines some of
    the NRCS's technical assistance expenses into one account, and the
    funds will be used for ``water resource assistance,'' we believe this
    is a means to put these funds in an account where they will not be used
    for Public Law 83-566 Small Watershed Projects, but instead will be
    spread around with virtually no program accountability. In our view
    this represents the long time desire of some in the Administration to
    circumvent the will of the Congress and eliminate Small Watershed
    Projects. The Administration's budget also eliminates any funding for
    the eleven watersheds authorized by the Flood Control Act of 1944
    (Public Law 78-534), which was about $18 million in 1997, but suggests
    that ``worthwhile Public Law 534 projects'' can be continued under the
    Small Watershed Program, Public Law 83-566 (with no funding?). We see
    this as a way to again administratively eliminate a congressionally
    mandated program which some in the Administration don't care for, but
    one which has provided millions of dollars of benefits to society.
    Watershed project sponsors, who were encouraged to assume such
    responsibility by the federal government, now feel abandoned by that
    same federal ``partner.'' It seems to us that the money taken from the
    Small Watershed Program ($71 million put in the Conservation Operations
    account) would be far better used, and provide many more real benefits,
    if left in the Small Watershed Program where Congress intended it.
        The availability of only $49 million in the administration's budget
    for actual project installation presents a special problem for
    watershed sponsors. In addition to virtually eliminating most project
    construction, this lack of funding allows the NRCS to say they are
    ``reevaluating project priorities in order to make the limited finds
    stretch, and be used for environmentally friendly projects.'' Thus
    reevaluation is done without the input of project sponsors, whose
    planned work meets every environmental regulation, and meets the
    criteria in the law. What in truth happens with this reevaluation, is
    that projects which have a flood damage reduction objective, and which
    might propose building a small upstream dam to reduce flooding, are
    eliminated from the NRCS priority listing. Those local project sponsors
    have made legal commitments based on the federal agreements, and they
    are being left out in the cold.
        The Administration has also suggested that the $49 million for
    project construction be transferred to the Rural Development for
    ``loans.'' They are also proposing the collection of ``user fees'' for
    services that taxpayers have already paid for once, and for which no
    statutory authority exists. Not only is this not the intent of Congress
    or in the legislation, if the wealthy communities elect to use the loan
    option to implement their projects, it would virtually eliminate any of
    the poorer, limited resource communities from competition for very
    limited funds. This sounds like another crazy idea originating with the
    Office of Management and Budget (OMB). It flies in the face of those
    interested in the notion of ``environmental justice.''
        A number of proposed amendments to this legislation were considered
    during the discussions of the 1996 Farm Bill. The NWC would urge you,
    whenever the time is appropriate, to take another look at those
    proposals, particularly the idea of expanding the objectives that the
    legislation can serve to include more non-structural practices, allow
    the provision in the law to provide assistance in developing rural
    water supplies (without water there is no rural development) actually
    be used (we understand OMB has never allowed its use), eliminate the
    current requirement that mandates twenty percent (20 percent) of the
    total project benefits be ``directly related to agriculture'' which has
    the unintended effect of penalizing projects in poor, small, rural
    communities, and continue to explore the idea of allowing the USDA
    Secretary to accept transfers from other Federal departments and
    agencies to carry out projects under Public Law 83-566, when it is to
    the advantage of all. We would also urge that as the issue of cost
    sharing rates is examined in the future, cost sharing rates be set for
    the natural resource purpose to be achieved, rather on the practices
    used to achieve those purposes.
        The Coalition appreciates the opportunity to offer these comments
    regarding fiscal year 1999 funding for the water resource programs
    administered by the Natural Resources Conservation Service. With the
    ``downsizing'' the NRCS has experienced, we would be remiss if we did
    not again express some concern as to their ability to provide adequate
    technical support in these watershed program areas. NRCS technical
    staff has been significantly reduced and budget constraints have not
    allowed that expertise to be replaced. Traditional fields of
    engineering and economics are but two examples. We see many states
    where the capability to support their responsibilities in these program
    areas is seriously diminished. This is a disturbing trend that needs to
    be halted. This downsizing has a very serious effect on state and local
    conservation programs. Local Watershed and Conservation Districts and
    the NRCS combine to make a very effective delivery system for providing
    the technical assistance to local people--farmers, ranchers and rural
    communities--in applying needed conservation practices. Many states and
    local units of government also have programs that provide financial
    assistance to land owners and operators for installing measures that
    reduce erosion, improve water quality, and maintain environmental
    quality. The NRCS provides, through agreement with the USDA Secretary
    of Agriculture, ``on the land'' technical assistance for applying these
    measures. The delivery system currently is in place, and by downsizing
    NRCS we are eroding the most effective and efficient coordinated means
    of working with local people to solve environmental problems ever
    developed. Our system and its ability to produce food and fiber is the
    envy of the entire world. In our view, these programs are the most
    important in terms of national priorities.
        The administration is also proposing millions of dollars for a new
    so-called ``Clean Water Initiative.'' Why have they chosen to abandon
    the tried and proven conservation watershed programs which have served
    us so remarkably for 50 years in order to fund diner initiatives?
        The Coalition pledges its full support to you as you continue your
    most important work. Our Executive Director/Watershed Programs
    Specialist Mr. John W. Peterson, who has over forty years experience in
    this business, is located in the Washington, DC area, and would be
    pleased to serve as a resource as needed. John's address is 9304 Lundy
    Court, Burke, VA 22015-3431, phone 703-455-6886, Fax; 703-455-6888,
    email; jwpeterson@theonramp.net.
        Thank you for allowing the National Watershed Coalition (NWC) this
    opportunity.
                                     ______

      Prepared Statement of Dr. Sam Curl, Dean and Director, Division of
    Agricultural Sciences and Natural Resources, Oklahoma State University,
        The Oklahoma Agricultural Experiment Station, and the Oklahoma
                         Cooperative Extension Service
        Mr. Chairman and Members of the Subcommittee: Thank you for
    providing me the opportunity to submit testimony to your subcommittee
    today concerning agriculture research, extension, and education funding
    for fiscal 1999.
        On behalf of Oklahoma State University, the Oklahoma Agricultural
    Experiment Station and the Oklahoma Cooperative Extension Service, I
    seek your support of funding for the following continuing special
    research grants, which are the priority initiatives for the Division of
    Agricultural Sciences and Natural Resources:

    Animal Waste Management in Semiarid Agroecosystems............  $400,000
    Expanded Wheat Pasture........................................   330,000
    Integrated Production Practices for Horticultural Crops.......   258,000
     Preservation and Processing of Selected Fruits and Vegetables   258,000
    Pilot Tech Transfer (Mississippi and Oklahoma)................   400,000

        Your support is also solicited for national agriculture research,
    extension, and education funding consistent with the recommendations of
    the National Association of State Universities and Land-Grant Colleges.
    Included within those recommendations is the proposal for a 5.7 percent
    increase in base (formula) funding for agriculture research, extension,
    and education that we solidly support.
          animal waste management in semiarid agroecosystems--$400,000
        The proposed Oklahoma Panhandle Research and Education Center's
    research project in Animal Waste Management in Semiarid Agroecosystems
    is designed to develop sustainable, environmentally safe, and
    ecologically sound best management principles and practices for
    beneficial animal waste applications for ``High Plains Agriculture.''
    The project will be conducted in support of rural economic development
    through a federal-state-local partnership.
        Emphasis is placed on the rapidly expanding hog industry in the
    semiarid region, but information gained will also be applicable to the
    beef and dairy industries. The objectives of this study are to develop
    informational databases for:
        (1) sustainable, environmentally safe, and ecologically sound
    principles and practices for beneficial animal waste management in
    semiarid agroecosystems;
        (2) best management practices to maximize nutrient utilization and
    minimize odor for land application of animal wastes in crop and
    grazingland production systems;
        (3) the design and operation of waste lagoons in semiarid
    agroecosystems to minimize odor and risk of harmful effects to ground
    water, air quality, and the environment;
        (4) ensuring public health; and
        (5) technology transfer systems that will benefit ``High Plains
    Agriculture.''
        Research and education programs must provide a flow of timely
    information addressing problems faced by agricultural clientele and
    allied industries in the region. Climatic conditions and soils are
    unique to this semiarid region, and information that has been derived
    from other more humid regions is not applicable. This research will
    develop regional information regarding the prudent management of animal
    waste systems that is applicable to a five state, semiarid area. The
    multidisciplinary research activities will be conducted by the Oklahoma
    Agricultural Experiment Station and Oklahoma Cooperative Extension
    Service in cooperation with Oklahoma Panhandle State University and
    consultation with other land-grant universities from the four
    surrounding states.
        Information gained will be adaptable to producers in the Texas
    panhandle, northeastern New Mexico, eastern Colorado, and western
    Kansas. Research and extension programs dealing with beneficial land
    applications of biosolids from well-established beef-cattle feedlots,
    new emerging swine lagoons, and the expanding dairy industry are
    underway. Nutrient loading rates for crop production and grazingland
    systems, design and operation of waste lagoon systems with major
    emphasis on odor control, and minimizing risks to surface and ground
    water all will receive major attention. It is essential that
    economical, sustainable, environmentally prudent, and ecologically
    sound waste management principles and practices be developed for the
    rapidly expanding animal industry in this semiarid region.
                        expanded wheat pasture--$330,000
        The Expanded Wheat Pasture Project is a continuing
    multidisciplinary research and extension initiative at Oklahoma State
    University. The project is also known as, ``Increasing Profitability of
    the Wheat/Stocker Cattle Enterprise,'' and its objectives are to:
        (1) increase profitability of the wheat grain/stocker-feeder cattle
    enterprise;
        (2) decrease production risks and income variability from the
    enterprise, thereby increasing growth of the industry in the southern
    Great Plains; and,
        (3) improve the economics of many rural communities in Oklahoma and
    the southern Great Plains.
        This initiative permits Oklahoma State University (OSU) to help
    improve the profitability, global competitiveness, and sustainability
    of agriculture, and revitalize rural Oklahoma.
        This initiative is at a pivotal stage with regard to evaluation of
    grazing management strategies to overcome the negative effects of
    increasing stocking density on grain yield, and further development of
    decision-support microcomputer models. The project presently focuses on
    evaluating different wheat varieties by cattle grazing trials, and
    further development of supplementation programs that will minimize
    variation in daily intake while achieving desired mean intakes of new
    technologies for growing cattle. This will maximize both biologic and
    economic efficiency.
        This initiative compliments the new Beef Cattle Environmental
    Stress Research Facility at OSU. This will allow measurement of the
    effects of receiving health and nutrition treatments for stressed
    calves on subsequent performance on wheat pasture. Similarly, effects
    of treatments on wheat pasture on subsequent feedlot performance of the
    cattle can be evaluated. These studies are a prerequisite to improving
    the overall efficiency and decreasing costs of beef cattle production
    in the United States.
        Differences in net return (dollars per acre) from cattle and total
    net return from cattle and grain have been as large as $35 and $63 per
    acre, respectively, depending on variety and stocking density. Oklahoma
    plants about 7.4 million acres of wheat each year.
        The potential of this project for improving the economies of many
    rural communities in Oklahoma and the southern Great Plains is
    enormous. Annual income in Oklahoma could be increased by $131,000,000
    by improving the technical efficiency of production of the 1.5 million
    head of stocker cattle that are grown to heavier weights on wheat
    pasture in Oklahoma prior to being finished in feedlots. By improving
    the technical efficiency and increasing the number of cattle that are
    grazed on wheat pasture in Oklahoma, annual income in the state could
    potentially be increased by almost $308,000,000. This research has
    similar potential impacts on the 5.5 million head of wheat pasture
    stocker cattle in Texas, Kansas, New Mexico, and Colorado. The
    opportunity for expansion (growth) of the industry has never been
    greater than it is today because of the changing structure of the U. S.
    beef cattle industry.
       integrated production practices for horticultural crops--$258,000
        The goals of the Integrated Production Practices for Horticulture
    Crops research project include evaluating and developing cropping
    systems that will diversify agricultural production, thus increasing
    profits and improving the stability of farms in the southeast region of
    Oklahoma. The focus of the project has been to develop alternative
    agricultural enterprises for the region, especially horticulture crops.
        The research is conducted by a multidisciplinary team of scientists
    from OSU and the U.S. Department of Agriculture's Agriculture Research
    Service (ARS), who are co-located at the Wes Watkins Agricultural
    Research and Extension Center in southeast Oklahoma, as well as
    scientists at other universities. The mission of the facility is to aid
    in the agricultural development in the region.
        Applied and theoretical research projects are necessary and are
    being conducted in support of the overall project. The project leaders
    have received additional peer reviewed competitive grants for
    supporting work. Funds from these grants have directly supported the
    research of scientists located at the Center, support local students as
    technicians working on projects, supplies, scientific equipment, and
    infrastructure that will support long term research efforts at the
    center.
        Research has resulted in development of cropping systems for six
    different vegetable crops not currently grown extensively in the region
    plus a comprehensive cropping system for watermelons. The cropping
    systems that have been developed will allow producers to reduce risks,
    diversify farms, and increase profits. In addition, results will be
    useful for producers of traditional crops grown in the region. Future
    support will allow the team to develop new systems, extend the results
    of prior research to producers, and to optimize production in the
    region. Databases developed will enable producers to better understand
    the relationships among farm geography, climate, management practices,
    yield, and profit.
    preservation and processing of selected fruits and vegetables--$258,000
        Preservation of quality after harvest is of special importance for
    fresh fruits, nuts, and vegetables. The overall objectives of the
    Preservation and Processing of Selected Fruits and Vegetables research
    initiative at OSU are: to define the major limitations for maintaining
    quality of harvested fruits, nuts, and vegetables, and, then, to
    prescribe appropriate harvesting, handling, and processing protocols to
    extend shelf life and/or to improve value. Research activities have
    concentrated on factors currently limiting quality and shelf life of
    Oklahoma-grown produce and focuses on supporting the growth of the
    fruit, nut, and vegetable industry by providing technological
    improvements essential to meet consumer demands. This research program
    also addresses high priority national research topics in development of
    new technologies for handling and processing agricultural products.
        A systems approach to harvesting, handling, and processing
    operations is being used to integrate specialized crop culture,
    harvesting, handling, and processing operations to optimize new
    cropping systems, and to provide technological information required for
    integration of new value-added processing industries for Oklahoma
    horticultural products. Commercial application of ongoing food products
    processing projects will be facilitated by activities in the newly
    opened Oklahoma Food and Agricultural Products Research and Technology
    Center. Technological improvements in fruit, nut, and vegetable
    harvesting, handling and processing are critically needed to supply
    domestic markets and to support continued U.S. participation in
    international commerce. This research will help Oklahoma industries
    compete in a global economy.
            pilot tech transfer (mississippi and oklahoma)--$400,000
        Within the Mississippi and Oklahoma Pilot Technology transfer
    project, the Oklahoma funding supports an integrated extension program
    that provides technology transfer and associated business support for
    small manufacturers in southeastern Oklahoma. The team includes
    engineers and technology transfer specialists from the Oklahoma
    Cooperative Extension Service working cooperatively with specialists
    from Rural Enterprises, Inc., of Durant, Oklahoma. Team members
    cooperate with specialists in other districts of the state in programs
    supported by the National Institutes of Standards and Technology (NIST)
    through the Oklahoma Alliance for Manufacturing Excellence. The
    Alliance programs are focused on other areas in Oklahoma.
        The focus of the program is one-on-one assistance to small
    manufacturers to help make their operations sustainable and more
    profitable. In the process, jobs are saved and created. In addition,
    the small manufacturers increase their technical competence and learn
    to access these kinds of services on their own through private service
    providers. They are also encouraged to become members of local and
    state manufacturing organizations that can help make them sustainable.
        Rural Oklahoma traditionally has relied on agriculture and energy,
    with a scattering of small industry, for its economic base. Of the more
    than 5,800 manufacturing firms in Oklahoma, more than 5,200 employ
    fewer than 250 employees. Approximately half of these small firms are
    located in rural areas. Rural manufacturers are extremely important to
    their local economies. The loss or downsizing of these small plants can
    have devastating consequences for the host and surrounding communities,
    while the establishment or growth of a manufacturing facility can
    provide far-reaching and sustainable economic benefits.
        The technology transfer activity supported by this program provides
    the only on-site, one-on-one, focused transfer of engineering and
    technical assistance to manufacturers in southeast Oklahoma. It is the
    only fully integrated program of financial, technical, and business
    assistance to small manufacturers in Oklahoma.
       national agriculture appropriations for research, extension, and
                                   education
        Agricultural science is important for improving the components of
    life that matter the most to the public. Agricultural science
    continually produces healthier, more nutritious, safer food than found
    anywhere else in the world. It produces fibers for American clothing
    and textiles. Agricultural science produces discoveries that make
    dramatic improvements in human health. Agricultural scientists work
    closely with Cooperative Extension personnel who ensure that
    agricultural discoveries get into the hands of those who need them,
    resolving problems for whole industries and single individuals.
        Despite the documented successes of agricultural research, and
    education, federal funding for these programs has stagnated since the
    1970's. Buying power has eroded 15 percent in real terms since 1985.
    The Clinton Administration has proposed significant budget cuts for
    fiscal 1999 in the base funds, which are compounded when the last five
    years of flat funding for the programs is taken into account. The
    Clinton budget base funding cuts of particular concern are:
      --Hatch Act, Experiment Station--9 percent cut;
      --Smith-Lever, Cooperative Extension--4 percent cut;
      --McIntire-Stennis, Forestry--3 percent cut; and
      --Animal Health--elimination.
        Support is requested for agriculture appropriations for fiscal 1999
    to: (1) increase base formula funding for agriculture research,
    extension, and education by 5.7 percent; and (2) fund other
    agricultural research, extension, and education appropriations as
    outlined in the recommendations of the National Association of State
    Universities and Land-Grant Colleges.
                                     ______

         Prepared Statement of the Organization for the Promotion and
               Advancement of Small Telecommunications Companies
                               summary of request
        The Organization for the Promotion and Advancement of Small
    Telecommunications Companies (OPASTCO) seeks the Subcommittee's support
    for fiscal year 1999 loan levels for the telecommunications program
    administered by the Rural Utilities Service (RUS) in the same amounts
    as those contained in the fiscal year 1998 Agriculture Appropriations
    Act. The requested program levels are:

                        Telecommunications Loans Program

    5 percent hardship loans................................     $75,000,000
    Treasury rate loans.....................................     300,000,000
    Guaranteed loans........................................     120,000,000
    Rural Telephone Bank (RTB) loans........................     175,000,000

        In addition, OPASTCO requests the Subcommittee's support for the
    following: (1) removal of the statutory 7 percent cap on Treasury rate
    loans for fiscal year 1999; (2) a prohibition against the transfer of
    unobligated RTB funds to the general fund of the Treasury or Federal
    Financing Bank; (3) continuation of funding the RTB's administrative
    expenses and subsidy budget authority through the general fund of the
    Treasury; and, (4) funding of the distance learning and telemedicine
    grant and loan program at sufficient levels.
        OPASTCO is a national trade association of more than 500
    independently owned and operated telephone companies serving rural
    areas of the United States. Its members, which include both commercial
    companies and cooperatives, together serve over 2 million customers in
    40 states. Well over half of OPASTCO's members are RUS or RTB
    borrowers.
        Perhaps at no time since the inception of the RUS (formerly the
    REA) has the telecommunications program been so vital to the future of
    rural America. The telecommunications industry is at a crossroads, both
    in terms of technology and public policy. Great leaps in
    telecommunications technology in recent years will deliver on the
    promise of a new ``information age.'' The Federal Communication
    Commission's (FCC) implementation of the landmark Telecommunications
    Act of 1996, as well as fundamental statutory changes to RUS's lending
    program, will expedite this transformation. However, without continued
    RUS support, rural telephone companies will be hard pressed to build
    the infrastructure necessary to bring their communities into this new
    age, creating a bifurcated society of information ``haves'' and ``have-
    nots.''
        Contrary to the belief of some critics, RUS's job is not finished.
    In fact, in a sense, it has just begun. We have entered a time when
    advanced services and technology--such as broadband fiber optics,
    digital switching equipment, custom calling features, and the
    Internet--are an expected and needed part of a customer's
    telecommunications service. In addition, the fast approaching year 2000
    will require all telephone companies to upgrade their digital switches
    in order to avoid network disruptions and provide a seamless transition
    to the new millennium. Unfortunately, the inherently higher costs of
    upgrading rural networks has not abated. Rural telecommunications
    continues to be more capital intensive and involves fewer paying
    customers than its urban counterpart. RUS borrowers average only 6.1
    subscribers per route mile versus 130 subscribers per route mile for
    large local exchange carriers. In order for rural telephone companies
    to modernize their networks and provide their customers with advanced
    services at reasonable rates, they must have access to reliable low-
    cost financing.
        Furthermore, the relative isolation of rural areas increases the
    value of telecommunications services for these citizens.
    Telecommunications enables applications such as distance learning and
    telemedicine that can alleviate or eliminate some rural disadvantages.
    Telecommunications can also make rural areas attractive for some
    businesses and result in revitalization of the rural economy. For
    example, businesses such as telemarketing and tourism can thrive in
    rural areas, and telecommuting can become a realistic employment
    option.
        While it has been said many times before, it bears repeating that
    RUS's telecommunications loans program is not a grant program. The
    funds loaned by RUS are used to leverage substantial private capital,
    creating public/private partnerships. The RUS estimates that every
    dollar of government money invested in telecommunications plant
    leverages $4.80 in private capital. For a very small cost, the
    government is encouraging tremendous amounts of private investment in
    rural telecommunications infrastructure. Moreover, there has never been
    a default in the history of the lending program.
        The FCC's implementation of the Telecommunications Act of 1996 will
    only increase rural telephone companies' need for RUS assistance in the
    future. The forward-looking Act defines universal service as an
    evolving level of telecommunications services that the FCC must
    establish periodically, taking into account advances in
    telecommunications and information technologies and services. While the
    competitive environment engendered by the 1996 Act may offer the means
    of meeting this definition in urban areas, rural and high cost areas
    have less potential for competitive investment.
        One of the principles of universal service established in the 1996
    Act is that consumers in rural areas have access to advanced
    telecommunications and information services that are reasonably
    comparable to those services provided in urban areas at reasonably
    comparable rates. At present, it is uncertain whether the FCC will
    provide a ``sufficient'' mechanism, as required by the Act, to achieve
    this urban/rural comparability goal. Long before the enactment of the
    1996 Act, RUS has been the great facilitator of a dynamic universal
    service concept in rural areas, providing rural telephone companies
    with the financing to fund technological improvements. RUS now has an
    essential role to play in the implementation of the new law, as it will
    compliment new funding mechanisms established by the FCC and enable
    rural America to move closer to achieving the federally mandated goals.
        Working in tandem with the 1996 Act, the Rural Electrification Loan
    Restructuring Act of 1993 (RELRA) will further help to ensure the
    comparability of telecommunications service between urban and rural
    America. As a prerequisite to eligibility for insured and RTB loans,
    RELRA requires that every state have an RUS approved modernization plan
    which provides a timeline for the improvement of the state's
    telecommunications network and assures that the purpose of every loan
    is consistent with achieving the requirements of the borrower's state
    plan. These plans set forth the requirements for the transmission of
    video images and high speed data that will promote educational and
    health care opportunities as well as provide the necessary
    infrastructure for economic development. Implementation of these plans
    has already begun to generate additional loan demand as rural telephone
    systems strive to meet the increased service objectives in the rural
    areas they serve.
        One of the most vital components of RUS's telecommunications loans
    program is the 5 percent hardship loan program. These loans are
    referred to as hardship loans for good reason: They provide below-
    Treasury rate financing to telephone companies serving some of the most
    sparsely populated, highest cost areas in the country. The commitment
    these companies have to providing modern telecommunications service to
    everyone in their communities has made our nation's policy of universal
    service a reality and, in many cases, would not have been possible
    without RUS's hardship loan program. Companies applying for hardship
    loans must meet a set of eligibility requirements and the projects to
    be financed are rated on a point system to ensure that the loans are
    targeted to the most needy and deserving. The RUS reports that through
    the second quarter of fiscal year 1998, they had already approved over
    $65 million in hardship loans--or more than 86 percent of their
    authorization--and had an additional $62 million in applications on
    hand. By year end, RUS estimates that it will have $79 million in
    hardship loan applications that cannot be funded. For fiscal year 1998,
    the government subsidy needed to support a $75 million loan level was
    under $3 million. Given the need and demand for this essential program,
    it is critical that the loan level be maintained at $75 million for
    fiscal year 1999.
        With regard to RUS's Treasury rate loan program, OPASTCO supports
    the removal of the 7 percent ceiling on these loans for fiscal year
    1999. This Subcommittee appropriately supported language in the fiscal
    year 1996 Agriculture Appropriations Act to permit Treasury rate loans
    to exceed the 7 percent per year ceiling contained in the authorizing
    act. This language was continued in fiscal year 1997 and fiscal year
    1998. Were long-term interest rates to exceed 7 percent, adequate
    subsidy would not be available to support the Treasury rate loan
    program at the authorized levels. Accordingly, OPASTCO supports the
    continuation of this language in the fiscal year 1999 appropriations
    bill in order to prevent potential disruption to this important
    program.
        OPASTCO also urges the Subcommittee to reinstate the language
    introduced in the fiscal year 1997 Agriculture Appropriations Act, and
    continued in fiscal year 1998, prohibiting the transfer of any
    unobligated balance of the RTB liquidating account to the Treasury or
    the Federal Financing Bank which is in excess of current requirements
    and requiring the payment of interest on these funds. As a condition of
    borrowing, the statutory language establishing the RTB requires
    telephone companies to purchase Class B stock in the bank. Once all
    loans are completely repaid, a borrower may then convert its Class B
    stock into Class C stock. Thus, all current and former borrowers
    maintain an ownership interest in the RTB. As with stockholders of any
    concern, these owners have rights which may not be abrogated. The
    Subcommittee's inclusion of the aforementioned language into the fiscal
    year 1999 appropriations bill will ensure that RTB borrowers are not
    stripped of the value of this required investment.
        On the other hand, the Subcommittee should reject the
    Administration's proposal to fund the RTB's administrative expenses and
    subsidy budget authority through the bank's liquidating account
    balances. This proposal is inappropriate on both legal and policy
    grounds. Statutorily, the Rural Electrification Act provides for the
    RTB's use of facilities and services of employees of the Department of
    Agriculture, without cost to the RTB, until such time as the bank is
    privatized. The proposal also appears inconsistent with the bifurcated
    structure of the RTB under the Federal Credit Reform Act of 1990 which
    does not permit funds in the liquidating account to finance new loans.
    From a public policy standpoint, unobligated balances of the
    liquidating account have been targeted to support the privatization of
    the RTB and use of these funds for other purposes would only serve to
    dilute the value of the bank for all stockholders. Finally, paying for
    the RTB's administrative expenses and subsidy through the liquidating
    account offers no budgetary savings. For these reasons, OPASTCO is
    opposed to the Administration's proposal and urges the Subcommittee to
    continue to fund the RTB through the general fund of the Treasury.
        In addition to RUS's telecommunications loans program, OPASTCO
    supports adequate funding of the distance learning and telemedicine
    grant and loan program authorized in the Federal Agriculture
    Improvement and Reform Act of 1996. This sensible investment allows
    rural students to gain access to advanced classes which will help them
    prepare for college and jobs of the future. Also, rural residents will
    gain access to quality health care services without traveling great
    distances to urban hospitals. The Agriculture Act authorizes $100
    million for each of the fiscal years 1996 through 2002. Loans are made
    at the government's cost-of-money, which should help to meet demand for
    the program in the most cost effective way. In light of the
    Telecommunications Act's requirement that schools, health care
    providers, and libraries have access to advanced telecommunications
    services, sufficient targeted funding for this purpose is essential in
    fiscal year 1999.
                                   conclusion
        The development of the nationwide telecommunications network into
    an information superhighway, as envisioned by policymakers, will help
    rural America survive and prosper in any market--whether local,
    regional, national, or global. However, without the availability of
    low-cost RUS funds, building the information superhighway in
    communities that are isolated and thinly populated will be untenable.
    By supporting the RUS telecommunications programs at the requested
    levels, the Subcommittee will be making a significant contribution to
    the future of rural America at a negligible cost to the taxpayer.
                                     ______

        Prepared Statement of Alan F. Holmer, President, Pharmaceutical
                     Research and Manufacturers of America
        Mr. Chairman and Members of the Subcommittee: On behalf of the
    Pharmaceutical Research and Manufacturers of America (PhRMA), I present
    recommendations on the fiscal year 1999 budget request submitted by the
    Administration for the Food and Drug Administration (FDA). PhRMA
    represents the country's major research-based pharmaceutical and
    biotechnology companies, which are leading the way in the search for
    new cures and treatments that will enable patients to lead longer,
    happier, healthier, and more productive lives.
        Let me acknowledge at the outset that we appreciate the very
    difficult decisions the Subcommittee must make as it considers funding
    for the many vital agriculture, infant feeding, rural development,
    tobacco, and other programs with which it is concerned. Our interest is
    in the FDA and the critical role it plays in promoting and protecting
    the health and safety of our country's citizens.
        Let me also acknowledge and thank the Subcommittee for its key
    leadership in ensuring that FDA receives the necessary funding to carry
    out its important functions. This was particularly true last year when
    the Subcommittee approved funding for fiscal year 1998 that enabled
    Congress to pass the FDA Modernization Act of 1997 (FDAMA), which
    extended the Prescription Drug User Fee Act of 1992 (PDUFA) for another
    five years. Under the first five years of the user-fee law, FDA cut
    drug-approval times in half and is making new life-saving, cost-
    effective medicines available to patients much more quickly.
        We also thank you, Mr. Chairman, for your leadership on the pending
    fiscal year 1998 supplemental appropriations legislation. PhRMA
    supports FDA's request, as a result of FDAMA, for an increase to the
    current authorized appropriation level, plus an additional amount for
    the FDA's increased workload of drug applications, for a total of $25.9
    million. We appreciate that your Subcommittee has pressed to provide
    this additional funding for the agency to allow it to utilize all of
    the drug user-fee revenues that will be paid this year.
        PhRMA also supports the Administration's fiscal year 1999 request
    for budget authority for direct federal appropriations of $878.9
    million for FDA salaries and expenses--the major and essential
    component of FDA's resources. This represents a $21.4 million increase
    over the appropriations enacted by Congress for the current fiscal
    year.
        However, the Administration is further proposing to raise an
    additional $127.7 million through the imposition of new user fees for
    such activities as medical device reviews, animal drug approvals,
    import inspections, food additive petition reviews, generic drug
    application reviews, and post-market surveillance of products. Unlike
    the prescription-drug user fee program, these user fees would
    substitute for regular appropriations, would not be dedicated to a
    specific purpose, and would not require that FDA meet performance
    goals.
        For more than a decade, this and previous Administrations have made
    such proposals and Congress has repeatedly rejected them. We anticipate
    that this will happen again this year.
        For this reason, we believe it is critical that Congress provide
    direct federal appropriations of $1.007 billion for FDA salaries and
    expenses for fiscal year 1999--which includes the $878.9 million
    requested by the Administration and the additional $127.7 million the
    Administration believes is necessary but should be derived from general
    user-fees that Congress has consistently declined to authorize.
        Without the additional $127.7 million in appropriations, FDA will
    not be able to carry out all of its important public health and safety
    responsibilities in regulating more than $1 trillion worth of
    products--one-quarter of all the money spent annually by U.S.
    consumers--in the areas of drugs, biologics, medical devices, food,
    cosmetics, radiation-emitting devices, and pet food and drugs.
        In his prepared testimony for the Subcommittee's hearing on March
    31, 1998, FDA Lead Deputy Commissioner Michael A. Friedman, M.D.,
    stated that, while ``focused'' food safety and tobacco programs that
    have received ``specially designated appropriations [will] continue to
    grow, core FDA functions have seen a steady decline in non-PDUFA FTE's
    from the fiscal year 1992 level of 8,868 to a low of 8,444 in the
    current fiscal year, a 4.8 percent drop.''
        Of primary concern to PhRMA, the prescription drug user-fee
    program--entirely different than the Administration's proposals for
    general new user fees--is good for FDA, industry and, above all,
    patients. The pharmaceutical industry and FDA are working to serve a
    common client--the patient. The research-based pharmaceutical industry
    is working to develop new and better drugs, FDA to improve the drug
    development and approval process. According to the agency, more than 11
    million patients received an approved medicine in 1997 that would not
    have been available except for the prescription drug user-fee law.
        PhRMA companies will spend over $20 billion this year--almost 20
    percent of sales, more than virtually any other U.S. industry--to
    discover and develop new medicines and vaccines to combat such diseases
    as AIDS, cancer, Alzheimer's, heart disease, stroke, diabetes,
    arthritis, asthma, and numerous other diseases. In his testimony, Dr.
    Friedman recognized the symbiotic relationship between industry and
    FDA:

              The industry's research and development investment of some
            $21 billion in drugs and nearly $4 billion in medical devices
            last year continues to grow as companies try to transform the
            advancing medical science into new products. The payoff is a
            new product pipeline filled with promising new therapeutics,
            some of which are strikingly novel. For society, the benefit
            from this investment in basic research is great. For FDA, as
            society's technological midwife for medical products, the
            burden also is great as it struggles to manage the burgeoning
            flow of new products to the market.

        We are concerned that FDA's baseline appropriations be maintained
    and that user fees not be substituted for direct federal
    appropriations. This is a fundamental principle underlying the
    agreement reached between Congress, FDA, and industry and embodied in
    PDUFA and FDAMA.
        Under the 1992 law, industry agreed to pay $327 million in user
    fees during 1993-1997, which enabled FDA to hire 600 additional
    reviewers and cut drug-approval times from 29.2 months in 1992 to 16.2
    months in 1997. During fiscal years 1998-2002, pharmaceutical companies
    will pay more than $550 million in user fees under FDAMA so FDA can
    continue to reduce approval times and can begin to cut development
    times as well. While approval times have been cut in half, total
    development times have continued to rise through the 1990's to more
    than 15 years according to the most recent figures.
        As Dr. Friedman stated in his prepared testimony, FDA will increase
    its number of reviewers and support staff under FDAMA by 120 FTE's over
    the current fiscal year to 820 in fiscal year 1999, ensuring that the
    agency will be able to continue to perform at its current high level.
        As revised under FDAMA, general fund appropriations for FDA
    salaries and expenses each year must equal or exceed the fiscal year
    1997 appropriation level (excluding user fees) of $820 million, as
    adjusted for inflation or changes in overall domestic discretionary
    budget authority, beginning after fiscal year 1998, whichever is lower.
    We understand that the requested basic direct federal appropriations
    level of $878.9 million for overall federal salaries and expenses may
    be adequate to meet the ``waterline'' requirement for ``triggering''
    FDA authority to assess and collect user fees for prescription drugs in
    fiscal year 1999.
        However, if FDA must absorb a shortfall of $127.7 million that will
    not be derived from proposed new user fees and is required to direct
    existing staff resources to support new Administration domestic policy
    initiatives in such areas as tobacco and food safety, the agency will
    not be able to carry out all of its other important public-health
    responsibilities, as Dr. Friedman made clear.
        Thus, PhRMA strongly urges that Congress appropriate $1.007 billion
    in fiscal year 1999 for FDA salaries and expenses to ensure that the
    agency can fulfill all its vital responsibilities to promote and
    protect public health and safety.
                                     ______

       Prepared Statement of David Gaillard, Forest Predator Protection
                     Campaign Coordinator, Predator Project
        I am writing you on the 67th anniversary of the creation of the
    Wildlife Services program (formerly called, ``Animal Damage Control''),
    in regards to the appropriations of federal funds to this program. I am
    writing on behalf of Predator Project, a non-profit conservation
    organization based in Bozeman, Montana. We urge you and the other
    members of the Appropriations Subcommittee on Agriculture to cut $10
    million from Wildlife Service's ``livestock protection'' program, which
    is almost entirely comprised of lethal predator control in the western
    United States.
        The federal Wildlife Services program has received much public
    scrutiny and criticism for its livestock protection program, which
    primarily involves killing coyotes, mountain lions and other predators.
    As we explain in our attached report, the problem with the USDA's
    Wildlife Services program is that public money is being spent to kill
    publicly owned wildlife, often on public lands, for the benefit of a
    small percentage of private livestock producers, who are neither
    required to change their management practices to reduce livestock/
    predator conflicts nor directly pay for this government ``service.'' Of
    the federal funds Congress allocates to Wildlife Services, we find that
    the majority goes to the western states, and the majority of that is
    spent on killing predators.
        Our report ``Wildlife Services?'' identified the following
    problems:
      --Despite a Clinton Administration policy that federal dollars should
            fund no more than half of Wildlife Services' state office
            expenditures, this is violated in 13 of the 17 western states;
      --Western livestock producers, including individuals and
            organizations, contributed less than 14 percent in direct
            payments for livestock protection, and less than 26 percent
            when indirect payments to county governments (typically due to
            a ``head'' tax on livestock) are included;
      --Livestock protection--which is almost exclusively lethal predator
            control--accounts for two-thirds (67 percent) of Wildlife
            Services' western state office expenditures, and more than two-
            thirds (69 percent) of its western state office expenditures of
            federally appropriated funds; and
      --Wildlife Services' western state office expenditures to kill
            predators exceeds reported livestock losses to predators in
            those states by more than three times!
        Predator Project considers the Clinton Administration's recent
    proposal to reduce Wildlife Services' operational budget for fiscal
    year 1999 by $2.5 million a step in the right direction. However, we
    urge Congress to further reduce Wildlife Services' budget by $10
    million, by eliminating federal appropriations for the lethal predator
    control work conducted through the Wildlife Services' ``livestock
    protection'' program. For fiscal year 1996 (the most recent years for
    which figures are available) Wildlife Services state offices spent
    $9.95 million of federally appropriated funds on livestock protection.
    We propose a $10 million cut in Wildlife Services' annual federal
    appropriations to eliminate this aspect of the Wildlife Services
    program. It is important to note that this total comprises the amount
    spent by state offices only. Additional federally appropriated funds
    are spent by the western and national Wildlife Services offices to
    manage lethal predator control work; these funds will be unaffected by
    this cut, and will therefore be available to provide technical
    assistance to livestock producers, targeted lethal predator control,
    and other Wildlife Services activities in the western 17 states.
    Eastern Wildlife Services activities, which largely assist landowners
    in managing their own wildlife problems, would be unaffected by this
    reduction.
        Predator Project is not alone in suggesting that Congress end the
    wildlife control program. In January, an unusual coalition of taxpayer
    and environmental groups released ``Green Scissors 1998--Cutting
    Wasteful and Environmentally Harmful Spending''. Wildlife Services was
    one of 71 programs which the report recommended be cut, because the
    program is ``preying on taxpayers.'' According to the report, not only
    is the program harmful and costly, it does not even work: ``Livestock
    losses to predators have not declined despite a 71 percent inflation-
    adjusted increase in WS's appropriations between 1983 and 1993 and a 30
    percent increase in coyotes killed in the last decade.'' In addition,
    Wildlife Services' livestock protection activities benefit western
    ranchers to the exclusion of most eastern ranchers. I would add to this
    that only a small percentage of western ranchers use Wildlife Services.
        In sum, there are three good reasons for cutting Wildlife Services'
    budget. First, ranchers who get Wildlife Services' help are neither
    required to pay directly for that help, nor do they have to change
    their livestock management practices to try and reduce the need for
    Wildlife Services' predator control work. In other words, those
    ranchers who are asking for Wildlife Services' assistance are getting
    something from the federal government without having to try and meet
    their own needs first. Second, all wildlife is considered the property
    of the individual states. So, the states should retain the
    responsibility for managing its wildlife. This would give power back to
    the states. Increasingly, we are hearing that states in the West are
    frustrated with Wildlife Services' work. Eliminating the Wildlife
    Services' lethal predator control program would allow the states to
    manage their own wildlife, instead of having to accept the constraints
    of the federal government's program. Finally, the federal predator
    control program is outdated because it is no longer in step with the
    wishes of the majority of Americans. Our nation spends millions of
    dollars each year to aid wildlife, so the killing of wildlife by
    Wildlife Services is not cost-effective.
        We look forward to working with you to reduce the federal
    government's operations and budget.
                                     ______

        Prepared Statement of A. Lynn Lowe, President, Red River Valley
                                  Association
        The Red River Valley Association is a voluntary group of citizens
    banded together to advance the economic development and future well-
    being of the citizens of the four state Red River Basin area in
    Arkansas, Louisiana, Oklahoma and Texas.
        For the past 73 years, the Association has done notable work in the
    support and advancement of programs to develop the land and water
    resources of the Valley to the beneficial use of all the people. To
    this end, the Red River Valley Association offers its full support and
    assistance to the various Port Authorities, Chambers of Commerce,
    Economic Development Districts and other local governmental entities in
    developing the area along the Red River.
        The Resolutions contained herein were adopted by the Association
    during its 73rd Annual Meeting in Shreveport, Louisiana on February 19,
    1998, and represent the combined concerns of the citizens of the Red
    River Basin area as they pertain to the goals of the Association,
    specifically:
      --Economic and Community Development;
      --Flood Control;
      --Bank Stabilization;
      --Watershed Improvement;
      --A Clean Water Supply for Residential, Commercial, Industrial and
            Agriculture Uses;
      --Hydroelectric Power Generation;
      --Recreation;
      --Navigation; and
      --Environment.
        The Red River Valley Association is aware of the constraints on the
    federal budget, and has kept those restraints in mind as these
    Resolutions were adopted. Therefore, and because of the far-reaching
    regional and national benefits addressed by the various programs
    covered in these Resolutions, we urge the members of Congress to review
    the materials contained herein and give serious consideration to
    funding at the levels requested.
        Mr. Chairman and members of the Committee. I am Lynn Lowe, and I am
    pleased to represent the Red River Valley Association as its President.
    Our organization was founded in 1925 with the express purpose of
    uniting the citizens of Arkansas, Louisiana, Oklahoma and Texas to
    develop the land and water resources of the Red River Basin.
        As an organization that knows the value of our precious water
    resources we support the most beneficial water and land conservation
    programs administered through the Natural Resources Conservation
    Service (NRCS). We understand how important a balanced budget is to our
    nation; however, we cannot sacrifice what has been accomplished. The
    NRCS programs are a model of how conservation programs should be
    accomplished and our testimony will address the needs of the nation as
    well as our region. We believe strongly that the whole, national
    program must be preserved.
        Even though the fiscal year 1999 President's budget appears to
    increase NRCS funding the actual use of the funds has changed, to the
    detriment of the agency and our citizens. The effect is a decrease of
    usable funds for direct technical and financial assistance. The
    diversion of funds to new proposed initiatives would reduce assistance
    to those who need it.
        We would like to address several of the programs affected by the
    President's fiscal year 1999 budget proposal.
        1. Watershed and Flood Prevention Operations (Public Laws 566 and
    534).--More than 10,400 individual structures have been installed
    nationally. They have contributed greatly to environmental enhancement,
    economic development and the social well being of our communities. More
    than half of these structures are over 30 years old and approaching
    their 50 year planned life.
        These programs offer a complete watershed management approach and
    should continue for the following reasons:
      --Their objectives sustain our nation's natural resources for future
            generations.
      --They are federally assisted and do not grow the federal government.
      --Initiatives and decisions are driven by the communities.
      --They are cost shared.
      --They follow NEPA guidelines and enhance the environment.
      --They can address the needs of low income and minority communities.
      --The benefit to cost ratio of this program has been evaluated to be
            2.2:1. What other federal programs can claim such success?
        There is no doubt of the value of this program. The cost of losing
    this infrastructure exceeds the cost to reinvest in our existing
    watersheds. Without upgrading existing structures we will miss the
    opportunity to keep our communities alive and prosperous. It would be
    irresponsible to dismantle a program that has demonstrated such great
    return and is wanted by our citizens.
        The present level, outlined in the budget, of $49 million is not
    adequate. We strongly recommend that a funding level of $250 million be
    dedicated to this program. This is more realistic and compares to the
    programs appropriated in the years prior to 1997. At the proposed
    funding level it would take over 30 years to complete just the
    identified projects, with no attention given to rehabilitation needs.
        2. Technical and Financial Assistance.--The Administration wants to
    change the watershed program from its existing ``financial assistance''
    policy to ``loans''. This is not acceptable and NOT the intent of
    Congress. Under a loan system there would be no financial incentive to
    develop these projects.
        A serious issue is that the Administration has diverted the
    necessary ``Technical Assistance'' funds from the watershed program to
    ``Conservation Operations''. These funds must be put back in
    ``Watershed Operations'' to provide accountability and assure the
    program will continue. Once in the Conservation Operation's account
    these funds could be diverted to any other program.
        The watershed program was mandated by Congress and this is an
    attempt by the Administration to eliminate the program through funding
    cuts. We know this is not the will of Congress.
        3. User Fees.--It is proposed that $10 million of the NRCS budget
    come from newly established user fees, which requires legislation to
    implement. This would be for technical assistance, sales of seeds and
    plants, soil and snow survey data and technical services.
        This cannot be cost effective and will be a burden on the producers
    that are least able to afford good conservation practices. There has
    not been a federal fee program that has been effective. We strongly
    recommend that Congress NOT implement this proposal and instead fund
    the NRCS budget at the levels required to provide the services our
    nation needs.
        4. Forestry Incentives Program.--The President's budget has no
    funding for this program, citing that it ``promotes timber production
    on private lands and is incompatible with the agency (NRCS) strategic
    plan''. In fact, Congress transferred this program to NRCS from the
    Farm Service Agency as a restructuring in the Federal Agricultural
    Improvement and Reform Act of 1996. Forestry is recognized as a farming
    activity. NRCS is the best agency to administer this program which
    assists farmers in production agriculture.
        We request Congress to fund the Forestry Incentives Program at a
    level of $10 million for fiscal year 1999.
        5. Environmental Quality Incentives Program (EQIP).--Requests for
    assistance through the EQIP program have been overwhelming. The
    resulting requests far exceed the available funds and is an additional
    workload on NRCS's delivery system. Additionally, the Administration
    has failed to provide adequate funding for technical assistance to
    implement the program. The fiscal year 1999 budget increases the
    program by $100 million but reduces the technical assistance by $8
    million from fiscal year 1998. In essence, the program, or workload,
    was increased by 50 percent and the technical assistance was reduced
    from 19 percent in 1998 to 10 percent in 1999. There is no logic in
    this proposal.
        The $300 million proposed for the EQIP program is an adequate
    budget for fiscal year 1999; however, we request that the technical
    assistance for this program by increased to $57 million.
        6. NRCS Staffing.--We are greatly concerned with the
    Administration's effort to ``downsize'' this agency. Over the past 3
    years staffing has been reduced by about 2,000 staff years. Most of
    this has been absorbed by national Headquarters (50 percent) and the
    state offices (20 percent) with minimal impact to field offices. The
    further cuts proposed will come from the field offices, closing many.
    This will adversely impact technical support required for field
    delivery of conservation programs. The end result will be the
    dismantling of our nation's conservation infrastructure. The proposed
    budget would eliminate another 532 staff years. Can we afford this?
    Congress must not allow this to happen.
        Additionally, we request that $10.5 million be appropriated for
    ``Watershed Planning'', $13 million for River Basins Surveys and
    Investigations and that $20 million be allocated for the Emergency
    Watershed Program to provide rapid response in time of natural
    disaster.
        A further reduction to technical assistance will jeopardize the
    local, state and federal partnership in conservation making it
    impossible to meet this nation's commitment to land stewardship in a
    voluntary manner. Acceptance of the proposed budget would contradict
    the policies set forth by Congress over the years, abandoning their
    commitment to the sound, conservation goals of our agricultural policy.
        Over 70 percent of our land is in private ownership. This is
    important to understanding the need for NRCS programs and technical
    assistance. Their presence is vital to ensuring sound technical
    standards are met in our conservation programs. These programs not only
    address agricultural production, but sound natural resource management.
    Without these programs and NRCS properly staffed to implement them much
    of our private lands will not apply conservation measures.
        The administration has proposed ``new'' Clean Water Initiatives,
    but why do they ignore the agency that has a proven record for
    implementing conservation watershed programs? Congress must make a
    decision. Will NRCS continue to provide the leadership within the
    communities to build upon the partnerships already established? The
    President does not provide for that leadership and so it is up to
    Congress to insure NRCS is properly funded and staffed to provide the
    needed help to our taxpayers for conservation programs.
        All these programs apply to the citizens in the Red River Valley
    and we are concerned for the future. The RRVA is dedicated to work
    toward the programs which will benefit our citizens and provide for
    high quality of life standards. We therefore request that you correct
    the President's budget and appropriate the required funding levels
    within the dedicated programs to insure our nation's conservation needs
    are met.
        I thank you for the opportunity to present this testimony on behalf
    of the members of the Red River Valley Association and we pledge our
    support to assist you in the appropriation process.
        Grant Disclosure.--The Red River Valley Association has not
    received any federal grant, subgrant or contract during the current
    fiscal year or either of the two previous fiscal years.
                                     ______

     Prepared Statement of Lester W. Myers, President and General Manager,
                              Delta Western, Inc.
        Mr. Chairman and Members of the Subcommittee, I thank you for the
    opportunity to provide testimony in support of the Regional Aquaculture
    Centers. My name is Lester Myers. I own and operate a catfish farm near
    Inverness, Mississippi, and am President and General Manager of Delta
    Western, Inc., Indianola, Mississippi, the largest catfish feed mill in
    the United States.
        With relatively little fanfare, the aquaculture industry in the
    United States has developed into a significant part of domestic
    agriculture in the last 20 years. Production of channel catfish, the
    largest sector of domestic aquaculture, has increased more than 30
    percent this decade--a rate of expansion matched by very few
    industries. Channel catfish now make up a remarkably large proportion
    of domestic seafood consumption and, on a value basis, catfish ranks
    fourth in the United States, behind only shrimp, salmon, and crabs.
    Further, a significant portion of the salmon consumed by Americans also
    derives from aquaculture. So, as we enter the next century, domestic
    aquaculture is well positioned to make up for the expected shortfalls
    in wild fisheries harvest and supply an increasing proportion of the
    domestic demand for seafood products.
        Continued expansion and profitability of the aquaculture industry
    will, however, depend on development of new technology to reduce
    production costs and make production more competitive in the global
    market. For the past several years, I have been actively involved with
    the Southern Regional Aquaculture Center as Chairman of the Industry
    Advisory Council, and I feel that the Regional Aquaculture Center
    program is well suited to help meet the need for technology
    development. Already, results from the Regional Center projects are
    having a significant impact on domestic aquaculture. I believe this
    success is attributable to three characteristics that set the Regional
    Aquaculture Centers apart from other publicly funded programs.
        First, the activities of the Regional Centers are industry-driven.
    The Center's activities are initiated by the Industry Advisory Council,
    which consists of producers, marketing personnel, bankers, and other
    individuals with fiscal interests in aquaculture. The Industry Advisory
    Council provides a forum for input from private and public sectors
    which is then incorporated into annual and ongoing plans for the
    Center. As such, the genuine needs of the industry are addressed rather
    than the needs as perceived by scientists or government officials.
        Second, allocation of funds through the Center is a deliberate
    process involving input from experts and concerned industry
    representatives from throughout the region and the nation. This
    approach assures that only priority issues are addressed and that the
    approach used to solve the problem is efficient, thorough, and
    carefully developed.
        Third, the Center's programs are regional in nature, rather than of
    local interest only. It is the policy of the Center that the issues
    addressed must be of regional significance and that the resulting
    project involves participation from institutions from at least two
    states within the region. In reality, most Center projects involve
    institutions from at least seven states within the region. This
    approach makes it possible for Centers to efficiently address problems
    that require more personnel, equipment, and facilities than are
    generally available at one location. It also makes better use of
    limited resources and a saving of funds relative to funding of
    independent, uncoordinated projects at many different locations.
    Accordingly, it is possible to bring the best scientific talent in the
    region to bear on priority problems in an extremely cost-effective
    manner.
        In summary, representatives of the U.S. aquaculture industry are
    convinced that the Regional Center programs are highly valuable and
    productive. Additional new research findings will help insure future
    success for aquaculture production in the United States. The authorized
    level of funding for the five Regional Aquaculture Centers is $7.5
    million annually. The total annual appropriation for the Centers for
    fiscal year 1998 was $4.0 million, or $800,000 for each of the five
    Regions. Despite an enviable performance record while operating for
    more than 10 years at half the authorized level of funding, the
    President's Budget Proposal for fiscal year 1999 calls for a 3 percent
    reduction in funding for the Center Program. We strongly request that
    you rescind the proposed fiscal year 1999 reduction in funding and
    provide the full authorized level of $7.5 million for the existing five
    Centers to support these extremely important and effective programs.
        On behalf of the U.S. aquaculture industry, I thank you for the
    opportunity to present testimony in support of the Regional Aquaculture
    Centers, and express my sincere appreciation for the support you have
    provided in previous years. Again, I would like to emphasize that
    significant benefits have already been provided from work conducted by
    these Centers and additional funding is urgently needed by our
    industry.
                                     ______

     Prepared Statement of Dr. Richard Spencer, Limited Partner, Hawaiian
                               Marine Enterprises
        Mr. Chairman and Members of the Subcommittee, thank you for
    allowing me to submit testimony on behalf of the Regional Aquaculture
    Centers and the Center for Tropical and Subtropical Aquaculture or
    CTSA. My name is Richard Spencer, and I am a limited partner in
    Hawaiian Marine Enterprises, a commercial aquaculture farm that raises
    edible seaweeds, clams and abalone. I have been a member of the CTSA
    Industry Advisory Council for ten years and am privileged to serve as
    its chairman.
        I am a businessman, and I have a doctorate in oceanography. Wearing
    both those hats gives me a true appreciation of the Center's singular
    role linking the needs of industry and the expertise of science to
    further the development of aquaculture. The Center recognizes the
    necessity of integrating industry priorities and scientific research to
    ensure that its program directly meets the needs of commercial
    aquaculture producers.
        Each year, the United States imports far more seafood than it
    exports. A high proportion of those imports come from countries that
    have little or no regulations regarding the safety of cultured aquatic
    animals or the manner in which wild stocks are harvested. The growth of
    the U.S. aquaculture industry ensures a reliable, safe source of high
    quality protein for the American diet and an alternative to the over-
    harvesting of wild stocks, which are being rapidly depleted. In
    addition, the growth of aquaculture will create new jobs and generate
    tax revenues, thereby strengthening the economy. However, commercial
    aquaculture is a mere toddler in terms of its development, and, like
    all toddlers, requires support and nurture to develop to its full
    potential.
        The Center for Tropical and Subtropical Aquaculture provides that
    support. Each year, the Center holds a meeting for commercial producers
    from throughout the region and asks them to define industry problems.
    Then the appropriate scientific experts are called upon to conduct
    research to solve those problems.
        The routes to those solutions have varied, including education,
    training, technology transfer, addressing disease issues and government
    regulations, marketing and economics, and revitalizing or initiating
    aquaculture activity throughout the Pacific. Most importantly, each
    route was mapped out in direct response to an industry need.
        Although the Center's research projects have been underway for one
    to ten years, commercial producers in the region and throughout the
    nation have already reaped enormous benefits.
        As a producer of edible seaweed, I benefited directly from Center-
    funded projects investigating Graccilaria gall syndrome. The syndrome,
    a relatively new disease problem, attacks cultured seaweed and makes it
    unsuitable for sale. It nearly devastated seaweed production in Hawaii.
    The project titled ``Disease Management for Hawaiian Aquaculture''
    found that continuous aeration controls the syndrome. Since that time,
    I have lost no crops to the syndrome.
        The Center-funded ``Pacific Regional Aquaculture Information
    Service for Education'' provides easy access to the latest scientific
    information on aquaculture. It also ensures that individuals in the
    developing Pacific Island nations--where libraries may well be non-
    existent--also can easily access that vital information. The project
    provides a cost benefit of $20 for each $1 of Center funding.
        Another project, ``Ornamental Aquaculture Technology Transfer,''
    allowed me to diversify into producing ornamental fish for the aquarium
    trade. In 1995, the U.S. imported $54 million worth of ornamental fish,
    so this is clearly a lucrative market that U.S. farmers should tap.
        Such progress in so short a time clearly illustrates that the
    Regional Aquaculture Centers' approach of spotlighting industry
    concerns is the right one, offering rapid, effective results. The
    investment in the Regional Aquaculture Centers has yielded high returns
    thus far and will continue to do so. However, I was recently informed
    that the future yields may well be diminished because of a planned 3
    percent funding cut for fiscal 1999. I find that most unfortunate. I
    have continually urged that expanding the funding capabilities of the
    Centers would afford even greater results. Please reconsider this
    decision. Although that may not sound like a huge cut, it will
    seriously deter the Centers ability to fulfill its mission of
    developing a viable U.S. aquaculture industry to benefit producers,
    consumers and the U.S. economy.
        With level funding, the Regional Aquaculture Centers funding
    allocation had lost much of its purchasing power. Over the years, we
    have found it increasingly difficult to fund the desired research at
    levels equivalent to the scope of the work. The cost of conducting
    science has increased dramatically, and the number of worthy proposals
    has increased as the aquaculture industry in the Pacific region has
    grown.
        With reduced funding, the rising costs of research are eroding
    available funds and further reducing the amount of real dollars
    available for projects. This means that a project must be funded over
    several years to solve a problem that could possibly be solved in a
    shorter time span, given sufficient funds. Because the economy is doing
    well, now would be the perfect time to move forward decisively. I
    strongly urge you to take this into account and approve the authorized
    full funding of $7.5 million for the Regional Aquaculture Centers
    program.
        Thank you again for the opportunity to submit this testimony.
                                     ______

     Prepared Statement of Dr. David A. Smith, President, Freshwater Farms
                                 of Ohio, Inc.
        This past year in Ohio, several landmark events have occurred in
    aquaculture. The first is that all farm-raised fish products have been
    brought under the new federal seafood inspection program of HMCP. The
    second is that fish processors along Lake Erie have turned their sights
    inland to the few pioneering fish farmers that have started modest
    production of yellow perch. Fishery harvests of wild perch stocks are
    at an all time low, and record prices have been maintained virtually
    all year. The bad news is that there is no perch aquaculture industry
    large enough in the whole country to satisfy the demand of just one of
    these major fish wholesalers in northern Ohio.
        Why is this the case? If there is such demand, why don't fish
    farmers just produce more? There is a reason. A technological/extension
    bottleneck exists at the level of fingerling production. Farmers cannot
    produce, with today's level of understanding, a reliable and adequate
    number of young fish to stock out their ponds.
        This is one example of problems that are directly addressed by
    research at the U.S.D.A. Regional Aquaculture Centers. In our own North
    Central Region, yellow perch research has been given the highest
    priority and attention. The Center's research priorities are identified
    by those of us in commercial aquaculture, and are geared to providing
    hands-on answers to these very real problems that hold back the
    economic potential of aquaculture in the United States. They are
    designed to do this through a network of university research and
    extension outreach that has the highest potential of economic return
    than any other program out there.
        Please give serious consideration to supporting a higher level of
    funding for adequate aquaculture research through the Regional
    Aquaculture Centers. I would like to request on behalf of the
    aquaculture industry that funding be extended to the fully authorized
    level of $7.5 million. If the fully authorized amount is not
    appropriated, then they should at least be funded at the level they
    have received over the last few years which is $4.0 million.
                                     ______

       Prepared Statement of Joseph McGonigle, Executive Director, Maine
                            Aquaculture Association
        Mr. Chairman and members of the Subcommittee: I appreciate this
    opportunity to express my support for USDA's Regional Aquaculture
    Centers in the Northeast and in the four other regions of the country
    where vital research partnerships among entrepreneurs, academia and the
    extension service are fostering an emerging fish farming industry that
    is bringing economic opportunity to rural communities and the hope of
    food sufficiency to an increasingly crowded world.
        Maine has been a leading supplier of high quality seafood for fully
    400 years--since before the settlement at Jamestown and the landing at
    Plymouth Rock. But capture fishery harvests are stagnant or declining,
    no less in Maine than around the world. So today, Maine is a leader in
    marine aquaculture, as well, with fanned fish and sea vegetable
    harvests that are closing in on the state's lobster catch as our most
    valuable fishery.
        I represent a trade association whose members grow salmon, trout,
    oysters, mussels, clams and nori, with commercial quantities of
    haddock, halibut, urchins and scallops on the immediate horizon. Twenty
    years ago, my association did not exist. Ten years ago, its members
    produced just a few hundred tons of fish. Today, Atlantic salmon is
    Maine's third most important farm crop, after potatoes and dairy.
        Worldwide, one pound of fish in five is Ann raised, and virtually
    all of the growth in the world seafood harvest stems from aquaculture.
    In the U.S., fish fauns also contribute to the growth to our seafood
    supply, but only 7 percent to the overall harvest. The difference
    between U.S. and world aquaculture performance is largely attributable
    to differences in public investments in research, demonstration and
    technology transfer--investments like the RAC's before you today. The
    farms I represent in Maine are living proof of the returns such
    investments can provide to the consumers and communities we all serve.
        Of the ten marine species grown in Maine today, NRAC supported
    either the basic research or the technology transfer that launched
    three new crops from a standing start and provided critical management
    breakthroughs for four others:
      --NRAC tech transfer support in 1993 helped a tiny 2-man seaweed
            company create America's first nori farm, which today supports
            25 jobs, cross-licensing with an emerging web of biotechnology
            fines and a budding seaweed cooperative that could provide jobs
            and incomes for up to 100 displaced fishermen.
      --A 1995 project allowed a small salmon farmer to diversify into
            halibut by supporting broodstock collection from which future
            generations can be spawned. A follow-up grant is supporting
            University research into the light- and depth-sensitive
            breeding behavior and the nutritional needs of these
            mysterious, and disappearing, beasts.
      --Several dozen displaced fishermen are looking ahead this year to
            new careers on the water as mussel farmers, following an NRAC-
            supported education program that brought Canadian and European
            raft culture technology to the hard-fished waters of the Gulf
            of Maine.
      --A University of Maine professor's 1997 breakthrough in groundfish
            nutrition will pay off this year with America's first
            commercially-significant haddock crop, thanks to research
            funded in part by NRAC.
      --A 1996 graduate student in Food Science has become an entrepreneur
            in 1998 with a new line of sausages made from salmon scraps,
            based on techniques he identified with NRAC assistance.
      --NRAC also supports long term fish health research with particular
            value to Maine's established salmon and oyster industries,
            including projects to identify genetic susceptibility to, and
            genetic probes for, Juvenile Oyster Disease, partial support
            for an investigatory new animal drug coordinator (INAD) at FDA,
            and the northeast's premier fish health workshop, now entering
            its 6th year.
        While these examples focus on projects that have impacted Maine, in
    particular, a key element of the RAC approach is an emphasis on multi-
    state proposals or on research that has impacts beyond a single species
    or state. So, for example, the salmon sausage project actually has
    potential applications for any value-added fish product subject to
    oxidation and off flavors. The Maine projects, in fact, have been only
    a small part of NRAC's impact on the development of a fresh and marine
    water aquaculture industry between the Gulf of Maine and the Chesapeake
    Bay. And what NRAC provides in the northeast, four other RAC's offer in
    the south, the west and the heartland of the nation.
        RAC projects have addressed waste management and effluent
    reduction; improved low phosphorous feeds and acoustic ``seal scarers''
    that replace lethal taking of predators. They have led the way in
    demonstrating how aquaculture can be environmentally benign as well as
    economically beneficial--how rural and water-dependent communities can
    have payrolls and pickerel well into the future.
        RAC-sponsored forums where industry and academic researchers sit
    down together to hammer out a common research agenda have evolved into
    efficient collaborative networks that can quickly marshal public and
    private resources to find solutions in a rapidly changing world. The
    RAC's have become a research infrastructure, a problem solving tool
    that, with your continued support and the full authorized allocation of
    $7.5 million, can make this the generation of Americans that farms the
    sea, the next generation of Americans that feeds the world.
                                     ______

           Prepared Statement of Kenneth E. Cline, Cline Trout Farms
        Mr. Chairman and Members of the Subcommittee: My name is Kenneth
    Cline. I am an owner of Cline Trout Farms, a family owned business
    established in 1946. We produce trout for recreation markets in
    Colorado, New Mexico, Wyoming, and surrounding states. I have served as
    president of the National Aquaculture Association, The United States
    Trout Farmers Association, and the Colorado Aquaculture Association.
    Currently, I chair the Colorado Fish Health Board and am a member of
    the Colorado Aquaculture Board. I have been a member of the Western
    Regional Aquaculture Center Industry Advisory Council for the past
    eight years.
        In addition to the potential for aquaculture to provide food fish,
    aquaculture also provides fish and services to recreation fisheries.
    State and federal natural resource management agencies are adjusting
    their priorities away from sport and recreation fisheries and toward
    endangered species, biodiversity, and native species. Private
    aquaculture provides fish and services for over one-third of Colorado's
    billion dollar recreation fishing industry.
        Research is needed for the aquaculture industry to keep pace with
    increasing demand for its products and for the industry to respond to
    environmental concerns. The Regional Aquaculture Centers have been very
    successful in identifying research needs, coordinating research
    efforts, and disseminating research results to industry. In September
    of 1995 industry representatives from all of aquaculture met to discuss
    the National Aquaculture Development Plan. The Regional Aquaculture
    Center program was identified as the most positive government program
    for aquaculture in the last ten years.
        The success of the Regional Aquaculture Center system lies in
    several strengths. First, the Regional Aquaculture Centers are industry
    driven. Research needs are identified and prioritized by industry, and
    research is monitored by industry so that industry research objectives
    are accomplished. Second, the Regional Aquaculture Centers are very
    successful in facilitating collaboration among institutions. Leveraging
    of resources among institutions has resulted in a very high rate of
    return on research dollars. Another strength is the regional structure;
    which, along with the strong input from fish farmers, facilitates
    responsiveness to the many diverse, and often local, research needs.
        The Regional Aquaculture Centers have strongly demonstrated their
    worth to our industry and to the national economy. This program is an
    investment, not an expense, for the American public. It is unfortunate
    that the Administration has proposed a 3 percent cut in funding. I urge
    you to not only reinstate that 3 percent, but also to bring the
    appropriation for the Regional Aquaculture Centers to the fully
    authorized funding of $7.5 million per year.
        Thank you for this opportunity for input.
                                     ______

         Prepared Statement of William H. Banzhaf, CAE, Executive Vice
                    President, Society of American Foresters
        Mr. Chairman, my name is William H. Banzhaf. I am the Executive
    Vice-President of the Society of American Foresters (SAF). The more
    than 18,000 members of the Society constitute the scientific and
    educational association representing the profession of forestry in the
    United States. SAF's primary objective is to advance the science,
    technology, education, and practice of professional forestry for the
    benefit of society. We are ethically bound to advocate and practice
    land management consistent with ecologically sound principles. I am
    especially pleased to submit comments on the President's proposed
    fiscal year 1999 budget for the Department of Agriculture and Related
    Agencies. I wish to thank the subcommittee for its continued support of
    professional forestry and its continued support of SAF's priorities. We
    will especially need your help this year to correct a mistake on the
    part of the Administration in requesting the elimination of the
    Forestry Incentives Program. I thank the Chair for the opportunity to
    submit testimony on the Forestry Incentives Program, the Renewable
    Resources Extension Act, and Department of Agriculture research
    programs.
        The public policy activities of SAF are grounded in scientific
    knowledge and professional judgment. From this perspective we review
    proposed budgets for forestry and related natural resource programs to
    determine their adequacy to meet stated objectives and public needs.
                       forestry incentives program (fip)
        As you know, the forest-related programs funded under the
    Department of Agriculture largely affect the nation's 9.7 million
    nonindustrial private forest landowners, who own 57 percent of the
    nation's forestlands, which supply 48 percent of the nation's timber
    harvest. A recent report by the National Research Council points out
    that these owners are woefully underserved by both the private and the
    public sector. This is critically important today because, as you are
    aware, the level of timber harvest from federal lands has dropped
    significantly in recent years, an important factor resulting in
    increased harvests on other ownerships. Several programs within this
    appropriations bill are important to ensuring that the shift of timber
    demand to nonindustrial private lands doesn't impair their owners'
    willingness or ability to produce a broad array of forest resources
    sustainably over the long term.
        Programs such as the Forestry Incentives Program (FIP) are needed
    now more than ever. FIP's focus on reforestation helps keep large
    tracts of land in continuous forest cover, helping to ensure long-term
    forest benefits while providing habitat for wildlife, protecting soil
    productivity, and enhancing water quality. We strongly oppose the
    Administration's request to eliminate the Forestry Incentives Program
    and reject their rationale that the program is not compatible with the
    Natural Resources Conservation Service's (NRCS) strategic plan. Keeping
    lands forested most certainly helps the NRCS meet its objectives of
    protecting watersheds and soils. In fiscal year 1997, FIP provided
    funding to help plant trees on more than 141,000 acres and helped
    owners perform timber stand improvement on more than 22,000 acres.
    Congress specifically reauthorized FIP through the 1996 Farm Bill, and
    the NRCS has a statutory responsibility to carry out the program.
        There is concern about the NRCS's administration of the FIP
    program. It appears to many that the NRCS is not committed to the FIP
    program. We encourage the USDA to reevaluate the transfer of this
    program from the Farm Services Agency (FSA) to NRCS and request that
    USDA consider either returning the program to the FSA or transferring
    it to the Forest Service.
                               forestry research
        The Society of American Foresters promotes public policies that
    advance knowledge about the behavior and functioning of forest
    ecosystems and their responses to specific actions and policies. SAP
    believes forestry research is critical to understanding the
    relationship between societal expectations for diverse needs and values
    from the forest, and the capability of the forest to meet and sustain
    those expectations. We advocate continued public and private funding of
    research activities that address a broad variety of natural resource
    concerns. Such knowledge, based on sound science, is vital for
    resolving conflicts about forest policy and management. Two key
    programs funded by this appropriations bill provide important research
    dollars that can be used to benefit forest management across all
    ownerships in this country.
        The first is the Cooperative Forestry (McIntire-Stennis) Research
    Program. This program supports research on forestry and wood fiber
    conducted by the nation's public universities. University-based
    research is an important part of the collaborative forestry research
    effort involving federal, state, and industry scientists. McIntire-
    Stennis research is critical to the development of new information and
    technologies that increase not only the efficiency and productivity of
    forest management on all forest ownerships for a wide range of forest
    benefits, but also provide information for developing natural resource
    management policy. As you know, McIntire-Stennis research funds are
    granted directly to public colleges and universities on a matching
    basis. This program has provided funding for research demands that have
    not been met through other programs or in the private sector.
        The second research program is the National Research Initiative
    (NRI). This competitive grant program provides funding for research on
    problems of national and regional importance in biological and
    environmental sciences. The NRI awards grants on a matching basis to
    university researchers in biological, environmental, and engineering
    sciences to address critical problems in agriculture and forestry. The
    SAF strongly supports this program and believes some of the funding
    should be specifically directed at renewable natural resources
    research.
                renewable resources extension act program (rrea)
        Finally, we are pleased that the Administration has requested
    funding for the Renewable Resources Extension Act program (RREA) for
    fiscal year 1999, and we applaud the action of this subcommittee in
    restoring funding for RREA in spite of the Administration's request to
    eliminate it in fiscal year 1998. The SAF supports this program, which
    we believe helps in communicating ecologically sound technical advice
    to landowners, foresters, and loggers. This advice improves the
    productivity and management of nonindustrial private forests.
                               about the society
        The Society of American Foresters, with about 18,000 members, is
    the national organization that represents all segments of the forestry
    profession in the United States. It includes public and private
    practitioners, researchers, administrators, educators, and forestry
    students. The Society was established in 1900 by Gifford Pinchot and
    six other pioneer foresters.
        The mission of the Society of American Foresters is to advance the
    science, education, technology, and practice of forestry; to enhance
    the competency of its members; to establish professional excellence;
    and to use the knowledge, skills, and conservation ethic of the
    profession to ensure the continued health and use of forest ecosystems
    and the present and future availability of forest resources to benefit
    society.
        The Society is the accreditation authority for professional
    forestry education in the United States. The Society publishes the
    Journal of Forestry; the quarterlies, Forest Science, Southern Journal
    of Applied Forestry, Northern Journal of Applied Forestry, and Western
    Journal of Applied Forestry; The Forestry Source; and the annual
    Proceedings of the Society of American Foresters national convention.
                                     ______

      Prepared Statement of the Society for Animal Protective Legislation
        We respectfully request the following appropriations and oversight
    to permit these programs within the U.S. Department of Agriculture to
    be carried out effectively.
                   $12 million for aphis' animal care program
        At least $12 million is desperately needed for enforcement of the
    federal Animal Welfare Act. The Act, passed in 1966 and amended in
    1970, 1976, 1985 and 1990, is intended to ensure the protection of
    millions of animals nationwide used in exhibition, the commercial pet
    trade, experimentation, and during transportation.
        Animal Care is responsible for enforcement of the Animal Welfare
    Act, but their excellent efforts are on the verge of collapse due to
    the failure of Congress to provide sufficient resources. The Animal
    Care program has always been forced to function with less than needed
    funds, as a result they are squeezing everything they possibly can out
    of what Congress provides. Given the vital protection provided to
    animals, it is time for Congress to provide a little support back to
    Animal Care through a modest increase in appropriations. Shamefully,
    current appropriations are below the fiscal year 1993 level:

            Fiscal year                                              Million
    1993..............................................................$9.188
    1994.............................................................. 9.262
    1995.............................................................. 9.262
    1996.............................................................. 9.185
    1997.............................................................. 9.175

        This decreased funding is impairing the ability of Animal Care to
    fulfill its duties, leaving the animals and the Department vulnerable.
        This year circus elephants were diagnosed with tuberculosis. This
    serious potential health hazard to humans arid elephants must be
    addressed by Animal Care. The plan calls for tuberculosis testing and
    monitoring of all elephants covered under the Animal Welfare Act. More
    work for the Animal Care staff!
        The Animal Care field staff of 44 Veterinary Medical Officers and
    30 Animal Care Inspectors must inspect to ensure compliance with the
    Act, including provision of food, water, housing and veterinary
    attention, at the more than 10,000 sites of dealers (random source
    suppliers, breeders, brokers and operators of auctions), exhibitors
    (zoos, circuses and carnivals), research facilities (hospitals,
    pharmaceutical companies, universities and private firms), intermediate
    carriers (airlines and railroads), and intermediate handlers (service
    between consignor and carrier).
        Approximately $800,000 in license fees currently go to USDA's
    general treasury; at minimum, these funds should be provided as
    additional funding to Animal Care. Animal Care is taking a get tough
    attitude towards licensees and registrants who habitually violate the
    Animal Welfare Act; in fiscal year 1997, violators of the Animal
    Welfare Act were assessed more than $820,000 in fines. License
    revocations and suspensions increased substantially.
        Critical additional needs of Animal Care include:

    Laptops for all inspectors (to facilitate data transfer and
        storage)..................................................  $350,000
    Training (program implementation and computer instruction)....   120,000
    Addition of 15 Veterinary Medical Officers.................... 1,243,000
    Addition of 12 Animal Care Inspectors.........................   715,000
    Tuberculosis testing/monitoring in elephants..................   190,000

        Cost savings in the existing Animal Care Program could be achieved
    through the elimination of Random Source (USDA licensed Class B)
    dealers who supply dogs and cats to research. Report language could
    offer support to H.R. 594, The Pet Safety and Protection Act, sponsored
    by Agriculture Committee Members Congressman Charles Canady and
    Congressman George Brown. As you can see from the attached book, The
    Animal Dealers: Evidence of Abuse of Animals in the Commercial Trade,
    1952-1997, this legislation would greatly reduce USDA's regulatory
    burden, while still allowing research to continue unhindered.
      $900,000 line item for the animal welfare information center at the
                         national agricultural library
        In 1985, Congress had the ingenuity and foresight to create the
    Animal Welfare Information Center (AWIC) to serve as a resource for all
    individuals involved in the care and use of animals in research
    (scientists, veterinarians, caretakers, administrators, members of
    Institutional Animal Care and Use Committees and USDA inspectors
    responsible for enforcing the law).
        The Center provides information on: (a) appropriate care for
    animals including minimization of pain and distress, (b) reduction and/
    or replacement of the use of animals in research where possible, (c)
    preventing unintended duplication of experiments, (d) training for
    employees in the laboratory, and (e) legal requirements regarding the
    use of animals in research.
        Its value to the research community has led to an ever-increasing
    demand for assistance. However, AWIC has not received an increase in
    appropriations during its 11 years, making it impossible to provide
    services as needed. The Center has had to stop use of a work study
    student and is facing the laying off of additional staff it will not be
    able to afford. AWIC staff have responded to more than 24,000 requests
    for specific publications and more than 2,500 request for reference
    services. The Center produces a newsletter, now in its eighth year. It
    also maintains a worldwide web site (http://www.nal.usda.gov/awic)
    which is being used an average of 860 times per day!
        An increase in appropriations to $900,000 provided as a line item
    with report language preventing use of these funds for other purposes
    is desperately needed. (The report language is necessary to stop the
    siphoning off of funds by the National Agricultural Library.)
                     $500,000 for the horse protection act
        APHIS Animal Care is in need of an appropriation of $500,000 to
    maintain at least a minimal level of enforcement of the Horse
    Protection Act (HPA). The HPA, passed in 1970 and amended in 1976,
    prohibits the cruel practice of ``soring''. According to APHIS, soring
    is defined as ``the application of any chemical or mechanical agent
    used on any limb of a horse or any practice inflicted upon the horse
    that can be expected to cause it physical pain or distress when
    moving.'' Soring is done to give the animal an exaggerated gait.
    Tennessee Walking Horses are the common victims.
        Due to a lack of basic funding, enforcement of the Horse Protection
    Act is being increasingly turned over to industry. Unfortunately,
    industry has demonstrated a failure to achieve the level of enforcement
    of the unbiased, well-trained, professional inspectors who work for
    Animal Care. The inspectors from industry are called ``Designated
    Qualified Persons''. The rate at which DQP's turned-down horses for
    soring in fiscal year 1996 was 1.09 percent, less than half the rate of
    government inspectors who had a turn-down rate of 2.55 percent.
        Nearly 600 horse shows took place in fiscal year 1996, yet Animal
    Care inspectors were only able to inspect 22! Additional resources are
    needed to permit Animal Care inspectors to attend more shows thereby
    ensuring significantly stronger compliance with the HPA.
        USDA possesses thermography equipment which is used to look for
    abnormal heat indications as a means to detect apparent soreness.
    Resources are needed to permit training of inspectors to maximize use
    of this important enforcement tool. Thermography can greatly strengthen
    enforcement efforts by providing an accurate, scientific determination
    of soreness in horses and by serving as a useful deterrent against
    would-be violators.
                    increased oversight of wildlife services
        Animal Damage Control changed its name to Wildlife Services (WS) to
    signify a re-birth of the program with increased effectiveness and an
    improved consciousness. Unless key changes are made, Wildlife Dis-
    Services may be a more appropriate title. We, therefore, hope that
    Congress will provide increased oversight of both the research and
    field operations of Wildlife Services.
        A basic principle of WS is supposed to be consideration of non-
    lethal methods of control prior to the conduct of any lethal control
    activities. Last year, WS was preparing a non-lethal report form as a
    means of documenting efforts at non-lethal control. We supported use of
    this form. However, WS announced recently that it has curtailed
    development and implementation of the reporting form and instead ``will
    work with the National Agricultural Statistics Service to obtain
    information regarding the extent to which WS cooperators use non-lethal
    control methods.'' No reason for this change has been offered. We
    strongly object to WS' abandonment of the reporting form which would
    have provided accountability here to fore lacking in the program.
        A fundamental matter is continued use of steel jaw leghold traps by
    WS. 30,000 steel traps are owned by WS for use in predator control.
    Polls reveal that the vast majority of Americans want these traps
    banned, and the American Veterinary Medical Association has condemned
    them as ``inhumane''. A growing list of states are prohibiting or
    severely restricting their use. A switch to less cruel methods must
    take place if WS wants to retain the ability to manage predators when
    necessary.
        In an international trapping agreement reached on December 11,
    1997, between the U.S. and the European Union, the U.S. agreed to phase
    out use of ``conventional steeljawed leghold restraining traps'' within
    6 years. WS has the responsibility of complying with the U.S.
    obligation by ending its use of these traps. Steps should be undertaken
    immediately.
        Last year Congress provided $350,000 for trap testing ``to
    determine the most humane design while maintaining efficiency.''
    (Senate Report language). The testing was necessary ``to meet U.S.
    obligations under an international agreement for trap standards.''
    (House Report language) The U.S.-E.U. agreement was reached in response
    to E.U. Regulation 3254/91 against the leghold trap. Under the terms of
    the agreement, in addition to phasing out use of leghold traps, the
    U.S. agreed to implement trap standards within 8 years.
        Instead of conducting trap research with the funds, Wildlife
    Services passed the bulk of the monies received from Congress on to the
    International Association of Fish and Wildlife Agencies (IAFWA). The
    research being conducted under the auspices of the IAFWA needs careful
    scrutiny as we are gravely concerned that the funds are being misused.
        The only traps being tested are different types of steel jaw
    leghold trap and the EGG trap (a painful, footholding trap used on
    raccoon). We were shocked to discover that the control traps for the
    studies are standard steel jaw traps. There is no excuse for continued
    use of these traps. Box traps are extremely efficient at capture of
    raccoon, and they cause virtually no injuries to the animals, thus we
    fail to understand why they are not being considered. Further, since
    box traps are such a successful trap both at minimizing injuries as
    well as at catching animals, we fail to see the need for conducting
    painful tests of leghold traps on approximately 800 raccoon.
        Although USDA was presented with proposals for testing of
    footsnares on coyote and killing traps on muskrat, the Department
    elected to spend their money on leghold traps, that have been tested
    innumerable times over the years. By narrowing their testing to leghold
    traps, they guarantee results concluding that a leghold trap is
    acceptable. No further funding should be provided for trap testing
    while the process for determining which traps are tested and why is
    examined.
                                     ______

           Prepared Statement of Peter M.P. Norris, President, SPIN-2
        Mr. Chairman, thank you for this opportunity to present a short
    statement for the hearing record for outside witnesses. The subject of
    my statement concerns the potential for improved accuracy of
    agricultural usage and yield estimates in USDA's food and fiber supply
    and demand reports.
        There shortly will be a new data source available for high
    resolution remote sensing information. SPIN-2, which stands for ``Space
    Information/2-meter'', is a joint commercial venture with
    SOVINFORMSPUTNIK, the commercial division of the Russian Space Agency,
    utilizing Russian mapping satellites and launch vehicles. SPIN-2 is
    located in Washington, D.C., and is wholly owned by Aerial Images, Inc.
    of Raleigh, North Carolina. At two meter resolution, SPIN-2 data is 250
    percent higher resolution than previously available through commercial
    remote sensing channels. Ten meter resolution stereographic SPIN-2 data
    is used to produce the most accurate digital elevation models in the
    world made from satellite data.
        The first launch and recovery of data was highly successful. The
    catalog of data will be available through the Internet, utilizing
    Microsoft's Terraserver. The concentration of the first mission was the
    Southeastern United States and Southern California. However, large data
    sets were also gathered from the following regions: China, Brazil,
    Australia, the Middle East and Canada. These regions include major crop
    production areas. Many local, several state, and international
    governments have placed orders for the data. The data will be used in
    local planning, assessment and decision making regarding land use,
    natural resource assessment, and environmental change.
        What does this mean to the Department of Agriculture and USDA
    missions? There are two answers to this question.
        (1) USDA has the responsibility of producing world food and fiber
    supply and demand estimates. These estimates heavily influence futures
    prices of commodities, and also impact decision making on planting for
    numerous crops. The accuracy of USDA's supply and demand estimates
    depends on the refinement of the data from which the estimates are
    based. Today's estimates are derived from technology and equipment that
    have been eclipsed by several generations of improvement. Two meter
    resolution SPIN-2 data offers information not available through current
    methods (a) by providing refined field boundary definition, a major
    element in determining crop yields, and (b) crop differentiation by
    interpretation of feature texture on images. The accuracy of crop and
    growing condition estimates through the use of SPIN-2 data can be
    improved by 15 percent to 25 percent.
        (2) USDA has the responsibility of managing vast areas of natural
    resources through its conservation programs and the U.S. Forest
    Service. While the Forest Service is not funded through this
    appropriations bill, USDA decisions on Forest Service programs depend
    heavily on input through the portions of USDA that are funded through
    this bill. Improved information on the environment would help provide
    more accurate assumptions to Department officials in program decisions
    that were environmentally fragile or subject to change. USDA's
    stewardship of natural resources would be improved through better
    information and a more accurate data base.
        Some federal agencies are becoming aware of SPIN-2's resource base,
    and are exploring ways in which the new information can be applied to
    the better management of their programs. We think USDA should be among
    those who utilize this new source of information.
        The key aspect of my statement relates to the timely availability
    of information. If USDA were to access the SPIN-2 information this
    year, savings could be realized in the current growing season, and
    subsequent marketing season, as opposed to waiting for later data that
    could not be used for the current growing season, both domestically and
    world wide. USDA's timely access to this information would, in our
    estimate, result in real-time savings and more accurate forecasts one
    year in advance of later systems.
        Mr. Chairman, that concludes my brief remarks. If there are any
    questions regarding my testimony, we would be pleased to address them.
    Thank you again for this opportunity to present these views in the
    hearing record.
                                     ______

      Prepared Statement of William K. Quarles, Vice President, Corporate
                     Relations and Counsel, Sunkist Growers
        Chairman Cochran, Senator Bumpers, Members of the Subcommittee,
    Sunkist Growers appreciates this opportunity to bring to the
    Subcommittee's attention several matters of great importance to Sunkist
    Growers and to American agriculture as you undertake the difficult task
    of crafting the agriculture appropriations measure for the final fiscal
    year of this millennium.
        As you know, Sunkist Growers is a non-profit, farmer-owned
    marketing cooperative serving 6,500 citrus farmers in California and
    Arizona. For 105 years Sunkist has successfully marketed fresh citrus
    fruit grown by its farmer-members. Today, Sunkist Growers produce
    approximately 65 percent of the oranges, lemons, grapefruit and
    tangerines grown in Arizona and California. Eighty percent of our
    member's farms are fewer than 40 acres, truly small farms by U.S.
    standards. Our cooperative enjoys a long history of dedicated effort to
    create and develop markets around the world for our U.S.-grown citrus.
    Sunkist exports currently account for nearly 45 percent of our farmers'
    annual fresh fruit sales. Competition is intense with 18 countries now
    producing for the international market. Conditions in those markets is
    often inequitable and the terms of trade under which we have to compete
    are often unfair. For these reasons we need the continued help and
    partnership of our government.
                             market access program
        Concerning the U.S. Department of Agriculture programs that assist
    American farmers export their products, we urge the Committee to
    continue to fully fund at $90 million the very effective, essential and
    extensively reformed Market Access Program (MAP) which provides at
    least some limited help to American farmers confronted by the highly
    competitive and often inequitable market environments beyond our
    borders. The many reasons why American farmers need this vital USDA
    help to secure and maintain market access for American agricultural
    products continue to validate this program. Unfair trade barriers to
    U.S. products have not been eliminated. Increasingly we are having to
    counter bogus sanitary and phytosanitary allegations concerning U.S.
    agricultural products. High protectionist tariffs against American-
    grown fruit in key markets have not been reduced. In a direct challenge
    to displace American-grown commodities in markets around the world,
    foreign governments like the European Union have significantly
    increased market promotion assistance for their countries' competitor
    products. Unlike the U.S., many foreign governments continue to
    subsidize the transportation costs of our foreign competitors to help
    them move their products to market and be able to undercut our prices.
    At a time when America is once again confronted by massive trade
    deficits, American agriculture continues to be the one industry sector
    contributing a positive trade balance for our country. This effort
    needs to be fostered not undermined.
        The bottom line is this--if American farmers didn't have to contend
    with this host of anti-competitive, trade-distorting, tariff-imposed,
    foreign government-subsidized, discriminatory practices and inequitable
    conditions in the global marketplace, we could deliver the very best
    products at the most competitive price anywhere in the world. But
    reality is we do have to contend with these unfair conditions and we
    need our government's help to do so.
        We urge the Committee to continue to support full funding for the
    Market Access Program at USDA.
                          foreign agricultural service
        The work of USDA's Foreign Agricultural Service (FAS) is a critical
    component in America's global effort to compete with our products in
    overseas markets. FAS, with its corps of dedicated and very able
    professionals, both here and abroad, provides insightful information
    and guidance in overcoming trade barriers, responding to the actions of
    foreign competitors, and intervening to address unfavorable regulatory
    policies of foreign governments which negatively impact American farm
    exports into those markets. During the past year alone, FAS actions on
    behalf of our industry have been critically important in Korea, Japan,
    China, Thailand, Mexico, Chile, Argentina and other countries. The
    reality of a globalized marketplace increases FAS' workload and makes
    their that much more significant to American agriculture. We urge the
    Committee to provide increased resources to the Foreign Agricultural
    Service to meet this challenge in the year ahead. Specifically, we
    strongly support USDA's request for $145.6 million for FAS operations
    in fiscal year 1999. The workload and responsibilities of FAS will only
    increase in the days ahead as we commence in 1999 the next round of WTO
    negotiations on agricultural trade.
                   animal and plant health inspection service
        Despite progress in the Uruguay Round of trade negotiations, those
    still intent upon maintaining protectionist barriers now resort to
    sanitary and phytosanitary claims to thwart successful importation of
    U.S. agricultural products like our citrus fruit. SPS issues have
    become increasingly significant in determining the course of
    international trade for agricultural products. SPS issues, including
    pest quarantines, have with growing regularity become the linchpin of
    trade negotiations in determining market access for fresh produce. For
    example, the U.S. citrus industry's efforts to gain market access to
    the huge and potentially profitable consumer market in China is
    dependent upon the success of USDA's Animal and Plant Health Inspection
    Service (APHIS) in negotiations with its Chinese counterpart agency
    (CAPQ) to satisfactorily address concerns about periodic outbreaks of
    Mediterranean fruit fly in California and Florida. Only when these
    technical issues are resolved will market access efforts prove
    successful. Similar technical and scientific SPS issues have become
    pivotal in various markets for a host of American commodities. As a
    result, the manpower and resources of agencies like APHIS and ARS are
    spread dangerously thin.
        Concerns about proper management of production areas, assurance of
    swift eradication of destructive pests and diseases and mandatory
    certification that the fruit exported is pest free have become critical
    components of international trade. The surest way for us to have
    foreign markets slam shut their doors to our products is the advent of
    an exotic pest like Mediterranean fruit fly in or near our production
    areas. That is why USDA's Agricultural Quarantine and Inspection
    Service (AQI) which seeks to prevent exotic pests and diseases from
    entering the U.S. from abroad is vitally important to the health and
    well being of agriculture in California and Arizona.
        Sunkist Growers urges the Committee to fully fund APHIS at the
    requested fiscal year 1999 amount of $461,352,000 which includes
    $237,642,000 for Plant Protection and Quarantine (PPQ); $30,648,00 for
    AQI-appropriated; $6,685,000 for Pest Detection; and $22,322,000 for
    Fruit Fly Exclusion.
        Contrary to its actions in fiscal year 1997 and 1998, Congress
    should, we believe, appropriate the full $100 million for the AQI-User
    Fee budget. The reduced appropriations by Congress in fiscal year 1997
    and fiscal year 1998, totaling $14 million, imposed a severe hardship
    on these inspection and enforcement programs so vital to assuring pest
    protection for vulnerable U.S. farming areas like California where we
    are already witnessing increased volumes of contraband produce
    surreptitiously entering the U.S. If not fully funded, further
    reductions in the appropriated amount will likely reduce already
    deficient inspection levels at ports of entry and increase
    significantly the risk of exotic pest and disease.
        Similarly we strongly urge approval of the USDA budget request for
    Fruit Fly Exclusion and Detection. This program carries out all fruit
    fly trapping in Florida, Texas and California; the sterile fly release
    program to combat Medfly in California; the Mexican fruit fly program
    in the lower Rio Grande Valley in Texas; the Medfly programs in Mexico
    and Guatemala; and the sterile fruit fly rearing programs in Hawaii and
    Guatemala. This is preventive action needed to avoid the costly
    incidence of exotic pest infestation that destroys export markets
    because of quarantines and imposes tremendous costs of eradication both
    on industry and government.
                        arizona citrus research project
        Last year, the Committee provided $250,000 to the University of
    Arizona for research of attacking the problem of brown wood rot fungus
    citrus trees in southern Arizona. Nearly 40 percent of the commercial
    lemon groves in the region, which now includes the Coachella Valley in
    southern California, have been infected by the Coniophora eremophila
    fungus which is indigenous to the Sonora Desert. We ask the Committee
    to continue the same level of funding for this research, which will be
    the second of a planned three year effort.
        Mr. Chairman, we appreciate the opportunity to apprise the
    Committee of our interests and concerns about the fiscal year 1999
    agriculture appropriations legislation. Recognizing the significant
    reductions in funding levels imposed on agriculture programs over the
    last several years relative to other sectors of the federal budget, it
    is our fervent hope the Committee will ably defend existing programs
    and work to meet the needs identified as important to American farmers.
                                     ______

     Prepared Statement of A. Ellen Terpstra, President and CEO, USA Rice
                                   Federation
        My name is Ellen Terpstra and I serve as president and chief
    executive officer of the USA Rice Federation. I am submitting this
    statement in behalf of the Federation to recommend several items of
    particular concern to the organization that we would like to see
    included in the fiscal year 1999 appropriation bill for the Department
    of Agriculture (USDA). The USA Rice Federation is a trade association
    that consists of producers from States that are responsible for
    production of over 80 percent of the rice grown in the United States,
    as well as practically all the rice millers in the United States,
    wherever they may be located, and allied organizations.
        I would like to preface my remarks to thank the Subcommittee for
    its actions in the past in behalf of U.S. agriculture. Those engaged in
    agricultural production, processing, and marketing of U.S. agricultural
    products owe much to the efforts of the Subcommittee. When the farm
    bill was enacted in 1996, it heralded the end of an era for government
    supports which are gradually being phased down over a seven-year
    period. Producers are adjusting to the new environment where they must
    depend more and more on market forces for income. Increasingly they are
    reliant on export markets and research to maintain their competitive
    edge in world and domestic markets. Accordingly, we strongly recommend
    that appropriations for the export programs and research programs be
    maintained at current levels, if not increased. They should not be
    reduced as has been recommended by the Administration in several
    instances.
        1. For example, the Administration has recommended a drastic
    reduction in the appropriation for title 1, Public Law 480 from the
    current appropriated level--a reduction of more than 50 percent from
    $245 million to $112 million that would practically phase out the
    program completely. As the Administration has stated in its proposed
    budget, priority under title 1 is given to agreements which provide for
    the export of U.S. agricultural commodities to those developing
    countries which have demonstrated the potential to become commercial
    markets, among other things. Despite severe budgetary limitations in
    recent years, title 1 has remained vital and provided the stimulus to
    developing strong commercial markets for U.S. agricultural commodities.
    This concessional program continues to be America's ticket of admission
    into new markets for the future. It is particularly important today as
    the ``Asian flu'' has caused a reduction of over $2 billion in
    anticipated exports of U.S. agricultural commodities.
        2. Another item for which we recommend additional support is the
    appropriation for the Foreign Agricultural Service (FAS) which provides
    funding for the foreign market development program. It is our
    understanding that to maintain this program at current levels it will
    be necessary to increase the appropriation for FAS slightly. In the
    past the FMD program has been sustained in part by funds from a reserve
    that is almost exhausted and will no longer be available to supplement
    the FAS appropriation. This program is operated on a cost share basis
    with cooperators and has shown success in maintaining and expanding
    markets abroad. This program, like the title 1, Public Law 480 program,
    is part of the Department of Agriculture's ``arsenal'' in assuring that
    the U.S. can remain competitive in world markets.
        3. The USDA research program is another area that is of great
    importance to the rice industry. Construction of a National Rice
    Germplasm Evaluation and Enhancement Center at Stuttgart, Arkansas, is
    nearing completion. The work of this Center will enable the rice
    industry to improve efficiency and yields. The current year's
    appropriation bill provides an additional allocation of $700,000 in
    base funding for the Center's program of work from the appropriation to
    the Agricultural Research Service (ARS). However, the Administration
    eliminated this allocation in base program funds from its recommended
    fiscal year 1999 appropriation bill. Therefore, this allocation of
    $700,000 needs to be restored for fiscal year 1999, and an additional
    amount of $800,000 in program funds should be provided to complete
    staffing of the Center in fiscal year 1999. We urge that this
    additional allocation in a total amount of $1.5 million be provided
    from the appropriation to ARS to fully fund the Center's operations in
    the next fiscal year.
        4. Finally, we wish to express support for maintaining at current
    levels the existing USDA program to control blackbird damage to rice
    producers and others. The Administration's proposed budget would reduce
    the appropriation for the animal damage control activities, now part of
    the Wildlife Services Operations. The USDA has reported that blackbirds
    are the most frequently reported source of wildlife damage throughout
    the United States causing annual damage to a variety of U.S.
    commodities and to livestock feedlots and aquaculture. They congregate
    in large roosts where they also cause health, aesthetic and nuisance
    problems in addition to agricultural losses. USDA is constantly
    conducting research and testing methods to better control blackbirds,
    and adequate resources are needed to continue this work.
        We appreciate the opportunity to advise you of the recommendations
    of the USA Rice Federation and would appreciate it if you would include
    this statement in the record. Thank you again for the help you and the
    Subcommittee have provided the rice industry in the past.
                                     ______

     Prepared Statement of the U.S. Agricultural Export Development Council
        U.S. agricultural exporters want to compete on a level playing
    field. However, the large amount of foreign government manipulation of
    markets and production means U.S. agricultural exporters need
    Washington's support to make this happen. The record shows that U.S.
    agriculture is serious enough about this public-private partnership to
    contribute significant amounts of its own resources to the effort.
    Further, U.S. agriculture and the U.S. Department of Agriculture (USDA)
    are using strategic planning, program evaluation, quantifiable goals,
    and a competitive award process to ensure that taxpayer's money is
    being used in a way which generates the biggest returns for the U.S.
    economy and its 1.1 million citizens who depend on a healthy
    agricultural export sector for their livelihood. The U.S. Agricultural
    Export Development Council (USAEDC) respectfully urges this
    subcommittee to fully support all USDA export promotion efforts in the
    fiscal year 1999 budget, especially the FMD program at a level of $30
    million, and an MAP program at $90 million. We also urge the
    subcommittee to support a strong USDA Foreign Agricultural Service
    (FAS), our partner in promoting increased U.S. agricultural exports.
        First and foremost, it is important to revisit the role
    agricultural exports play in the health of our national economy and the
    well being of our citizenry. Every $1 billion in agricultural exports
    supports approximately 20,000 U.S. direct and indirect jobs. With our
    $57 billion in agricultural exports in 1997, this means a successful
    U.S. agriculture export effort was responsible for 1.1 million jobs.
    According to the U.S. Department of Agriculture Foreign Agricultural
    Service (FAS), more than ten percent of this total work force is in
    California (137,000 jobs). Iowa and Texas have the second and third
    largest number of agricultural export related jobs at 96,000 and 77,000
    respectively. Agricultural exports play an important role in every
    region of the country, including the South (189,000 jobs), the Pacific
    Northwest (67,000 jobs), and the Northeast (24,300 jobs). These jobs
    not only ensure family incomes, but help grow the national tax base and
    thus increase revenue to the Treasury, contributing to the reduction of
    our national debt. It is clear that without a healthy agricultural
    export sector, we all lose.
        Ensuring the long-term vitality of U.S. agricultural exports is the
    reason the U.S. Agricultural Export Development Council (USAEDC)
    exists. We are a national, non-profit, private sector trade association
    funded solely by our members. Our nearly 80 members are U.S. farmer
    cooperatives and agricultural trade associations who in turn represent
    the interests of farmers and agribusinesses in every state of the
    Union. Our members represent producers of both bulk and high-value
    processed products, including grains, fruits and vegetables, cotton,
    livestock, dairy products, seeds, fish, wood products, wine, poultry,
    nuts, and rendered products among others.
        Our members continually strive to ensure the United States remains
    one of the most active agricultural exporting countries in the world.
    We proudly produce among the world's highest quality products as
    evidenced by our ability to be one of the few sectors of the U.S.
    economy to consistently run a positive balance of trade. In 1997, U.S.
    agriculture racked up an impressive year in exports: $57 billion in
    sales to more than 40 countries.
     the world agricultural playing field is tilted against u.s. exporters
        Unfortunately, record exports do not tell the whole story. U.S.
    agriculture has done well, but international conditions are
    increasingly competitive. Foreign governments are bolstering
    agricultural production, putting the United States at a competitive
    disadvantage in foreign markets. With the demise of the Cold War, more
    and more countries have turned their attention to increasing support
    for agricultural production for both their domestic and export markets.
    Through their spending and production decisions, foreign governments
    have strengthened traditional, and created new, competitors for U.S.
    exports.
        U.S. exporters are also encountering a rapid increase in the
    proliferation of new non-tariff barriers to agricultural products. With
    the Uruguay Round's move to reduce tariffs, many countries have turned
    to sanitary and phytosanitary requirements as barriers to market entry
    of U.S. agricultural products. Although said by their proponents to be
    objective, many of these sanitary and phytosanitary barriers are in
    actuality an attempt to use scientific data (or lack thereof) to
    establish import regimes which effectively halt or severely restrict
    U.S. imports. The recent EU uproar concerning U.S. genetically modified
    corn and soybeans is a perfect example.
        A myriad of other types of non-tariff barriers exist. FAS and its
    overseas offices have gathered plentiful information on the numerous
    cases of foreign assistance for agricultural production as well as
    barriers to trade which prevent U.S. agriculture from reaching the
    exports levels of which it is capable. The National Trade Estimate of
    the Office of the U.S. Trade Representative catalogues this loss to
    U.S. agricultural exports from unfair foreign competition. Despite a
    significant commitment of their own resources, the U.S. private sector
    cannot overcome such an extensive amount of barriers alone.
         a u.s. public-private partnership is necessary and appropriate
        Given the magnitude of the task, it would be impossible to expect
    either the U.S. private sector or the U.S. public sector to be able to
    remedy the unfair competition which U.S. agriculture faces overseas on
    their own. In the past, U.S. agriculture has worked successfully with
    the U.S. Government to remedy foreign unfair competition and market
    access barriers which have prevented U.S. exports from fulfilling their
    potential. To those who say there is no appropriate role for Washington
    in this fight, former U.S. Under Secretary of Commerce Jeffrey Garten,
    now dean of the Yale School of Management, sums up the situation quite
    well: ``In the best of worlds, governments ought to get out of this
    business [of export promotion] altogether. But the marketplace is
    corrupted by the presence of government. So do you sit on the side and
    pontificate about Adam Smith, or do you enter the fray?'' \1\ Mr.
    Garten argues that Washington must enter into the battle or risk losing
    U.S. jobs.
    ---------------------------------------------------------------------------
        \1\ ``Don't Be Salesmen'', The Economist, Jan. 2, 1997.
    ---------------------------------------------------------------------------
        In the fiscal year 1999 Federal Budget, USDA proposes funding a
    number of programs for U.S. agriculture which help the sector overcome
    these foreign trade barriers and market distortions. USAEDC commends
    the actions of this subcommittee in the past to fund these programs. We
    strongly support efforts by this Congress and the Administration, as
    provided for in the fiscal year 1999 Federal Budget, to again provide a
    dynamic arsenal of programs to boost the efforts of U.S. agricultural
    producers to maintain current, and establish new, markets around the
    world.
        The Federal Agricultural Improvement and Reform Act of 1996 (the
    1996 Farm Bill) re-authorized and refocused a number of important
    export-related programs to help achieve the specific U.S. agricultural
    export goals contained in the Act itself. It is essential that the full
    range of USDA's export programs be fully funded and aggressively
    implemented this coming year, including the Foreign Market Development
    (FMD) program and the Market Access Program (MAP).
        Nowhere is the record of success of the public-private partnership
    move evident than in the FMD and MAP programs. USAEDC members consider
    these programs the ``heavy artillery'' in the USDA arsenal. These
    complementary programs have been instrumental in our record export
    performance. The Foreign Market Development Program is aimed at long-
    term marketing efforts, i.e., making infrastructural changes to foreign
    markets through training and educational efforts among members of the
    foreign trade. Successful efforts result in a modification of the
    foreign market structure so that U.S. products become an available,
    attractive, well understood alternative to other sources of competing
    products. FMD activities help the foreign importer, processor, and
    retailer to understand not only how to properly store, handle, process,
    and market the U.S. product, but also to appreciate its unique
    characteristics, high quality, and reliability of supply.
        The FMD program helps create new markets for U.S. agricultural
    exports. For example, as a result of FMD-funded market development
    efforts by the U.S. Beef Breeds Council and the American Shorthorn
    Association--one of their seventeen U.S. partner associations
    contributing their own resources to this program--150 head of U.S.
    breeding beef cattle departed in 1996 for China. This was the first-
    ever shipment of U.S. purebred cattle breeders to China. Now that an
    agreement has been reached between Washington and Beijing on a health
    regulation protocol, further purchases are expected. And, a Chinese
    buying team made inspections and selections for a second shipment
    completed within the first half of 1997. Without the FMD program, the
    Council does not believe they would have had the opportunity or
    resources to establish this new market for U.S. cattle. With the
    sustained effort of the U.S. cattle industry and the FMD program, China
    could become a multi-million dollar market for U.S. cattle exporters in
    the near future.
        The FMD program helps expand existing markets. Last year, the
    American Forest & Paper Association (AF&PA) succeeded in having the
    Government of Japan accept U.S. grade stamps for softwood lumber, a
    major non-tariff barrier to U.S. value-added wood products exports to
    Japan. AF&PA and the Western Wood Products Association--one of AF&PA's
    four U.S. partner associations contributing their own resources to this
    program--have been able to work with the Japanese for almost ten years
    on this issue. As the number one export market for U.S. wood products,
    Japan is currently a billion dollar market for the U.S. wood products
    industry and is expected to expand further with this major development.
    Without it, U.S. exports would have been lost to the Canadian wood
    industry which has already had its grade marks accepted by Japan. FMD
    resources, combined with those of the U.S. wood products industry, made
    this U.S. export expansion possible.
        The Market Access Program (MAP) is the complement to the FMD
    program. Where the FMD program is aimed at long-term market
    infrastructural change, MAP targets more immediate, shorter-term market
    opportunities. MAP funds are often used for consumer promotion efforts
    to create or capitalize on new trends in foreign consumption.
    Activities tend to be targeted at the foreign consumer, increasing
    their awareness and level of comfort with the imported U.S. product.
    Consumer promotions have taken the form of in-store promotions,
    contests, advertising, and cooking demonstrations to name but a few.
    Numerous examples of both successful FMD and MAP programs are contained
    in the attached pamphlet, ``A Working Partnership Builds Markets
    Abroad, Creates U.S. Jobs,'' which catalogues USAEDC member successes
    with both programs.
        Therefore, USAEDC strongly supports an fiscal year 1999 FMD funding
    level of $30 million. This amount does not grow the program, but keeps
    it at a level U.S. agriculture feels is necessary to support meaningful
    export promotion. It is consistent with recent funding levels of the
    program following years of program budget reductions. In addition,
    USAEDC strongly supports a fiscal year 1999 MAP funding level of $90
    million.
        It is important to realize that the program participants put up
    their own money to participate in these programs. As such contributions
    are part of the rules of both the FMD and MAP programs, no one is
    getting a ``free ride.'' Program participants are required to
    contribute their own cash and manpower to run these programs. Thus, the
    program participants have just as much, if not more, impetus to conduct
    responsible and effective FMD and MAP marketing programs. For example,
    in fiscal year 1995 (the most recent date available), USDA reports that
    U.S. program participants contributed over $60 million of their own
    funds to match the $92 million in MAP funds expended. Thus, U.S.
    agriculture contributed 65 cents for every MAP program dollar used. The
    FMD ratio is even higher, with U.S. agriculture contributing $1.12 for
    every FMD program dollar used in fiscal year 1996. These numbers
    clearly illustrate the private sector's strong belief that the FMD and
    MAP programs are essential, and that the public-private partnership
    approach is effective.
        U.S. agriculture is also active on other fronts to maximize
    opportunities for export increases, e.g., our public-private
    partnership with Washington extends into the trade policy arena. U.S.
    trade policy efforts have met with success in opening new markets to
    U.S. agricultural products. We are encouraged that the Administration
    appears set to continue this effort, as evidenced by Acting U.S. Trade
    Representative Charlene Barshefsky's comments to the House
    Appropriations Commerce, Justice, State Subcommittee March 14, 1997,
    indicating that increasing U.S. agricultural exports will be one of her
    top priorities.\2\ However, trade policy alone is not enough. Bringing
    down barriers to trade is only truly effective at increasing U.S.
    agricultural exports when followed by intensive marketing efforts. The
    FMD and MAP programs help U.S. agriculture do just that.
    ---------------------------------------------------------------------------
        \2\ ``China Dominates Barshefsky Hearing,'' Annie Tin,
    Congressional Quarterly Daily Monitor, March 17, 1997, on-line service.
    ---------------------------------------------------------------------------
       fine tuning of the fmd and map programs has enhanced effectiveness
        USAEDC members are as concerned as anyone else in America about the
    federal budget deficit and the long-term fiscal health of this country.
    The public-private partnership in the FMD and MAP programs allows us to
    do something about it, namely increase U.S. agricultural exports beyond
    that which U.S. agricultural interests would be able to do on their
    own. USDA's own evaluation efforts indicate that for every federal
    dollar spent on agricultural export promotion, $16 worth of exports are
    generated. In addition, USDA program rules require all program
    participants to conduct independent annual evaluations to determine the
    past impact and future direction of their marketing programs. This
    evaluation is in addition to that conducted independently by many of
    the associations themselves as part of their own strategic planning.
    Program evaluations are reviewed jointly by USDA and program
    participants to determine the appropriate promotional programs for
    particular markets in the future. These evaluations are evidence that
    USDA and program participants are serious about getting the best
    possible return on FMD and MAP funds.
        Both generic and branded promotion have a place in marketing U.S.
    agricultural products abroad. Depending on the type of product and
    foreign market involved, branded promotion can be more effective than
    generic promotion as a way to increase U.S. farmers' exports. In fiscal
    year 1997, 100 percent of FMD funds and more than 70 percent of MAP
    funds were awarded for generic marketing efforts overseas. More than 80
    percent of MAP branded marketing funds went to U.S. farmer cooperatives
    and small agribusinesses which met the Small Business Administration's
    definition of a ``small business.'' In accordance with recent program
    reforms, in fiscal year 1998 only farmer cooperatives and small
    businesses are eligible to receive MAP branded promotion funds.
    Additionally, all applicants--whether large or small, non-profit or
    corporate, for FMD or MAP programs--must go through a rigorous
    competitive award process for program funds. Recent program reforms
    have resulted in application and allocation criteria being much more
    widely known and transparent for all potential applicants.
        USDA has also made other changes to the FMD and MAP programs over
    the past several years in response to General Accounting Office and
    Office of Management and Budget recommendations to ensure the best
    possible return to the U.S. taxpayer and the U.S. Treasury. Changes
    also reflect public comment on various proposed changes published in
    the Federal Register. These changes include: per the Government
    Performance and Results Act, changes to evaluation procedures and
    demonstrations of additional sales as a result of the programs; a
    reduction in paperwork requirements; the addition of an appeal
    procedure for compliance findings; and the expediting of routine
    administrative issues by delegating approval authority to lower levels
    within FAS. FAS is to be commended for its work in implementing these
    changes as well as its continuing efforts to support efforts by U.S.
    agriculture to expand our exports. A continued strong and well-funded
    FAS is an important part of our successful public-private partnership.
        The U.S. Agricultural Export Development Council (USAEDC)
    appreciates this opportunity to submit written testimony in support of
    an aggressive U.S. effort in fiscal year 1999 to increase U.S.
    agricultural exports, specifically with an FMD program funded at $30
    million, and an MAP program funded at $90 million.
                                     ______

                Prepared Statement of the U.S. Apple Association
        On behalf of the U.S. apple industry, the U.S. Apple Association
    appreciates the opportunity to provide comments on the appropriations
    for the U.S. Department of Agriculture (USDA) for fiscal year 1999.
        Our focus is on four agencies of the Department: the Agricultural
    Research Service (ARS), the Foreign Agricultural Service (FAS), the
    Cooperative State Research, Education, and Extension Service (CSREES)
    and the Agricultural Marketing Service (AMS).
        The U.S. Apple Association is a non-profit national trade
    association representing all segments of the U.S. apple industry. Our
    membership includes 30 state organizations representing approximately
    9,000 producers and over 450 individual firms which handle and market
    the bulk of the nation's apples. Apples are grown commercially in 35
    states, with gross returns to growers last year totalling $1.7 billion.
    Top producing states include Washington, New York, Michigan,
    California, Pennsylvania, Virginia, North Carolina, Oregon, Idaho and
    West Virginia.
           foreign agricultural service--market access program (map)
        All segments of the U.S. apple industry benefit directly from the
    use of the export promotion funds, which build markets and demand for
    our domestically produced product, and indirectly strengthen our
    markets in this country as well. While many FAS activities are
    important to the apple industry, the U.S. Apple Association believes
    the Market Access Program (MAP) in particular should be fully funded at
    its current authorized level of $90 million. This program is consistent
    with new international trade rules, helps small businesses, and is
    effective in promoting U.S. exports.
        After nearly a decade of multinational trade negotiations in the
    Uruguay Round, the global agricultural community is facing substantial
    trade liberalizing policies. One of the few areas in which government
    policies can still effect agriculture is export promotion. We support a
    strong MAP, which is permissible under the Uruguay Round international
    trade rules.
        The U.S. apple industry faces severe competition from around the
    globe. Most competitors receive significant government funds for
    generic promotions. Both production and exports from European Union
    (EU) countries receive government subsidies. Foreign governments spend
    approximately $500 million on export promotion and market development.
    With apple production increases occurring around the world, already
    severe competition is expected to intensify further.
        Apple industry members believe in agricultural export programs and
    back their support of these programs with cost-sharing contributions of
    30 to 75 percent of the total. According to USDA estimates, every $1 in
    export promotion funds translates into $16 in additional agricultural
    exports. MAP is an investment by the federal government that generates
    substantial returns to the Treasury and helps American business. MAP
    has been a sound investment in this nation's agricultural economy.
        California, Colorado, Connecticut, Idaho, Maine, Massachusetts,
    Michigan, New Hampshire, New York, Pennsylvania, Utah, Vermont and
    Virginia are members of the U.S. Apple Export Council (USAEC). USAEC
    manages the export promotion activities of these states.
        Each year export markets become increasingly important to apple
    businesses and related industries. U.S. apple production has steadily
    grown over the past decade, and these new markets provide outlets for
    this increased production. It is vital not only to the apple industry
    but agriculture as a whole to continue trade promotion efforts to help
    U.S. producers and exporters take full advantage of emerging and
    existing export markets. It is critical that assistance to small
    businesses is continued. The program makes export markets more
    accessible to smaller businesses which would otherwise be unable to
    individually effectively promote and market their apples around the
    world.
          agricultural marketing service--pesticide data program (pdp)
        As requested in the President's budget, we recommend appropriation
    of $12 million for the Pesticide Data Program (PDP), managed by the
    Agricultural Marketing Service (AMS) of USDA.
        Since 1991, USDA has utilized PDP to collect reliable,
    scientifically-based pesticide residue data that benefit consumers,
    food processors, crop protection pesticide producers, and farmers.
    These data accurately reflect the consumer's actual exposure to
    pesticides from certain dietary sources. This real-world information
    allows the U.S. Environmental Protection Agency (EPA) to make more
    accurate assessments of risk. Without the actual residue data, overly
    conservative theoretical assumptions of risk are used. These
    assumptions could lead to withdrawal of pesticide uses that pose no
    actual human health risk.
        On August 3, 1996 the President signed into law the Food Quality
    Protection Act (FQPA). This landmark legislation requires extensive
    reevaluation of the safety of agricultural pesticides and requires
    extensive data to evaluate the risk associated with the exposure to
    pesticides. Over the next three years, EPA will reevaluate the
    pesticide tolerances of many of the most important pesticides used on
    apples. Lacking sufficient data, EPA will make conservative assumptions
    about the use of pesticides and the resulting exposure. The
    conservative assumptions could lead to unnecessary cancellations or
    restrictions of critically important pesticides used on apples. EPA
    will be able to make a more accurate assessment of the actual risk
    associated with pesticides using data from PDP. As a result, apple
    growers will benefit from the continued availability of safe and
    effective pesticides. It is imperative that the subcommittee support
    PDP.
             agricultural research service--food consumption survey
        The U.S. Apple Association supports the $2 million funding of the
    USDA food consumption survey as proposed in the USDA fiscal 1999
    budget. The data from this survey is expected to lessen the potential
    that critical pesticides used on apples will be unnecessarily canceled
    or restricted as a result of implementation of the Food Quality
    Protection Act.
        EPA uses food consumption data from the USDA food consumption
    survey to evaluate dietary pesticide exposures resulting from different
    food consumption patterns. EPA currently uses data which was produced
    from the latest survey conducted in 1978. The data from this survey are
    inadequate for certain demographic categories such as infants and
    children.
        As previously noted, FQPA implementation will require accurate data
    to avoid the unnecessary cancellation of critical pesticides used on
    apples. Under FQPA, EPA must issue a finding that tolerances are safe
    for infants and children. Lacking sufficient data on infants and
    children, EPA is required by the new law to use additional margins of
    safety that could threaten the availability of pesticides used on
    apples. Data from a new consumption survey would refine EPA's risk
    assessments and possibly prevent unnecessary cancellations or
    restrictions on pesticides used on apples. It is also important that
    the survey is completed as quickly as possible since EPA will make many
    of its most critical decisions on apple pesticides within the next
    three years and will proceed on that schedule regardless of the
    availability of the data.
     national agricultural statistics service (nass)--pesticide use surveys
        The U.S. Apple Association supports the $7 million fiscal year 1999
    budget request for NASS pesticide usage surveys. On an annual basis,
    USDA conducts statistical surveys on the use of agricultural
    pesticides. These surveys provide up to date information on the amount
    of pesticide use, the percentage of agricultural crops that are treated
    and other specific information on pesticide usage patterns. These data
    are used by the public and government agencies charged with the
    responsibility of tracking pesticide use and its implications. EPA
    currently uses the data in risk assessments that measure the
    theoretical health risk to the public from exposure to pesticides.
    Accurate information on pesticide use has never been so critical to the
    apple industry. Under FQPA, EPA will reassess the pesticide tolerances
    of some of the most important pesticides used on apples. The outcome of
    those assessments and the overall availability of pesticides for apple
    production will depend on the availability and accuracy of the
    pesticide usage data. A well funded USDA program that gathers pesticide
    use data on apples is critical to the proper implementation of the Food
    Quality Protection Act and to a realistic health risk assessment.
     agricultural research service--temperate fruit fly research position--
                               yakima, washington
        The U.S. Apple Association requests support for ongoing apple-
    specific research of $825,000 and requests an additional $300,000 in
    fiscal year 1999 for a temperate fruit fly research position at the
    USDA Agricultural Research Service facility in Yakima, Washington.
    Implementation of the food Quality Protection Act is expected to
    significantly reduce the number of pesticide alternatives that growers
    currently use to control a family of insects such as cherry fruit fly
    and apple maggot that are devastating pests to tree fruit growers.
    Research on this family of pests is critically important because
    alternative pest controls are presently unavailable without the use of
    organophosphate pesticides. Over the next two years, EPA is expected to
    take regulatory action that will significantly reduce if not eliminate
    the use of organophosphate pesticides. This action will leave growers
    without a commercially viable control. The apple industry believes that
    research on this family of insects must be undertaken immediately if
    growers are to avoid a future crisis in pest management.
     cooperative state research, education and extension service (csrees)--
     ``safeguarding the supply of specialty crops for consumers'' michigan
                                state university
        The U.S. Apple Association requests funding of $700,000 for funding
    of a special grant to Michigan State University to develop alternative
    pest management strategies on key apple pests such as plum curculio and
    apple maggot. Implementation of the Food Quality Protection Act is
    expected to eliminate organophosphate pesticides, the primary
    pesticides that currently control those pests. If other pesticide
    alternatives are used they will destroy the ability of growers to
    utilize Integrated Pest Management (IPM), cause growers to use more
    miticides, and eventually will lead to massive pesticide resistance.
    Apple growers and pest management experts agree that without
    organophosphate pesticides, growers will not be able to control apple
    maggot or plum curculio in the future. Plum curculio and apple maggot
    feed directly on the apple causing worm holes, surface defects and
    misshapen fruit that is unmarketable in the fresh or processing market.
    This special project will investigate alternative pest management
    strategies that could control these pests. The research enjoys broad
    support among the apple industry since the research results will be
    applicable to many major apple growing regions outside of Michigan.
     agricultural research service--national agricultural pesticide impact
              assessment program minor-use pest management office
        The U.S. Apple Association supports an increase of $1.5 million for
    the National Agricultural Pesticide Impact Assessment Program (NAPIAP)
    in the ARS budget to support the Office of Pest Management Policy
    established in August 1997 to improve coordination and communication
    with grower associations, USDA agencies and the U.S. Environmental
    Protection Agency. In passing the FQPA, Congress provided for the
    establishment of a minor-use program within USDA. The primary purpose
    of this office is to provide coordination and policy oversight for
    specific program areas within USDA that impact minor-use pest
    management practices. The $1.5 million increase will enable USDA to
    staff the Office of Pest Management Policy appropriately to meet the
    needs of minor-use industries.
        Some of the areas of emphasis for the Office of Pest Management
    Policy would include the issue of meeting grower needs for chemical or
    nonchemical pest management tools, providing extension and educational
    services, and direct coordination with other federal agencies,
    primarily with the U.S. Environmental Protection Agency.
        The minor-crop community believes that responsibility for this
    program must be placed at the highest levels of USDA. The U.S. Apple
    Association believes that the office should take an aggressive
    leadership role in providing for the needs of minor-use growers in the
    implementation of FQPA.
     cooperative state research, education and extension service (csrees)--
                           ipm research grant program
        The U.S. Apple Association supports the President's fiscal year
    1999 budget request of $8 million for the CSREES IPM Research Grant
    Program. Apple growers in all regions of the United States are taking
    steps to avoid pesticide applications whenever possible. The apple
    industry has made tremendous progress in reducing pesticide
    applications and reducing the risks associated with the use of
    pesticides through the use of IPM. Increased IPM funding is necessary
    to discover improved IPM practices that will lead to even more
    environmentally-friendly production practices.
                                     ______

    Prepared Statement of Dr. D. Jay Grimes, Director, Gulf Coast Research
                                   Laboratory
        Mr. Chairman, I am pleased to be here today and to have this
    opportunity to provide the Committee an overview of the activities of
    the U.S. Marine Shrimp Farming Program.
        Mr. Chairman, the United States imports 70 percent of the marine
    shrimp it consumes, resulting in annual trade deficits well in excess
    of $2 billion. The U.S. Marine Shrimp Farming Program, supported by
    this Committee since 1985, undertook the development of high tech
    processes, products and services designed to make U.S. shrimp farmers
    competitive in the world market.
        The Consortium enlisted the participation of top scientists, their
    institutions and states, the cooperation of the fledgling industry, and
    participation of government scientists and administrators to undertake
    narrowly focused and results oriented projects, to provide a sound
    scientific basis for industry expansion. Its approach is based on
    financial accountability, and minimal bureaucratic constraint. The
    Program has been administered by CSREES/USDA, which provides oversight
    and conducts periodic review by independent scientific panels.
        The obstacles to be overcome by new technologies and products, in
    order to underpin a competitive advantage for U.S. agriculture, were
    formidable. By comparison, worldwide shrimp farming practices are
    primitive as compared to modern animal husbandry standards. They depend
    on catching wild shrimp stocks, have little regard for the
    environmental consequences of their actions, use drugs and chemicals
    indiscriminately, and contribute to the spread of shrimp diseases with
    their products; this approach has often been referred to as ``rape and
    run.''
        These practices, while low-cost in the short-run, are not
    sustainable environmentally or economically in the long-run. Currently,
    worldwide producers are experiencing increasing shrimp mortalities,
    lower quality product, and lower profits. These world wide problems
    provide a substantial opportunity for exploitation of the technologies
    and products developed by the Consortium.
        The Consortium has made the United States a world leader in the
    development and use of:
      --domesticated stocks of high health and genetically improved shrimp
            broodstock and seed. Shrimp with superior growth and disease
            resistance traits are made available to U.S. farmers;
      --the most advanced molecular diagnostic tools for disease screening
            and control, including monoclonal antibodies and gene probes.
            Consortium scientists serve a primary role in the U.S. risk
            assessment of viral pathogens in imported shrimp products;
      --environmentally sound, sustainable and biosecure shrimp production
            systems that offer protection against viral pathogens and
            produce virus free products; and
      --advanced feeds and feeding methods in support of the domesticated
            stocks and biosecure production systems to maximize feed
            conversion and system stability, while minimizing and
            containing system wastes.
        The accomplishments above, while very encouraging, are not yet
    complete. We are in the process of integrating these advances into
    working shrimp farming systems for demonstration purposes. The industry
    does not yet have the complete technology package and remains dependent
    upon the Consortium for critical products and services. The Consortium
    is the only supplier of high health and genetically improved shrimp
    stocks in the United States and these stocks are provided at cost. The
    industry is equally dependent upon the Consortium for disease
    diagnosis, prevention and treatment methods, and services.
        Abrupt loss of Consortium support would cut the existing industry
    off at the knees and preclude completion of this important pioneering
    work. In anticipation of near term technology transfer, we are
    encouraging the industry to establish its own breeding program and
    disease control operations. The risks, however, are as yet too high to
    encourage the movement of investment capital. We are making substantial
    progress toward increasing profitability and reducing risk.
        Mr. Chairman, it is envisioned that the United States, with the
    best animal feed grains and health care in the world, will become a
    nonpolluting producer and major competitor in the shrimp farming world.
    Superior technologies, products and services will deliver higher
    quality and lower cost shrimp products to the nation and to the world.
        The Consortium receives substantial support and encouragement from
    CSREES/USDA. They have suggested that this is a model program for
    resolving important problems and capturing opportunities in both
    agriculture and aquaculture. Such sentiments have been repeatedly
    expressed by independent scientific review teams in 1988, 1991 and
    1995.
        To complete the tasks identified, the Consortium is requesting
    continued support of $3.5 million for fiscal year 1999. We deeply
    appreciate the Committee's support to date, and respectfully ask for
    favorable consideration.
                                     ______

         Prepared Statement of the United States Telephone Association
                               summary of request
        Project involved.--Telephone Loan Programs Administered by the
    Rural Utilities Service.
        Actions proposed.--Supporting RUS loan levels for the hardship,
    cost of money, Rural Telephone Bank and loan guarantee programs in
    fiscal year 1999 in the same amount as loan levels specified in the
    Fiscal Year 1998 Agriculture Appropriations Act (Public Law 105-86).
    Also supporting an extension of the language removing the 7 percent
    interest rate cap on cost of money loans for fiscal year 1999. Also
    supporting continuation of the restriction on the retirement of class A
    Rural Telephone Bank stock in fiscal year 1999 at the level contained
    in Public Law 105-86) and an extension of the prohibition against the
    transfer of Rural Telephone Bank funds to the general fund. Supporting
    funding for $150 million in loan authority and $15 million in grants
    designated for distance learning and telemedicine purposes.
        The United States Telephone Association (USTA) represents over 1000
    local telephone companies that provide over 95 percent of the access
    lines in the United States. USTA members range from large public held
    corporations to small family owned companies as well as cooperatives
    owned by their customers. We submit this testimony in the interests of
    the members of USTA and their subscribers.
        USTA members firmly believe that the targeted assistance offered by
    a strong telephone loan program remains essential in order to maintain
    a healthy and growing rural telephone industry that contributes to the
    provision of universal telephone service. We appreciate the strong
    support this committee has provided for the telephone program since its
    inception in 1949 and look forward to a vigorous program for the
    future.
                              a changing industry
        As Congress recognized through passage of the Telecommunications
    Act of 1996, the telephone industry is in the midst of one of the most
    significant changes any industry has ever undergone. Both the
    technological underpinnings and the regulatory atmosphere are
    dramatically different. Without system upgrades, rural areas will be
    left out of the emerging information revolution.
        The need has never been greater for the technology employed by RUS
    borrower rural telephone companies to continue to be modernized. The
    demand for new switches to serve rural areas could be unprecedented in
    the next year. What is driving this demand? First, there are several
    Federal Communications Commission mandates that incumbent local
    companies will have to meet. Upgrades related to new rules regarding
    pay phone compensation, implementation of four digit Carrier
    Identification Codes (CIC's), and number portability are all new
    Commission requirements driven by the 1996 Telecommunications Act.
    Second, there are still some companies that are not equipped to offer
    equal access to competing long distance carriers. Third, the
    Communications Assistance for Law Enforcement Act (CALEA) imposes new
    requirements on all carriers to upgrade their capabilities to assist
    the Federal Bureau of Investigation and other law enforcement agencies.
    Fourth, telephone company switches, which are really just sophisticated
    computers, are impacted by the ``year 2000'' problem.
        In addition to upgrading switching capability, it is important that
    rural areas be included in the nationwide drive for greater bandwidth
    capacity. In order to provide higher speed data services, such as ISDN
    (Integrated Services Digital Network) or even faster connections to the
    Internet, outside plant must be modernized in addition to new
    electronics being placed in switching offices. Rural areas with
    relatively long loops are particularly difficult to serve with these
    higher speed connections and require additional investment to allow
    modern services to be provided.
        Provision of greater bandwidth and switching capabilities are
    crucial infrastructure elements which will allow rural businesses,
    schools and health care facilities to take advantage of the other
    programs available to them as end users. The money spent on having the
    most modern and sophisticated equipment available at the premises of
    the business, school or clinic is wasted if the local telephone company
    cannot afford to quickly transport and switch the large amounts of data
    that these entities generate. RUS funding enhances the synergies among
    the FCC and RUS programs targeted at improving rural education and
    health care through telecommunications.
        The RUS program provides needed incentives to help offset
    regulatory uncertainties related to universal service support and
    interconnection rules with a reliable source of fairly priced long term
    capital. After all, RUS is a voluntary program designed to incent local
    telephone companies to build the plant essential to economic growth.
    RUS endures because it is a brilliantly conceived public private
    partnership in which the borrowers are the conduits for benefits from
    the federal government to flow to rural telephone customers, the true
    beneficiaries of the RUS program. The government's contribution is
    leveraged by the equity, technical expertise and dedication of local
    telephone companies.
              impact of credit reform on the rural telephone bank
        Contrary to the intent of Congress, the interpretation of credit
    reform by the Office of Management and Budget (OMB) has significantly
    affected the operation of the Rural Telephone Bank (RTB). One of the
    most damaging impacts of OMB's interpretation of the credit reform law
    is to essentially cleave the RTB into two banks--a liquidating account
    bank which is responsible for pre-credit reform loans, and a financing
    account bank which is responsible for post credit reform loans. Until
    the Administration's current budget proposal, OMB has clung to the
    proposition that funds from the two banks could not be intermingled.
    USTA has protested this arrangement since it began, since it prevents
    the relending of borrower repayments to fund new loans in direct
    contravention of Sec. 409 of the Bank's enabling act. This, in turn,
    forces the RTB to borrow unnecessarily from the Treasury to fund new
    loans. It also permits funds to build up in the liquidating account
    that were generated by GAO documented interest rate overcharges,
    instead of those funds being returned through relending to the same
    universe of borrowers that initially generated them.
        In this new budget proposal, the Administration proposes to take
    funds from the liquidating account and fund the loan subsidy for new
    loans as well as the RUS administrative expenses allocated to the RTB
    beginning in 1999. This is in direct conflict with an existing
    provision of law, Sec. 403(b) of the Rural Telephone Bank Act (Public
    Law 92-12). That provision states ``. . . in order to perform its
    responsibilities under this title, the telephone bank may partially or
    jointly utilize the facilities and the services of employees of the
    Rural Electrification Administration or of any other agency of the
    Department of Agriculture, without cost to the telephone bank''.
    (Emphasis added)
        OMB has clearly changed its position on whether the liquidating
    account funds can be used for purposes other than liquidating the pre-
    credit reform loans. And on this point OMB is correct. However, instead
    of using the repayments into the liquidating account to fund the
    expenses of the RTB (contrary to the Rural Electrification Act) or to
    fund the loan subsidy, neither of which would result in any budget
    savings, OMB should adhere to Sec. 409 of the Rural Electrification Act
    and allow those repayments to be used to fund new RTB loans. It is
    ironic that in the same budget proposal that purports to have the RTB
    act more like a private bank, OMB continues to maintain the artificial
    split of the bank's resources which prevents it from acting as would a
    private bank--relending repayments.
             rus telephone program procedures should be streamlined
        The Government Performance and Results Act of 1993 (Public Law 103-
    62) was designed by Congress to establish clear goals for government
    programs and places a strong focus on results, service and customer
    satisfaction. This Act applies to all RUS lending programs.
    Streamlining the practices and procedures of the RUS telephone programs
    is an extremely meritorious notion. USTA is fully in support of less
    regulation and improved service delivery, within the context of the
    government's interest in security for these rural telecommunications
    infrastructure improvement loans. We have consistently requested RUS to
    examine and streamline its rules and procedures for the benefit of both
    the agency and the borrowers and their subscribers. Unfortunately
    nothing has been done by RUS to move in this direction. We hope that
    the Government Performance and Results Act provides the needed spur to
    encourage RUS to expeditiously accomplish this goal.
                                recommendations
        Continuation of the loan levels and necessary associated subsidy
    amounts for the RUS telephone loan programs that were recommended by
    this committee and signed into law for fiscal year 1998 would maintain
    our members' ability to adequately serve the nation's
    telecommunications needs and to maintain universal service.
        For a number of years, through the appropriations process, Congress
    has eliminated the seven percent ``cap'' placed on the insured cost-of-
    money loan program. The elimination of the cap should continue. If long
    term Treasury interest rates exceeded the 7 percent ceiling contained
    in the authorizing act, adequate subsidy would not be available to
    support the program at the authorized level. This would be extremely
    disruptive and hinder the program from accomplishing its statutory
    goals. Accordingly USTA supports continuation of the elimination of the
    seven percent cap on cost-of-money insured loans in fiscal year 1999.
        The restriction on the retirement of the amount of class A stock by
    the Rural Telephone Bank, adopted in fiscal 1997, should be continued.
    The Bank is currently retiring Class A stock in an orderly, measured
    manner as current law requires. This should continue. The Committee
    should also continue to protect the legitimate ownership interests of
    the Class B and C stockholders in the Bank's assets by continuing to
    prohibit a ``sweep'' of those funds into the general fund.
    Recommended Loan Levels.
        USTA recommends telephone loan program loan levels for fiscal year
    1999 as follows:

    RUS Insured Hardship Loans (5 percent)..................     $75,000,000
    RUS Insured Cost-of-Money Loans.........................     300,000,000
    Rural Telephone Bank (RTB) Loans........................     175,000,000
    Loan Guarantees.........................................     120,000,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................     670,000,000

        The President's budget proposes a reduction of $25 million in the
    hardship program designed for the neediest borrowers. There is strong
    demand for hardship loans. Rural Americans cannot wait any longer to be
    full participants in the Information Age. A minimum amount of subsidy
    authority would restore this proposed $25 million cut in the hardship
    loan level. We cannot imagine a more deserving use of scarce government
    resources for the benefit of rural Americans.
    Distance Learning and Telemedicine
        USTA strongly supports the loan and grant proposal and recommends
    its funding for fiscal year 1999 at the levels proposed in the
    Administration's budget submission, that is, $15 million for the grant
    program and $150 million for the loan program. This program is a
    perfect complement to the traditional RUS telephone loan programs. For
    distance learning and telemedicine to become a reality, schools and
    hospitals need training and equipment. Similarly, local telephone
    companies need modern infrastructure to connect these facilities to the
    telecommunications network.
                                   conclusion
        Our members take pleasure and pride in reminding the Subcommittee
    that the RUS telephone program continues its perfect record of no
    defaults in almost a half century of existence. RUS telephone borrowers
    take deadly seriously their obligations to their government, their
    nation and their subscribers. They will continue to invest in our rural
    communities, use government loan funds carefully and judiciously and do
    our best to assure the continued affordability of telecommunications
    services in rural America. Our members have confidence that the
    Subcommittee will continue to recognize the importance of assuring a
    strong and effective RUS Telephone Program through authorization of
    adequate loan levels.
                                     ______

         Prepared Statement of Cyrus M. Jollivette, Vice President for
                   Government Relations, University of Miami
        Mr. Chairman and Members of the Subcommittee: I am pleased to
    submit testimony on behalf of the University of Miami and Florida State
    University. My colleagues in Florida are deeply appreciative of your
    leadership, Mr. Chairman, and the Subcommittee's confidence in our
    respective institutions. We recognize that you and your colleagues on
    the Appropriations Committee face difficult choices as you prepare for
    the Subcommittee's priorities for fiscal year 1999 and we know that you
    will continue to make the difficult choices with the best interests of
    the nation guiding your decisions. My colleagues and I hope that you
    will find it possible to fund an important initiative detailed below in
    the fiscal year 1999 appropriations cycle.
        In the past several years, the Congress has been especially
    responsive to the Florida Congressional Delegation's requests
    concerning The Florida Consortium for Climatic Research, a project
    involving the University of Miami, Florida State University, the
    University of Florida, and the University of South Florida. We greatly
    appreciate your support of this critical area of research.
        The importance of El Nino South Oscillation (ENSO) events as a
    major source of climate fluctuations, together with advances in ENSO
    predictability, suggest that forecasts have significant potential for
    benefiting agricultural productivity and economic decision-making. The
    Florida Consortium for Climatic Research proposes to focus on the
    southeastern United States geographical area., a large food producer
    whose productivity is significantly impacted by weather conditions
    generated by the ENSO phenomenon. Decisions made by well-informed
    participants from farm to policy level, made several months or seasons
    in advance, can significantly benefit productivity, an especially
    farmers' ability to plan ahead.
        This project presents an end-to-end approach that will provide the
    bridge between climate and forecast producers, such as the recently-
    formed International Research Institute for Climate Prediction (IRICP),
    and agricultural decision makers. Specific objectives for the project
    are to: (1) adapt, develop, and evaluate a generic, flexible set of
    tools and methodologies for assessing regional agricultural
    consequences of El Nino events and for applying forecasts to improve
    agricultural decision-making; (2) demonstrate by successful
    applications of forecasts to agriculture and other sectors which would
    benefit best in the southeastern United States that began in 1996; and
    (3) assess the value of climate predictions to different agricultural
    sectors in these southeastern region.
        The consortium's objectives include developing scientific
    applications for climate data. This consortium draws upon the expertise
    of scientists at FSU (climate analyses and coupled ocean-atmosphere
    prediction models), UM (climate analyses and economic value of
    forecasts), and the University of Florida (agriculture) to quantify
    climate variability (e.g., the El Nino phenomena) for the SE and to
    explore the potential value and practical application (there is a
    strong emphasis on agricultural applications) of climate forecasts.
        During the initial phase of this effort, the FSU team described
    qualitatively the impact of El Nino (and the other extreme, La Nina) on
    temperature and precipitation patterns across the SE. Additionally,
    they found a geographic shift in tornadic activity associated with El
    Nino events. A new climate forecast system to provide predictions of
    seasonal temperatures and precipitation with longer lead times and
    improved skill is in the testing phase. Improvements are due partly to
    the coupled nature (i.e., linking the ocean and atmosphere so they
    respond to each other dynamically) of the forecast system. Our
    colleagues at the University of Florida identified several crops in
    Florida which are vulnerable to shifts in weather patterns associated
    with El Nino and La Nina, but noted further that the impact is not
    uniform in nature across the state.
        Continuing with this collaboration, we hope to estimate the
    economic advantages that could be achieved by incorporating climate
    forecast information into farming management systems and eventually
    work with sector representatives in developing guidance products for
    the agricultural community. We believe that the Department of
    Agriculture is a major stakeholder in this critical area. We
    respectfully seek $3 million from USDA to continue and expand this
    important research activity in fiscal year 1999.
                                     ______

       Prepared Statement of Dr. Shelby F. Thames, Professor of Polymer
                  Science, University of Southern Mississippi
        Mr. Chairman, distinguished Members of the Subcommittee, I would
    like to thank you for this opportunity to provide testimony to you
    concerning the ongoing efforts of The University of Southern
    Mississippi (USM) and the Mississippi Polymer Institute. I would also
    like to repeat my expression of gratitude to the Subcommittee for its
    leadership and support of the Institute and its work. This testimony
    will include an update on the progress of the Institute since my
    testimony of approximately one year ago. During the past year, our
    efforts have primarily focused on the commercialization of novel
    inventions resulting from our emulsion polymerization team and efforts
    to produce multi-functional additives. I am happy to report that we
    have secured industrial partners who wish to manufacture and sell our
    novel agricultural based materials into the polymer industry.
    Specifically, we have designed and synthesized novel monomers or
    polymer building blocks that allow the production of solvent-free, non-
    polluting, latex coatings. This is novel technology, and promises to be
    significant in reducing emissions of polluting materials into our
    atmosphere. In yet another, invention we have developed formaldehyde-
    free adhesives for use in the particle board industry. The new
    adhesives are composed of more than 98 percent agricultural products,
    and are comparable in properties with traditional formaldehyde
    adhesives. The examples noted herein are two of several active ongoing
    commercializing efforts.
        In 1983, the Mississippi Legislature authorized the Polymer
    Institute at USM to work closely with emerging industries and other
    existing polymer-related industries to assist with research, problem-
    solving, and commercializing efforts. During the past year, seventeen
    new polymer-related industries have located in Mississippi. The
    Institute provides industry and government with applied or focused
    research, development support, and other commercializing assistance.
    This effort complements existing strong ties with industry and
    government involving exchange of information and improved employment
    opportunities for USM graduates. Most importantly, through basic and
    applied research coupled with developmental and commercializing efforts
    of the Institute, the Department of Polymer Science continues to
    address national needs of high priority.
        The focus of my work is commercialization of alternative
    agricultural crops in the polymer industry. This approach offers an
    array of opportunities for agriculture as the polymer industry is the
    largest segment of the chemical products industry in the world, and
    heretofore has been highly dependent upon petroleum utilization.
    However, my efforts are directed to the development of agricultural
    derived materials that can improve our nation's environment, and reduce
    our dependence on imported petroleum. As farm products meet the
    industrial needs of American society, rural America is the benefactor.
    Heretofore this movement to utilize alternative agricultural products
    as industrial raw materials has received some attention but much less
    than the opportunities warrant. Your decisions are crucial to the
    accomplishment of these goals as funding from this Subcommittee has
    enabled us to implement and maintain an active group of university-
    based polymer scientists whose energies are devoted to commercializing
    alternative crops. We are most grateful to you for this support and ask
    for your continued commitment.
        The faculty, the University, and the State of Mississippi are
    strongly supportive of the Mississippi Polymer Institute and its close
    ties with industry. Most faculty maintain at least one industrial
    contract as an important part of extramural research efforts.
        Polymers, which include fibers, plastics, composites, coatings,
    adhesives, inks, and elastomers, play a key role in the materials
    industry. They are used in a wide range of industries including
    textiles, aerospace, automotive, packaging, construction, medical
    prosthesis, and health care. In the aerospace and automotive
    applications, reduced weight and high strength make them increasingly
    important as fuel savers. Their non-metallic character and design
    potentials support their use for many national defense purposes.
    Moreover, select polymers are possible substitutes for so-called
    strategic materials, some of which come from potentially unreliable
    sources.
        As a polymer scientist, I am intrigued by the vast opportunities
    offered by American agriculture. As a professor, however, I am
    disappointed that few of our science and business students receive
    training in the polymer-agricultural discipline as it offers enormous
    potential.
        I became involved in the polymer field 34 years ago, and since that
    time have watched its evolution where almost each new product
    utilization offered the opportunity for many more. Although polymer
    science as a discipline has experienced expansion and a degree of
    public acceptance, alternative agricultural materials are an under-
    utilized national treasure for the polymer industry. Moreover, there is
    less acceptance of petroleum derived materials today than ever before
    and consequently the timing is ideal for agricultural materials to make
    significant inroads as environmentally friendly, biodegradable, and
    renewable raw materials. These agricultural materials have always been
    available for our use, yet society, for many reasons, has not
    recognized their potential. I would like to share with you several
    examples to support this tenet:
      --I have described our efforts at meeting volatile organic compound
            (VOC) emission standards via the design and synthesis of
            solventless emulsion polymers. The novel technology which
            allows the synthesis of solventless emulsion polymers is based
            on the use of an agricultural material. For instance, this
            natural product allows the synthesis of emulsion polymers that
            perform their intended uses at room temperature and without any
            organic solvents. Thus, we have developed a truly no VOC
            coating. Most coatings of this type contain approximately 400
            to 1500 grams of VOC/gallon. It is expected that this monomer
            will be offered for sale in the first quarter of 1999.
      --A waterborne, waterproofer has been designed and formulated with
            the help of several natural products. The material functions as
            a waterproofer yet is carried in water. However, after
            application to the intended substrate, typically wood or
            cementous products, the material becomes hydrophobic and highly
            water resistant. We have collected two and one-half years of
            exposure data on this product with excellent success. It is
            currently being marketed via Southern Chemical Formulators of
            Mobile, AL.
      --A new, multi-functional polymer additive has been designed,
            synthesized, and tested. It is currently being evaluated by the
            J.W. Hanson Company as a potential commercial product. It is a
            highly efficient, multi-faceted additive that functions as a
            dispersant, a defoamer, an adhesion promoter, a gloss enhancer,
            and corrosion inhibiting species. It is derived from an
            agricultural raw material and is very novel in its performance
            and applications.
      --We continue to exploit the potential of lesquerella, a crop that
            produces a triglyceride similar to castor oil. Several products
            have been prepared and include: polyesters, stains, foams,
            pressure sensitive adhesives, and 100 percent solid ultraviolet
            (UV) coatings. This technology was highlighted at the AARC/
            NASDA meeting in Washington, DC.
      --Novel open cell foams have been designed and prepared from
            lesquerella and/or castor oil. They are of high quality and can
            substitute for foams used extensively in industrial settings.
            The Union Camp Corporation has shown interest in these
            materials and will soon visit our facility to discuss possible
            application/commercialization of these foams.
      --Closed cell lesquerella foams have been prepared from lesquerella
            derivatives and will be submitted for testing. This
            commercialization focus is attractive as castor foams are
            prepared from imported oil, i.e., at an annual $50-$75 million
            import cost. Thus, emergence of a lesquerella oil industry has
            the potential to reduce U.S. imports.
        It is clear that commercial utilization of agricultural products is
    needed and that ag based products can play a viable role as industrial
    raw materials for the polymer industry. However, we simply must
    continue to devote support and effort to this rewarding undertaking.
        U.S. agriculture has made the transition from the farm fields to
    the kitchen tables, but America's industrial community continues to be
    frightfully slow in adopting ag based industrial materials. Let us
    aggressively pursue this opportunity and in doing so:
      --Intensify U.S. efforts to commercialize alternative crops.
      --Reduce U.S. reliance on imported petroleum.
      --Maintain a healthy and prosperous farm economy.
      --Foster new cooperative opportunities between American farmers and
            American industry.
        Mr. Chairman, your leadership and support are deeply appreciated by
    the entire University of Southern Mississippi community. While I can
    greatly appreciate the difficult financial restraints facing your
    Subcommittee this fiscal year, I feel confident that further support of
    the Mississippi Polymer Institute will continue dividends of increasing
    commercialization opportunities of agricultural materials in American
    industry. Advances in polymer research are crucial to food,
    transportation, housing, and defense industries. Our work has clearly
    established the value of ag products as industrial raw materials;
    however, while these are but a limited number of applications, our
    success confirms that it is time to move to yet another level of
    effort. Thus, we respectfully request $1.2 million in federal funding
    to exploit the potentials of commercializing alternative agricultural
    materials and to continue our initiatives. Thank you Mr. Chairman and
    Members of the Subcommittee for your support and consideration.
                                     ______

    Prepared Statement of Sam J. Maselli, Executive Vice President, Western
                          Rural Telephone Association
                              summary of requests
        Program of Interest.--Telecommunications lending programs
    administered by the Rural Utilities Service (RUS) of the U.S.
    Department of Agriculture.
        Recommendation.--WRTA supports loan levels for fiscal year 1998 at
    such amounts as they have been designated in the Agriculture
    Appropriations Act for Fiscal Year 1997 (Public Law 105-86) for
    hardship, treasury-cost, Rural Telephone Bank (RTB), and guaranteed
    loan programs and the associated subsidy to support hardship and RTB
    loans at existing levels. WRTA also supports the President's budget
    request for funding of the RUS's Distance Learning and Telemedicine
    (DLT) programs at $15 million in grants and $150 million in loan
    authority. WRTA supports a continuation of the current fiscal year's
    policy of language removing the 7 percent interest rate ceiling on
    Treasury-cost loans for fiscal year 1998. WRTA supports the continued
    provisions contained in Public Law 105-86 restricting retirement of RTB
    class A stock in fiscal year 1998 and prohibiting the transfer of RTB
    funds to the general fund. Finally, we are opposed to the President's
    budget proposal to transfer funds from the unobligated balances of the
    liquidating account of the RTB for the bank's administrative expenses
    and loan subsidy costs.
        Mr. Chairman and Members of the Subcommittee: It is an honor and
    privilege to have the opportunity to discuss the unique infrastructure
    financing needs of the rural local exchange carrier (LEC) industry. My
    name is Sam J. Maselli, and I am the Executive Vice President of the
    Western Rural Telephone Association (WRTA). WRTA is a regional trade
    association representing nearly 150 small rural commercial and
    cooperative telephone systems throughout the western United States and
    the Pacific Rim territories.
                                   background
        WRTA's member systems, like most of this nation's independent
    LEC's, evolved to serve the high cost, low density areas in the rural
    western United States. Congress recognized this unique dilemma
    confronting America's rural LEC's as early as 1949 when it amended the
    Rural Electrification Act (RE Act) to create the REA telephone loan
    program. With the future of rural America in mind, Congress charged the
    REA with the responsibility for making low interest rate loans to both
    ``furnish and improve'' rural telephone service at the local exchange
    level.
        In subsequent years, Congress has periodically acted to amend the
    RE Act to insure that the original mission of the program is fully met.
    In 1971, the Rural Telephone Bank (RTB) was created as a supplemental
    source of direct loan financing. In 1973, the REA was provided with the
    ability to guarantee Federal Financing Bank (FFB) and private lender
    notes. And in 1993, the Congress established a fourth lending
    component, the Treasury-cost program, and Congress eliminated most of
    the subsidy costs associated with the administration of the program.
    The formal consolidation of the Department's utility programs through
    transferring the telecommunications loan and technical assistance
    programs of the REA to the Rural Utilities Service (RUS) in 1994
    further served to enhance and update the effectiveness of the agency in
    promoting rural infrastructure development.
        Due to the difficulty of providing service in high cost, low
    density areas, Congress provided for long-term, fixed rate loans
    available at reasonable rates to borrowers to assure that rural
    citizens benefited from the highest quality of telephone service and
    affordable subscriber rates. Through this ongoing commitment to capital
    financing, Congress affirmed the goal of comparable and affordable
    telephone service for rural Americans as their urban counterparts.
        As a result of this commitment to rural telecommunications, rural
    America has greatly benefited from the highest quality of information
    technology. Through its effort, Congress has played a critical role in
    developing a rural telecommunications infrastructure financing program
    which best responds to the needs of rural America.
                    the obligations of the industry continue
        The RUS telecommunications loan program represents a remarkable
    public/private partnership success story which continues to produce
    tangible results in the lives of rural citizens. With the assistance of
    RUS capital and technical standards, rural telephone systems are
    providing modern telecommunications services of a highly sophisticated
    quality. However, with the rapid pace of change in the development of
    information technology, the need for RUS telecommunications lending is
    greater than ever.
        Due to the nature of rural areas, particularly in the rural West,
    the challenge of providing modern telecommunications services is
    formidable. Compared to their urban counterparts, rural communities are
    faced with higher poverty rates, lower income levels, physical
    isolation and higher costs associated with deploying modern
    infrastructure. Economic development is often frustrated by these
    unique rural conditions. With the United States in the midst of the
    ``information revolution,'' rural areas are confronted with the dilemma
    of being left behind.
        The implementation of the Telecommunications Reform Act of 1996 has
    also added to the uncertainty and collective uneasiness of the rural
    telecommunications industry. Despite the Act's solid rural safeguard
    provisions, the Federal Communications Commission (FCC) has embarked in
    a regulatory direction which explicitly threatens rural ratepayers,
    services, and infrastructure investment.
        Congress must keep a vigilant watch over the FCC to ensure that
    implementation of the Act is consistent with congressional intent. This
    is particularly true of RUS program borrowers where the federal
    government has a significant loan security interest at stake. Whatever
    the outcome of the regulatory process, the RUS telecommunications loan
    program will be as important as ever to rural systems attempting to
    modernize their networks and improve service to rural residents.
                         the promise of the rus program
        Despite the obstacles to rural economic revitalization, information
    technology holds significant promise for our rural areas. As we have
    seen in recent years, information services can directly benefit our
    schools, libraries, hospitals and clinics. In addition,
    telecommunications services facilitate commercial opportunities such as
    telemarketing, insurance, and manufacturing not possible in previous
    years.
        While the explosive nature of technological change offers our rural
    communities genuine opportunities for economic and social progress,
    special attention must be placed on providing rural areas with the
    appropriate tools to address their unique set of needs. In this
    context, the RUS telecommunications loan program is playing a critical
    front-line role in ensuring that rural America is linked to the
    Information Superhighway.
        Today, RUS borrowers average only 6 subscribers per mile compared
    to 37 per mile for the larger, urban-oriented telephone systems. This
    results in an average plant investment per subscriber that is 38
    percent higher for RUS borrower systems. Without the availability of
    affordable capital financing, enhancing telecommunications networks for
    rural communities would be untenable.
        The RUS is providing affordable capital financing to allow its
    borrowers to upgrade their plant and facilities for digital switching,
    fiber optic cabling, emergency 911, and other enhanced features such as
    ISDN, SS7, and CLASS. Due to the dependability of the RUS program,
    borrowers provide their rural subscribers with cutting edge services.
        RUS telecommunications lending also performs a pivotal function of
    stimulating substantial private investment. In fact, RUS borrowers
    invest in telecommunications plant at a rate of $4.80 for every RUS
    dollar spent.
        In addition, the RUS telecommunications program boasts a proud
    financial record probably unprecedented for federal loan programs. To
    date, the program has never experienced a borrower-related default in
    its history. At the end of 1997, $4.5 billion in principal and $4.5
    billion in interest had been paid by RUS borrowers. For nearly 49
    years, this successful public/private partnership has worked.
        In 1993, this partnership agreed to a $31 million cut in the name
    of debt reduction, and it agreed to a twelve year freeze in program
    loan levels while other programs grew by at least the rate of
    inflation. This partnership is committed to providing service to areas
    long neglected by others. Ultimately, this partnership will foster the
    rural information network of the 21st century.
         specific recommendations for the subcommittee's consideration
        RUS Telecommunications Loan Program.--Increasing demands for
    expanded telecommunications services and infrastructure upgrades
    suggests that the level of need continues. Congressional mandates as a
    result of the Rural Electrification Restructuring Act (RELRA) of 1993
    (Public Law 103-129) have placed additional obligations on RUS
    borrowers to upgrade their technology in order to maintain their loan
    eligibility. To address the persisting need, WRTA recommends that the
    Committee consider the following RUS Telecommunications Program loan
    levels for fiscal year 1999:

    5 percent Hardship Loans................................     $75,000,000
    Treasury-cost Loans.....................................     300,000,000
    FFB Loan Guarantees.....................................     120,000,000
    Rural Telephone Bank Loans..............................     175,000,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................     670,000,000

        These loan levels are the same as the current fiscal year's funding
    provided by Congress and represent a genuine commitment to rural
    telecommunications.
        Removal of Interest Rate Ceiling on Treasury-cost Loans.--WRTA
    supports language removing the 7 percent interest rate cap on the
    program's Treasury-cost loans. This provision was originally included
    in the Agriculture Appropriations Act for fiscal year 1996 and
    continued for the current fiscal year. The inclusion of this provision
    for fiscal year 1999 will prevent a potential disruption of the program
    in the case where interest rates exceed 7 percent and insufficient
    subsidy cannot support authorized loan levels. Stated simply, it is a
    continuation of current policy, and it promotes the viability of the
    program at zero cost.
        Rural Telephone Bank (RTB) Issues.--During the course of fiscal
    year 1996, the Rural Telephone Bank began the statutory retirement of
    class A, government-owned stock. WRTA supports the restriction on
    accelerating the privatization process as conceived beginning in fiscal
    year 1996 of no more than 5 percent of total class A stock retired in
    one year. We believe that a continuation of this policy best addresses
    the orderly and systematic privatization of the RTB. WRTA also urges
    the Committee to continue the prohibition against the transfer of bank
    funds to the general fund of the Treasury along with the requirement
    that the bank receive interest on those funds. The private B and C
    stockholders of the RTB have an interest in the assets of the bank and
    the protection of all funds.
        For these reasons, WRTA is also opposed to the proposal contained
    in the President's budget that the costs of RTB administration and loan
    subsidy be funded by a transfer from the unobligated balances of the
    bank's liquidating account rather than by appropriations consistent
    with the federal credit reform act. WRTA believes that this proposal
    would impinge upon the ownership interests of the bank's stockholders.
        In addition, we believe that funding the administrative costs of
    the bank through a transfer of unobligated balances of the bank's
    liquidating account rather than through appropriation is contrary to
    the RTB enabling act (Public Law 92-12). Budget language suggests that
    these recommendations would not result in budgetary savings, and no
    justification for this proposal is contained in the budget.
    Furthermore, this proposal would require new authorizing legislation
    prior to an appropriation.
        Distance Learning and Telemedicine (DLT) Loans and Grants.--The RUS
    Distance Learning and Telemedicine (DLT) program has proven to be a
    remarkable tool for promoting rural development. The DLT loan and grant
    program administered by the RUS significant promise for the deployment
    of modern technology for scores of our rural communities. WRTA supports
    the President's request for $150 million in loans delivered at the
    government's cost-of-money and $15 million in grants for DLT purposes.
    We believe that the proposed level adequately responds to the
    overwhelming demand for DLT resources since the implementation of the
    program by the RUS in 1993.
                                   conclusion
        Rural economic and social development and access to advanced
    information services are an inseparable combination for the future. The
    RUS telecommunications program has proven to be an indispensable tool
    for rural America. Its existence continues to improve the nature of
    rural life in our nation, particularly in our isolated Western
    communities.
        We appreciate the opportunity to comment on this critical program.
    Thank you for your time and consideration of this issue.
                                     ______

         Prepared Statement of Ronald R. Helinski, Conservation Policy
                   Specialist, Wildlife Management Institute
        I am Ronald R. Helinski, Conservation Policy Specialist of the
    Wildlife Management Institute. Established in 1911, the Institute is
    staffed by professional wildlife scientists and managers. Its purpose
    is to promote the restoration and improved management of wildlife in
    North America.
     cooperative state research, education, and extension service (csrees)
        The Wildlife Management Institute (WMI) recognizes that the
    research and educational programs of the CSREES and its Land Grant
    Partners effect relevant, positive changes in attitudes and
    implementation of new technologies by private landowners, managers,
    community decisionmakers, and the public. This results in significant
    benefits to individuals and to the Nation through building and
    sustaining a more viable and productive natural resource base and a
    competitive and profitable agriculture. Since over two-thirds of our
    lands, approximately 1.35 billion acres, are controlled by over 10
    million private landowners and managers, it is most appropriate that
    the CSREES-Land Grant System, with its grass roots credibility and
    delivery system, be adequately funded to translate and deliver
    research-based educational programs and new technologies to help the
    Nation's private landowners and managers move towards a more
    sustainable society. However, in the President's fiscal year 1999
    budget, we see very little emphasis on natural resources research and
    education directed toward helping these clientele.
                                    purpose
        The Wildlife Management Institute recommends that the fiscal year
    1999 budget for CSREES should redirect funding to accomplish the
    following goals:
        WMI recommends that the Renewable Resources Extension Act be funded
    at a minimum level of $9.5 million in fiscal year 1999. The RREA funds,
    which are apportioned to State Extension Services, effectively leverage
    cooperating partnerships at an average of about four to one, with a
    focus on the development and dissemination of useful and practical
    educational programs to private landowners (rural and urban) and
    continuing education of professionals. The increase to $9.5 million
    would enable the Extension System to accomplish the goals and
    objectives outlined in the 1991-1995 Report to Congress. The need for
    RREA educational programs is greater today than ever because of the
    fragmentation of ownerships, the diversity of landowners needing
    assistance, and the increasing environmental concerns of society about
    land use. It is important to note that RREA has been reauthorized
    through 2002. It was originally authorized at $15 million annually;
    however, even though it has been proven to be effective in leveraging
    cooperative state and local funding, it has never been funded at a
    level beyond $3.4 million. An increase to $9.5 million would enable the
    Extension Service to expand its capability to assist over 500,000
    private landowners annually to improve decisionmaking and management on
    an additional 35 million acres while increasing productivity and
    revenue by $200 million.
        WMI recommends that Smith-Lever 3(b)&(c) base program funding be
    increased by 9.0 percent to a level of $280,950,770 with an appropriate
    portion of this increase targeted to Extension's Natural Resource and
    Environmental Management programs (NREM). The President's fiscal year
    1999 budget requests a reduction of $10,740,000 funding for Smith-Lever
    3(b)&(c) funds from the fiscal year 1998 level. WMI appreciates that
    Smith-Lever 3(b)&(c) base programs provide ``Block Grant'' type funds
    for land grant universities to provide essential educational outreach
    based on local needs assessment. This will enable NREM programs to
    develop the critical mass of expertise at the state and local levels to
    redirect and leverage limited funding to address critical existing and
    emerging natural resource and environmental issues that are directly
    affecting small landowners and farmers in both rural and urban
    communities nationwide. Expanding Extension programs in natural
    resource public issues education on such issues as forest health,
    wetlands, endangered species, and human/wildlife interactions, as well
    as to strengthen its programs in urban and community forestry and
    environmental education as called for in the 1990 FACT Act is essential
    to address natural resource issues that are relevant to the
    sustainability of these critical resources. Such an increase targeted
    appropriately would help producers better understand and implement the
    changes in the 1995 Farm Bill Conservation Provisions. Moreover, we are
    concerned that appropriate positions in the Natural Resources and
    Environment Unit have not been retained to provide needed national
    leadership for critical interdisciplinary resources such as range
    management.
        WMI encourages continuation of close cooperation between State
    CES's and their State Fish and Wildlife agencies, as well as other
    appropriate state and federal agencies and conservation organizations.
    Extension 4-H Youth natural resource programs and projects continue to
    increase with over 1,350,000 youngsters presently enrolled from both
    urban and rural communities across the Nation. Increased Smith-Lever
    funds targeted appropriately will enable CSREES to carry out its
    environmental education and NREM National Strategic Plan obligations
    nationwide.
        WMI recommends restoration of the Rangeland Research Grants
    $500,000 budget for fiscal year 1999. The Institute is disappointed
    that the practical and applied problems addressed by the Rangeland
    Research Grants (RRG) program were zeroed out in the President's 1998
    budget and totally ignored in this fiscal year 1999 budget. Over one-
    half of the land area of the United States is rangeland; and
    elimination of the only federal competitive grants program for
    rangelands has serious implications for wildlife, watersheds, and other
    natural resources. Modest appropriations for RRG in the past have
    supported some of the most important rangeland research conducted over
    the past decade, and wildlife issues on rangelands will present some of
    the more critical rangeland research problems over the next decade.
    This would help increase the interdisciplinary capacity of research and
    educational programs to help landowners improve the adoption of forests
    and rangelands ecosystem management and the conservation of
    biodiversity on an ecoregion level.
        WMI recommends that an appropriate portion of the total increased
    appropriation for Pest Management should be dedicated to educational
    programs for prevention and control of vertebrae pests in urban and
    rural communities and to address invasive exotic species and noxious
    weed problems on rangelands for restoring, managing, and sustaining the
    biological integrity of the Nation's natural resource base upon which
    the agricultural and natural resource economies depend. WMI notes that
    a combined total increase of almost $15.5 million has been recommended
    in the President's budget for Pest Management and related research and
    extension programs over and above increases received in fiscal year
    1998. Vertebrate pests and invasive species have been identified in
    many states as posing the most significant problems, now and in the
    future, that agricultural and related crop producers and private
    landowners face. This targeting of Pest Management funds for research
    and educational programs would advance the knowledge and capability of
    landowners to reduce significant losses to vertebrate pests and
    invasive species.
        WMI recommends that the Hatch and McIntire-Stennis funds be
    restored to fiscal year 1998 levels and, if necessary, redirected from
    the substantial $32,800,000 proposed increase in NRI funding, WMI is
    pleased that the Administration proposes a 9.5 million increase in
    basic research identified under the National Research Initiative (NRI)
    as Natural Resources and the Environment; however, what is proposed
    under this ``Area of Special Emphasis'' clearly does not address
    critical natural resource research needs that the Natural Resource
    Community and the public are vitally concerned about. The Institute is
    alarmed at the significant reduction in both the Hatch Act and
    McIntire-Stennis research programs of over $15.5 million. Both of these
    research programs, conducted by land grant university partners and
    other educational institutions, are crucial to addressing natural
    resource and environmental issues critical to agriculture and natural
    resource sustainability now and in the future.
                                    summary
        The Wildlife Management institute, based on the above
    considerations, recommends the following for the fiscal year 1999
    budget of CSREES:
        (a) The RREA budget be increased to $9.5 million;
        (b) Smith-Lever 3(b)&(c) base program funding be increased by 9.0
    percent;
        (c) Rangeland Research grants be restored at $500,000 level;
        (d) A portion of the Pest Management and related increase be
    targeted to provide increased research and education programs to
    address vertebrate pest prevention and control needs and invasive
    species and exotic weed problems; and
        (e) McIntire-Stennis and Hatch Act funding be restored to fiscal
    year 1998 levels.
                                     ______

      Prepared Statement of Hon. Jim Geringer, Governor, State of Wyoming
        This testimony supports fiscal year 1999 funding for the Department
    of Agriculture in the amount of $300,000,000 for the Environmental
    Quality Incentives Program (EQIP). The State of Wyoming requests that
    $12,000,000 of that amount be directed for EQIP activities to continue
    the functions of the Colorado River Colorado River Salinity Control
    Program, one of the programs made a part of the EQIP by Public Law 104-
    127. Designation of Colorado River Basin salinity control as an EQIP
    national conservation priority area is requested.
        This testimony supports fiscal year 1999 appropriations for the
    Department of Agriculture's Environmental Quality Incentives Program to
    carry out Colorado River salinity control activities. You recently
    received testimony from the Colorado River Basin Salinity Control Forum
    (Forum), on behalf of the seven Colorado River Basin States. The State
    of Wyoming, a member state of the Forum, concurs in that testimony
    submitted by the Forum's Executive Director, Jack Barnett. I wish to
    emphasize to this Subcommittee that EQIP funding to accomplish salinity
    control in the Colorado River Basin is critically important to
    maintaining the basin-wide Water Quality Standards for Salinity in the
    Colorado River System.
        Interpretation by the Environmental Protection Agency of Public Law
    92-500, the 1972 amendments to the Federal Water Pollution Control Act,
    led to the adoption of basin-wide water quality standards for salinity
    in the Colorado River in 1975. Those standards consist of numeric
    criteria at three lower river stations (Hoover Dam, Parker Dam and
    Imperial Dam) and a plan of implementation. Jointly developed by the
    States and involved Federal agencies, the Plan of Implementation is
    reviewed and updated each three years in accordance with Section 303 of
    the Clean Water Act. The overall strategy is to prevent salts from
    dissolving and mixing with the river's flow. The USDA's CRSC Program
    has focused on reducing deep percolation of applied irrigation water by
    reducing the amount applied through conversion from flood application
    to sprinkler systems and other irrigation water application procedure
    improvements. Changing irrigation methodologies and other irrigation
    improvements have provided some of the most cost-effective (dollars
    spent per ton of salt loading reduction) means to control salinity
    loading into the river system available in the Colorado River Basin.
        In June 1974, Congress enacted the Colorado River Basin Salinity
    Control Act (CRBSCA) which directed the Secretary of the Interior to
    proceed with a program to enhance and protect the quality of the water
    available in the Colorado River for use in the United States and the
    Republic of Mexico. Implementation of the Salinity Control Act is
    necessary to assure that the U.S. complies with both the quality of
    water delivery requirement under a 1973 amendment to the Mexican Water
    Treaty and the water quality standards for salinity established in the
    United States. The USDA was directed to establish a major voluntary on-
    farm cooperative salinity control program by the 1984 amendments to the
    Act. Since that time, a cost-effective on-farm program involving six
    units located in the states of Colorado, Utah and Wyoming has been
    initiated. Through fiscal year 1996 almost 230,000 tons of salt loading
    reduction per year had been put into place on these USDA Colorado River
    Basin Salinity Control units. Prior to its incorporation into USDA's
    Environmental Quality Incentives Program, the USDA's on-farm Colorado
    River Salinity Control (CRSC) program was working; providing the least
    cost means of controlling salt loading available to the basin-wide
    program and providing important benefits to producers installing
    salinity reduction practices and downstream water users for whom the
    salinity concentrations of Colorado River water creates severe economic
    damages and detriments. The Bureau of Reclamation has recently updated
    studies on the economic impacts of these salt concentrations in the
    River and estimates that damages to United States' water users may soon
    be approaching $1,000,000,000 per year.
        The Federal Agriculture Improvement and Reform Act of 1996 (Public
    Law 104-127) combined the CRSC Program and three other programs into
    the newly-created Environmental Quality Incentives Program (EQIP).
    Public Law 104-127 is explicit in stating that the functions of the
    CRSC Program would continue as a part of EQIP. We view the inclusion of
    the Salinity Control Program in EQIP as a direct recognition on the
    part of Congress of the Federal commitment to maintenance of the water
    quality standards for salinity in the Colorado River--and that the
    Secretary of Agriculture has a vital role in meeting that commitment.
    The intent and approach of the EQIP is that this agricultural program
    is to be ``locally led and driven.'' We agree with that approach, but
    experience over the past several years has indicated that the basin-
    wide CRSC Program (now a part of EQIP) is not being funded at a level
    adequate to ensure that the water quality standards for Colorado River
    salinity can be maintained.
        As we have observed the start-up and administration of the EQIP
    over that past year and a half, EQIP is not working relative to the
    Congressional directive to ``carry out salinity control measures in the
    Colorado River Basin as part of the Environmental Quality Incentives
    Program'' (Section 336.c.1 of the FAIRA, amending Section 202.c. of the
    CRBSCA). Locally led, locally-derived resource management priorities
    are both displacing and preempting salinity reduction program
    activities that have both international and basin-wide significance and
    importance. Experience is indicating, as we observe the EQIP resource
    allocation and funding process at work, that local working groups and
    state technical committees do not feel obliged to implement the above-
    mentioned Congressional directive with regard to salinity control.
    Local working groups and state technical committees are unable and
    perhaps should not be expected to maintain the ``national perspective''
    (e.g., maintaining basin-wide water quality standards and a water
    quality commitment to the Republic of Mexico) when local priorities are
    competing for limited EQIP funding to accomplish very visible, local
    resource management goals and objectives.
        For these reasons, the State of Wyoming urges this Subcommittee to
    direct the Department of Agriculture to establish an EQIP national
    conservation priority area for Colorado River Basin salinity control.
    Numerous requests by the Forum and its participating states for
    designation of the basin-wide salinity control program as an EQIP
    national conservation priority area have gone unheeded by the
    Department of Agriculture. It is our contention that the proposal for
    national conservation priority area designation has great merit and is
    urgently needed to keep the basin-wide salinity control program on
    track. As time passes, it is becoming clear that implementation of
    USDA's salinity control program is falling further behind under the
    present administration of the EQIP. I wish to emphasize that the USDA
    portion of the basin-wide salinity reduction effort is critical to the
    continued success of the salinity control program.
        In the President's Recommended Budget, the Administration has
    indicated its intention to borrow $300,000,000 from the Commodity
    Credit Corporation (CCC) for EQIP in fiscal year 1999. This increase of
    $100,000,000 over the prior fiscal year's level will be most helpful in
    addressing important environmental needs across this nation. We urge
    the Subcommittee to remind the Secretary of Agriculture of his
    obligations to continue the Colorado River Salinity Control Program
    under EQIP and to direct that no less than $12,000,000 of the fiscal
    year 1999 EQIP funding allocation be expended for Colorado River
    salinity control.
        Wyoming is represented on both the Colorado River Basin Salinity
    Control Forum and the Colorado River Basin Salinity Control Advisory
    Council, created within the 1974 CRBSCA. Like the Forum, the Advisory
    Council is composed of gubernatorial representatives of the seven
    Colorado River Basin states. It serves as a liaison between the seven
    States and the Secretaries of the Interior and Agriculture and the
    Administrator of the Environmental Protection Agency (EPA). The Council
    advises these Federal officials and the involved agencies on the
    progress of efforts to control the salinity of the Colorado River and
    annually makes funding recommendations, including the amount believed
    necessary to be expended by the USDA for its on-farm Colorado River
    Salinity Control (CRSC) Program. The Forum's testimony is in accordance
    with the Advisory Council's written recommendations.
        During its October, 1997 meeting, the Advisory Council recommended
    that at least $12,000,000 be expended by the Department of Agriculture
    for cost-sharing to implement salinity reduction practices (funds that
    are matched with individual contractor's cost-share funds) in fiscal
    year 1999, plus sufficient funds for administration, technical
    information and education activities. The Council's recommendation is
    based on assuring that the progress of removing salt and preventing
    additional salt loading into the Colorado River system stays on
    schedule with the Plan of Implementation. Should a lesser funding level
    be provided for this important basin-wide water quality program, the
    progress (as measured in tons of salt prevented from entering the
    Colorado River system) achieved by the USDA component of the multi-
    agency, state and federal Colorado River Basin Salinity Control Program
    will fall far short of meeting the rate of salinity control determined
    to be needed to maintain compliance with the water quality standard's
    numeric criteria for salinity.
        Falling further behind the schedule set forth in the water quality
    standard's plan of implementation raises vitally important questions
    about whether the Basin States can be assured that the water quality
    numeric criteria for the Colorado River will continue to be complied
    with in the future. Accordingly, if less salt is removed from the
    Colorado River than specified in the Plan of Implementation, salinity
    concentration levels of Colorado River water at the three downstream
    stations will exceed the numeric criteria values established for those
    stations.
        The Forum and Advisory Council have both enjoyed a good working
    relationship with the Department of Agriculture since the 1984
    amendments to the CRBSCA mandated direct involvement and a significant
    role in salinity control by the Department of Agriculture. Prompt,
    appropriate measures to ensure the viability of USDA's salinity control
    efforts are needed to continue that productive relationship.
        I wish to thank you for the opportunity to bring to your attention
    the status of the Colorado River Basin Salinity Control Program
    component of the Environmental Quality Incentives Program and the
    necessity to remind the Department of Agriculture to carry out the
    Congressional directive in Public Law 104-127 to continue the functions
    of the salinity control program. I am pleased to submit this testimony
    and would request, in addition to your consideration of its contents,
    that you make it a part of the formal hearing record concerning fiscal
    year 1999 appropriations for the Department of Agriculture.

           LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS

                                  ----------
                                                                       Page
    Ackerman, Kenneth D., Administrator, Risk Management Agency......   865
        Prepared statement...........................................   896
    Ad Hoc Coalition, prepared statement.............................  1205
    Adee, Richard, president, American Honey Producers Association,
      Inc., prepared statement.......................................  1222
    Allen, W. Ron, president, National Congress of American Indians,
      prepared statement.............................................  1347
    American Association of Retired Persons, prepared statement......  1207
    American Farm Bureau Federation, prepared statement..............  1209
    American Indian Higher Education Consortium, prepared statement..  1223
    American Nursery & Landscape Association, prepared statement.....  1226
    American Seed Trade Association [ASTA] Corn and Sorghum Basic
      Research Committee, prepared statement.........................  1232
    American Society for Nutritional Sciences [ASNS], prepared
      statement......................................................  1239
    Amontree, Tom, Director of Communications, Office of
      Communications, Department of Agriculture, prepared statement..  1170
    Amundson, Sara, Doris Day Animal League, prepared statement......  1275
    Anand, Rajen, Executive Director, Center for Nutrition Policy and
      Promo-
      tion...........................................................   647
        Biographical sketch..........................................   667
    Armstrong, Robert, Executive Director, Alternative Agricultural
      Research and Commercialization Corporation.....................   557
        Biographical sketch..........................................   589
    Association of American Veterinary Medical Colleges, prepared
      statement......................................................  1328

    Baker, James R., Administrator, Grain Inspection, Packers and
      Stockyards Administration......................................   745
        Prepared statement...........................................   786
    Banzhaf, William H., CAE, executive vice president, Society of
      American Foresters, prepared statement.........................  1395
    Barnett, Jack A., executive director, Colorado River Basin
      Salinity Control Forum, prepared statement.....................  1262
    Bay, Donald, Administrator, National Agricultural Statistics
      Service........................................................   129
        Prepared statement...........................................   141
    Berne, Bernard H., M.D., Ph.D., prepared statement...............  1247
    Beyer, Wally, Administrator, Rural Utilities Service.............   557
        Prepared statement...........................................   571
    Bier, Dennis, M.D., director, Children's Nutrition Research
      Center, prepared statement.....................................  1256
    Billy, Thomas J., Administrator, Food Safety and Inspection
      Service........................................................   745
        Prepared statement...........................................   754
    Bohlen, Larry, D.C. issues coordinator, Friends of the Earth,
      prepared statement.............................................  1289
    Bolinger, Madge, Director, Office of Financial Management,
      Commodity Futures Trading Commission...........................   983
        Biographical sketch..........................................   995
    Born, Brooksley, Chairperson, Commodity Futures Trading
      Commission.....................................................   983
        Biographical sketch..........................................   994
        Prepared statement...........................................   987
    Bowden, Ben F., chairman, National Watershed Coalition, prepared
      statement......................................................  1377
    Brouha, Paul, executive director, American Fisheries Society,
      prepared statement.............................................  1220
    Bumpers, Hon. Dale, U.S. Senator from Arkansas, prepared
      statements............................3, 130, 469, 649, 747, 867, 983
    Burns, Hon. Conrad, U.S. Senator from Montana, prepared
      statements...........................................5, 471, 749, 869
    Bye, Dr. Raymond E., Jr., associate vice president for research,
      Florida State University, prepared statement...................  1286
    Byrd, Robert J., Deputy Commissioner, Management and Systems,
      Food and Drug Administration, Department of Health and Human
      Services.......................................................  1021
        Biographical sketch..........................................  1032

    Carlson, Mary, president, National Association of Farmers' Market
      Nutrition Programs, prepared statement.........................  1321
    Castelnuovo, Richard, attorney, National Farm*A*Syst/Home*A*Syst
      Office, prepared statement.....................................  1277
    Cheney, Carolyn, chairman, American Sugar Alliance, prepared
      statement......................................................  1242
    Chunha, Manuel, Jr., president, Nisei Farmers League, prepared
      statement......................................................  1249
    City of Gainesville, FL, prepared statement......................  1283
    Clark, Les, vice president, Independent Oil Producers'
      Association, prepared statement................................  1249
    Cline, Kenneth E., Cline Trout Farms, prepared statement.........  1394
    Coalition to Promote U.S. Agricultural Exports, prepared
      statement......................................................  1261
    Collins, Father T. Byron, S.J., assistant to the president,
      Georgetown University, prepared statement......................  1292
    Collins, Keith, Chief Economist, Office of the Chief Economist,
      Department of Agriculture......................................     1
        Prepared statement...........................................  1148
    Cooper, Norman G., Director, National Appeals Division,
      Department of Agriculture, prepared statement..................  1146
    Coughlin, R. Lawrence, president, Friends of the National
      Arboretum, prepared statement..................................  1290
    Crispin, William K., executive director, Everglades Restoration
      Oversight Group, prepared statement............................  1276
    Crow, Dr. Michael, vice provost, Columbia University, prepared
      statement......................................................  1265
    Curl, Dr. Sam, dean and director, Division of Agricultural
      Sciences and Natural Resources, Oklahoma State University,
      prepared statement.............................................  1379

    DeAlmedia, Lino, Jr., president, National Utility Contractors
      Association, prepared statement................................  1376
    Dewhurst, Stephen B., Budget Officer, Department of Agriculture..     1
    Dunn, Michael, Assistant Secretary, Marketing and Regulatory
      Programs, Department of Agriculture............................   745
        Prepared statement...........................................   765

    Fass, Luie, International Seafood, prepared statement............  1306
    Figueroa, Enrique, Administrator, Agricultural Marketing Service.   745
        Biographical sketch..........................................   794
        Prepared statement...........................................   780
    Floyd, Dr. McArthur, research director, Alabama A&M University,
      prepared statement.............................................  1341
    Friedman, Michael A., M.D., Lead Deputy Commissioner, Food and
      Drug Administration, Department of Health and Human Services...  1021
        Biographical sketch..........................................  1031
        Prepared statement...........................................  1024

    Gaillard, David, forest predator protection campaign coordinator,
      Predator Project, prepared statement...........................  1387
    Gain, W. Jeffrey, prepared statement.............................   587
        Biographical sketch..........................................   589
    George, Father William L., S.J., assistant to the president,
      Georgetown University, prepared statement......................  1292
    Geringer, Hon. Jim, Governor, State of Wyoming, prepared
      statement......................................................  1421
    Glenn, Gary A., president, Massachusetts Foundation for
      Excellence in Marine and Polymer Sciences, prepared statement..  1314
    Glickman, Dan, Secretary of Agriculture..........................     1
        Prepared statement...........................................    19
    Goldstein, Ruth, Federal policy program manager, American Farm
      Trust, prepared statement......................................  1212
    Goldthwait, Christopher E., General Sales Manager, Department of
      Agriculture....................................................   865
    Gonzalez, I. Miley, Under Secretary, Research, Education, and
      Economics, Department of Agriculture...........................   129
        Biographical sketch..........................................   159
        Prepared statement...........................................   136
    Grimes, Dr. D. Jay, director, Gulf Coast Research Laboratory,
      prepared statement.............................................  1410
    Grocery Manufacturers of America, prepared statement.............  1293
    Gunnerson, Chuck, vice president, legislative/government affairs,
      National Potato Council........................................  1365
    Guthrie, Dr. Richard L., associate dean and director,
      International Programs in Agriculture, Auburn University,
      prepared statement.............................................  1340

    Hatamiya, Lon, Administrator, Foreign Agricultural Service.......   865
        Biographical sketch..........................................   900
        Prepared statement...........................................   889
    Health Industry Manufacturers Association, prepared statement....  1294
    Helinski, Ronald R., conservation policy specialist, Wildlife
      Management Institute, prepared statement.......................  1419
    Hollis, Steven M., American Federation of Government Employees,
      prepared statement.............................................  1214
    Holmer, Alan F., president, Pharmaceutical Research and
      Manufacturers of America, prepared statement...................  1385
    Holveck, David P., president and chief executive officer,
      Centocor, Inc., prepared statement.............................  1252
    Hooper, Helen, director of public policy, Land Trust Alliance,
      prepared statement.............................................  1312
    Horn, Floyd P., Administrator, Agricultural Research Service.....   129
        Prepared statement...........................................   145
    Humane Society of the United States, prepared statement..........  1298

    Intertribal Agriculture Council, prepared statement..............  1306

    Jackson, Gary, director, National Farm*A*Syst/Home*A*Syst Office,
      prepared statement.............................................  1277
    Jackson, Yvette, Administrator, Food and Nutrition Service.......   647
        Biographical sketch..........................................   666
        Prepared statement...........................................   660
    Jollivette, Cyrus M., vice president for government relations,
      University of Miami, prepared statement........................  1413

    Kaplan, Dennis, Deputy Director, Office of Budget and Program
      Analysis, Department of Agriculture...........129, 557, 647, 745, 865
    Kavanaugh, E. Edward, president, Cosmetic, Toiletry, and
      Fragrance Association, prepared statement......................  1270
    Kelley, Keith, Administrator, Farm Service Agency................   865
        Biographical sketch..........................................   899
        Prepared statement...........................................   883
    Kennedy, Eileen, Acting Deputy Under Secretary, Research,
      Education, and Economics, Department of Agriculture............   129
        Biographical sketch..........................................   160
    Kenny, Michael P., executive officer, California Air Resources
      Board, prepared statement......................................  1249
    Kohl, Hon. Herb, U.S. Senator from Wisconsin, prepared statement.   904
    Kwan, Quon Y., D. Crim., prepared statement......................  1311

    Leahy, Hon. Patrick J., U.S. Senator from Vermont, prepared
      statement......................................................   871
    Levitt, Joseph A., Director, Center for Food Safety, Food and
      Drug Administration, Department of Health and Human Services...  1021
    Lowe, Lynn A., president, Red River Valley Association, prepared
      statement......................................................  1388
    Lyons, James R., Under Secretary, Natural Resources and
      Environment, Department of Agriculture.........................   467
        Prepared statement...........................................   479

    Maizel, Margaret S., principal investigator, National Center for
      Resource Innovations, prepared statement.......................  1343
    Martin, Marsha Pyle, Chairman and Chief Executive Officer, Farm
      Credit Administration, prepared statement......................  1142
    Maselli, Sam J., executive vice president, Western Rural
      Telephone Association, prepared statement......................  1416
    Maurer, Teresa, project manager, National Center for Appropriate
      Technology, prepared statement.................................  1342
    McGonigle, Joseph, executive director, Maine Aquaculture
      Association, prepared statement................................  1393
    Medley, Terry L., Administrator, Animal and Plant Health
      Inspection Serv-
      ice............................................................   745
        Prepared statement...........................................   772
    Metropolitan Water District of Southern California, prepared
      statement......................................................  1315
    Miller, Gordon, president, National Commodity Supplemental Food
      Program Association, prepared statement........................  1346
    Minor, Samuel F., chairman, Council for Agriculture Research,
      Extension, and Teaching, prepared statement....................  1273
    Moench, Lorin, Jr., president, American Sheep Industry
      Association, prepared statement................................  1236
    Mortenson, Dr. James H., associate dean, resident instruction,
      Pennsylvania State University, prepared statement..............  1331
    Myers, Lester W., president and general manager, Delta Western,
      Inc., prepared statement.......................................  1391

    National Association of State Foresters, prepared statement......  1325
    National Corn Growers Association, prepared statement............  1349
    National Cotton Council of America, prepared statement...........  1350
    National Dry Bean Council, prepared statement....................  1354
    National Easter Seal Society, prepared statement.................  1360
    National Pharmaceutical Alliance and the Generic Pharmaceutical
      Industry Association, prepared statement.......................  1362
    National Telephone Cooperative Association, prepared statement...  1372
    Norris, Peter M.P., president, SPIN-2, prepared statement........  1399
    Notar, Russell C., president and CEO, National Cooperative
      Business Association, prepared statement.......................  1348

    O'Neal, John F., general counsel, National Rural Telecom
      Association, prepared statement................................  1368
    Offutt, Susan, Administrator, Economic Research Service..........   129
        Prepared statement...........................................   149
    Oliver, Janice F., Deputy Director, Center for Food Safety, Food
      and Drug Administration, Department of Health and Human
      Services.......................................................  1021
    Organization for the Promotion and Advancement of Small
      Telecommunications Companies, prepared statement...............  1383

    Patrick, Barbara, member, Board Supervisors of Kern County and
      member, California Air Resources Board, prepared statement.....  1249
    Payne, Dr. Thomas L., director, Agricultural Research and
      Development Center, Ohio State University, prepared statement..  1335
    Peterson, R. Max, executive vice president, International
      Association of Fish and Wildlife Agencies, prepared statement..  1301

    Quarles, William K., vice president, corporate relations and
      counsel, Sunkist Growers, prepared statement...................  1400
    Quickel, Dr. Kenneth E., Jr., president, Joslin Diabetes Center,
      prepared statement.............................................  1309

    Rawls, Charles R., Acting General Counsel, Office of the General
      Counsel, Department of Agriculture, prepared statement.........  1172
    Ray, Dr. Melvin C., Mississippi State University, chair,
      Mississippi EPSCoR Committee, prepared statement...............  1259
    Reed, Pearlie S., Acting Assistant Secretary for Administration,
      Departmental Administration, Department of Agriculture,
      prepared statement.............................................  1137
    Reheis, Catherine H., managing coordinator, Western States
      Petroleum Association, prepared statement......................  1249
    Rice, Rudy K., president, National Association of Conservation
      Districts, prepared statement..................................  1317
    Robinson, Bob, Administrator, Cooperative State Research,
      Education, and Extension Service...............................   129
        Prepared statement...........................................   153
    Rominger, Richard, Deputy Secretary of Agriculture...............     1

    Scalet, Charles G., president, National Association of University
      Fisheries and Wildlife Programs, South Dakota State University,
      prepared statement.............................................  1326
    Schram, Susan G., Ph.D., food and agriculture coordinator, deputy
      director, Washington operations, Consortium for International
      Earth Science Information Network, prepared statement..........  1268
    Schultz, William B., Deputy Commissioner, Policy, Food and Drug
      Administration, Department of Health and Human Services........  1021
        Biographical sketch..........................................  1032
    Schumacher, August, Jr., Under Secretary, Farm and Foreign
      Agricultural Services, Department of Agriculture...............   865
        Biographical sketch..........................................   899
        Prepared statement...........................................   876
    Shadburn, Jan E., Administrator, Rural Housing Service...........   557
        Prepared statement...........................................   575
    Shalala, Donna E., Secretary of Health and Human Services, letter
      from...........................................................  1081
    Shearman, Dr. Robert C., executive director, National Turfgrass
      Evaluation Program, prepared statement.........................  1375
    Smith, Dr. David A., president, Freshwater Farms of Ohio, Inc.,
      prepared statement.............................................  1393
    Society for Animal Protective Legislation, prepared statement....  1397
    Spencer, Dr. Richard, limited partner, Hawaiian Marine
      Enterprises, prepared statement................................  1392

    Terpstra, A. Ellen, president and CEO, USA Rice Federation,
      prepared statement.............................................  1402
    Thames, Dr. Shelby F., professor of polymer science, University
      of Southern Mississippi, prepared statement....................  1414
    Thompson, Jill Long, Under Secretary, Rural Development,
      Department of Agriculture......................................   557
        Prepared statement...........................................   565
    Thompson, Sally, Chief Financial Officer, Office of the Chief
      Financial Officer, Department of Agriculture, prepared
      statement......................................................  1157
        Biographical sketch..........................................  1161
    Thomson, Anne F., Chief Information Officer, Office of the Chief
      Information Officer, Department of Agriculture, prepared
      statement......................................................  1162

    U.S. Agricultural Export Development Council, prepared statement.  1403
    U.S. Apple Association, prepared statement.......................  1407
    United States Telephone Association, prepared statement..........  1411

    Viadero, Roger C., Inspector General, Office of the Inspector
      General, Department of Agriculture, prepared statement.........  1179
    Vogel, Ronald J., Associate Deputy Administrator, Special
      Nutrition Programs, Food and Nutrition Service.................   647
        Biographical sketch..........................................   667
    Vogt, Dr. Albert, president, National Association of Professional
      Forestry Schools and Colleges, prepared statement..............  1322

    Wardensky, Kim M., American Federation of State, County, and
      Municipal Employees, prepared statement........................  1214
    Watkins, Dayton J., Administrator, Rural Business-Cooperative
      Service........................................................   557
        Prepared statement...........................................   580
    Watkins, Shirley R., Under Secretary, Food, Nutrition, and
      Consumer Services, Department of Agriculture...................   647
        Biographical sketch..........................................   666
        Prepared statement...........................................   654
    Weber, Thomas A., Acting Chief, Natural Resources Conservation
      Service........................................................   467
        Prepared statement...........................................   490
    Wilcox, Caren A., Deputy Under Secretary for Food Safety,
      Department of Agriculture, biographical sketch.................   763
    Williams, Dennis P., Deputy Assistant Secretary, Budget,
      Department of Health and Human Services........................  1021
        Biographical sketch..........................................  1033
    Wootton, Richard D., associate dean and associate director,
      Cooperative Extension Service at Kansas State University,
      prepared statement.............................................  1337
    Woteki, Catherine, Ph.D., R.D., Under Secretary, Food Safety,
      Department of Agriculture......................................   745
        Biographical sketch..........................................   762
        Prepared statement...........................................   752

    Yount, Ralph G., Ph.D., president, Federation of American
      Societies for Experimental Biology, prepared statement.........  1281

    Zeller, Mitchell R., Director, Office of Tobacco Programs, Food
      and Drug Administration, Department of Health and Human
      Services.......................................................  1021
    Zimbelman, Dr. Robert G., chair, Coalition on Funding
      Agricultural Research Missions, prepared statement.............  1260
    Zimmerman, Gerald R., executive director, Colorado River Board of
      California, prepared statement.................................  1264
    Zuiches, Dr. James J., chair, National Association of State
      Universities and Land Grant Colleges, prepared statement.......  1332

                                 SUBJECT INDEX

                                  ----------

                      COMMODITY FUTURES TRADING COMMISSION

                                                                       Page
    Market surveillance, new system for..............................   997
    Off-floor transactions, fraud or abuse in........................   998
    Over-the-counter derivatives market..............................   996
    Overseas exchanges, losing business to...........................   995
    Streamlining operation of the agency.............................   998
    Submitted questions..............................................   999
    Tokyo communique, impact of......................................   995

                           DEPARTMENT OF AGRICULTURE

                              Farm Service Agency

                             General Sales Manager

                          Foreign Agricultural Service

                             Risk Management Agency

    American producers, market promotion spending by.................   911
    Asian exports, reasons for declines in...........................   913
    Boll weevil eradication..........................................   919
    Chinese import restrictions......................................   907
    Cochran Fellowship Program, resources for........................   920
    Dairy export incentive program...................................   902
    Dairy options pilot program......................................   901
    Declines in Asian exports, reasons for...........................   906
    Disaster assistance, needs for...................................   904
    EEP expenditures.................................................   912
    Expense reimbursement to private companies, GAO report on........   917
    Fiscal year 1998 MAP allocation..................................   905
    Flood risk reduction program.....................................   909
    Farm Service Agency [FSA]:
        Data collection..............................................   919
        Reductions in staff-years....................................   907
        Reorganization...............................................   915
    IMF supplemental.................................................   912
    Market Access Program............................................   910
    Proposed risk management tools...................................   917
    Public Law 480, reduction in.....................................   912
    Single FSA personnel system......................................   909
    State trading enterprises........................................   903
    Submitted questions..............................................   923
    Trade negotiations, goal for next round of.......................   914
    WTO negotiations, congressional participation in.................   914

                           Food and Nutrition Service

                   Center for Nutrition Policy and Promotion

    Administrative savings and offsets...............................   681
    Center for Nutrition Policy and Promotion........................   653
    Child Nutrition Program..........................................   651
        Reauthorization..............................................   689
    Electronic benefit transfer cards and fraud......................   684
    Estimating and addressing America's food losses..................   668
    Food and Nutrition Service fiscal year 1999 budget request.......   650
    Food gleaning....................................................   654
        Recovery.....................................................   668
    Food Program Administration......................................   654
    Food Stamp Program...............................................   651
        Employment and training......................................   689
    Food stamps and school breakfast, participation in...............   680
    National Food Service Management Institute.......................   690
    Program and financial integrity..................................   679
    Reserves, Food Stamp Program and WIC.............................   682
    Studies and evaluation...........................................   653
        Transfer.....................................................   683
    Submitted questions..............................................   690
    Training and technical assistance................................   654
    Transportation and storage.......................................   679
    Women, Infants and Children [WIC] Program........................   652
        Electronic transfer program..................................   688
        Food package costs reductions................................   686
        Full participation...........................................   686

                       Food Safety and Inspection Service

                   Animal and Plant Health Inspection Service

                         Agricultural Marketing Service

            Grain Inspection, Packers and Stockyards Administration

    Animal and Plant Health Inspection Service [APHIS]...............   764
    Boll weevil......................................................   806
    Brucellosis......................................................   796
    Budget request, fiscal year 1999.................................   750
    Food safety initiative...........................................   751
    Fruit and vegetable inspection...................................   800
    FSIS Directive 5400.5............................................   795
    Grain inspection, packers and stockyards.........................   764
    Guidelines versus command and control............................   803
    Hazard Analysis and Critical Control Point Program [HACCP]:
        Implementation...............................................   798
        Inspection changes due to....................................   794
        Plant closures under.........................................   800
    Hudson Foods recall..............................................   802
    Import inspection................................................   801
    Inspectors, redeployment of......................................   798
    Irradiation......................................................   797
    Marketing and regulatory programs................................   764
    Recall, impact of................................................   804
    Reworked product...............................................803, 804
    Sanitary/phytosanitary standards.................................   796
    Seafood inspection...............................................   799
    Single food safety agency........................................   797
    Submitted questions..............................................   807
    User fee proposal.........................................746, 751, 799

                    National Agricultural Statistics Service

                         Agricultural Research Service

                           Economic Research Service

          Cooperative State Research, Education, and Extension Service

    Agricultural research............................................   172
    Agricultural Research Service:
        Implementation of fiscal year 1999 program increases.........   160
        Proposed closure of facilities...............................   164
    Alternative pest controls........................................   165
    Aquaculture:
        Census.......................................................   172
        Research.....................................................   162
    Budget request, fiscal year 1999.................................   132
    Civil rights initiative..........................................   135
    CSREES research programs, reductions in..........................   169
    Economic Research Service budget.................................   135
    Facilities task force............................................   164
    Fiscal year 1998 implementation plans, status of.................   162
    Food genome initiative...........................................   134
    Food safety initiative...........................................   134
    High-priority initiatives for fiscal year 1999...................   134
    McIntire-Stennis Program.........................................   171
    National Agricultural Statistics Service budget..................   135
    Pest management initiative.......................................   134
    Postaward management.............................................   170
    Production agriculture...........................................   166
    Proposed funding levels, fiscal year 1999........................   135
    Rice research....................................................   163
    Submitted questions..............................................   173
    Trade flows......................................................   168

                            Office of the Secretary

    Agricultural:
        Exports......................................................    15
        Research.....................................................    16
        Trade balance................................................    49
    Agriculture, status of...........................................    47
    Asia's commodity export value....................................    50
    Asian financial crisis...........................................    37
    Civil rights.....................................................    13
    Cochran Fellowship Program.......................................    53
    Commodity yield comparisons......................................    48
    Conservation.....................................................    17
        Programs.....................................................    50
    Conservation Reserve Program.....................................    13
    Crop Insurance Program...........................................    14
    CSREES research programs.........................................    39
    Customer service and program delivery............................    18
    Dairy price issue................................................    12
    E. coli..........................................................    42
    EQIP Program.....................................................    51
    European Union...................................................    47
    Federal crop insurance funding...................................    38
    Food assistance..................................................    17
    Food Safety Inspection Service...................................    42
    Government debt forgiveness......................................    14
    Lower Mississippi Delta Commission...............................    52
    National Commission on Small Farms...............................    14
    National food safety initiative..................................    16
    New milk marketing order.........................................    44
    Office of the Inspector General..................................18, 36
    President's balanced budget......................................    13
    Rice production..................................................    41
    Rural development................................................    15
    Severe weather problems..........................................    12
    State trading enterprises........................................    46
    Submitted questions..............................................    53
    USDA outlays, decreases in.......................................    12
    Weakened livestock prices........................................    12

                            Rural Utilities Service

                             Rural Housing Service

                       Rural Business-Cooperative Service

      Alternative Agricultural Research and Commercialization Corporation

    Alternative agricultural research and commercialization..........   599
    Appropriate technology transfer for rural areas..................   594
    Business and industry programs...................................   602
    Cooperatives, research on........................................   604
    Delta region economic development program........................   590
    Delta Regional Commission........................................   593
    Delta Teachers Academy...........................................   593
    Electrical restructuring.........................................   595
    Home ownership loans.............................................   593
    Mississippi Delta................................................   603
    Multifamily housing..............................................   598
    National Centers for Excellence..................................   590
    Rural:
        Business-cooperative programs................................   564
        Housing programs...........................................563, 598
        Utilities programs...........................................   562
    Rural Utilities Service..........................................   591
    Salaries and expenses............................................   565
    Submitted questions..............................................   604
    Water 2000 initiative............................................   592
    Water and waste programs.........................................   594

                    DEPARTMENT OF HEALTH AND HUMAN SERVICES

                          Food and Drug Administration

    Arkansas regional laboratory.....................................  1040
    Blood safety.....................................................  1048
    Food safety initiative...........................................  1033
    Irradiation of food..........................................1038, 1042
    Medguide program.................................................  1039
    New product applications.........................................  1049
    Submitted questions..............................................  1051
    User fees........................................................  1043
    Youth tobacco prevention initiative..............................  1044

                                       -